May 17, 2022
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“What’s good for the United States is good for the New York Stock Exchange. But what’s good for the New York Stock Exchange might not be good for the United States.” – William McChesney Martin
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If this market has you down lately, you have a group of 24 stockbrokers to thank, who signed the Buttonwood Agreement, which basically established the New York Stock Exchange, 230 years ago today. Through all of the country’s ups and downs, the NYSE has weathered it all, and as bad as 2022 has been for markets, the NYSE has seen worse.
This morning, futures are in a positive mood following on the back of strength in Asia and Europe. Rates are higher, the dollar is down, and crude oil is down for the fifth straight day. In order to remain positive, though, we have a busy day of economic data to get through with Retail Sales at 8:30, Industrial Production and Capacity Utilization at 9:15, and then Business Inventories and Homebuilder Sentiment at 10 AM. As if that wasn’t enough, there will be a number of Fed speakers hitting the wires throughout the trading day.
In today’s Morning Lineup, we recap the continued developments in retail earnings (pg 4), market action in Asia and Europe (pg 4), economic data in Asia and Europe (pg 5), and a lot more.
We’re now in the retail leg of earnings season, and this morning’s report from Walmart (WMT) marks the unofficial end of the reporting period as the stock reported weaker than expected EPS despite stronger than expected revenues (you can thank inflation for that). The stock is currently trading down about 7% which is somewhat fitting given how bad this earnings season has been for the stock market.
The graphic below is from our Earnings Explorer and shows every time in the last 20 years that WMT has gapped down 3% or more in reaction to earnings. Just to illustrate how large this morning’s downside move is for WMT, there have only been two other times in the last 20 years that the stock gapped down 5% or more in reaction to earnings. Those reports were both in February (2018 and 2021), and the stock continued lower from the open to close each time. For a company like WMT with such strong operations and logistics, downside surprises of this magnitude have been few and far between.
Below we show a price chart of WMT for the last year. While the stock broke out of a range in early April, the momentum didn’t last long, and by late April the rally reversed. Last week, the stock broke below prior resistance levels, and while it tried to bounce yesterday, the rally ran out of steam right at the 50-day moving average. At current pre-market levels, WMT will not only be trading back below its 200-DMA, but it will also be trading at oversold levels and its lowest point since early March.
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May 16, 2022
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“If you have the right attitude, interesting problems will find you.” – Eric S. Raymond
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Markets are getting off to a slow start this week. Futures, which were modestly lower most of the morning and overnight, have turned modestly higher as we type this. Given the horrendous data coming out of China overnight and the fact that Europe lowered economic growth forecasts, that’s actually not so bad. Treasury yields are basically flat while crude oil prices are modestly lower but still trade just below $110 per barrel. The only economic report on the calendar this morning is the Empire State Manufacturing Index which will give us the first read on data for the month of May. Economists are expecting the headline index to decline from last month’s reading of 24.6 down to 15.
In today’s Morning Lineup, we recap the continued developments in the crypto space (pg 4), market action in Asia and Europe (pg 4), the lousy economic data out of China (pg 5), and a lot more.
After six weeks in a row of declines, will the seventh time be the charm as bulls look to eke out a week of gains for a change? In last Thursday’s reversal, the S&P 500 managed to find some support right around the highs from early Q1 2021 even as it traded to 52-week lows. At the index level, this support level works out to roughly a range of 3,800 to 3,850.
At the sector level, the only one to finish last week in positive territory was Consumer Staples, and just barely at that. On the downside, Real Estate, Consumer Discretionary, Financials, and Technology all fell by more than 3%. Energy was also down substantially but still managed to close out the week at overbought levels. Sectors like Consumer Discretionary, Communication Services, Financials, Real Estate, and Technology all finished off last week more than 8% below their 50-DMAs, so if the momentum from late Thursday and Friday can continue, these sectors have the most room to rally.
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May 13, 2022
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“I’d be a bum on the street with a tin cup if the markets were always efficient.” – Warren Buffett
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Futures are higher this morning, so the only question investors have at the moment is, what time does the sell-off begin? Treasury yields are sharply higher across the board this morning as the 10-year yield is back above 2.9%. Crude oil is up over 1%, while gold declines to around $1,800 per ounce. In the crypto space, we’ve seen some stabilization as bitcoin is trading back above $30K.
On the COVID front, there are some signs that Shanghai will start lifting its lockdown measures at the end of next week, and the government has also denied rumors that similar lockdowns are in store for Beijing.
There was some good news on the economic front as Import Prices were unchanged versus expectations for an increase of 0.6%. The only other report on the calendar is the Michigan Sentiment at 10 AM.
In today’s Morning Lineup, we recap the continued developments in the crypto space (pg 4), overnight economic data out of China and Europe (pg 5), and a lot more.
Barring an epic rally on the final trading day of the week, both the S&P 500 and Nasdaq will put in their sixth straight week of losses today. In the case of both the S&P 500 and Nasdaq, it will be tied with four other periods for the longest weekly losing streak since 2001. Below we show historical weekly losing streaks for the Nasdaq since 1971. While there have been a number of streaks that have been as long, just five have been longer, and only one (1973) lasted longer than seven weeks.
Even more notable than the fact that the Nasdaq has been down for six weeks in a row is the fact that every down week in the last six has been a decline of at least 1.5%. In the Nasdaq’s entire history, there have only been four other periods where the Nasdaq was down for six or more straight weeks and every one of those weeks was a decline of at least 1%. Three (1973, 1980, and 2001) lasted seven weeks, while the streak in 1990 lasted six weeks. In the Nasdaq’s history, losing streaks of this magnitude have been extremely uncommon.
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May 12, 2022
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“Money does not buy you happiness, but lack of money certainly buys you misery.” – Daniel Kahneman
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Today, the futures aren’t even attempting to sucker traders in with a rally, so maybe today, we’ll actually get a bounce. Treasuries are continuing to rally again this morning, while crude oil trades modestly lower and crypto plunges. Overnight, China pledged further support to its economy. On the geopolitical front, Finland has said it is preparing to apply for membership in NATO, and Russia has responded by threatening retaliatory steps of both military and ‘other’ measures.
We just got a chunk of economic data in the form of PPI and jobless claims. In terms of PPI. headline CPI was in line with forecasts at a m/m gain of 0.5%. Core PPI rose much less than expected at 0.4% vs 0.7%, but data for March was revised higher. In terms of jobless claims, initial claims came in 10K higher than expected 203K vs 193K while continuing claims showed another drop falling to 1.343 million versus forecasts for 1.372 million. Equity futures have seen little in the way of a reaction to the news while treasury yields remain lower.
In today’s Morning Lineup, we recap the recent developments in the crypto space (pg 4), overnight earnings (pg 5), economic data out of Europe (pg 6), and a lot more.
The year is barely more than a third over, but already the Nasdaq has had 24 different over the course of just 90 trading days. That works out to more than once a week! Again, we still have nearly two-thirds of the year left ahead of us, but already, the number of 2%+ daily declines this year ranks as the 8th highest in the Nasdaq’s history. The only years that were higher were 1999, 2000, 2001, 2002, 2008, 2009, and 2020. If, and this is a big if, the current pace of 2% declines continues, 2022 wouldn’t quite catch 2000 for the record number of 2% declines in a single year, but it would be a close second.
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May 11, 2022
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“The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.” – Bob Marley
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The hype surrounding today’s CPI report has reached levels we don’t know if we’ve ever seen for another similar report. Whether it comes in much better or worse than expected, we can pretty much guarantee that like every other report that gets so hyped up, no one will even remember it a few days from now. Outside of the CPI report, energy inventories will be released at 10:30, and given some of the concerns regarding diesel supplies, this report has the potential to be a market mover.
After a back and forth session yesterday, futures are higher again this morning but whether these gains hold or not will largely depend on how CPI comes in relative to expectations. The rally in US futures comes on the heels of a 1%+ rally in major European markets even after German CPI increased at its fastest year/year pace since 1974 (7.4% which was in line with expectations).
Heading into today’s CPI report, treasury yields are lower across the curve, the dollar is lower and WTI is up over 4% and back above $100 to $104 per barrel.
In today’s Morning Lineup, we recap the recent developments in stablecoins (pg 4), overnight earnings (pg 4), Chinese CPI (pg 5), and a lot more.
Inflation running at multi-year highs for the last several months should surprise no one. What sticks out to us is the fact that economists have been so behind the curve in catching up to it. The chart below shows the 24-month rolling number of monthly headline CPI reports coming in lower than expected.
Leading up to today’s report, just three headline CPI reports in the last 24 months surprised to the downside, and the last weaker than expected report was all the way back in September. Before that, you have to go back to the October 2020 report. The current rolling 24-month total of three ranks as the lowest number of weaker than expected reports since at least 2000. There’s been no shortage of criticism for the Federal Reserve and how it has failed to get ahead of the surge in inflation, but economists haven’t fared much better.
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May 10, 2022
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“It always seems impossible until it’s done.” – Nelson Mandela
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It’s been a painful three days for US equity investors, and they’re looking to catch a break today as S&P 500 futures are indicating a rally of about 1% at the open. Investors have been fooled enough times this year already by a strong tape at the open, so you can’t fault them for viewing this morning’s rally with a fair amount of skepticism.
Treasuries are also rallying this morning as the 10-year yield is back below 3%. The only economic news on the calendar this morning was the NFIB Small Business Optimism report which was unchanged from March and slightly ahead of expectations.
Over in Europe, economic sentiment came in better than expected whole Industrial Production in Italy managed to come in unchanged versus forecasts for a decline of 1.9%.
In today’s Morning Lineup, we recap the recent developments in stablecoins (pg 4), overnight earnings (pg 5), economic data out of Asia and Europe (pg 6), and a lot more.
After breaking below support to close last week, the bottom fell out of the Nasdaq 100 yesterday as the index dropped to another 52-week low and its lowest level since November 2020.
With the Nasdaq 100 at 52-week lows, we wanted to check in on its valuation and how it looks relative to the S&P 500. The chart below shows the historical premium in the Nasdaq 100’s P/E ratio relative to the S&P 500. For the last ten years, there has never been a point where the Nasdaq 100 traded at a cheaper valuation than the S&P 500, and the average premium during that span has been 23.1%.
Towards the end of 2019, right before COVID, the Nasdaq 100’s premium valuation to the S&P 500 was right in line with its historical average, but that premium exploded higher during COVID reaching as much as 50% in late 2021. Through a combination of earnings growth and rapidly falling stock prices, much of the air has come out of the Nasdaq 100’s premium relative to the S&P 500, but it still remains elevated relative to the historical average.
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