Jan 15, 2021
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We may have all come on different ships, but we’re in the same boat now.” – Martin Luther King Jr.
Even after an ambitious $1.9 trillion stimulus plan unveiled by President-Elect Biden last night and promises for more in the future, US futures are lower this morning while US treasury yields are lower. There’s a ton of economic data coming up this morning beginning with producer prices, Empire Manufacturing, and retail sales at 8:30. Later, we’ll get reports on industrial production, and University of Michigan consumer sentiment.
It’s a three-day weekend as US financial markets will be closed on Monday in observance of the birthday of Martin Luther King Jr (his actual birthday would have been today). Enjoy the three-day weekend, because earnings season will kick into a higher gear starting next week.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a discussion of Biden’s stimulus plan, an update on the latest national and international COVID trends (which were all positive), and much more.
Between this morning and Tuesday morning, seven of the largest US banks and brokerage firms will be reporting results. As of this writing, the four reports to cross the wires have been Citigroup (C), JPMorgan (JPM), PNC, and Wells Fargo (WFC). Of these four, all of them beat EPS forecasts while both C and WFC missed revenue estimates. In reaction, all four stocks are currently trading lower with declines of up to 3%. On Tuesday (Monday is a holiday), we’ll get reports from Bank of America (BAC), Charles Schwab (SCHW), and Goldman Sachs (GS).
Below we have provided a snapshot from our Trend Analyzer of each of the large banks reporting today and Tuesday morning showing where they are trading relative to their trading ranges. While we’re just barely halfway into the first month of the year, all seven of these stocks have posted gains that many would have been happy with for an entire year. With the exception of PNC, every other stock in the snapshot is already up over 10% YTD with GS and WFC both up over 15%!
With these strong gains in such a short period of time, though, all of these stocks are trading at short-term overbought levels, while BAC, GS, and JPM are all more than two standard deviations above their 50-day moving average heading into today’s trading. This could be one reason all four of the banks reporting this morning are trading lower even though they all topped EPS forecasts. With high stock prices also comes high expectations, so that’s something to watch in these companies as they report.
Jan 14, 2021
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“The ability to recognize that the winds have shifted and to take appropriate action before you wreck your boat is crucial to the future of an enterprise” – Andrew Grove
The President was impeached by the House for the second time in just over a year yesterday, and like the first time, financial markets were unfazed. While the President’s first impeachment in the House in December 2019 was completely on a partisan basis and dead on arrival in the Senate, this time around, the fate of the impeachment in the Senate is more uncertain. What seems certain at this point, though, is that the completion (or maybe even the start of a trial) would not take place until after the inauguration, so from a market perspective, it really doesn’t matter much.
The only economic data of note today was Jobless Claims, and both initial and continuing claims came in much higher than expected. Initial Claims spiked up to 965K versus forecasts of 786K, and Continuing Claims rose to 5.271 million compared to forecasts for 5.0 million. In terms of the market reaction to these much weaker than expected reports, there really hasn’t been any.
In terms of individual companies, although earnings season kicks off today with reports from BlackRock (BLK) and Delta (DAL), the pace of reports will remain slow today and tomorrow. Regarding today’s reports, both BLK and DAL are trading modestly higher in reaction to their reports. Also notable, although not a US company, Taiwan Semi (TSM) also reported strong results and is trading up over 2.5%.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a discussion of the latest import and export orders from China, an update on the latest national and international COVID trends, and much more.
With yesterday’s big move in Intel (INTC), the stock is now over three standard deviations above its 50-DMA. In the last nearly 40 years, there have only been 22 other days in which the stock was as overbought or more overbought than it is today.
Jan 13, 2021
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“The intelligent investor is a realist who sells to optimists and buys from pessimists.” – Benjamin Graham
We’ve had a flurry of central bank officials on both sides of the Atlantic reiterate their stances that they are in no rush to start removing accommodation from the system. In Europe, ECB President Lagarde and council member Villeroy de Galhau both doubled down on their commitment to a 2% inflation target and that they will keep monetary policy loose for as long as needed in order to get the economy back into gear. These comments today follow comments from Fed Presidents Bullard and Rosengren who both also reiterated their commitments to get the economy back to its full potential.
Despite the dovish commentary, futures are modestly lower this morning ahead of the December CPI report. Outside of that report, though, the only other report of note is the monthly Budget Statement later this afternoon. On the political front, the House is expected to vote on impeachment again and at least some Republican members are expected to vote in favor.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a discussion of the latest report on Machinery Tool Orders in Japan, an update on the latest national and international COVID trends, and much more.
Small-cap stocks have been on roll so far in 2021, but the real action now has been in micro-cap stocks. Through the first seven trading days of 2021, the Russell Micro Cap Index is up 9.4% which is the best start for the index since its inception in 2007. The only other year that was even close was in 2019 when the Micro Cap index was up 8.1% in the first seven trading days of 2021.
The chart below shows the performance of the Russell Micro Cap Index from the close on the seventh trading day of the year through year-end. For all years since 2007, the Russell Micro Cap index has seen a median gain of 11.62% for the remainder of the year with gains 64% of the time. While it’s a very small sample size, in the three prior years where the Micro Cap Index was up over 3% to start the year, the index continued higher for the remainder of the year with gains all three times ranging from 11.9% up to 38.5%.
Jan 12, 2021
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“In the midst of chaos, there is also opportunity” – Sun-Tzu
Futures are higher this morning and attempting to regain some of the losses from Monday’s weak start to the week. Both the DJIA and the S&P 500 are on pace to erase more than half of yesterday’s losses, but the Nasdaq is a bit further behind.
We got our first economic indicator of the week today with the NFIB Small Business Optimism Index which dropped to 95.9 versus estimates for a reading of 100.2. That wide gap actually represents the biggest miss relative to expectations since July 2015, but before reading too much into it we would note that over time, this index has tended to have some political undertones to it.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a discussion of stock performance in Hong Kong, Chinese economic data, an update on the latest national and international COVID trends, and much more.
Yesterday was an interesting day as even though the VIX jumped more than two points, the yield on the 10-year US Treasury was also up by 2 basis points (bps). Normally, on days when the VIX has a big gain, investors are rotating into treasuries and pushing yields lower. The chart below shows the S&P 500 over the last ten years, and each dot represents days where the VIX was up at least two points and the yield on the 10-year also jumped more than two bps. In the last decade, there have only been 14 other days where we saw similar moves with the most recent occurring back in March 2020, but looking through the chart they have occurred at all different points of the market cycle.
Jan 11, 2021
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“If I had nine hours to chop down a tree, I would spend the first six sharpening my ax.” – Abraham Lincoln
Just as Monday was the worst trading day of last week, it’s not shaping up to be much of a good day for the bulls this week either. There’s still plenty of time left in the day, but it’s not getting off to a strong start. In terms of potential catalysts for the market today, there’s little in the way of economic or earnings data, so the focus will likely be on Washington DC and what will transpire in the final days of the President’s term.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a discussion of China delistings, an update on the latest national and international COVID trends, and much more.
While the US equity market collectively is overbought, there’s quite a bit of dispersion among individual sectors heading into the second full week of the year. As shown in the snapshot from our Trend Analyzer, Consumer Discretionary, Health Care, and Materials sectors are all at ‘extreme overbought’ levels and have ‘poor’ timing scores. Beneath those three sectors, four more are overbought, while four are still at neutral levels. Of those four sectors (Industrials, Consumer Staples, Utilities, and Real Estate), the first two also currently have ‘good’ timing scores.
Jan 8, 2021
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“Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.” – Benjamin Graham
It’s ‘jobs Friday’ and for once it seems that it isn’t ‘the most important jobs report of the year’. What makes that even more impressive is that so far, it’s the first report released in 2021! Right now, the market either has other things to worry about or simply doesn’t’ care. It’s hard to tell.
In markets, futures are higher again today as equities have rallied around the world, especially in Asia. Treasury yields are slightly higher in the US, while the dollar is slightly lower.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events, a recap of economic data out of Europe, an update on the latest national and international COVID trends, and much more.
The year is only four trading days old, but already we’ve seen some big moves. While it may seem like we’re an environment where everything is going up, five of the S&P 500’s eleven sectors are actually down on the year with defensives like Consumer Staples, Utilities, and Real Estate all down 1.5% or more. On the upside, the S&P 500 and six other sectors are up over 1%, but the real strength has been in Energy, Materials, and Financials. Energy’s 9.4% gain has been the most impressive of any sector, though. If the year ended today, it would be the best year for Energy since 2016!
