Sep 22, 2021
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“We learn who we are in practice, not in theory.” – David Epstein – Range
After a day in which the S&P 500 finished trading right around the flatline after opening sharply higher, markets are doing a re-take today with futures higher by just about the same amount they were at this time yesterday. Unlike yesterday, though, investors will have to contend with a Fed policy statement, dot plots, and a press conference from Jerome Powell this afternoon. Powell pressers haven’t had a particularly positive impact on the market lately.
Outside the US, equities in Europe are higher across the board this morning, and the STOXX 600 is actually now flat on the week after gains yesterday and today have erased all of Monday’s drop. In China, equities finally opened for trading this week after a two-day mid-Autumn Festival holiday. While Chinese stocks opened the week lower, they rebounded throughout the day to finish down 0.70%. So, while Europe is flat and China is down less than 1% on the week, US stocks are down over 1.75%.
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.
Lately, it seems as though plenty of good arguments can be made for being long or short the US dollar. Given the strong feelings on both sides of the trade, it probably shouldn’t come as too much of a surprise that the Bloomberg US Dollar Index is currently trading right in the middle of its one year range around 1,150 and at a level it has had difficulty meaningfully breaking above throughout the year. Whichever way the greenback breaks from its most recent run to 1,150 will likely have a major impact on which sectors/strategies outperform through the end of the year.
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Sep 21, 2021
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“You can’t predict, [but] you can prepare.” – Howard Marks
Markets are attempting to stage a turnaround Tuesday this morning with equity futures firmly in the green and Europe also trading firmly higher. Just release economic data has provided a boost as both Building Permits and Housing Starts for the month of August came in significantly better than expected, although the strength was attributable to multi-family rather than single-family units.
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.
After a rough options expiration week, this week didn’t start any better as the S&P 500 fell 1.7% yesterday. So how common is it for the S&P 500 to trade down more than 1% on the Monday following options expiration? Since the start of 2010, there have been eighteen other occurrences, and yesterday was the second time this year and the seventh time since the COVID outbreak in 2020; so they are occurring with a bit more frequency lately. That being said, a year before COVID it happened three months in a row spanning November 2018 through January 2019. Also, like 2020, there were five occurrences in 2011.
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Sep 20, 2021
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“Failing to raise the debt limit would produce widespread economic catastrophe.” – Janet Yellen
Good Morning Subscriber,
After months of heat, it only seems fitting that problems are boiling to the surface just as Summer winds to a close this week. Between FOMC tapering, slower economic data, the upcoming debt limit, and China’s Evergrande, the problems are starting to mount. Futures opened lower last night, and originally the damage didn’t look like it was going to be too bad, but by 11 o’clock eastern time, things started to deteriorate.
The continuing collapse of Evergrande is obviously the main concern of investors around the world this morning. The fact that most of those Asian markets are closed for holidays today also makes it harder to discern what the overall impact is going to be and that only creates more uncertainty in other markets around the world that are open for trading today.
S&P 500 futures are near their lows of the morning and indicated to open down by over 1.5%, the 10-year yield is down nearly six basis points to 1.30% (it was actually lower than that last Wednesday), and the VIX is back above 25 and at its highest level since May.
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 numbers below are going to look worse in a couple of hours after the US market’s open, but the table below breaks down where sectors stand after last week and heading into this morning’s decline. Last week, both Materials and Utilities were easily the worst performers with declines of 3% or more. As a result of those losses, the Materials sector moved into oversold territory, while Utilities isn’t far behind. Industrials were down by only about half that much, but that was enough to put it into ‘Extreme’ oversold levels. Along with those three sectors, the only others that were below their 50-day moving averages (DMA) as of Friday were Consumer Staples and Communication Services. While only five sectors were below their 50-DMA as of Friday, there’s a good chance that by the end of the day today, either all or all but one of them (Consumer Discretionary) will be below their 50-DMAs. Change has a way of coming quickly in the market.
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Sep 17, 2021
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“If you buy things you do not need, soon you will have to sell things you need.” – Warren Buffett
Futures are pointing to a modestly lower open this morning, and they’re right near the lows of the morning as European stocks opened the day higher and have steadily sold off throughout the morning session there. Two culprits are behind the weakness in Europe. The first is a hot CPI report which showed y/y increases of 3.0% versus 2.2% last month. The second is technical; after opening back up above its 50-DMA this morning, the STOXX 600 couldn’t hold on to that level after closing below it in each of the last two trading days.
The economic calendar is light today with the only report on the calendar being Michigan Sentiment, and economists are expecting a modest rebound following last month’s plunge.
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 the S&P 500 on pace for its eighth down day in the last 10 trading days, there’s a good degree of trepidation on the part of investors lately. Look no further than this week’s sentiment survey from the American Association of Individual Investors (AAII) where bullish sentiment plunged as an example. One encouraging aspect of trading the last several days is the performance of semiconductors, a sector we consider to be a good barometer of the market’s direction. Yesterday, for example, the VanEck Semiconductor ETF hit a new record high and finished in positive territory for the sixth day in a row. Not only that, but in the last 20 trading days, the ETF has finished the day lower only four times.
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Sep 16, 2021
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“It’s not like the CIA. We don’t have private, secret data on the economy.” – Jerome Powell
We’ve seen a fair amount of weaker than expected economic data over the last several weeks, and today will be a test for the strength of the recovery as a number of key reports are on the calendar. Retail Sales, Jobless Claims, and the Philly Fed will all be released at 8:30, while Business Inventories will hit the tape at 10 AM.
Yesterday was a nice relief from the recent selling, but it has been surprising to see just how quickly investors have reversed course in terms of sentiment. According to the weekly sentiment survey from AAII, bullish sentiment plunged from 38.9% down to 22.4% this week (lowest level since June 2020) while bearish sentiment surged from 27.2% up to 39.3% (highest level since last October). That was quick!
This morning, there’s been little movement in different asset classes as equity futures are just slightly lower, the 10-year yield is modestly higher, and oil is lower. Even in the crypto space, there’s little life as bitcoin is trading down just … 77 cents!
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.
When it comes to seasonal patterns in the market, one less widely known trend is related to the Jewish calendar regarding Rosh Hashanah (the Jewish New Year) and Yom Kippur (Judaism’s most solemn day of the year). The old saying says to “Sell Rosh Hashanah and buy Yom Kippur” as the period between these days tends to be a weak time of year for the market. We’ll leave it to others to try and explain the reasons behind the axiom, but the actual results don’t refute the pattern.
The table below shows the performance of the S&P 500 from the close before the start of Rosh Hashanah to the closing price on the day Yom Kippur ends from 2000 through 2020 (2021’s performance is through Wednesday’s close). During that span, the S&P 500’s median performance during this period has been a decline of 0.50% (average: -0.92%) with positive returns less than half of the time.
While equity market returns have been weak during the period between these two days on the Jewish calendar, Yom Kippur ends tonight at sundown, so what are market trends from after Yom Kippur ends through year-end? Overall, the broad market trend has been positive. In the twenty-one prior years shown, the S&P 500’s median rest of year performance has been a gain of 6.07% with gains 71% of the time. In the table, we have also shaded those years where the S&P 500 bucked the market headwinds and posted positive returns during this period, but it tended to have no impact on performance for the remainder of the year.
While we have seen all sorts of theories over the years as to why the equity market has been weak in the period between Rosh Hashanah and Yom Kippur, it is also important to remember that both of these days occur at a time of year that is already seasonally weak to begin with.
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Sep 15, 2021
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“I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers.” – Henry Paulson
Futures were higher earlier this morning than they are now, and as we’ve seen the last couple of days, equity markets have been struggling to hold onto gains throughout the trading day. The fact that today marks the 13th anniversary of the Lehman bankruptcy also probably doesn’t help sentiment either. Overnight, Retail Sales out of China showed an increase of just 2.5% in August whereas expectations were for a rate of nearly triple that. Chinese Industrial Production also missed estimates, but at 5.3% was much closer to consensus forecasts for growth of just under 6%.
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 wasn’t a good day for stocks in general yesterday, but the banks were one sector that was hit especially hard. Of the six large banks shown below, Wells Fargo (WFC), which Senator Warren actually called for to be broken up yesterday, was the only one to finish the day in positive territory. The other five were down anywhere from 1.36% (Goldman) to 3.14% (PNC). Of the six, the only one that’s currently not in some sort of consolidation mode right now is Goldman which is still within 5% of its 52-week high from just two weeks ago. While trading in the sector has been frustrating lately, look on the bright side, it’s not 13 years ago.
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