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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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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