Feb 3, 2021
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“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. – Jeff Bezos
A strong earnings report from Amazon.com (AMZN) last night was overshadowed by the news that founder and CEO Jeff Bezos would be stepping down to take on the role of executive chairman beginning on July 1st. While the news made headlines, Bezos isn’t going anywhere; he’s only going to be less active in the day-to-day operations of the company which reports suggest he already has been for some time.
While Jeff Bezos is symbolically moving on from running the company he founded, we’ve also passed the peak of earnings season as all of the mega-caps have now reported quarterly numbers. There are still a lot of individual companies scheduled to report, but the companies representing much of the market cap for the S&P 500 have already reported. Investors will now have to find another issue to focus on, and that will likely be the progression of economic and COVID data which are both intertwined. One economic data point out this morning was the ADP Private Payrolls report which topped expectations by more than 100K (174K vs 70K).
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, an update on Markit Services PMIs, an update on the latest national and international COVID trends, and much more.
The price of bitcoin has been consolidating in recent weeks after its surge to end 2020, but prices of ethereum have been climbing to new highs. The chart below shows the ratio of ethereum to bitcoin over the last twelve months, and ethereum’s strength has caused the ratio to breakout above its highs from the end of last summer.
From a longer-term perspective, ethereum’s rally has also taken the ratio above its highs from early 2019 as well, but still well off its record highs from early 2018. While ethereum still trades for less than one-twentieth of the price of bitcoin back in early 2018 it was as much as one-tenth of the price. In other words, even after the recent rally, ethereum’s price relative to bitcoin is close to historical lows than highs.
Feb 2, 2021
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The stock market is a device to transfer money from the impatient to the patient.” – Warren Buffett
The global rally continued overnight as US futures are firmly in positive territory after the S&P 500 briefly tested its 50-DMA. The only area of the market not rallying are stocks (like GameStop and others) originally targeted by the Reddit traders. Silver is also down sharply on the day, erasing much of Monday’s gains.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, a discussion on the latest moves in the commodities markets, a recap of the latest in the COVID relief negotiations, an update on the latest national and international COVID trends, and much more.
Just as equities in the US bounced after the S&P 500 tested its 50-day moving average, European equities also bounced at two key levels of support yesterday. As shown in the chart, the rally of the last two days started just below the STOXX 600’s 50-day moving average and right at the prior highs of the consolidation range from December.
Feb 1, 2021
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“Short cuts make long delays.“ – J.R.R. Tolkien
When futures opened for trading last night, it was looking like January’s end of month weakness was going to continue right into the start of February. After the opening weakness, dip buyers stepped up in full force turning a weak start to the month into a strong one. Across the globe, equities are rallying, and strangely enough, GameStop (GME) shares are basically flat on the day!
Economic data is relatively quiet this morning with ISM Manufacturing and Construction Spending at 10 AM eastern. Both reports are expected to show a modest decline from last month’s pace of growth but are still expected to be positive.
We’d also be remiss not to mention the spike in silver this morning as Reddit traders are moving on from equities that investors have always loved to hate to silver – one of the least respected of the precious metals. In early trading, silver is up over 10% to its highest levels since 2013.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, economic data out of Europe, an update on the latest national and international COVID trends, and much more.
After a weak close to January, the S&P 500 ended at its lows of the month on Friday. That decline was also notable for the fact that it was the first time since the Election that the S&P 500 closed below its 50-day moving average and ended a streak of 58 straight trading days above that level.
At 58 trading days, the most recent streak of closes above the 50-DMA for the S&P 500 was a relatively long one but nothing extreme by historical standards. In the last 10 years alone, there have been 12 streaks of longer duration including the 102 trading day streak coming out of the COVID lows. In other words, while the S&P 500’s post-election rally has ended, it doesn’t necessarily mean the market is in for an extended period of market weakness either. Without pullbacks, there wouldn’t be rallies.
Jan 29, 2021
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“Look at market fluctuations as your friend rather than your enemy. Profit from folly rather than participate in it.” – Warren Buffett
We’re just about through the first month of 2021, and if you thought this year would be less chaotic than the last, don’t hold your breath. In a fitting end to what has been a crazy month in the markets, shares of GameStop (GME) and the other heavily shorted stocks out there are rallying on news that Robinhood would allow clients to trade the stocks again. The company drew on its credit lines and raised new capital last night to shore up its balance sheet, so hopefully, that will prevent a repeat of yesterday’s chaos.
In markets today, futures were already lower but are near their lows of the morning after JNJ released preliminary results of its COVID vaccine. While the initial numbers showed that the vaccine was effective, the overall efficacy doesn’t appear to be as strong as the Pfizer and Moderna vaccines already in circulation. One difference between the JNJ study and others, though, is that JNJ’s study took place during a period when other variants of the virus were in circulation, so more details on this will likely be forthcoming.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, economic data out of Europe, an update on the latest national and international COVID trends, and much more.
Shares of Caterpillar (CAT) are bucking the negative tone this morning after the company reported positive earnings results. One positive aspect of CAT’s results for the broader economy was that machinery sales saw a significant improvement. While overall machinery sales on a three-month average basis are still down on a global basis, they improved from a decline of 11% to a drop of just 2%. That’s the least negative level since November 2019.
Jan 28, 2021
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“There is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market to-day has happened before and will happen again.” – Edwin Lefevre, Reminiscences of a Stock Operator
After some of the individual stock moves we have seen in the last few days and continue to see this morning, it seems odd to see futures for the S&P 500 only modestly lower. The pace of earnings season has really started to pick up steam in the last 24 hours, and the next 24 hours will be busy as well. So far, companies have been reporting strong results, but given the run-ups we’ve seen in stocks leading up to the reporting period and the high level of expectations, it’s not too surprising to see investors selling the news.
As if all the earnings news wasn’t’ enough to deal with, there’s also a tone of economic date to navigate through over the next two days as well, including today’s releases of Jobless Claims, Q4 GDP, Leading Indicators, New Home Sales, and the KC Fed report.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, Economic data out of Europe, an update on the latest national and international COVID trends, and much more.
Yesterday was an interesting day in the market. Interesting may be an understatement, but our point is that while the S&P 500 was down just over 2.5%, the upward move in the VIX was suggestive of a much larger downside move. The VIX’s massive upside move of 14.2 points Wednesday was the 17th day in the index’s history that it jumped ten or more points in a single day. On those days, the S&P 500’s average decline was 6.27% (median: 5.89%). Of those 17 days, yesterday’s 2.57% decline ranks as the smallest decline of them all. Even on the days where the VIX rose by less than it did yesterday but was still up more than 10 points, the S&P 500’s median decline was 5.28%. The smallest one-day decline of those days was -3.5% – nearly a full percentage point more than Wednesday’s decline. Based on the S&P 500’s performance on prior days where the VIX had a large one-day increase, yesterday there was a disconnect between sentiment in the market and the options market.
Jan 27, 2021
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“Beware of false knowledge; it is more dangerous than ignorance.” – George Bernard Shaw
Shares of GameStop (GME) are trading up over 50% in the pre-market, and while that may sound ludicrous, earlier this morning they were up well over 100%! The pre-market rally lin GME lost its steam following a CNBC report that Melvin Capital completely exited its short position on Tuesday afternoon. The crying uncle of one of the most notable shorts on GME would presumably mark the peak of this surge, but then again, no one would have really predicted that things would have gone this far to begin with. It’s interesting to note that much of the moves in GME have been driven by options trading, so when those markets open at 9:30 things could get a lot more interesting.
From GME, where will things go next? Was this just a one-shot deal, or will the traders that originally targeted GME move on to other targets? From a broader market perspective, though, it’s hard to look at what’s going on in the market right now and frame it as a positive. Also, keep in mind that today is an FOMC meeting day, and while there will likely be no changes to policy, we can guarantee that the subject of GME will come up in the 2:30 press conference.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, earnings reports from around the world, Economic data out of Europe and Asia, an update on the latest national and international COVID trends, and much more.
Yesterday, we showed a version of the table below showing the performance of the most heavily shorted Russell 300 stocks as of the end of 2020. As we noted, heading into yesterday’s session GME was up an incredible 307%. The other stocks were also doing well with every single one of them up at least 10% and half of them up over 50%. Since we published that list, the performance of these stocks has only gone much higher. Through yesterday’s close, the 16 stocks listed below are up an average of 96% while the median gain is still an incredible 58%. Along with GME, Bed Bath and Beyond (BBBY) and SunPower (SPWR) have also doubled since the start of the year.
