Dec 7, 2021
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“I would say that financial markets are very inefficient, and capable of extremes of being completely dysfunctional.” – Jeremy Grantham
Forget about a ‘turnaround’ for now, this Tuesday is looking more like a terrific one as US futures, led by the Nasdaq, are sharply higher following through on Monday’s rally. The opening bell hasn’t even rung yet, though, so there’s plenty of time left in the day. That said, early indications are pointing higher with risk assets all trading higher, although long-term Treasury yields are moving much less higher than you would expect given the move in equity futures. Crypto assets are also in rally mode this morning as bitcoin is back above $50K, and ether is back above its 50-day moving average.
In economic data, the revision to Non-Farm Productivity was lower than expected (-5.2% vs -4.7%) while Unit Labor Costs increased more than expected (9.6% vs 8.3%).
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 Russell is indicated to open more than 1.5% higher this morning continuing what has been a volatile run for the small-cap benchmark index. So far during this sell-off from a false breakout, IWM has managed to stay within its prior trading range after falling below both its 50 and 200-day moving averages. In addition to the consistency of much higher than average volume during the last seven trading days, IWM has also had an intraday trading range of more than 2% and averaging more than 3.3% during that span. The last time IWM experienced a run of 2%+ intraday ranges for seven consecutive trading days was back in July 2020.
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Dec 6, 2021
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“I would say that financial markets are very inefficient, and capable of extremes of being completely dysfunctional.” – Jeremy Grantham
US equity futures are tentatively higher this morning with leadership in the Dow while the Nasdaq continues to lag. The economic calendar is empty today, but investors already have an eye out for Friday’s CPI report. Omicron continues to be a concern, and while there’s still a lot more we don’t know than we do know about the latest strain, reports continue to suggest that despite the higher transmissibility, its impact has not been nearly as harsh. In the crypto space, bitcoin has been relatively stable since Sunday following a sharp decline Friday night into Saturday morning.
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.
While companies valued at high multiples to revenues have been hit hard since the emergence of the omicron variant and the FOMC’s hawkish pivot just after Thanksgiving, there’s been a decent amount of disparity in performance among international markets with developed markets falling in the last week while emerging markets actually eked out gains. As shown below in the snapshot of international regional ETFs from our Trend Analyzer, the worst-performing ETF of the group was the MSCI All Country World (ACWI) which fell just over 1%. Moving down the list, at the bottom, the lone ETFs that were positive on the week were related to Emerging Markets. US equities were also a drag on performance last week. While the ACWI was down just over 1%, CWI, which is the MSCI All Country World ex-US Index was only down -0.07% on the week.
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Dec 3, 2021
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“Never confuse genius with a bull market.” – Unknown
After five days where the S&P 500 has moved up or down 1%, futures are practically flat this morning as the market tries to catch its breath from all the volatility. The quiet tone may not last long, though, as Non-Farm Payrolls was just released and came in much weaker than expected at just 210K compared to estimates for a gain well in excess of 500K. Despite the weak print, the unemployment rate was much less than expected (4.2% vs 4.5%). In terms of average hourly earnings, month/month growth was 0.3% vs 0.4%. In addition to the jobs data, we’ll be getting ISM Services, Factory Orders, and Durable Goods all at 10 AM. The initial reaction to the jobs number has been slightly positive with Nasdaq futures leading the way.
Last night, the state of New York announced five additional COVID cases related to the omicron variant, and Hawaii announced one case. At this point, all the cases appear to be mild which is encouraging. In South Africa, where the variant was first detected, the number of cases has tripled within the last three days, but thankfully, hospitalizations are not rising nearly as fast. Barely a week after the omicron variant first made headlines, there’s still a lot we don’t know about this variant, but based on data so far, it doesn’t appear to be any worse than other strains.
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 quite a week in the markets, so investors probably deserve a quiet day for a change. Check out the carnage that we’ve seen in US stocks since Thanksgiving when news of the Omicron variant first surfaced and then Powell’s hawkish pivot this week. Every major US index ET we track in our Trend Analyzer is down more than 2%, while small caps are down more than twice that. Market cap has really been a factor in market performance this week as the Micro-Cap ETF (IWC) is down close to 6% while mega-cap indices like the Nasdaq 100 (QQQ) and S&P 100 (OEF) are both down less than 2.5%.
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Dec 2, 2021
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“Our liquidity is fine. As a matter of fact, it’s better than fine. It’s strong.” – Kenneth Lay
Good Morning Subscriber,
Today marks the 20-year anniversary of the Enron bankruptcy, and if you think the last few days in the market have been lousy, it was nothing compared to late 2001 when we were in the middle of the dot-com bust, coming out of 9/11, and heading into another rough year in 2002 when Worldcom eventually collapsed as well.
Futures are higher this morning, but traders aren’t even waiting until the opening bell to raise cash as Nasdaq futures have reversed into the red and the Dow and S&P 500 have also given up much of their earlier gains. One of the main culprits behind the weakness this morning is a report from Bloomberg that Apple (AAPL) has told suppliers that demand for the iPhone 13 after the holidays may not be as strong as previously estimated. AAPL had been a bright spot in the Nasdaq over the last few trading days but is trading down over 3% in the pre-market.
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 an extremely disappointing day for small caps as the Russell 2000 rallied more than 2% intraday only to give it all back and a lot more throughout the trading day. By the time the closing bell rang, the Russell 2000 was down over 2% on the day. Since the Russell 2000 tracking ETF (IWM) launched in early 2000, yesterday was just the 9th time that the ETF saw a similar intraday rally (+2%) only to finish the day down more than 2%. Each of those days is shown as a red dot in the chart below. Despite over 20 years of trading history for IWM, all eight prior occurrences were confined to a two-month period in 2008 (six occurrences) and a three-week period in 2020 (two occurrences).
Unlike yesterday’s reversal, most of the other occurrences came well into market declines. The only exception was on 3/3/20. Interestingly enough, that occurrence also followed a period of sideways trading for the Russell where it broke out of a multi-month range (but didn’t reach a new high) only to reverse and sell-off sharply into the COVID crash. It’s unlikely the Omicron variant will cause the same sort of market turmoil that COVID initially created in early 2020, but the Fed is certainly not going to be nearly accommodative going forward as they have been since early 2020.
This morning, Russell 2000 futures are indicated higher by about 1%, but to put that in perspective, the gain isn’t even enough to bring the index back to where it was trading 15 minutes before the close yesterday.
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Dec 1, 2021
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“I am a warrior, so that my son may be a merchant, so that his son may be a poet.” – John Quincy Adams
You may think that the market has been volatile over the last several trading days, but just be thankful it’s not 1824. Back in November of that year, no candidate for President received the required majority of electoral votes in the election which forced Congress, on December 1st, to turn the election over the House of Representatives and basically choose between Andrew Jackson and John Quincy Adams. The actual winner wasn’t decided for more than two months when John Quincy Adams came out on top in early February 1825. Despite coming in second in the actual election, Adams’ victory came thanks to the backing of Henry Clay in what was called the ‘Corrupt Bargain’, and because he wasn’t the most popular candidate in the election, Adams’ presidency was largely considered to be unimpactful. Can you imagine in this political climate if the House was actually deciding an election today?
Futures are higher this morning as investors can’t decide which way they want the market to go as the S&P 500 goes back and forth between 1% losses and 1% gains in a game of ‘Loves Me, Loves Me Not’. One thing to note is that just as Monday’s 1% rally was weaker in magnitude than Friday’s drop, we’re seeing the same pattern play out today where the S&P 500 is on pace to open higher by 1.4% after Tuesday’s 1.95% decline.
In yesterday’s rout, only seven stocks in the S&P 500 finished the day higher, which was the weakest breadth reading since June 11th, 2020. Breadth in small caps wasn’t nearly as weak as the S&P 500 yesterday (more than 400 stocks traded higher), but its breadth reading on Friday was also the weakest since June 11th.
On the data docket today, the ADP Private Payroll report for November was released at 8:15 AM and came in higher than expected with little impact on futures. The only two other reports on the calendar today are Construction Spending and ISM Manufacturing which will be released at 10 AM. Powell and Yellen will also be testifying in front of the House this morning, and yesterday, the S&P 500 was only down modestly while the Nasdaq was actually higher before Powell’s testimony.
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.
2021 has really been a pretty crazy year for small-cap stocks. After doubling from its COVID lows, the Russell 2000 peaked in early March and traded in a sideways range through the summer and into the fall. After several close calls at a 10% correction, including a 9.7% drop on a closing basis through mid-July, the Russell finally broke out of its trading range in early November to trade at a new record high. From its first new high on 11/2, though, the breakout for IWM didn’t last long. After rallying an additional 3.4% in the four trading days since its first new closing high since March, it’s been a one-way trip lower for small caps ever since, and through yesterday’s close, IWM closed down 10.1% from its record high earlier this month. What the Russell couldn’t do in more than six months from early March through the end of Summer, it did in just 15 trading days this month!
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Nov 30, 2021
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“History doesn’t repeat itself, but it often rhymes.” – ???
On this day in 1835, Samuel Clemens aka Mark Twain, considered by many to be one of the greatest American writers, was born. While the quote above has often been attributed to Twain, there is no documented evidence that he ever said the last part of the quote. One variation he has written was “History never repeats itself, but the Kaleidoscopic combinations of the pictured present often seem to be constructed out of the broken fragments of antique legends.” Not quite as succinct but along the same lines.
Whoever said it, the fact that history doesn’t repeat itself, but it often rhymes is often on display in financial markets. While there’s no historical parallel to the current period of COVID and the unprecedented amount of stimulus that has been put into the system, human emotions are always a driving factor in market movements, and when faced with increased uncertainty, many investors choose to sell first and ask questions later- even if the headlines driving the market lower today (vaccines and COVID treatments potentially being less effective against the Omicron variant) were also in the market yesterday as well.
Equity futures are indicating a sizable decline at the open with the Dow leading things lower. The moves in the Energy and Treasury market have been even more notable with WTI trading under $68 a barrel, nat gas down over 6% after a 10% decline yesterday, and the yield on the 10-year down below 1.44% to its lowest level since late September.
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.
There’s been quite a bit of bifurcation in sector performance over the last several trading days. While four sectors are up over the last five trading days, they’re all among the smallest sectors in the market. At the bottom of the list, two sectors (Communication Services and Industrials) are down over 2% while another two are down more than 1.5% (Consumer Discretionary and Materials). Technology, the S&P 500’s largest sector is also down but by a more modest 0.68%.
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