Jun 21, 2021
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“I’m the fellow who takes away the punch bowl just when the party is getting good.” – William McChesney Martin, Jr.
Investors got the first hints of the punch bowl being taken away in the post-COVID world last Wednesday, and they haven’t taken it well. The Dow was down every day last week which was the first “o-fer” an entire week the index has experienced since February 2020 just as the COVID crash was getting underway. Bulls are attempting to regroup this morning after last Friday’s plunge with all of the major US indices trading higher in the pre-market, but it’s still early. The economic and earnings calendars are light today with the only economic report being the Chicago Fed National Activity Index missing expectations (0.29 actual vs 0.70 forecasts). While quiet on the data front, there will be plenty of Fedspeak to contend with.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around, a discussion of elections in Europe, South Korean trade data, and the latest US and international COVID trends including our vaccination trackers, and much more.
Last week was a rough one for most sectors, and the most damage was done in cyclical sectors. Materials, Financials, and Energy were all down over 5% while another three sectors were down over 3%. The only sector to successfully swim against the tide was Technology which managed to trade up a mere 0.08%. In the wake of last week’s decline, no sectors are overbought, four are oversold, and one (Utilities) is at ‘Extreme’ oversold levels.
As mentioned above, Technology was able to buck the trend last week and finish the week higher, and because of that the Nasdaq 100 remains just shy of record-high levels. The S&P 500, meanwhile, doesn’t look nearly as strong as it closed below its 50-DMA on Friday for the first time since March 8th. These two indices are both telling different stories.
Jun 18, 2021
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“I think it’s natural we’ve tilted a little bit hawkish.” – James Bullard
So much for a quiet summer Friday. While futures were already lower, a CNBC interview with St Louis Fed President James Bullard (non-voter) where he had some relatively hawkish comments has only caused the losses to snowball. The S&P 500 is now on pace to open down about 1%. Today is an options expiration day with an unusually large amount of contracts expiring so that coupled with the fact that it’s now a Federal Holiday (Juneteenth) where volumes will likely be low, may only add to any potential volatility.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, a discussion of the latest delta COVID variant, the post-FOMC moves in markets, and the latest US and international COVID trends including our vaccination trackers, and much more.
We’ve seen quite a divergent move in the growth and value spaces over the last two days. While the S&P 500 Growth index closed at an all-time high, its Value counterpart has been subjected to selling pressure. As a result, the performance gap between the two indices over the last two trading days has shot up to 2.64 percentage points. That may sound like a relatively wide gap, but relative to the last year, it’s not all that extreme. Back in January, we saw a wider performance gap, and last year we saw numerous two-day periods where the two-day gap widened out more.
Jun 17, 2021
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“Face reality as it is, not as it was or as you wish it to be.” – Jack Welch
The headache from the post-Fed hangover remains in effect this morning as US equity futures trade lower. It’s a relatively busy morning for economic data with Philly Fed and Jobless Claims at 8:30 and Leading Indicators at 10 AM. With the FOMC apparently taking a bit of a more hawkish turn, look for good economic data to start having a negative impact on equity prices.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, and the latest US and international COVID trends including our vaccination trackers, and much more.
It’s been a strong week for the US dollar. After hanging around and holding support, the Bloomberg US Dollar Index has attempted to turn the corner in the last few days. Yesterday, it traded and closed above its 50-day moving average (DMA) for the first time since April, and now today, it’s making an attempt to trade and close above its 200-DMA for the first time in nearly a year.
Price history for the Bloomberg Dollar Index only goes back as far as 2005, but during that time, there have only been three streaks where the index closed below its 200-DMA for a longer period of time, and only one of them was significantly longer than the current one. Whether this is just a short-term bounce for the dollar or the beginning of a longer-term trend remains to be seen, but if the dollar’s bounce does get legs from here, its impact will be felt across a broad range of asset classes.
Jun 16, 2021
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“You simply flooded the system with money?” – Scott Pelley
Happy Fed Day! There’s been a lot of talk this week that today’s FOMC decision is the most important of Jay Powell’s career. We’re never one to diminish the importance of a Fed meeting, but most important ever? Even in this era where comments seem to mean nothing unless they make for a splashy headline the term ‘most important’ may be an overstatement. Have we already forgotten the days 15 months ago when the entire financial system was seizing? Say what you want about what some of the consequences may have been to the FOMC’s actions, but we’d bet that the economy would be in worse shape now had it not been for the steps that the FOMC took when they took them at last year’s very important meetings. Today’s rate decision may be the most important rate decision of the spring or even this year, but it’s probably not the most important of Powell’s career.
In economic data this morning, Housing Starts and Building Permits both missed expectations for the second straight month, while Import Prices rose more than expected. In reaction, futures have actually seen a modest bounce as the 10-year yield saw a slight decline in yield.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, economic data out of China, and the latest US and international COVID trends including our vaccination trackers, and much more.
Commodities have been on fire recently, but some areas of the space have been showing some short-term cracks. As shown in a one-year chart of copper, it has been in a steady uptrend for the last year and has repeatedly found support at its 50-day moving average. While it didn’t get a lot of attention yesterday, though, copper fell more than 4% for its second-worst day of the last 12 months and broke below its 50-DMA in the process.
Not only was Tuesday the second weakest day for copper in the last 12 months, but after closing 2.76% below its 50-day moving average, it was also the second most oversold reading for copper on this metric in the last 12 months. From a longer-term perspective, closing 2.8% below the 50-day moving average is hardly an extreme amount by any measure, but coming ahead of an FOMC meeting where the predominant view is that inflation is out of control, copper’s weakness, along with declines in some other commodities in recent weeks, warrants at least a mention.
Jun 15, 2021
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“It’s tough to make predictions, especially about the future.” – Yogi Berra
As the Fed kicks off a two-day meeting to discuss interest rate policy, the major area of debate will no doubt surround inflation and whether the current surge we have experienced over the last few months ends up being temporary or persistent. Unfortunately, the answer is not so clear-cut as both sides have good arguments to support their view. That’s what makes a market, though, and tomorrow we’ll get a better idea of how wedded to the idea of temporary the FOMC really is.
It’s another quiet morning in financial markets today as US futures are little changed, yields are slightly lower, and even bitcoin is basically unchanged. That’s likely to change as the day goes on. At 8:30, we’ll get May reports on Retail Sales, PPI, and Empire Manufacturing. Then, at 9:15, Industrial Production and Capacity Utilization will be updated followed by Homebuilder Sentiment for June at 10 AM.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, and the latest US and international COVID trends including our vaccination trackers, and much more.
It wasn’t looking that way an hour before the close yesterday but a last-hour rally helped to push the S&P 500 into positive territory for the day resulting in the 29th record closing high for the S&P 500 this year. At the current rate, the S&P 500 is on pace for 64 record closing highs this year, which would eclipse the total of 62 in 2017 and put 2021 into third place overall for the most record closing highs in a given year. The record was 77 back in 1995, while 1964 ranks second with 65. While 64 is the current pace, where the year ends up could vary widely. All it takes is a sell-off to knock the pace off track, while a string of higher closes could really add to the pace. Wherever this number ends up on 12/31, we’ve already been in a very positive environment for equities.
Jun 14, 2021
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“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” – Friedrich August von Hayek
In terms of the economy, there’s a lot on the calendar this week, but it starts out slow as there are no reports to kick off the week today. A number of indices in Asia were closed overnight, but Japan was open and managed to rally 0.7% as Industrial Production surprised to the upside. European indices are trading higher to kick off the week as Industrial Production in the region also doubled expectations (0.8% vs 0.4%). In US markets, futures are mixed with the Dow lower, the S&P 500 flat, and the Nasdaq higher.
With not much going on in financial markets, the real action has been in bitcoin which is trading at its highest levels since late May following comments on Sunday from Elon Musk that Tesla may start accepting bitcoin as payment again in the future provided there’s confirmation of ‘reasonable (~50%) clean energy usage by miners with a positive future trend’. These days, that’s enough to move a $700 billion asset by over 5%.
Read today’s Morning Lineup for a recap of all the major market news and events, the latest economic news from around the world overnight, including Industrial Production in Europe, and the latest US and international COVID trends including our vaccination trackers, and much more.
It was a pretty positive week for US equities last week. In the “US Index” screen of our Trend Analyzer, every index ETF we track with the exception of the Dow (DIA) finished the week higher. DIA’s weakness primarily stemmed from a nearly 10% drop in shares of Caterpillar (CAT). With the rally last week, all of the ETFs listed head into the new week at overbought levels with a neutral timing score. You can’t get much more uniform than that.
While the ‘wide-angle’ view of US indices shows a good deal of uniformity, at the sector level there has been a lot more dispersion. Six sectors finished last week higher, and five traded lower. The biggest winners of the week were Health Care, Real Estate, and Technology, while cyclical sectors like Financials, Materials, and Industrials all fell more than 1%. In many respects, last week was a bit of a reversion to the mean trade where the biggest winners traded lower while the biggest underperformers had their day in the sun. To illustrate, the six sectors that were up on the week are now up an average of 12.95% while the five sectors that were down are still up an average of 23.6% YTD.
