May 4, 2022
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“During this time of reopening, we are likely to see some upward pressure on prices…But those pressures are likely to be temporary as they are associated with the reopening process.” – Jerome Powell
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The above comments from Fed Chair Jerome Powell were made a year and six days ago today, and we’d be willing to bet that when he made them he never imagined that one year later CPI would be over 8.5% on a y/y basis and accelerating. It just goes to show that predicting the future is hard, and today’s foregone conclusions are often hindsight’s most embarrassing moments.
Futures are actually higher this morning, and while we’re still far from the closing bell, a positive close would be the S&P 500’s first three-day winning streak since late March. Before we can get there, though, we still have to digest the weaker than expected ADP Private Payrolls Report which came in at 247K compared to forecasts for an increase of 385K. At 10 AM, we’ll get the ISM Services report, which is expected to show a modest uptick from 58.3 to 58.5. The big event of the day, obviously, will be the FOMC rate decision at 2 PM and the press conference at 2:30. For much of Powell’s tenure as Fed Chair, when he speaks, investors sell, so hopefully for the bulls, the most hawkish outcome is already priced in.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), India’s emergency rate hike (pg 4), the war in Ukraine (pg 4), other European economic data (pg 5), and a lot more.
Mick Jones of The Clash couldn’t decide whether he should stay or go, and in a similar way, the market can’t decide whether it wants to rise or fall. While the ultimate direction this year has been to the downside, in looking at the intraday range of the S&P 500 over the last 100 trading days, we’ve increasingly seen a trend where the market trades in positive and negative territory in the same session.
The chart below shows the 100-day rolling number of days where the S&P 500 tracking ETF (SPY) traded in both positive and negative territory relative to the prior day’s close. Through yesterday’s close (5/3), the S&P 500 traded in positive and negative territory on 69 of the last 100 trading days. That’s slightly off the recent peak of 71, but as shown in the chart, the market hasn’t been this indecisive since July 2014. Make up your mind already!
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May 3, 2022
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“In times of great stress or adversity, it’s always best to keep busy, to plow your anger and your energy into something positive.” – Lee Iacocca
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Futures have been trading on either side of the flatline this morning and most of the overnight session as investors look to digest Monday’s volatility. US Treasury yields are modestly lower along with crude oil prices, while bitcoin is either modestly higher or lower depending on when you look. In economic data, Germany had some better than expected data related to employment, and this morning in the US we’ll get updates on Factory Orders, JOLTS, and Durable Goods.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), economic data in China and Europe (pg 5), and a lot more.
That was quite a reversal in the S&P 500 yesterday! After trading down over 1% heading into the final hour of trading, the market got an early start on a ‘turnaround Tuesday’ and rallied nearly 2% into the close. By the time the closing bell rang, the S&P 500 was up over half of a percent.
Reversals like Monday’s always feel great in the moment, but do they really mean anything in terms of the market’s future direction? Since the early 1990s, yesterday was just the 17th time that the S&P 500 was down at 3 PM but rallied by more than 1.5% in the final hour of trading to finish the day in positive territory. The two most recent occurrences were this past January (1/24) and before that December 2018 (12/27/18). After that, you have to go back to October 2011 to find the most recent occurrence. The chart below shows the S&P 500 on a long-term basis going back to 1995, and we have included red dots to show the day of every prior reversal like yesterday when the S&P 500 was down at 3 PM, rallied more than 1.5% in the last hour, and then closed in positive territory.
Looking at the various occurrences, there appears to be little in the way of a clear trend. While there were multiple occurrences during the dot-com bust and the financial crisis, there were also a number of occurrences just after the March 2009 low and in the years since.
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May 2, 2022
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“Take a simple idea, and take it seriously.” – Charlie Munger
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Futures were modestly positive for most of the overnight session but have weakened as we get closer to the opening bell. After a day like last Friday, it’s all but guaranteed that we’re likely to see continued volatility today. As they say around the roulette wheel, “Round and round it goes. Where it stops nobody knows.”
Economic data at 10 AM will also be a big factor in where the market trades today, but the looming Fed meeting mid-week will be on everyone’s mind. While the current rate hiking cycle has already been called the most aggressive in a generation, it’s important to remember that the Fed has only hiked 25 bps so far. That will change this week as a hike of at least 50 bps is pretty much fully priced in. The most ironic aspect of it all, though, is that after months of delay, the Fed is starting to ramp up the pace of hikes just after a negative Q1 US GDP print, slower than expected economic data, and even weaker data in China and Europe.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), economic data in China and Europe (pg 5), as well as a recap of PMI data for April (pg 6).
It’s often said that the stock market is one of the only places where investors don’t like bargains. In other words, when the market is rallying investors love stocks, but when it declines, investors can’t get out fast enough. Warren Buffett is one investor who has bucked the conventional approach of many investors and consistently used weakness as an opportunity. His actions in Q1 were a perfect example. In this weekend’s annual meeting, one slide that stood out was the breakdown of Berkshire Hathaway’s equity purchases during the quarter. Of the nearly $52 billion in purchases made by Berkshire in Q1, just under 80% of it occurred during the highlighted period in the chart (from 2/21 through 3/15) when prices in the quarter were at their weakest.
It’s also worth keeping in mind what Berkshire was buying during the quarter. It wasn’t growth stocks that were down the most. Instead, it was mostly in stocks with reasonable valuations like Chevron (CVX). Occidental (OXY), Alleghany (Y), HP (HPQ), and even Apple (AAPL).
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Apr 29, 2022
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Bespoke’s Quote of the Day: “Risk comes from not knowing what you’re doing.” – Warren Buffett
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It’s not looking like a positive close to the week with futures solidly in the red following negative reactions to earnings from Amazon.com (AMZN) and Apple (AAPL). With the Fed announcement looming next week, investors are likely to be a bit apprehensive ahead of the meeting.
In terms of economic data, the week is closing off on a busy note. Employment Cost Index for Q1 came in much higher than expected at 1.4% compared to forecasts for an increase of 1.1%, and it was the highest level since at least the mid-1990s. Personal Income and Personal Spending also topped expectations. Still upcoming, we’ll get an update of Chicago PMI at 9:45 and Michigan Sentiment at 10 AM.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), inflation in Europe (pg 5), and prior quarters whereAMZN gapped down sharply in reaction to earnings (pg 5).
It’s been quite a week for US stocks. While both the Russell 2000 (IWM) and Nasdaq 100 (QQQ) made marginal new lows this week, the S&P 500 (SPY) managed to hang on to its lows from earlier this year. The fact that equities were quick to bounce following those breakdowns was encouraging, but with futures in the red to kick off the last trading day of the month, these will be critical levels to watch throughout the day.
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Apr 28, 2022
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Bespoke’s Quote of the Day: “Your time is limited, so don’t waste it living someone else’s life.” – Steve Jobs
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Wouldn’t you just love to be on the Fed right now? As the FOMC is in the early stages of what is expected to be its most aggressive rate hiking cycle since the early 1980s, the first read on Q1 GDP not only came in weaker than expected but it actually declined more than 1.4%. Whether or not they put themselves in this position in the first place or not, we don’t envy the place they are in now. Other economic data this morning was mixed. Personal Consumption came in weaker than expected (2.7% vs 3.5%) while the GDP Price Index rose more than expected (8.0% vs. 7.2%). Jobless claims were right in line on an initial basis but came in ever so slightly higher than expected on a continuing basis.
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), take a look at the collapse in the yen (pg 4), sentiment in Europe (pg 5), and then a look at 2%+ gaps higher in the Nasdaq 100.
Many of you liked it the last time we did it, so this morning we are bringing back our little game to test your chart reading abilities and see how good of a technical analyst you are. Take a look at the chart below. It’s a one-year stock chart of a US company in the period spanning August 2020 through August 2021. Looking only at the chart pattern do you think the stock was higher or lower six months later? Make a decision and click on one of the buttons below to find out if you picked the right trade (the answer will appear in a new window). Good luck!
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Apr 27, 2022
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
Bespoke’s Quote of the Day: “I much prefer the sharpest criticism of a single intelligent man to the thoughtless approval of the masses.” – Johannes Kepler
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6,999 years ago today, the Universe was born. At least that’s according to German astronomer Johannes Kepler who came to that conclusion in the 1600s. Kepler’s work has been ‘revised’ in the centuries since, and it is now widely agreed that he was off by at least 10 billion years. What’s a few billion amongst friends, though? It just goes to show that facts that people take for granted in one environment can look foolish in another.
Futures are looking to recoup some of yesterday’s losses, but even at their best levels earlier this morning, we weren’t even on pace to recoup half of Tuesday’s losses. Let’s just call it the ‘two steps backward, one step forward market’. There’s been a ton of earnings news since the close yesterday, and the pace will only intensify over the next two days.
The only two economic reports on the economic calendar this morning are Wholesale Inventories which came in higher than expected (2.3% vs 1.5%), and at 10 AM we’ll get the latest read on Pending Home Sales which are expected to show a decline of 1.0%
In today’s Morning Lineup, we recap overnight events in Asia and Europe (pg 4), take a look at the rising levels of volatility in the Nasdaq 100 (pg 4), and then highlight the dollar’s rip higher in recent weeks (pg 5).
While equities are looking to gain today, the Nasdaq has declined 8.3% over just the last five trading days. Relative to history, this move hasn’t been extraordinary by any means, but it still hurts. Looking more recently at just the period since COVID first surfaced in early 2020, there have only been three other periods where the Nasdaq saw steeper declines in a five-day period.
The first two were during the COVID crash while the third occurred in September 2020 right when the Nasdaq experienced a short-term peak. What’s interesting to note about the current period is that ever since the start of 2022, we’ve started to see the intensity of five-day sell-offs start to increase.
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