Feb 7, 2022
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“I have never in my life envied a human being who led an easy life. I have envied a great many people who led difficult lives and led them well.” – Theodore Roosevelt
After a lower start overnight, futures have slowly picked up steam this morning and are now in modestly positive territory across the board with the Nasdaq leading the way higher. Overnight, economic data in Asia was on the weak side with China’s Services PMI missing expectations while Japan’s index of Leading Indicators decelerated relative to December.
Here in the US today, the only economic report on the calendar is Consumer Credit at 3 PM Eastern. On the earnings front, key reports after the close today include Amgen (AMGN), Tenet Healthcare (THC), and Simon Properties (SPG).
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.
If you talk to just about any investor lately, they’ll tell you that it has been a difficult year in the market. Putting the recent moves into perspective, it could have been a lot worse. Friday’s close marked 23 trading days since the S&P 500’s last closing record high, and during that span, the S&P 500 is down 6.2%. When comparing the last 23 trading days to other 23 trading day periods since 2000, there have been plenty of periods where the market saw much larger declines. Prior to the current period, the last time the S&P 500 declined 6% over a 23 trading day period was in late September 2020, but six months before that we saw what was the largest decline in a 23 trading day period since the Great Depression when the S&P 500 lost more than a third of its value from its peak on 2/19/20 to its low on 3/23/20.
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Feb 4, 2022
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“Always buy your straw hats in the Winter” – Benjamin Graham
There’s a lot of ‘straw hats’ on sale in the market lately, but the question is how far they are from their ‘final markdowns’. Futures were much higher overnight, but have been drifting lower ever since Europe opened for trading. Amazon.com (AMZN) is still up over 10% following its earnings report after the close yesterday, and that’s helping to keep Nasdaq futures marginally higher this morning while the S&P 500 is flat and Dow futures are down. One asset not on the sale rack is crude oil as WTI is firmly above $90 and looks headed to triple-digits.
The big market event of the morning was the January Non-Farm Payrolls report, and after two months where economists were expecting a strong report and received much weaker than expected news, today they were expecting a weak report due to Omicron, but as luck would have it, the results came in much stronger than expected. The initial reaction in the markets was for higher rates and lower equities, so it looks like bulls may be heading into the weekend disappointed.
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 market couldn’t keep bouncing forever, but even after the rally off of last week’s lows, yesterday’s decline was a tough one for bulls to stomach. As shown in the chart below, while the bounce brought the S&P 500 back above the 200-DMA – a level it still trades above now – it stalled out just below the 50-DMA, and yesterday’s sell-off brought it back below the highs from late last summer. How the S&P 500 trades today following AMZN’s strong report will likely say a lot in whether yesterday’s weakness is the beginning of another leg lower.
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Feb 3, 2022
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“There are decades where nothing happens, and there are weeks where decades happen.” – Vlad Lenin
Good Morning Subscriber,
This earnings season, you could even say there are after-hours sessions where decades happen. Between earnings reports from Netflix (NFLX), PayPal (PYPL), and Meta Platforms (FB) last night, some very large market cap stocks have lost a fifth of their value overnight. These kinds of declines in reaction to one quarter’s worth of corporate performance are not exactly normal market events, and in the case of FB, today’s decline could be the largest single-day decline in market cap for a single stock in history! These are some unprecedented moves, and we’re not even halfway through earnings season!
We have a busy day of economic data ahead as well with Non-Farm Productivity, Unit Labor Costs, Jobless Claims, ISM Services, Durable Goods, and Factory Orders. Jobless Claims were already released and came in right around expectations while Non-Farm Productivity topped forecasts and Labor Costs were lower than expected. Following last month’s weaker than expected ISM Services report, the headline index is expected to show further deceleration this morning but still come in at a healthy reading of around 60.0. Durable Goods and Factory Orders, meanwhile, are both expected to show declines of less than 1%.
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 looked like an encouraging day for the Nasdaq 100 as the index traded and closed back above its 200-DMA, but that’s unlikely to last long as the index is expected to gap down more than 2% at the open this morning putting it back below its 200-DMA.
Going back to 2000, today will likely be the Nasdaq 100 ETF’s (QQQ) 106th downside gap of more than 2%. In the charts below, we show its performance from the open to close on the day of prior downside 2%+ gaps broken out by weekday along with the frequency of positive returns for each day of the week. Overall, the best day for QQQ to gap down 2% has been Wednesday as it has averaged a gain of 1.52% from the open to close with positive returns 54.5% of the time. Average intraday gains on Tuesday haven’t been nearly as strong (0.42%), but QQQ has been more consistent to the upside with gains 60% of the time. Unfortunately, Thursdays haven’t been a very good day for QQQ to gap down 2%+. On those 17 prior occurrences, QQQ’s average performance from the open to close has been a decline of 0.02% with positive returns less than a third of the time.
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Feb 2, 2022
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“It is an old device in Wall Street—to change the colour of the certificates in order to make them more valuable.” – Edwin Lefèvre
Everyone knows that stock splits are completely meaningless when it comes to a company’s fundamentals, but yet companies continue to split their stocks anyway, and more often than not, the price of a stock gets at least a short-term boost from the announcement. The latest example was last night when Alphabet (GOOGL) said they would split the stock on a 20-1 basis. So rather than trading for around $3,000 per share, GOOGL will trade for around $150 per share post-split.
Again, the split means nothing in terms of GOOGL’s fundamentals, but it does make the stock more palatable for investors looking to add a position. In a world where most brokerage firms now offer fractional shares, a company’s share price should be even less of a factor, but from the psychological perspective of an individual investor, it feels better to own a few shares of a company’s stock rather than a fraction of one share of a company’s stock. GOOGL’s split wasn’t the only news for the stock last night. The company also reported a very large earnings beat, and while the stock split is no doubt a contributing factor behind today’s move, the earnings results are the primary driver of today’s move.
GOOGL’s earnings results are helping to push futures in the green this morning as the Nasdaq is indicated to open up by more than 1%. S&P 500 futures are also firmly higher, while the Dow, where GOOGL is not represented (at least for now) is only looking at fractional gains. Besides GOOGL. strong results from AMD are also contributing to the positive tone in tech, but that strength has been offset from weak results from PayPal (PYPL) and Starbucks (SBUX).
In economic news, the only report of the day is ADP Private Payrolls, and it was a big dud. While economists were forecasting an increase of nearly 200K jobs in January, the actual reading was a decline of 301K as the Omicron wave that spread across the country caused major – although likely temporary- disruptions to the economy.
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 have seen some big moves over the last five trading days as the Nasdaq 100 (QQQ) has rallied close to 6%. Behind QQQ, the S&P 100 (OEF) is also up over 5%. At the other end of the spectrum, the three weakest indices are all connected to small caps. In other words, the latest bounce has been driven completely by mega-caps. Even after the market has started to dig itself out of the January hole, every major index ETF remains below its 50-day moving average (DMA) and nearly half are still oversold, including the Nasdaq 100.
Turning back to GOOGL, the stock is currently indicated to open up by a little over 10% this morning which would be the 9th time in its history that the stock gapped up over 10% in reaction to earnings with the last occurrence all the way back in October 2015. In the prior eight periods where GOOGL gapped up over 10% in reaction to earnings, the stock continued higher during the trading day five out of eight times for a median gain of 0.19%.
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Feb 1, 2022
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“To be successful in life, you must get in the habit of turning negatives into positives.” – George Foreman
The last two trading days of the month helped to soften the blow, but a lot of people are probably happy to turn the page on January and start a new month. Futures are mixed to kick off the month with the S&P 500 and Dow futures modestly lower while the Nasdaq is slightly higher. Major economic reports today will include the ISM Manufacturing report, Construction Spending, and JOLTS which will all be released at 10 AM. In the case of all three reports, this morning’s prints are expected to show some deceleration relative to last month’s readings.
We’ve already seen a decent number of earnings reports this morning with UPS trading up sharply after reporting an earnings triple play, but this afternoon will be even busier with Alphabet (GOOGL) headlining. Other notables will include General Motors (GM), Starbucks (SBUX), PayPal (PYPL), and AMD.
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 was looking at a loss of more than 10% heading into the final trading day of January, but Monday’s 3%+ rally moderated the decline to a still steep 8.98%. With a rally of more than 6% in the month’s last two trading days, January was only the sixth month in the Nasdaq’s history where the index rallied more than 5% in the final two trading days of the month. Before January, the last occurrence was more than twenty years ago in May 2000. As shown in the table and chart below, back around the peak of the dot-com bubble there were actually three different occurrences in the span of less than a year, and before that, you had to go back to October 1987. The only other occurrence was in March 1980.
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Jan 31, 2022
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“Success is not final; failure is not fatal: It is the courage to continue that counts.” – Winston Churchill
US equity futures are trading down towards their lows of the morning after trading higher most of the night. A key concern for the market continues to be – you guessed it – the Fed, and comments from Atlanta Fed President Raphael Bostic suggesting the possibility of a 50 basis points (bps) hike has some investors on edge. A read of his comments, though, shows that he only said ‘every option is in the table for every meeting’, and then went on to say that his views will follow incoming data rather than committing to some pre-set plan. With more than six weeks between now and the March meeting, there’s probably going to be a lot more headlines like this as investors look to decipher and dissect every comment from every Fed official for signs of where they’re leaning.
The economic calendar is on the light side today with Chicago PMI and Dallas Fed the only reports on the calendar. The Chicago report is forecast to show slower growth than December while the Dallas read on manufacturing activity is expected to come in right around December’s levels. Earnings data is also on the light side today, but that won’t last as the rest of the week will be one of the busiest of the earnings season.
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 the month we’ve had, there isn’t much positive to say about the equity market so far in 2022. One silver lining could be seasonality. The gauges below taken from today’s Morning Lineup show that the upcoming one and three-month periods for the S&P 500 are among the best one and three-month periods of the year. Over the last ten years, the S&P 500’s median performance from the close on 1/31 out through the next month has been a gain of 3.94% while the forward three-month return has been a gain of 5.68%. Those median performance numbers are good enough to rank in the 98th and 85th percentile, respectively, relative to all other one and three months periods of the year. Seasonal trends are only one part of the puzzle when it comes to market returns and they can easily be outweighed by other factors, but at least the market has the calendar working in its favor.
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