Nov 12, 2021
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“Life’s tragedy is that we get old too soon and wise too late.” – Ben Franklin
First, it was General Electric (GE) and now it’s Johnson & Johnson (JNJ) which has announced that it will split up and separate its consumer business from its pharma and medical device unit. The stock is trading up 3% on the news but is still well off its recent highs from August.
The rally in JNJ has provided a lift to Dow futures along with the S&P 500 and Nasdaq, but unless equities can meaningfully build on these early gains during the trading day, all three major averages will finish the week in the red ending a five-week streak of gains.
On the economic calendar today, the only two reports are JOLTS and Michigan Confidence. The JOLTS reading is expected to show a modest decline from last month’s reading, which you may recall came in significantly weaker than expected. Michigan Confidence is expected to show a small bounce, but the key in that report will be where inflation expectations stand.
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 the S&P 500 is lower over the last five trading days heading into today, the majority of sectors have actually experienced gains during that five-day stretch. Leading the way higher, Materials (XLB) has rallied more than 2.5%, followed by Industrials (XLI), Consumer Staples (XLP), and Energy (XLE). On the downside, Consumer Discretionary (XLY) has dropped more than 3% while Communication Services (XLC) is down more than 1%. The only two other sectors that have declined are Health Care (XLV) and Technology (XLK).
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Nov 11, 2021
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“He died unquestioning, uncomplaining, with faith in his heart and hope on his lips, that his country should triumph and its civilization survive.” – Warren G Harding
In observance of Veterans Day, the Federal government and banks are closed today. That means that for today at least, stocks will not be able to fall because of rising yields. Equity futures are modestly higher this morning with the Nasdaq leading the gains. There’s no economic data on the calendar due to the holiday, and even the earnings calendar is relatively quiet.
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 one of those relatively uncommon days where it didn’t matter if you were in stocks or bonds- they both had a rough day. While the S&P 500 was down around 0.80%, long-term treasuries dropped more than twice as much as the iShares 20+ Year US Treasury ETF (TLT) fell 1.83%. Over the last ten years, there have been just 34 other days where SPY and TLT both finished the day down more than 0.75%, and in the charts below we summarize the performance of both ETFs in the day, week, and month following each prior occurrence.
Starting with SPY, the day after the 34 prior occurrences its median gain has been 0.17% with gains 57% of the time which is better than the average one-day performance for all one-day periods over the last ten years. However, as you move out over the next week and month, median performance following these days where both SPY and TLT were down 0.75% or more, returns have actually been negative and well below the long-term average. In fact, both one week and one month later, SPY was higher less than half of the time.
Although SPY has tended to show weaker than average performance over the following week and month, TLT’s median one-week and one-month performance has been better than average. In fact, one month following the 34 prior occurrences, TLT only fell five times.
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Nov 10, 2021
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“Success or failure in business is caused more by the mental attitude even than by mental capacities.” – Walter Scott
After days where it seemed as though stocks could only go up and yields could go down, major US indices are poised for their second straight day of losses while the yield on the 10-year is up from its lowest levels since late September. Coming into today’s CPI report for October, there was some upside risk based on certain aspects of yesterday’s PPI report, and that definitely showed through in the numbers as headline CPI rose 0.9% versus forecasts for an increase of 0.6%. Core CPI rose 0.6% which was also significantly higher than the 0.4% forecasts. On a y/y basis, headline CPI rose 6.2%. Outside of October 1990 when y/y CPI rose 6.3%, this reading hasn’t been higher since the early 1980s.
Due to the Veterans Day holiday tomorrow, jobless claims were released a day early this week, and the results were also not what the market wanted to see as both initial and continuing claims came in higher than expected. In reaction to both reports, equity futures have dropped modestly and yields are higher but not to a large degree either way.
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 decline in the 10-year yield over the last several days (before today) caught a number of investors off guard. After rebounding off its summer lows right around 1.25%, the yield ran up to just above 1.7% in late October. Just as the taper started to show up on the horizon, though, the upside momentum in yields stalled out and quickly started to reverse even as inflation data continues to run hot.
Since the 10-year yield peaked on 10/21 just above 1.7%, it has seen a rapid decline falling to 1.44% yesterday. While it’s a bit of an arbitrary time window, the current 13-trading day decline of 27 basis points (bps) in the 10-year yield is the second largest over the last 12 months behind only the 28 bps decline seen in mid-July. That decline actually came right around the low point in yields for the summer. How markets react to today’s much higher than expected October CPI report will likely give us clues as to whether or not the same reversal in yields plays out this time around too.
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Nov 9, 2021
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“It’s such a fine line between stupid, and uh…” – David St. Hubbins, Spinal Tap
It’s a mixed morning in the equity markets as the S&P 500 and Dow are indicated to open modestly lower while the Nasdaq is indicated higher. In the case of the Nasdaq, it’s looking to extend its “Spinal Tap” streak of eleven straight days of gains to a full dozen. The rally in crypto has continued again this morning with both bitcoin and ether trading at record highs. In the treasury sector, 10-year yields are back down to 1.46%.
In economic data, PPI came in right in line with expectations at the headline level (0.6%) and slightly weaker than expected at the core level (0.4% vs 0.5%).
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.
With a gain to kick off the week yesterday, the Nasdaq extended its streak of positive days to eleven. There hasn’t been a streak longer than this since July 2009, and the only one that was as long was back in December 2019. Going back to 1980, the current streak is just the 15th that has lasted at least eleven trading days. Of those, the majority (8) of them were in the 1980s, including the longest which stretched out to 17 trading days in early 1985. Since 1990, there have only been six other streaks of eleven or more trading days, and only two of those have occurred since 2000.
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Nov 8, 2021
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“If you wish to increase your success rate, double your failure rate.” – Thomas Watson
There’s a modestly positive bias to the equity market following a week where new highs were seen across just about every major US average. This morning, the big moves have been seen in the crypto markets where ether is at record highs, and bitcoin is testing its highs from late October.
There haven’t been any major earnings reports yet to speak of today, but that pace will pick up again after the close with PayPal (PYPL) leading the charge. Economic data is also getting off on a slow start to the week, but Tuesday’s PPI and Wednesday’s CPI will be the most important reports of the week to watch.
In terms of Fedspeak today, a number of officials (including Powell) are scheduled to speak throughout the day.
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.
As mentioned above, it was a banner week for the US equity market as just about every major index touched and closed out the week right at record highs. In terms of the Russell 2000, Nasdaq, and S&P 500, last week was the first time since early February that all three of these indices had record closing highs on the same day. For all three indices, the recent moves are all starting to look extremely steep, and while they’re great for anyone who is long the market, they won’t last forever.
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Nov 5, 2021
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“I don’t mind going back to daylight saving time. With inflation, the hour will be the only thing I’ve saved all year.” – Victor Borge
First things first. Don’t forget to set your clocks back Saturday night before going to bed. Now, on to the markets. Futures are higher again this morning as the S&P 500 looks to close out a perfect week with record closing highs every single day. Last night was a busy one for earnings, so the positive tone in futures suggests that despite some misses, investors were pleased with what they heard. Now the focus shifts to the October jobs report where economists are expecting just over half a million new jobs. The last two reports have had some pretty significant misses relative to expectations, so we’ll see if the trend breaks this month.
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 performance of the semiconductor sector lately has been stunning. After successfully testing its 200-DMA in mid-October, the semiconductor sector ETF (SMH) has surged to record highs. More recently, the Philadelphia Semiconductor Index (SOX) has rallied more than 1% every day this week.
With just 36 prior streaks of four or more days in the last 25 years, these kinds of streaks don’t happen very often but they aren’t unprecedented. Streaks of five or more days are much more uncommon though. There have only been 12 prior streaks where the SOX was up 1%+ for five straight days. Currently, the SOX is indicated to open up about 0.60%, so an extension of the current streak to five can’t be ruled out at this point, although the jobs report will have a say in that. Moving on, there have only been four prior streaks where the SOX was up 1%+ for more than five straight days, and all of those streaks ended at six trading days.
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