Nov 29, 2021
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“The ability to concentrate and to use time well is everything.” – Lee Iacocca
Markets are looking to recover a chunk of Friday’s losses in early trading this morning. Equity futures are up across the board, but the Nasdaq is leading the way higher erasing about 40% of Friday’s losses. Crude oil is also bouncing back above $70 with a gain of over 5%, copper is up 1.5%, and the yield on the 10-year US Treasury is up 6 basis points (bps) to 1.54%. In crypto, bitcoin is trading just below $57K gaining nearly 4% while Ethereum is trading just above $4,300.
Investors are trying to make sense of the latest Omicron Covid strain, but at this point more seems to be unknown than known. Clouding things even more, we’re unlikely to have definitive answers in the immediate future. Early reports have suggested that symptoms from this latest strain have been mild and that vaccines are still likely to provide good protection from severe illness, but that it is also more transmissible. While demographics may be a factor behind the mild symptoms (younger population in South Africa), if that did turn out to be the case overall, it would certainly be a positive. Even if the best-case scenario does play out and Friday’s panic proves to be a massive over-reaction by markets and governments around the world, the short-term impact of restrictions on activity and international travel around the world will have some economic impact. Just last night, Japan announced that it will ban the entry of foreign travelers joining Israel, which made the same announcement last week.
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.
Whether you’re looking at small caps or large-cap equities, it’s a tale of two markets this week. In the small-cap space, the Russell 2000’s break out earlier this month looks increasingly like a fakeout, and rather than a new leg higher, the question for small-caps is whether they can hold support at the uptrend line from the summer lows and not break down. For large caps, the S&P 500 still remains well above its breakout level from the summer high before September’s sell-off. Support for the S&P 500 doesn’t come into play until the 50-day moving average which is just above the 4,500 on the index and $450 for SPY.
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Nov 26, 2021
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“Anytime anybody tells me the trend is such and such, I go the opposite direction. I hate the idea of trends.” – Clint Eastwood
Prices are being slashed across the investment spectrum this black Friday morning as concerns over the new COVID variant detected in South Africa has investors reigning in risk. It’s important to stress that very little is known at this point about this latest strain, including whether it can evade vaccines or how severe it is relative to other mutations. Therefore, it’s hard to make any informed investment decisions at this point. Historically speaking, chasing a rally or selling into a sharp decline (especially on a very illiquid trading day) rarely ends up being profitable, but that isn’t stopping a lot of people this 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 inflation concerns have shown no signs of abating in November, crude oil prices have been weak and broken some key support levels. Today’s decline of over 5% puts WTI on pace for its worst day since July, and in the process, it has traded below its summer high, which was a level that acted as support earlier this week. This latest break of support follows the break of the trend line that was broken earlier this month, where the subsequent bounce failed right as WTI traded back towards its trend line.
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Nov 24, 2021
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“Those who are not grateful soon begin to complain of everything.” – Thomas Merton
If you were expecting a quiet day in the markets ahead of Thanksgiving, you may want to think again. While we got most of the earnings data out of the way yesterday (with some big losers), today we’ll be squeezing in three days worth of economic data including Jobless Claims, Wholesale Inventories, GDP, and Durable Goods at 8:30. Then, at 10 we’ll get Personal Income and Spending as well as Michigan Confidence. Don’t worry, though, there’s more! At 10:30, the DoE will release weekly oil inventory data, and then at noon, the EIA will release Natural Gas inventory data. At 1 PM, Baker Hughes will release the weekly rig count, which usually comes out on Friday. Then, to cap things off, at 2 PM, the FOMC will release the minutes from its latest meeting, and then after that ‘feast’ of data, we’ll all need a nap!
Futures are lower heading into today’s data deluge but off their overnight lows. With all the data releases, though, we’re likely to see some back and forth action with each one. Happy Thanksgiving!
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 it hasn’t been a positive week for the Nasdaq, if you’ve been long the index this year, you have a lot to be thankful for as the index is still up over 20% YTD. While 20% is nothing to sneeze at, going back to 1972, this year would be the 17th year in 50 where the Nasdaq was up 20%+ YTD through Thanksgiving. Looking ahead, the index’s median performance from Thanksgiving through year-end was a gain of 3.05% with positive returns three-quarters of the time. That compares to a median gain of 2.44% and positive returns 67% of the time for all years since 1972. So, while the Nasdaq has historically closed out the year on a positive note, performance in years that were already strong has been even a little bit better.
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Nov 23, 2021
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“The individual investor should act consistently as an investor and not as a speculator.” – Benjamin Graham
We’re seeing a mixed tone in equity futures this morning after a pretty significant negative reversal in equities yesterday. Continuing the trend from yesterday, Dow futures are indicated slightly higher, S&P 500 futures are flat, and the Nasdaq is lower, but all three indices are off their overnight lows. While earnings season unofficially ended last week, it’s been a busy morning for earnings as companies squeeze in results today ahead of the Thanksgiving holiday. In terms of investor reactions to the report, it has been mostly negative with stocks like Abercrombie (ANF), Best Buy (BBY), Urban Outfitters (URBN), and Zoom (ZM) all down between 5% and 10%.
Where the real action has been the last two days is in the Treasury market, especially the two-year where the yield is on pace for a two-day increase of 14 basis points (bps). If these levels hold through the end of the day, it would mark the biggest two-day increase in the two-year yield since March 2020.
In economic news, European flash PMI readings for the month of November were released and came in better than expected at the headline level despite the rising COVID case numbers. Internals of the reports, however, were not quite as strong. The US calendar today also includes flash PMI readings for November as well as the Richmond Fed. Next week will be an extremely packed calendar as it will be the last day of economic releases for the week.
Lastly, in what was a widely expected move this morning, the US announced that it would release some oil from the Strategic Petroleum Reserve in coordination with other countries including China, India, Japan, Korea, and the UK. Given the move was widely expected, the market reaction has been muted.
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 shown in the charts below, while value stocks were correcting last week (charts on left), the rally in growth stocks went on unabated, and yesterday’s reversal appears to have been a bit of catch-up trade.
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Nov 22, 2021
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“No man ever steps in the same river twice, for it’s not the same river and he’s not the same man.” ― Heraclitus
It’s a holiday-shortened week, but there is some excitement this morning as reports suggest that Biden has made his decision on who will be the Fed chair in the next term. US futures are higher this morning on little news, but over in Europe, COVID trends continue to move in the wrong direction. German Chancellor Merkel described the current situation as dire, as the country’s health minister said Germans will be ‘vaccinated, cured, or dead’ by Spring. Case counts in the country continue to surge with new cases coming in at a similar rate to the UK while other countries in the region continue to see their case counts spike higher as well.
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 equity futures are off to a positive start to the week, but the same can’t be said for the crypto space where prices are down 3% or more across the board. Bitcoin is currently trading down closer to 4%, and this morning’s decline follows a weekend rally that stalled out just below the 50-day moving average (DMA). As shown in the chart below (and the enlarged portion of the last week), after dropping below its 50-DMA for the first time since October 1st last week, bitcoin rallied on Saturday and into Sunday. That momentum wasn’t able to carry into the new trading week, though, and at current levels, the world’s largest crypto is on pace for its lowest closing price since mid-October.
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Nov 19, 2021
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“Failure is simply the opportunity to begin again, this time more intelligently.” – Henry Ford
After the near-complete shutdown last year and the gradual re-opening of the economy in fits and starts around the world since then, most people probably thought we would never return to the days of lockdowns again, but Austria and other parts of Europe are changing that mindset this morning. In Austria, two regions of the country are locking down beginning on Monday by closing non-essential businesses and schools for a month. Whether these lockdowns extend to the entire country remains to be seen. Outside of Austria, parts of Germany have also announced that bars and restaurants will be temporarily closed in an effort to halt the spread. With case counts rising in other parts of Europe as well, a spread of these restrictions to other parts of Europe can’t be ruled out.
Not surprisingly, the new restrictions on activity being placed in Europe have put pressure modest pressure on equities in the region and here in the US this morning while treasury yields decline and crude oil is down sharply falling to its lowest level since October 1st. The weakness in equities this morning isn’t all one-sided, though. Re-opening stocks are under pretty significant pressure and the Russell 2000 is down over 1%, while ‘work from home stocks’ have been catching a bid with the Nasdaq indicated to open higher.
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 charts below are what have government officials in Europe and investors around the world on edge. Starting with Germany but spreading to other countries, COVID case numbers across major European economies have been surging in recent weeks. As shown in the chart at left, case numbers in Europe as a whole have been surging and are now well back above levels (per million people) in the US (where case levels have also started a new leg higher). Within the European continent (right chart), Germany has been leading the way higher in terms of total new case counts which are actually at a new high for that country, but if you look a little closer at the chart, you can also see that case numbers in France, Italy, Spain, and Sweden have also started to trend higher.
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