Jan 5, 2022
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“Never confuse movement with action.” – Ernest Hemingway
After a snowstorm paralyzed the mid-Atlantic region earlier in the week, there’s not a lot of movement on roads in the Northeast this morning, but it is nothing compared to what drivers faced in the Virginia area. Futures are generally stalled out this morning as well with Dow and S&P 500 futures flat on the morning, while Nasdaq futures are firmly in the red, pointing to more weakness ahead for tech and growth stocks.
The major economic data release of the morning was the ADP Private Payrolls report which came in at 807K and was nearly double consensus expectations, and now the focus will shift to FOMC minutes from the December meeting at 2 PM Eastern.
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’re only two trading days into the year, but already there’s been a lot of action. Within the S&P 500, more than one hundred stocks have moved 5% YTD (72 stocks up 5%+ and 30 down 5%+). At the sector level, the moves have also been monstrous. The Energy sector is up 6.66% (welp) while Financials has rallied 3.88%. For both sectors, the YTD gains already rank as the best two-day starts to a year since at least 1990. On the downside, three sectors have also declined at least 1% with Health Care leading the way lower falling by 2.35%.
With 9.01 percentage points separating the best and worst-performing sectors, the YTD performance gap after two trading days is one of the widest since 1990. The chart below shows the performance gap between the best and worst-performing sectors on a YTD basis after just two trading days. During this span, the average gap has been 5.2 percentage points, but the current gap of just over 9 percentage points is the widest since 2002 when 9.36 percentage points separated the performance of Technology (+8.19%) and Health Care (-1.16%). The widest performance spread between two sectors after just two trading days was in 2001 when 18.7 percentage points separated the 10.2% rally in Telecom Services from the 8.5% decline in Utilities. 2001 was also a year when the Fed announced a surprise rate cut as the dot-com bubble was bursting. Don’t think we have to worry about one of those coming any time soon.
Turning back to the Energy sector, not only is its 6.66% YTD gain the best for that sector since 1990, but it is also the best two day start for any sector since 2002. That’s a lot of Energy!
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Jan 4, 2022
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“While you’re saving your face, you’re losing your ass.” – Lyndon Johnson
Futures are modestly higher this morning despite more record numbers of Covid cases as investors appear to be looking past the negative headlines and forward to a quick peak and receding of the current wave. Crude oil is modestly higher this morning ahead of the OPEC+ production decision later today. The sell-off in treasuries continues as the 10-year yield is up another three basis points to 1.66%. In the crypto space, bitcoin is up just over 1% to around $46,500. On the economic calendar today, the only major report of note is ISM Manufacturing which is forecast to pull back less than a point from last month’s reading of 61.1.
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.
Covid cases in the United States have reached record highs in recent days as the Omicron variant runs rampant around the United States and the world. Between Americans traveling less at the margin, airlines unable to fully staff flights, and winter weather canceling flights, air travel has been impacted. That should negatively impact the stocks of airlines, but in yesterday’s trading, the US Global Jets ETF (JETS) closed at its highest level since the Omicron variant first started making headlines over Thanksgiving.
In markets, it’s always a good sign when stocks stop going down on bad news, and while some of yesterday’s strength in airlines could have been tied to the drag of tax-loss selling no longer being a factor with the turn of the calendar, the fact that airlines stocks made a higher low back in mid-December and are now making a higher high is a trend to watch.
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Jan 3, 2022
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“For last year’s words belong to last year’s language and next year’s words await another voice.” – T.S. Eliot
It’s a new year, but things look a lot now like they looked in 2022 with markets in rally mode and COVID cases continuing to surge. There’s little in the way of catalysts driving this morning’s rally, and outside of the US, many international markets were closed in observance of the new year. The economic calendar is light today with Markit’s final read on the manufacturing sector scheduled for release at 9:45 while Construction Spending is on tap at 10 am.
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.
For the next several minutes, every sector is on an equal footing with respect to year-to-date performance, but below we wanted to provide a last look at where things stood to close out 2021. Topping the list in terms of sector performance was Energy (XLE) with a gain of more than 50%. Despite the strong year, though, Energy was one of just three sectors to finish below its 50-day moving average (along with Financials-XLF and Communication Services-XLC). Real Estate (XLRE), on the other hand, was the second-best performing sector of 2021, but it finished the year on a positive note gaining over 3.5% in the final week of the year and at more overbought levels than any other sector. At the other end of the spectrum, Communication Services, Consumer Staples (XLP), and Utilities (XLU) were the only three sectors to finish the year up less than 20%, but of those three, strong finishes for both Utilities and Consumer Staples left those two sectors among the most overbought of all the sectors.
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Dec 31, 2021
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“Time sometimes passes quite quickly.” – Jimmy Page
With a decline into the close yesterday and modestly weaker futures this morning, US equities are limping into the close of 2021 after a strong year of gains. Maybe we would have all been better off if, like many countries in Asia and Europe, markets had decided to close today in observance of New Year’s Day tomorrow. Happy New Year!
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 pretty incredible run for the market this year. It may not sound impressive at first, but through the end of the day Thursday the S&P 500 traded higher on just under 57% of all trading days this year. To put that in perspective, in sports betting, it’s practically unheard of for any professional to have a consistent winning percentage of even 55%. Not only has the S&P 500 traded higher on nearly 57% of all trading days this year, but last year (2020) more than 57% of all trading days were positive, and the year before that (2019) the winning percentage was just over 59.5%!
With this year’s 56%+ winning percentage, the last three years rank as just the second time since 1945 that the S&P 500 was up on more than 55% of all trading days for three straight years. The only other similar streak was from 2004 to 2006 (55.56%, 55.95%, and 55.78%), but during that streak, not one of the three years was as consistent to the upside as any of the last three years. Outside of one of the most tumultuous five weeks in history back in early 2020, for most of the last three years, the market has been on cruise control. Hopefully, it doesn’t run into any speed traps in 2022.
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Dec 30, 2021
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“Time sometimes passes quite quickly.” – Jimmy Page
Futures are higher but not rising as fast as the number of daily Omicron cases in the United States which has now reached the parabolic stage. Given the light volumes, it’s hard to read too much into this morning’s market moves, so we won’t try to force any narrative to what’s behind the strength. Initial jobless claims came in both below 200K and consensus expectations while continuing claims also experienced a large drop falling to 1.716 mln which is consistent with levels prior to Covid. The last economic release of the year will be the Chicago PMI at 9:45.
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.
When it comes to small-cap stocks, not all indices tracking the sector are created equal. The chart below compares the performance of the ETFs that track the Russell 2000 (IWM) and the S&P Small Cap 600 (IJR). Early on in 2021, both indices tracked each other very closely, but late in the first quarter, the two ETFs started to diverge and have continued to do so throughout the year. Through yesterday’s close, IJR was up 25.3% YTD while IWM was up just 13.9%. One lesson from 2021, therefore, is that sometimes even picking the right asset class isn’t enough. You also have to pick the right vehicle to put that investment thesis into place.
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Dec 29, 2021
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“Coaches have to watch for what they don’t want to see and listen to what they don’t want to hear.” – John Madden
After trading with a positive bias overnight, US equity futures have turned lower and are now indicated to open flat to slightly lower. Given the light flow of news and data that is typical of year-end, there isn’t much of a catalyst driving the reversal, although Samsung did announce that it would be adjusting production schedules in China due to an outbreak of the Omicron virus in Xi’an. Any indications of further disruptions to the supply chain because of rising COVID cases would be viewed negatively at the margin by the market even if they are only temporary.
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 S&P 500 is up just under 5% over the last five trading days, and the rally has been led by Consumer Discretionary (thanks mostly to Tesla) and Technology which are both up over 6%. Other sectors that have outperformed the broader market include Energy (+5.75%), Materials (+5.25%), and Industrials (+5.11%). On the downside, four sectors are up less than 4% over the last five trading days, and ironically enough, they are also the only sectors trading more than two standard deviations above their 50-day moving averages as they outperformed the market during the weakness that preceded this latest rally. Even after the big Christmas rally and the fact that the S&P 500 is right near record highs, two sectors – Energy and Financials – are still below their 50-day moving averages while Communication Services is just barely above its 50-day.
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