Jan 2, 2019
Not a good start to the year. While futures are off earlier lows, the S&P 500 is poised to kick the year off with a decline of more than 1%. The culprit behind today’s weakness is poor economic data out of China and Europe. On the US front, things have been quiet…so far.
Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and commentary.
Bespoke Morning Lineup – 1/2/19
With futures indicating a decline of about 1.65% at the open, today’s start to 2019 could go down as the 16th time that the S&P 500 has kicked off a year with a first day decline of more than 1%. You may recall that the last such occurrence was in 2016 when stocks kicked off the year falling by 1.53% on the first trading day. The rest of that year wasn’t so bad as the S&P 500 went on to rally 11.24% from the first day’s close through year-end. That 11.24% advance also just happens to be the median rest of year gain that we have seen following prior years when the S&P 500 fell more than 1% on the first trading day of the year.
Besides 2016, the next two most recent occurrences where the S&P 500 fell more than 1% to kick off the year weren’t as friendly to the bulls. In 2008, the S&P 500 dropped 1.44% to kick off the year and proceeded to fall another 37.58% through year-end! Then, back in 2001, the S&P 500 kicked off the year with a decline of 2.8%. Following that sharp drop, the FOMC announced a surprise 50 bps rate cut from 6.5% down to 6.0% the very next day. Back then when rates were above 6%, the FOMC had plenty of more ‘ammo’ to ease further, but in the end, it didn’t seem to help as the S&P 500 fell another 10.5% through year-end, and the economy peaked and fell into recession in March.
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Dec 31, 2018
In a year that many investors are happy to see come to an end, US equities are looking to finish off 2018 on a positive note. Keep in mind, though, that there are still 7.5 hours between now and the closing bell. In today’s Morning Lineup, we discuss where we think this rally is going next in the short-term, China’s grim manufacturing data, and the dismal performance of equities around the world this year.
Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and commentary.
Bespoke Morning Lineup – 12/31/18
We’ve discussed the market’s extreme oversold breadth readings a number of times here and in various reports over the last couple of weeks, but it really is hard to appreciate just how extreme things have been. Another case in point is the S&P 500’s 10-day A/D line. Readings below -1,500 in this indicator aren’t particularly common and usually don’t last long as they are indicative of deeply oversold markets.
Heading into today, though, this indicator has been below -1,500 for eight straight trading days. That’s nearly unheard of! In fact, the only two other times since 1990 that the indicator has been below -1,500 for as long were in September 2001 after the World Trade Center attacks and then in October 2008 in the middle of the Financial Crisis. Each of those periods is indicated with red dots on the chart below. While both occurred well into a major decline in equity prices, neither occurrence marked an actual low in the market.
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Dec 28, 2018
It wasn’t looking that way early yesterday afternoon, but with two positive days in the books and futures pointing to a higher open today, the S&P 500 could have its first three-day winning streak since the end of November. The fact that asset allocators are being forced to buy equities to get their portfolios back into balance with their benchmark weightings could add further fuel to the fire. After all, we saw the same trend play out in the last few days of October and November as well. Then again, nothing is guaranteed in this market lately, and the difference between a big up day or down day is simply the timing of when the last buy or sell program of the day hits, sending stocks careening in one direction or the other.
Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and commentary.
Bespoke Morning Lineup – 12/28/18
Yesterday’s reversal which followed a big up gain the day before certainly has helped to provide a boost to sentiment, but as we mentioned in yesterday’s commentary, while the type of action we have seen in the last couple of days has ultimately led to better than average returns over the following year, in the short-term, there was usually more downside.
Take yesterday’s reversal in the Nasdaq. After trading down over 3% intraday, the late-day rally in the Nasdaq to finish in positive territory was just the 20th time since 1985 that the index was down at least 3% intraday and finished in positive territory. Of the 19 prior occurrences, 18 of them occurred either between 2000 and 2002 or in 2008. Chasing those rallies didn’t turn out particularly well.
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Dec 27, 2018
We were bound to give some of it back, but even with futures suggesting a near 300 point decline at the open, that would only take us back to levels we traded at 30 minutes before yesterday’s closing bell! For bulls, the weakness at the open should actually be welcome. If yesterday’s buying was real money coming in, you would expect to see this morning’s weakness met with buying later on in the morning. So, that will be the test to watch for.
Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals and commentary.
Bespoke Morning Lineup – 12/27/18
Volatility has definitely made a comeback over the last two months, so much so that the S&P 500’s average daily range has now ticked up to 1.19%. While we are nowhere near the record levels of over 4% from the peak of the Financial Crisis, the current level is the highest since early 2012. Just another indicator showing how the current environment is a major shift from recent history.
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Dec 26, 2018
After the Christmas Holiday provided a welcome timeout to a relentless market decline, US equity futures are indicated higher (if we had a penny for every time that was the case this month). It’s not often that a sitting US President comments on the stock market, but this is no ordinary President, and over the holiday Trump weighed in on the market’s decline by saying, “We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy. Really a great opportunity to buy.” More than that, though, investors were encouraged by the fact that the President also expressed confidence in his Treasury Secretary easing concerns that he would be the latest member of the administration to hit the chopping block. Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, and updated market internals. Due to market closures outside of the US and a lack of data, there will be no commentary section in today’s report.
Bespoke Morning Lineup – 12/26/18
There’s really no shortage of charts we could show this morning to illustrate just how crazy the last several days/weeks of trading have been, but we’ll keep it at three for now. For starters, check out the chart of how the S&P 500 and each sector are trading relative to their trading ranges. As shown, the S&P 500 and four sectors are literally off the charts oversold!
One sector that has been especially weak is Consumer Staples. Normally a defensive sector, given the sector’s relatively high dividend yields and stable businesses, the Consumer Staples sector has been down over 1% for seven consecutive trading days now. The last time that happened? Never!
Finally, with stocks tanking and treasuries rallying to close out 2018, the S&P 500’s dividend yield is starting to look a lot more attractive relative to long-term Treasuries. Through Monday’s close, the S&P 500’s dividend yield was 2.32%, which is just 41 basis points (bps) below the yield on the 10-year. From a long-term investor’s perspective, that’s an increasingly attractive yield for equities.
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Dec 24, 2018
Futures are getting in the Christmas spirit this morning, although not in the way you might expect as we have already seen the market trade both firmly in the green and deeply in the red. After trading decently higher overnight, they started to drop sharply shortly after six. There’s been a slight rebound off the lows since the initial leg lower, but they are still indicating a lower open.
A walk around Main Street and the malls this weekend would suggest that the economy remains on a firm footing, but after a rocky 72 hours in DC, confidence on K street is a whole different story. One thing we’re sure of, though, is that if you thought markets were thin lately, any expectations for liquidity today are nothing more than a mirage. Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and detailed analysis and commentary:
Bespoke Morning Lineup – 12/24/18
Last week they even got the Utilities to break. While still holding up better than most sectors, which are trading at extreme oversold levels, the Utilities sector, which had been trading at extreme overbought levels just a week earlier is now firmly below its 50-DMA and not far from oversold territory,
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