Nov 4, 2021
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“The riskiest thing we can do is just maintain the status quo.“ – Bob Iger
Commodities are generally trading higher this morning, while treasury yields are lower. Equity futures are little changed but indicated higher as investors digest another busy batch of earnings reports since the close last night. Following the announcement of the taper yesterday afternoon, equities have taken the news, which was entirely expected, very well.
Economic data just released showed a larger than expected drop in initial and continuing jobless claims. Non-Farm Productivity was weaker than expected while Unit Labor Costs rose more than expected.
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.
Just like the US, stocks in Europe have consistently been hitting 52-week highs after breaking out above their Summer highs last week. Like the S&P 500, the STOXX 600 has been higher for five days in a row and is on pace for its sixth straight day of gains today. While the STOXX 600 has been performing in line with the S&P 500 on a nominal basis, after adjusting for the changes in the dollar, US stocks have been steadily outperforming in recent weeks. The chart below shows the relative strength of the S&P 500 vs the STOXX 600 (in dollar terms) over the last year. While stocks in Europe were outperforming the S&P 500 for the first half of 2021 (falling line in the chart below), ever since June, it has been US stocks that have been leading.
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Nov 3, 2021
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“It’s amazing what you can accomplish if you do not care who gets the credit.” – Harry S. Truman
It’s Taper Time. At least that’s what most investors are expecting to hear this afternoon when the FOMC releases its policy statement and chair Powell holds his press conference. The only questions now seem to be when it will start and how long it will take to completely wind down. A delay in the start to December would be considered dovish at the margin while any plan to wind asset purchases down in less than six months would be taken as a hawkish stance. In addition to asset purchases, investors will be looking for signs of when Powell and the FOMC is thinking the first rate hike will take place (the current assumption is for the end of 2022).
Outside of the FOMC, the October ADP Private Payrolls report came in better than expected, and ISM Services will be released at 10 AM. Besides the economic and earnings flow. throughout the day, market watchers will be trying to assess what impacts last night’s election results will have on policy coming out of Washington.
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 number of major averages hitting record highs yesterday, one area of financial markets that has been taking a breather over the last week is commodities. Of the commodity-related ETFs in our Trend Analyzer, every single one of them with the exception of the DB Agriculture Fund (DBA) has traded down over the prior week ending Tuesday. The weakest of these commodity-related ETFs is the US Natural Gas Fund (UNG) which has declined more than 7% while another six are down more than 1%. Despite the recent weakness, though, it’s important to keep in mind just how well many of these ETFs have performed in 2021. UNG is still up more than 100% YTD while other energy-related ETFs are up more than 70%.
The laggards this year have been precious metals. Silver (SLV) is down by double-digit percentages YTD, the Precious Metals ETF is down over 8% and gold-related ETFs are all down between 6% and 8%.
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Nov 2, 2021
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“Don’t worry about failure; you only have to be right once.” – Drew Huston
Futures are mixed this morning as the S&P 500 is indicated to open marginally higher and the Nasdaq is looking to open lower. Interest rates are firmly lower at the front end of the curve and most commodities are lower. Bitcoin was flat for most of the night, but then saw a quick 3% rally right around 6 AM Eastern. The economic calendar is light today, but there are still plenty of earnings reports on deck for after the close.
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 the Fed begins its two-day policy meeting where it is widely expected to announce a tapering of its asset purchases, the long end of the treasury curve has remained extremely calm. While there was a bit of jump in yields in late September and into early October, the move higher ran out of steam right at its downtrend line and has now nearly made a roundtrip back to where it was to begin with.
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Nov 1, 2021
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“If people knew how hard I worked to get my mastery, it wouldn’t seem so wonderful at all.” – Michelangelo Buonarroti
There are less than 45 trading days left in the year, and the major US averages are looking to pick up in November where they left off at the end of October. Today’s economic data includes the ISM Manufacturing report and Construction Spending at 10 AM. In addition to another busy week of economic data and Friday’s employment report, the key event of the week will be Wednesday’s FOMC policy statement and Powell press conference.
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 rallied more than 1% last week but at the sector level just over half of the eleven S&P 500 sector ETFs actually finished the week lower. None of the sector declines were more than 1%, but it does show that last week’s rally wasn’t a tide that lifted all boats. The two worst performing sectors on the week were Financials (XLF) and Energy (XLE), but they are still easily the top-performing sectors YTD and still two of six sectors that head into the new week at overbought levels.
Even in the top-performing sector last week – Consumer Discretionary (XLY)- the rally was far from even. The sector’s 4.36% surge was primarily all due to the rally in Tesla (TSLA) which surged over 20%. On an equal-weighted basis, the sector’s performance was much more muted at just 0.45%.
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Oct 29, 2021
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“Nature is pleased with simplicity. And nature is no dummy” – Isaac Newton
Futures are indicating a negative end to the week and the month, but it probably could have been worse. With Apple (AAPL) and Amazon.com (AMZN) both down close to 4%, they are accounting for just about all of the weakness in equities at the open. Even with the losses, though, October is on pace to be the best month for the S&P 500 since last November and the best October since 2015.
In the latest dump of economic data, the only outliers relative to expectations were the Employment Cost Index (ECI) which came in higher than expected, and Personal Income which declined more than expected. The only remaining reports scheduled are Chicago PMI and Michigan Confidence shortly after the opening bell.
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 may seem like the law of gravity sometimes gets suspended, but it usually makes its presence felt at some point. In the case of Apple’s (AAPL), that was last night as the company traded down in reaction to weaker than expected earnings and lowered guidance citing the impact of supply chain issues. With the stock indicated to gap down close to 4% at the open, it is on pace for its worst earnings reaction day in exactly a year.
Heading into last night’s earnings report, AAPL still held the title of the company with the largest market capitalization in the world at $2.46 trillion, but its lead over Microsoft (MSFT) was slim at ‘just’ $20 billion. When the opening bell rings today, though, MSFT will move into the top spot by virtue of not falling as much as AAPL. Looking at the performance of each stock over the last year, there has been a growing divergence between the two stocks. Up until late February of this year, both were performing relatively in line with each other, but ever since March, MSFT has been widening the gap over AAPL. Based on where each stock is trading in the pre-market, MSFT’s gain of 59.69% over the last year is just over double the gain of AAPL.
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Oct 28, 2021
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“Don’t find fault, find a remedy; anybody can complain.” – Henry Ford
While just about every company reporting earnings has lamented about the semiconductor shortage impacting their business, in Ford’s (F) earnings report last night, the company took a more constructive tone noting that “revenue, net income, adjusted earnings before interest and taxes, cash flow from operations, and adjusted free cash flow were all sharply higher from the second to the third quarter of 2021, driven by significant increases in semiconductor availability and wholesale vehicle shipments from Q2.” The company didn’t say that the shortage is behind us, but it was nice to hear some positive news for a change.
Equity futures are higher this morning with the Nasdaq leading the way, but the gains aren’t even enough to bring us back to levels the major averages were trading at in the final hour of trading yesterday. The S&P 500 is marginally higher on the week, but which side of unchanged it finishes the week will likely hinge on earnings reports from Apple (AAPL) and Amazon.com (AMZN) after the close today.
As if all the earnings news wasn’t enough, there’s also a ton of economic data to contend with both today (Jobless Claims, GDP, Pending Home Sales, and KC Fed) and tomorrow (Employment Cost Index, Personal Income and Spending, Chicago PMI, and Michigan Sentiment). The ECB just announced no major changes to policy in its latest statement noting that its pandemic program will remain in place until at least March, but there will likely be more details to come in the press conference at 8:30 AM. Back here at Home, President Biden is expected to announce details for a framework of a $1.75 trillion social-spending and climate package. Whether Congress can pass it is a whole other story.
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 were some really disparate moves in the US Treasury market yesterday as investors sold the short end of the curve on fears of more aggressive policy tightening down the line. At the same time, they were buying the long end betting that more aggressive tightening will cause a slowdown in growth. You can really see the dynamic playing out in the snapshot from our Trend Analyzer below. The ETFs listed below are sorted by where they closed Wednesday within their respective trading ranges, but they are also perfectly sorted by the maturities of the treasuries they track from the short-end of the curve (most oversold) to the long-end (closest to or above their 50-day moving averages).
The charts below show the performance of the 1-3 Year US Treasury ETF (SHY) and the 20+ Year Treasury ETF (TLT). While the magnitudes of the moves are much smaller for SHY, its price chart looks like a steep cliff, while TLT has seen a nice bounce over the last few days.
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