Jan 26, 2022
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“The path to innovation begins with curiosity.” – Robert Iger
It’s not often that one of the top stories on the lead into a mainstream show like “The Today Show” is a Fed Meeting (don’t ask us how we know), but that was the case this morning as market volatility has made its way into the mainstream zeitgeist. Futures are sharply higher this morning with S&P 500 futures trading up 1.5% and the Nasdaq up by over 2%. After dropping sharply immediately after it reported results last night, shares of Microsoft (MSFT) reversed course and are now up over 5%.
The economic calendar is light today with Wholesale Inventories at 8:30 and New Home Sales at 10 AM, but the Fed will take center stage this afternoon with its 2 PM announcement and 2:30 Powell presser.
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.
It’s been a volatile start to 2022 so far as the Nasdaq is currently on the pace for its 11th 1%+ daily move in 17 trading days so far this month. At a rate of just under 65%, this would rank as the most volatile month for the S&P 500 since March 2021 but is nowhere near the levels of volatility that were experienced during the COVID crash. While this month hasn’t been nearly as volatile as early 2020, looking back all the way to the start of 2010, there have only been a handful of other months where the percentage of daily 1% moves for the Nasdaq in a given month was higher.
Looking further back, though, investors have been relatively spoiled by the lack of volatility. During the Financial Crisis and before that, leading up to the peak of the dot-com bubble, the Nasdaq routinely experienced 1% daily moves during many months.
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Jan 25, 2022
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“The only place success comes before work is in the dictionary.” – Vince Lombardi
The rally was fun while it lasted, and after yesterday’s impressive turnaround, futures on the major averages are all pointing to declines of more than 1% in early trading. After surges in volatility like the one we have seen in the last few days if you were expecting a quick return to calm, think again. Volatility is here to stay in the near future, especially with earnings season heating up, the FOMC meeting Wednesday, and oh yeah, major geopolitical tensions around the world.
Today’s economic calendar is on the light side with Consumer Confidence and the Richmond Fed report at 10 AM. Both reports are expected to show a slight pullback relative to last month’s readings.
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’s volatility saw a surge in trading volume relative to levels of the last year. Volume in the S&P 500 tracking ETF (SPY) topped 252 million shares which was the highest level of daily volume since March 2020 right in the thick of the COVID crash. Going further back, though, there have been plenty of other periods where daily volume in SPY was much larger than yesterday’s level.
When adjusting for SPY’s price, though, yesterday saw a near-record volume in terms of value traded. Based on the closing price yesterday, roughly $111 billion was traded in SPY yesterday. The only day where a higher value was traded was back in late February 2020 when the daily dollar volume topped $114 billion.
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Jan 24, 2022
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“Control your own destiny or someone else will.” – Jack Welch
Futures were briefly in the green at the open last night, but that positive tone didn’t last long. Futures are not only in the red, but the pace of the decline has been picking up steam with S&P 500 futures down 1% and the Nasdaq down about 1.5%. There were a number of times in the last year when it felt like the market could do nothing but go up. Now you know how it feels the other way around.
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.
How steep of a drop for the Nasdaq has it been over the last several days? The chart below measures the Nasdaq’s spread versus its 50-day moving average (measured in standard deviations) on a daily basis going back to 2009. As of Friday’s close, the Nasdaq was 3.3 standard deviations below its 50-day moving average which represents the most oversold level since the second half of March 2020 during COVID crash, and since the end of the Financial Crisis in 2009, there have only been a handful of other times that the spread was wider than it is now. We covered more on this topic in today’s Chart of the Day, which will be emailed out shortly.
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Jan 21, 2022
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“The shortage of skilled workers is now so serious that it is dramatically slowing down our economy,” – Christian Duerr, Leader of Free Democratic Party in German Parliament
The quote above illustrates that shortages of labor are not just an issue facing the US economy as aging populations, an acceleration in retirements and closed borders due to COVID shrink the available pool of labor in many countries. While not necessarily a concern in the present moment, these trends are long-term challenges facing advanced economies as birth rates around the world decline.
In markets today, unlike the last two days where futures traded higher only to reverse lower throughout the trading day, they aren’t even pretending to rally as all three major indices are firmly in the red. Equity markets are currently trading at extreme short-term oversold levels, but it’s going to be hard to convince investors to take a stand on the market heading into the weekend.
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.
This year’s sell-off in the Nasdaq is really starting to rank up there in terms of the worst starts to a year for the index in its history. With a decline of 9.5% YTD, it is one of only six years where the index has been down more than 5% in the first 20 days of the year and the third sharpest YTD decline ever. The only two years that experienced a sharper YTD decline were 2008 (-11.8%) and 2016 (-10.7%).
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Jan 20, 2022
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“If you absolutely can’t tolerate critics, then don’t do anything new or interesting.” – Jeff Bezos
The set-up in pre-market futures looks similar today to what it looked like yesterday, but hopefully, the outcome isn’t. After trading up as much as 1% in early trading yesterday, the Nasdaq quickly gave up all of its gains and more throughout the trading day and finished down more than 1% by the closing bell. Economic data just released includes jobless claims and the Philly Fed. Regarding claims, both initial and continuing claims came in significantly higher than forecast, while the Philly Fed actually surprised to the upside even after the big miss from the Empire Manufacturing report earlier this week.
Recent weakness in the market is starting to show up in sentiment surveys, though. In this week’s survey from AAII, for example, just 21% of respondents reported as bullish while 46.7% were bearish. In terms of bulls, that’s the lowest reading since July 2020, and for bears it was the highest reading since September 2020.
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.
The Nasdaq made it official yesterday and reached the 10% threshold for a correction. In the post-global financial crisis (GFC) period, the current period ranks as the 14th correction for the Nasdaq with the most recent before the current one spanning mid-February through early March 2021. Overall, post-GFC Nasdaq corrections have seen an average total decline of 15.2% over a span of 53 days. The median during this period is a bit milder at 12.0% over the span of just 36 days. Going all the way back to 1970, the ‘average’ Nasdaq correction has seen a total decline of 19.5% putting them just shy of bear market territory (median: -16.6%) over a span of 75 days (median: 60 days). At just 10.2%, therefore, the current correction is still more modest than average, but at 61 days its been longer than average for the post-GFC period.
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Jan 19, 2022
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“A good first impression can work wonders.” – J.K. Rowling
Futures are attempting a bounce after yesterday’s wallop, and positive reactions to earnings from Bank of America (BAC) and Morgan Stanley are contributing to the positive tone. The only economic reports for the morning were Housing Starts and Building Permits, and both came in significantly higher than expected and at their second-highest levels since the financial crisis. The only readings that were strong for each series were in Q1 of 2021.
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.
First impressions are always important, but they’re not always accurate, and that’s the hope of bulls following the first days of earnings season. Banks kicked off the Q4 earnings season late last week, and two of the largest to report were Goldman Sachs (GS) and JP Morgan Chase (JPM). The stocks of both banks had abysmal reactions to their reports.
Following Friday’s report from JPM, the stock declined 6.15% which ranks as the worst earnings reaction day performance for the stock in at least 20 years beating out the 6.06% decline the stock experienced in January 2009 during the thick of the financial crisis. The reaction in GS to its earnings report on Tuesday wasn’t much better with the stock falling just under 7%. That was large enough to rank as the second-worst earnings day reaction for the stock behind only the 11.56% decline in April 2009 just as markets were coming out of the financial crisis.
As disheartening as a bad first impression can be, one potential bright side is that it can have the effect of resetting the bar low, and in early trading, both Bank of America (BAC) and Morgan Stanley (MS) are trading up close to 3% in reaction to their reports. Whether those gains can hold through the opening and closing bell, though, is another story.
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