Mar 30, 2022
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“Damn the torpedoes. Four bells, Captain Drayton, go ahead. Jouett, full speed.” – Admiral David Farragut
In today’s edition of never put a lot of trust in headlines coming out of the Russia-Ukraine war, after yesterday’s optimistic tone regarding a potential ceasefire, reduction of Russian troops, and even the possibility of a meeting between Putin and Zelenskyy, this morning much of that optimism has been walked back as the withdrawal of Russian troops appears to have been a mirage, and Zelenskyy is claiming that Russia is sending in new forces.
Across most asset classes, we’re seeing a reversal of yesterday’s moves with US equity futures down across the board and oil trading higher. In Germany, they’re even starting to talk about the possibility of rationing natural gas.
In economic data today, the ADP Private Payrolls report was pretty much right in line with forecasts while the second revision to GDP rose 6.9% which was slightly weaker than expected.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Following yesterday’s rally and the big bounce we have seen since the recent lows, we wanted to provide a quick look at all of the major index ETFs based on market cap. Moving from smallest to largest, both the Russell Micro-Cap Index (IWC) and the Russell 2000 (IWM) have broken their downtrends that have been in place since late 2021 after making a number of higher lows. In the mid-cap space, the S&P 400 (MDY) has also made a number of higher lows and taken out its early February high, but yesterday’s rally stopped out just shy of the intermediate-term downtrend.
Moving on to the large-cap side of the spectrum (bottom two charts), both the Nasdaq 100 (QQQ) and S&P 500 (SPY) look very similar to each other (probably because they are dominated by the same companies), and yesterday’s advance in both indices took out the highs from the short-term ‘double top’ in early February.
While technicals often have a way of looking good until they don’t, we’d be remiss not to note that the technical picture for the market looks rather impressive especially when you consider the fact that inflation is rampant, the FOMC is hiking rates, and there’s a war in Europe. Paraphrasing Admiral Farragut’s comments from the Battle of Mobile Bay back in August of 1964 during the Civil War, damn the torpedoes. Full speed ahead.
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Mar 29, 2022
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“Price is rarely the most important thing.” – Tim Cook
When our alarms went off this morning, futures were indicating a mixed to positive open, but that tone has moved firmly to the side of gains following reports of progress being made in the Russia-Ukraine ceasefire talks. The Ukrainian side believes that enough progress has been made to warrant a meeting between Putin and Zelenskyy, while the Russian side has said that talks have become constructive. We’ve seen positive headlines like this in the past only to get walked back in the hours following, but given the heavy losses Russian troops have sustained, there is a stronger feeling that Russia has become increasingly eager for a way out of the war. However things ultimately play out, the market has responded with equities moving higher, and both gold and oil dropping.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Price may rarely be the most important thing, but shares of Apple (AAPL) are in the middle of an impressive winning streak with ten straight days of gains. Since the launch of the iPod in late 2001, the current streak ranks as just the fourth time that AAPL’s stock has rallied for ten or more days, and it’s the first such streak since July 2010. Of the three prior double-digit winning streaks, the only one that lasted more than ten days was back in 2003.
The chart below shows the performance of AAPL since the start of 2002, and we have included red dots to show each prior time that AAPL was up for ten or more days. Looking at where the prior streaks occurred relative to AAPL’s price trend, one occurred early in an uptrend, one was followed by a short-term pullback, and the other was right in the middle of an uptrend. So, while the winning streak for AAPL is great for shareholders, it appears to say little about the future performance of AAPL’s stock. One item we found interesting, though, is that even after the current ten-day run of gains, the current streak is the first of the four that AAPL’s trailing three-month performance was negative (-2.1%). On the 10th straight day of gains in the prior streaks, AAPL’s trailing three-month returns were 29.3% (2003), 48.8% (2004), and 27.3% (2010).
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Mar 28, 2022
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“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” – Vladimir Lenin
What was looking like a positive start to the week has taken a turn for the worse as US equity futures have given up much of their earlier gains in the last few minutes. It’s been a quiet morning so far in terms of economic data, and the only real fireworks are taking place at the short end of the Treasury curve and in the crypto space as bitcoin trades above $47K to its highest levels of the year. On the war front, Russia’s stalled advance has that country now narrowing its focus to the ‘liberation of Donbas’ so there is some optimism that talks this week could lead to some sort of peace breakthrough. It’s the last several days of what has been a very volatile quarter, so don’t be surprised to see more of it as we close out the quarter.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
US stocks are still well off their highs from late 2021 and early 2022, but in the short-run, most are either close to or at short-term overbought readings. The S&P 500 moved into overbought territory last week for the first time since January 4th, and at current levels is just shy of taking out its early February highs – a level it stalled out twice at in the first ten days of February.
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Mar 25, 2022
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“Your information sources should complement one another, and also be redundant because that gives you a way to verify what you’ve learned.” – Andrew S Grove
It almost took an entire quarter but the S&P 500 is on the cusp of its first back-to-back weekly gains in all of 2022. For the Nasdaq, a positive finish to this week would be the first back-to-back weekly gain since November. Futures are currently indicated higher, and the only economic reports on the calendar are Pending Home Sales and Michigan Confidence. Pending Home Sales are expected to bounce back modestly following January’s surprise decline of 5.7%. Michigan Confidence, meanwhile, has been one of the most disappointing economic series of the last several months as it’s well below its COVID lows and at levels last seen in late 2011 and before that the Financial Crisis.
Markets in Europe are modestly positive with the major benchmark indices up between 0.5% to 1.0%. despite weaker than expected sentiment readings in Germany and Italy, while UK Retail Sales unexpectedly declined. Treasury yields in the US are higher again today with the 10-year up to 2.36% while the 5-year is even higher at 2.40%. Crude oil is down another 2% sending WTI down to $110 per barrel, gold is modestly lower, and bitcoin is trading above $44,500.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Yesterday was a good day for the equity market, but it was especially strong for semiconductors as the Philadelphia Semiconductor Index (SOX) rallied close to 5%, and every stock in the index was up at least 2%!. In the process of Thursday’s rally, the SOX finished the day above its 50 and 200-day moving average for the first time since January and also managed to close back above its highs from last Summer (red line).
We watch the relative strength of the SOX versus the S&P 500 as it has historically been a good leading indicator of the broader market. On the positive side, yesterday’s rally broke the most recent downtrend that has been in place since mid-January, but it came up just short of taking out the high end of last summer’s range.
One thing the SOX has been this year is volatile. Over the last 50 trading days, the index has seen an average daily move of more than 2.5%. That ranks as the highest average daily change since the COVID crash (when it went much higher), and before that, you’d have to go all the way back to the financial crisis to find the last time daily volatility in the SOX was as high as it is now. In the post-dot-com era, this kind of volatility for semiconductors has been extremely uncommon.
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Mar 24, 2022
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“I may have been born at night, but it wasn’t last night” – T. Boone Pickens
We’ve had a positive tone in equity futures for most of the night and into this morning, although the magnitude of the implied gains has been waning in the last several minutes. Initial and continuing jobless claims were just released and both came in lower than expected falling to levels not seen in more than 50 years! Durable Goods Orders, however, weren’t as strong with both the headline and ex Transportation readings coming in at negative levels.
On the geopolitical front, today’s NATO summit is likely to result in some headlines later today as more sanctions will be announced. On the ground in Ukraine, Russian troops still appear to be facing much more significant than expected resistance. For more on that, check out our commentary in today’s report. The strong resistance on the part of Ukraine has been impressive and welcome, but also raises the risk of Russia taking more drastic measures to win the war, something none of us hope to see.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
After a brief period mid-month where the sector took a back seat performance-wise, Energy finds itself back on top of the leaderboard with a gain of over 8% in the last week. For the year, Energy is up nearly 40% and once again remains the only sector in positive territory for the year. For much of the year, Energy’s gain meant pain for sectors like Consumer Discretionary and Technology, but both of these sectors are currently ranked in the top four of the eleven sectors with gains of 4.2% and 2.5%, respectively, over the last week. At the bottom of the list, no sectors are down in the last week, but defensive like Real Estate, Health Care, Utilities, and Consumer Staples have lagged with gains of less than 1%. So the market has been in a bit of a risk-on mode lately. Despite their underperformance over the last week, Utilities and Health Care are two of just four sectors that are in overbought territory.
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Mar 23, 2022
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“Don’t be afraid to give up the good to go for the great.” – John D. Rockefeller
After Jerome Powell hinted at the possibility of the FOMC hiking rates by 50 bps earlier this week, Cleveland Fed President Loretta Mester became the latest Fed official to throw their hat in the ring in support of a 50 bps hike when she said that she would “find it appealing to front-load some of the needed increases earlier rather than later”. Mester is only the first of a number of Fed officials scheduled to speak today with a roster that includes Powell at 8 AM, Daly at 11:45 AM, and Bullard at 3 PM (all times eastern).
Futures are lower this morning as the Nasdaq leads the declines. There’s been no major news regarding the war in Ukraine. President Biden will be traveling to a NATO summit where the US and EU are expected to issue additional sanctions against Russia, and the White House National Security Advisor warned that the war is not going to be easy or quick. Crude oil and gold are basically flat on the morning, while bitcoin is modestly lower as it continues to trade in what has been a relatively narrow range. Volatility in nickel continues, though, with the metal rallying 15% as that market attempts to find equilibrium.
On the economic calendar, mortgage applications fell more than 8% w/w, and the only other report on the calendar for today is New Home Sales at 10 AM. That report is expected to show an increase of about 1.5% to 814K versus January’s reading of 801K and would be down just under 3% versus last year’s level.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
We have really seen some monumental moves in financial markets over the last few weeks. Since we’re talking about the Federal Reserve, the latest example includes the S&P 500’s performance in the week since last week’s hike. From the close last Tuesday before the Wednesday FOMC announcement, the S&P 500 has rallied 5.85%. Going back to 1994 when the FOMC first started announcing its policy decisions on the day of the meetings, the S&P 500’s performance in the five trading days from the close on the day before last week’s announcement has been stronger than comparable time periods following any other rate hike. Heading into this hike, the S&P 500 was trading down further from its 52-week high than nearly every other rate hike since 1994, so the performance over the last week has helped the market to dig itself out of the hole.
The chart below shows the five-day performance of the S&P 500 following every prior rate hike announcement since 1994. Overall, the average five-day return of the S&P 500 following the 41 rate hike announcements has been a decline of 0.08% with positive returns less than half of the time (44%). The current period is easily the strongest on record, and the only two other periods where the S&P 500’s performance was even close were in March 2000 and before that June 1999. Granted, the S&P 500 was down sharply ahead of this hike, but any time March 2000 is the closest comparison you can find, that’s a comparison bulls don’t want to see.
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