May 3, 2019
The S&P 500 SPY ETF is trading up 37 basis points ahead of the 8:30 AM ET April Employment Report, where nonfarm payrolls are expected to rise by 190,000. Once the report is released, give our jobs preview another look for how stocks and sectors typically trade based on a stronger or weaker than expected outcome.
In today’s Bespoke Morning Lineup, we cover trends for earnings, revenues, and guidance after more than 500 companies reported earnings this week. We also include our regularly updated charts and graphics of market and sector internals that Bespoke subscribers have come to love. If you’re interested in international equity markets and economic data, we’ve got that covered too. This report is all you need to prepare yourself for the trading day ahead. To read today’s Morning Lineup and receive it every trading day going forward, start a two-week free trial to Bespoke Premium.
May 2, 2019
Futures are up ever so slightly pre-open following yesterday’s post-Fed sell-off. The sell-off gave investors a needed jolt since the biggest drop that the S&P saw in April was just 61 basis points. This AM we’ll be watching the weekly jobless claims print to see if last week’s small jump was just an outlier or something to be more concerned about.
In today’s Bespoke Morning Lineup, we cover US and European earnings, global PMIs, and global auto sales. We also include our regularly updated charts and graphics of market and sector internals that Bespoke subscribers have come to love. This report is all you need to prepare yourself for the trading day ahead. To read today’s Morning Lineup and receive it every trading day going forward, start a two-week free trial to Bespoke Premium.
May 1, 2019
Welcome to what has historically been the start of the toughest six month period for US equity markets. While the May through October period may not be the market’s best time of year, it is starting off on a positive note as all of the major averages are pointing to higher opens. The driver of this morning’s strength isn’t any sort of positive sentiment coming out of Asia or Europe, because those markets are all closed for the day. No, the key today is earnings. In yesterday’s note, we said it’s not all about Alphabet (GOOGL), and we’re seeing that play out again today as more than 65% of the nearly 200 companies that have reported since yesterday’s close exceeded EPS forecasts and a very impressive 63% beat revenue forecasts!
Outside of earnings, the ADP Private Payroll report was just released and came in at 275K, topping expectations by 95K for the strongest report relative to expectations since February 2017 and the 6th best report relative to expectations since 2006.
We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day. To view the full Morning Lineup, start a two-week free trial to Bespoke Premium.
With another month of positive returns in the books, we wanted to provide a quick update on how the S&P 500’s current performance over the short and long-term stacks up to historical averages. Current annualized returns for the S&P 500 over the last one, two, five, and ten years are all above the historical average. The only time window where returns have been subpar is over the last twenty years where the 6.0% annualized gain is well below the long-term average of 11.0%. Keep in mind, though, that this is a period that encompasses two bear markets where the S&P 500 lost half of its value.
In terms of where the current one, two, five, ten, and twenty year returns stack up in percentile terms, for the most part, they aren’t terribly stretched. For the one, two, and five year periods, returns are all less than the 60th percentile, while 20-year returns are only in the 4th percentile. Again, the only period that is elevated is the ten-year time frame where the S&P 500’s annualized return is better than three-quarters of all other ten-year windows.
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Apr 30, 2019
When a stock is set to open down over $100 in reaction to earnings, people notice, even if that decline is coming off a base of $1,200. That’s exactly the case this morning as shares of Alphabet (GOOGL) are on pace to have their most negative gap down in reaction to earnings since the company’s IPO in 2004. For more on how GOOGL tends to perform following negative reactions to earnings, please check out our Chart of the Day.
Even if it is one of the largest companies in the world, there’s a lot more to the economy than GOOGL, and this morning we are seeing that. Since the close yesterday, nearly 150 companies have reported earnings and 68% of those exceeded EPS forecasts, while a pretty impressive 60% have exceeded revenue forecasts.
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In yesterday’s Closer report, we highlighted the fact that a number of secondary indices/sectors that outperformed ahead of the December lows did not make new highs yesterday. Another indicator that hasn’t been keeping up with the equity market is high yield spreads. As shown in the chart below where we have plotted high yield spreads on an inverted basis, for well over a week now, we have seen stock prices make new highs but high yield spreads haven’t been keeping up. If the rally, is going to keep going, spreads will need to catch up.
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Apr 29, 2019
While this will be the busiest week of the earnings season, the pace of reports to start the week has been relatively quiet with just 21 companies reporting so far this morning. Of those reports, just over 60% have exceeded EPS guidance while slightly more than half have exceeded revenue guidance. This afternoon, the pace will pick up considerably with close to 60 companies reporting headlined by Alphabet (GOOGL). In economic data this morning, Personal Income came in weaker than expected at a rate of 0.1% vs estimates for growth of 0.4%, while Personal Spending was higher at 0.9% vs expectations for growth of 0.7%. Spending more and earning less! The only other economic indicator of note today is the Dallas Fed Manufacturing report at 10:30 Eastern.
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One factor causing Americans to spend more may be the incessant increase of prices at the pump. Even with crude oil trading lower for a fourth straight day, it hasn’t been enough to counter the seasonal uptick that is normal for gas prices at this time of year. According to AAA, the national average price of a gallon of gas currently stands at $2.89. The most painful thing for consumers, though, has been that the increase has been constant. As shown in the chart below, it has now been a record 76 days since the national average price of gasoline last saw a one day decline in a streak that has now dwarfed every prior one since data begins in 2004.
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Apr 26, 2019
There’s a negative tone to the futures market this morning after some notable earnings disappointments since yesterday’s close. First, Intel (INTC) reported after the close yesterday and issued disappointing guidance, sending shares down 8%. It’s not often that INTC trades down that much in reaction to earnings. Using our Earnings Explorer tool, we found only six other quarters since 2001 where the stock gapped down 8%+ on an earnings reaction day. INTC’s weakness is also casting a pall on the entire semiconductor sector, which had been leading the market. Another notable earnings miss to note is Exxon Mobil (XOM), which literally just reported weaker than expected earnings, missing the consensus EPS forecast of 69 cents by 14 cents and also reporting revenues shy of expectations.
While INTC and XOM were two notable misses, the overall tone of earnings since yesterday’s close has been pretty positive. Of the 125+ companies that have reported, 65% have exceeded EPS forecasts while 53% have managed to exceed revenue estimates. In terms of guidance, 8 companies raised forecasts going forward while only 5 lowered the bar.
We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day. To view the full Morning Lineup, start a two-week free trial to Bespoke Premium.
Each Thursday afternoon in our Sector Snapshot report, we provided up to date charts of S&P 500 sectors looking at each sector’s trading range, percentage of stocks above their 50-day moving average, ten-day A/D line, relative strength, and P/E ratio. In looking through the relative strength charts yesterday, one interesting trend that stood out was the relationship between the Health Care and Technology sector. Looking at the chart below, it’s pretty easy to see that just about all of the rotation out of the Health Care sector that began towards the end of last year went right into Technology.
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