Jul 20, 2020
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Futures are modestly lower this morning, although the Nasdaq is modestly outperforming. The big news so far this morning is progress among EU members regarding a stimulus package for the region, and that has the euro trading at four-month highs versus the dollar. That’s the big news now, but the big news later could be the release of phase one COVID vaccine data out of AstraZeneca and the University of Oxford.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the latest on the EU stimulus package, global economic data, trends related to the COVID-19 outbreak, and much more.
It’s been a good couple of months for the Technology sector of late, so it’s a bit out of the ordinary to see coming into a new week that Technology was the big laggard in the prior week. While the majority of sectors were up well over 1% last week, Technology was down a full percent. That kind of underperformance from the sector has been uncommon recently, but last week’s pullback proves once again that no sector, not even tech, is immune to the laws of gravity. While Technology lagged badly, sectors like Industrials, Materials, Health Care, and Utilities were all up over 4%.
Jul 17, 2020
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After trading modestly lower most of the night, futures have been rebounding as we approach the close and are now in positive territory. The Nasdaq, which was down yesterday, is looking to avoid its first back to back declines in two months. On the economic front, Housing Starts and Building Permits were mixed with Starts modestly exceeding forecasts while Permits missed.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the latest earnings reports, global economic data, trends related to the COVID-19 outbreak, and much more.
Market performance so far this week has been a complete reversal of roles from what we’ve been used to. At the top of the list, cyclical groups have uncharacteristically been leading the way higher as Autos & Auto Parts is up close to 10% while Capital Goods, Insurance, and Transportation have all seen gains of more than 5%. To the downside, groups that have normally topped lists like this are at the bottom with tech-related groups, Media, and Retail (mostly Amazon) all down so far on the week. Whether this trend has any durability remains to be seen, but these groups got a bit ahead of themselves, and their pullback serves as a reminder that their prices can go in more than one direction.
Jul 16, 2020
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We just got a big slug of economic data, and overall the results were positive. After an enormous bounce in retail sales for May, June’s reading came in much better than expected once again. The Philly Fed Manufacturing report was also better than expected but fell slightly from June’s reading. The one fly in the ointment was Initial Jobless Claims. While this week’s reading declined for a record 15th straight week, it did miss expectations. Continuing Claims, however, managed to come in slightly below forecasts. All in all, this data looked positive at the top line.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the latest earnings reports, global economic data, trends related to the COVID-19 outbreak, and much more.
In the whole ‘game’ of quarterly earnings, the general strategy for companies is that whatever earnings you report, just make sure it’s better than expected. Companies that beat estimates tend to see better share price reactions while companies that miss EPS forecasts tend to see adverse reactions to their stock prices. That’s the general pattern, but there are always exceptions, especially among the major brokers.
Take Goldman Sachs (GS), for example. Yesterday the company reported quarterly EPS $6.26 per share, which was $2.35 above the consensus expectation of $3.91, or an EPS beat of over 60%. Looking through our Earnings Explorer tool, yesterday’s report from GS was the third-largest EPS beat for the stock since at least 2001. Given the magnitude of the beat, how much do you think GS was up yesterday? 5%? 10%? How about 1.4%. That’s right. The third-largest EPS beat for the company in practically 20 years resulted in a gain for the stock of just 1.4%!
Looking through the Earnings Explorer at Goldman’s largest EPS beats shows an interesting trend. Including yesterday, on the earnings reaction day of the ten largest EPS beats for GS, the stock’s average change was a decline of 0.1% (median: +0.2%) with gains only six times. Even more interesting is the fact that the company’s two largest EPS beats in April 2009 and April 2011 were met with selling.
We also looked at Goldman’s stock price reaction following the nine times it has missed EPS forecasts (or reported inline EPS). Of the nine occurrences since 2001, the stock’s average one-day reaction to earnings was a gain of 0.7% (median: +0.2%). On an average basis, at least, Goldman has derived no benefit to its stock from reporting blowout numbers.
Jul 15, 2020
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Futures are off to the races this morning with the S&P 500 indicated to open up over 1%. It started last night after the close with some positive trial results from Moderna (MRNA) related to its COVID vaccine. Then this morning, futures received another boost when Goldman (GS) reported much better than expected earnings driven by strength in its sales and trading unit. It looks like Robinhood traders aren’t the only ones stuck at home and coining money!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the latest earnings reports, global economic data, trends related to the COVID-19 outbreak, and much more.
In last Friday’s Bespoke Report, we described the rally off the March lows as a series of three acts each represented by different market characteristics. With futures indicated higher this morning, we wanted to provide a snapshot of market performance following strong opens in each ‘act’ of the rally off the lows and how performance following these strong opens has differed in Act III relative to Acts I and II.
In both Acts I & II, strong opens were typically followed up with additional gains from the open to close. In Act I, the S&P 500 ETF (SPY) had 20 days where it gapped up at least 0.5%. On those days, SPY averaged an open to close gain of 0.72% (median: 0.52%) with gains 70% of the time. In Act II, performance was pretty much just as strong. In the six days where SPY gapped up more than 0.5%, SPY saw an average open to close gain of 0.31% (median: 0.55%) with gains five out of six times.
Act III, which includes the current period though (rightmost column), has been a completely different picture. On the seven prior days since June 8th where SPY gapped up over 0.5%, it has averaged an open to close decline of 0.91% (median: 0.80%) with gains only once. Whether the headlines related to COVID have been good or bad lately, investors have faded the initial market reaction.
Jul 14, 2020
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If there’s a time that bulls are hoping for a turnaround Tuesday, it’s today. After a strong rally yesterday that took the S&P 500 into positive territory for the year and the Nasdaq to another record high, sellers stepped in during the afternoon erasing all of the gains and then some. The S&P 500 finished down almost a percent and the Nasdaq was down over 2%. It’s pretty crazy to think that on the same day that the Nasdaq hit an all-time high, that it also finished the day down 4% from that record!
Today, sentiment is looking a little bit better than it did at the close yesterday. Futures are higher following some positive earnings news from Citi and JP Morgan, and NFIB Small Business Sentiment also came in better than expected.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the latest earnings reports, global economic data, trends related to the COVID-19 outbreak, and much more.
Yesterday’s reversal for the S&P 500 was the first time since March 20th that the index was up over 1.5% intraday but then finished the day down over 0.75% versus the prior day’s close. The chart below shows every similar occurrence going back to the late 1990s. The bulk of these prior occurrences all occurred during the late stages of the Financial crisis, but outside of that period, there were also a handful of occurrences leading up and after the dot-com peak.
More recently, occurrences in the last ten years have been more likely to occur in the later stages of a sell-off (August 2015 and December 2018) than near a peak. Overall, of the 17 prior occurrences since 1998, the S&P 500’s average next-day return was a gain of 1.24% (median: -1.13%) with positive returns just eight times. From a short-term perspective, the only takeaway is that volatility remains in place. On the day after all 17 prior occurrences, the S&P was up or down at least 1% each time. Buckle Up!
Jul 13, 2020
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
It’s a new week, but more of the same in the early going as the usual suspects are all trading higher. Leading the charge is Tesla (TSLA), which is trading up over 6% which in today’s share price works out to a gain of about $100. The pace of reports is slow today, but earnings season kicked off this morning with Pepsi (PEP) reporting better than expected EPS and rallying more than 2%. Outside of PEP, though, there are no other reports on the calendar for today.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, global and national trends related to the COVID-19 outbreak, and much more.
As mentioned above, earnings season started off slowly today with Pepsi (PEP). Tuesday, though, we’ll get reports from Citigroup (C), Delta (DAL), Fastenal (FAST), JP Morgan Chase (JPM) and Wells Fargo (WFC), all of whom are scheduled to report in the morning. Wednesday’s major reports include Goldman (GS), Progressive (PGR), and UnitedHealth (UNH) in the morning, while Alcoa (AA) will report in the afternoon. Thursday will be the busiest day of the week with too many stocks to list here, but Netflix (NFLX) will highlight the schedule of afternoon reports. Finally, Friday’s key reports include Blackrock (BLK) and State Street (STT).
For a more detailed rundown of the earnings schedule for the upcoming season, please see our Earnings Explorer Tool (available to all Institutional clients) on the Tools section of our website. The chart below is from that tool and shows the daily number of companies reporting. While large caps dominate the list of companies reporting next week, the volume of reports will not pick up until later July when the pace of reports from smaller and mid-cap companies picks up and more than 400 companies will report in a single day.
