Apr 15, 2020
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It’s Tax Day, and while Treasury delayed the deadline for this year, it’s still looking like a taxing day for financial markets as equity futures are indicated to fall over 1% and crude oil is below $20 at its lowest level since early 2002.
We finally got some economic data for this week, and while expectations were already low, the data was even worse. Retail Sales fell 8.7% in March versus expectations for a decline of 8.0%. That was a March number. For April, we got the Empire Manufacturing report, and that was an absolute disaster. Economists were forecasting the headline index to come in at -35.0, which would have been the worst reading in its history dating back to 2001. The actual result was more than twice as bad, though, coming in at a level of -78.2. As negative as that reading is, it’s to be expected when you have a complete shutdown of the US economy.
Read today’s Bespoke Morning Lineup for a discussion of overnight market events in Asia and Europe, the drop in crude oil, details of the airline bailout, the latest major US earnings reports, trends and statistics of the COVID-19 outbreak, and other stock-specific news of note.
This morning’s Retail Sales report was even more interesting in the details which we will discuss more in a report later. But one trend that has completely reversed is that of “Eating In vs Eating Out”. After trending lower for years now, the share of total retail sales taking place at food and beverage stores spiked to 13.53%. Moving in completely the opposite direction, the share of sales at Bars and Restaurants plunged to 10.05%. If you think that was bad, though, keep in mind that the economy wasn’t shut down for all of March. Wait until the April numbers are released.
Apr 14, 2020
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Earnings season kicked off this morning with JP Morgan (JPM) reporting Q1 results. If first impressions are to be trusted, it could be messy. Of the six companies reporting this morning, three missed EPS forecasts (JP Morgan, Wells Fargo, and Conn’s), two beat EPS forecasts (First Republic and Johnson & Johnson), and one reported inline bottom-line results (Fastenal). This is just the tip of the iceberg, though, as the pace of reports will only pick up going forward. Despite the weakness in results, the one silver lining is that expectations couldn’t be much lower, so that should help to set the bar incredibly low.
Read today’s Bespoke Morning Lineup for a discussion of overnight market events in Asia and Europe, the first batch of US earnings reports, the latest trends and statistics of the COVID-19 outbreak, and other stock-specific news of note.
We’ve talked in the past about how the US and every sector has finally moved out of oversold territory. On a more global scale, we have seen the exact same trend. The image below is from our Trend Analyzer and shows the performance of various international regional ETFs. What’s striking about this chart is how every ETF has not only moved out of oversold territory, but they are also all at nearly the same spot with regards to its trading range. Talk about uniformity!
Apr 13, 2020
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After the best week since 1974 and the second 10%+ rally for the S&P 500 in three weeks, US equities are understandably starting off the week on a down note. That being said, futures are off their lows. This is going to be a big week for the market as earnings season kicks off. With the economy shut down indefinitely, though, for a lot of companies, there aren’t going to be much in the way of earnings, revenues, or guidance to speak of.
Read today’s Bespoke Morning Lineup for a discussion of the oil production cut agreement over the weekend, the latest trends and statistics of the COVID-19 outbreak, and other stock-specific news of note.
The performance of semiconductors in recent days has been a bit concerning. We reference the group a lot, but that’s only because they have been such a reliable leading indicator for the broader market. While the Philadelphia Semiconductor Index (SOX) led the S&P 500 off its March lows, in the last few days it has been lagging.
On Thursday, as the S&P 500 rallied 1.5%, the SOX fell over 2% for its worst single-day underperformance versus the S&P 500 since March 16th. Even more disheartening than the bad day, though, was how it transpired. In early trading, the SOX was actually up with the market and even briefly traded above both its 50 and 200-day moving averages. Shortly after the open, though, the sellers stepped in and within the first hour of trading, it was down on the day. Had the early gains held, it would have been the first time since 2/21 that the SOX closed above both its 50 and 200-day moving averages, but instead of that milestone, the index saw its relative strength make a new short-term low. Watch the group today to see if last week’s weakness was temporary or not.
Apr 9, 2020
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With US markets closed for Good Friday tomorrow, it was looking like Corona Friday was coming a day early this week as US futures were indicating a decline of 1% at the open. Jobless claims were just released and came in at a level of 6.606 million versus forecasts of 5.0 million. That’s off last week’s record high, but still much higher than expected.
Right in sync with the release of jobless claims, the Fed is now just out with an announcement of adding $2.3 trillion in new loans to support the economy. Say what you want, but when the history of this is written, no one will be able to accuse the Fed of not going big. In response to the Fed’s announcement, futures have erased all of their declines and are now flat to slightly higher.
Read today’s Bespoke Morning Lineup for a discussion of the latest trends and statistics of the outbreak, an analysis of groups driving the rally in Europe this week, and a big drop in Machinery Tool Orders in Japan.
It was only a week or so ago that we were looking at a situation where there were just about no stocks in the S&P 500 that were overbought, while nearly all of them were oversold. That situation has changed a lot in the last few days. Through yesterday’s close, less than 10% of stocks in the S&P 500 were oversold, but at the same time, less than 10% of stocks in the S&P 500 were overbought as well. In other word’s right now the market is basically in no man’s land.
Apr 8, 2020
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US futures have been gradually drifting higher all morning and are now indicating a gain of nearly 1% for the S&P 500 at the open. In terms of data today, there isn’t much on the economic front, so the primary focus of investors is going to be on trends in COVID-19 case counts both here in the US and abroad.
Read today’s Bespoke Morning Lineup for a discussion of the latest trends and statistics of the outbreak, trading in European markets, and the latest on the political back and forth between EU member countries on how to deal with virus relief.
In yesterday’s post, we noted that Financials was the only S&P 500 sector still trading at oversold levels. Even with yesterday’s negative reversal in the S&P 500, the Financials managed to finish slightly in the green and more importantly, out of oversold territory. With that move, it was the first time in 51 trading days that at least one S&P 500 sector was not in oversold territory. That may sound like a long time, but it is nowhere near a record. In late 2016, the S&P 500 went 74 straight days where at least one sector was oversold, and there have been multiple periods in the past when there were streaks of 100 or more trading days with at least one sector oversold. That was before the days of ETFs where the market was a lot less one-sided on a day to day basis.
What is rather unique about the recent period is that back in late March, there was a 13 trading day stretch where every S&P 500 sector finished the day at oversold levels. Going back to 1990, there has only been one other longer streak. That was in October 2008 when every sector was at oversold levels for a full 17 straight trading days.
Apr 7, 2020
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Global equties are in major rally mode as the S&P 500 tracking ETF is now trading up over 10% versus its close on Friday. We would also note that volumes have been on the high side as well. Yesterday’s rally was fueled by optimism over flatter curves. Not yield curves but pandemic curves. With little in the way of economic data today, the focus will likely continue to be on case counts out of Europe, New York, and other areas of the country.
Read today’s Bespoke Morning Lineup for a discussion of the latest trends and statistics of the outbreak and an analysis of the factors driving stocks in Europe in today’s rally.
Yesterday we mused that if the early gains held we could see a day where the S&P 500 and none of its sectors closed the day at oversold levels. Well, we got close, but couldn’t quite make it. While most sectors moved out of oversold levels yesterday, Financials had to be the Debbie Downer finishing the day just barely at oversold levels. Let’s hope today’s early gains hold and even the Financials can move into the neutral zone. Even with the S&P 500 and every sector moving out of oversold territory, though, we would note that neither the S&P 500 nor any sectors are trading above their 50-day moving averages. So, even with the recent gains, the market has a sizable hole to dig itself out of.
