Oct 19, 2021
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“The worst market I have ever seen in my lifetime or would hope to see again.” – John J. Phelan Jr.
Futures have been moving higher throughout the overnight session but have taken a slight hit following some weaker than expected residential housing data. In terms of both Building Permits and Housing Starts, the headline numbers came in significantly weaker than expected while August readings were revised modestly lower. Looking at the data, multi-family units look to have been the main driver of the weakness. Despite the weaker data, the 10-year yield is still above 1.6%. Commodities are higher as the dollar falls to its lowest levels of the month. All eyes will be on the crypto space this morning as the first US-based bitcoin ETF debuts today.
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.
Thirty-four years ago today, the S&P 500 experienced what was at the time (and remains now) the largest ever single-day percentage decline losing just over a fifth of its value. The crash of 1987 has a lot of lessons for investors, but one important one is that time is on your side when it comes to investing. If you were a dip buyer and stepped in right at the close on 10/19/87 and held through now, your annualized return, not including dividends, would have been an impressive 9.2%. But what if you had the worst possible timing and decided to get long the market on the Friday before Black Monday? Surely, you would have felt pretty stupid on Monday afternoon. However, if you were able to lick your wounds and put the pain of those losses behind you, and hold through the present, the annualized return of your investment would have still been 8.5% (not including dividends). Sure it’s not as good as you would have done if you waited a couple of days and put that money to work after the crash, but it’s still nothing to turn your nose at. When making investment decisions, sitting on your hands sometimes is one of the better decisions you can make.
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Oct 18, 2021
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“Uneasy lies the head that wears a crown.” – William Shakespeare
It’s looking like a weak start to trading for the week as futures are firmly lower ahead of the opening bell. We’ve seen a big jump in interest rates over the last two trading sessions as BoE Governor Bailey came out with some hawkish comments related to inflation. In economic data, Chinese GDP came in below forecasts with Q3 growth coming in at just 0.2 on a quarter/quarter basis.
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.
Outside of Communication Services which fell nearly 1%, every other sector within the S&P 500 finished last week higher, and in some cases, a lot higher. Materials, Real Estate, and Consumer Discretionary all rallied more than 3% with the latter also hitting a new high. Every other sector besides Health Care (and Communication Services) were all up by over 1%. In terms of where each sector finished the week relative to its 50-day moving average, they are currently all over the map. Sectors like Consumer Discretionary, Energy, and Financials are all at ‘extreme’ overbought levels while Health Care and Communication Services are still below their 50-DMAs. Even Real Estate, which was the second-best performing sector, still finished the week below its 50-DMA.
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Oct 15, 2021
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“Success usually comes to those who are too busy to be looking for it.” – Henry David Thoreau
There’s a decent amount of economic data on the calendar this morning with Empire Manufacturing, Retail Sales, and Import Prices just hitting the wires. Empire Manufacturing came in a bit shy of forecasts, but Retail Sales came in higher across the board. Not only that but August’s reading was also revised higher. While Import Prices aren’t as widely followed as CPI and PPI, the headline reading showed lower than expected increases.
The increase in risk appetite from yesterday appears to be in place again this morning as futures are firmly positive (and higher now then before the data hit) and interest rates are higher. Goldman earnings just hit and the headline numbers were all much better than expected and the stock is trading up nearly 2%.
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 seeing it again this morning where some companies are reporting weaker results or guidance citing the impact of supply chain issues, labor shortages, and inflation. Perhaps the biggest question heading into this earnings season is whether these issues, which are impacting just about every company out there, have been sufficiently priced into the market.
In looking at Google Trends search data for these three terms, it’s not as if they aren’t front and center. The chart below shows the frequency of search results for the three terms (Inflation, Labor Shortage, and Supply Chain) going back to 2004, and all three have spiked enormously this year to levels not seen in the history of the data. In the case of ‘labor shortage’ and ‘supply chain’ searches for these two terms hit a record this month.
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Oct 14, 2021
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Below is the intro text to today’s full Morning Lineup:
“It will fluctuate.” – J. P. Morgan
Futures were already strong heading into this morning’s economic data, and they remained strong after both jobless claims and PPI came in below forecasts. As things stand now, the major averages are indicated to open up by 1% or more. While yields aren’t changed all that much today, we would note that the 10-year yield has declined nearly 10 bps this week.
On the earnings front, bank earnings this morning have been strong, and most of them are trading higher in the pre-market. Overall, of the eleven companies reporting this morning, just two (Commercial Metals and Domino’s) missed EPS forecasts. Top line results versus consensus forecasts have been equally strong.
In what has become a trend for a lot of big banks, JP Morgan Chase (JPM) declined in reaction to its earnings report yesterday falling by 2.64%. Yesterday’s decline marked the 5th straight time that shares of JPM declined in reaction to earnings. While these weak reactions to earnings reports tend to cause a fair amount of near-term angst on the part of investors towards the stock, it’s important to focus on the big picture rather than the day-to-day squiggles. Despite a negative one-day reaction to each of its last five earnings reports, shares of JPM are up 66% since the start of last November.
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Oct 13, 2021
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“Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price.” – Robert Orben
Earnings season kicked off this morning and all five of the major companies reporting before the bell topped consensus estimates. In terms of share price reactions, four of the five names are either flat or slightly higher, but SAP which reported an earnings triple play is trading up over 5% in the pre-market. So far, so good.
With all of the earnings reports out of the way, the focus will shift to CPI and how bad the inflation pressures were on the economy in September. Then, at 2 PM the FOMC will release the minutes from its most recent meeting three weeks ago.
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 consensus estimates anticipating headline CPI to rise 0.3% on a month/month basis in September, it would represent the 10th straight month that headline inflation came in ahead of the five-year average of 0.2%. That being said, if the actual m/m increase comes in close to forecasts of 0.3% it will clearly represent a slowdown in the pace of price increases from the spring and summer months. Still above average, but getting back more in line with the historical norm.
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Oct 12, 2021
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“Many will start fast, few will finish strong.” — Gary Ryan Blair
After a very quiet start to the week due to the Columbus Day holiday, today is all business for the markets. In the early going, futures have rebounded from overnight lows and are firmly positive ahead of the opening bell. Treasury yields have come in slightly with the 10-year trading right at 1.6%. Asian stocks were mostly lower following news that Evergrande missed another coupon payment, and while European stocks opened lower, they have rebounded a bit during the trading session.
As we head into earnings season and expect to hear endless commentary about supply chain disruptions, inflationary pressures, and labor shortages, there were some encouraging comments on the subject over the last 24 hours. For starters, JP Morgan CEO Jamie Dimon said he feels as though supply chain issues won’t be a problem “next year at all.” Also, both Intel and Samsung have said they expect their plants in Ho Chi Minh city to resume full operations by the end of November.
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.
In a pattern that’s becoming all too familiar these days, the S&P 500 traded higher throughout the day yesterday only to give up those gains heading into the closing bell and finishing at the lows of the day. In the 28 trading days since the start of September, the S&P 500 has traded lower in the last hour of trading 18 times. The trend has been even more pronounced over the last two weeks as there have only been two trading days in the last ten that the S&P 500 closed the day higher than where it was at 3 PM. Like an old pair of socks where the elastic isn’t strong enough anymore, equities have looked a lot like quitters since the unofficial end to summer.
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