Feb 27, 2025
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“I really try to put myself in uncomfortable situations. Complacency is my enemy.” – Trent Reznor
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Well, we made it through Nvidia (NVDA). The hype surrounding last night’s earnings report was as high as we can remember for any stock reporting earnings in the past and reminiscent of Cisco (CSCO), Intel (INTC), or Microsoft (MSFT) reports in the late 1990s, or Apple (AAPL) reports in more recent years. NVDA’s report wasn’t great, but it wasn’t bad either. The company managed to report better-than-expected EPS and sales, while slightly raising sales guidance. That was good enough for investors who had set the bar low in recent weeks. The stock is currently trading just about 2.5% higher in the pre-market, and Nasdaq and S&P 500 futures are riding its coattails trading higher by more than 0.5%.
Bulls will take it, but as the last few days have shown us, we’re in a market environment where what the market is doing right now is hardly indicative, no less a guarantee of where we’ll be an hour from now let alone the end of the day. Add to that a ton of economic data and several Fed speakers on the calendar, and it’s sure to be an eventful day!
What happened to sentiment? Everywhere you look, fear has set into the collective mood. Indices that measure economic uncertainty have shot up to record highs, even taking out their prior extremes from the early days of Covid. The latest measures of consumer sentiment from the University of Michigan and the Conference Board both also showed much larger than expected declines in their latest readings. But nowhere has the negative turn in sentiment been more pronounced than in the equity market.
The CNN Fear & Greed Index gauges stock market behavior by looking at momentum, breath, options activity, strength in the junk bond market, and demand for safe havens. As of this morning, the index was at 21, putting it in the “Extreme Fear” range.
Over the last year, the current level of the CNN Fear & Green Index is among the lowest. The only time it was lower was in early August when markets briefly sold off as the Japanese equity market crashed over 10% in a single day.
Feb 26, 2025
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“Greatness comes from character, and character is not formed out of smart people, it’s formed out of people who suffered.” – Jensen Huang
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After four days in a row of losses for the S&P 500 and Nasdaq, including three days in a row of 1%+ losses for the Nasdaq, bulls are getting a chance to catch their breath this morning as futures are higher across the board. The breather comes just in time as markets gear up for Nvidia’s (NVDA) earnings report after the close. How the market reacts to that report could give us a good idea of the market tone as we head into spring. Besides NVDA after the close, New Home Sales is the only economic report on today’s economic calendar, and we’ll also hear from Richmond Fed President Barkin at 8:30 and Atlanta Fed President Bostic at noon.
Everything has been turned upside down in the markets over the last week. While equities and bitcoin have pulled back sharply, fixed-income ETFs – especially treasuries – have surged. As shown in the snapshots from our Trend Analyzer, the US Aggregate Bond ETF (AGG) and every Treasury ETF with a maturity longer than a year has moved into extreme overbought territory (more than two standard deviations above their 50-day moving averages (DMA). On the equity side, the S&P 500 hasn’t quite reached oversold territory, but all the other major index ETFs along with Bitcoin have now moved at least into oversold territory. It seems like a while since we last saw a situation where fixed-income securities were moving to the right side of their ranges while equities were moving to the left.
The iShares 20+ year US Treasury ETF (TLT) had a notable move yesterday as it broke its downtrend that has been in place since the peak (trough in long-term yields) right as the Fed started cutting rates in September. It finished yesterday right below its 200-DMA, which could act as resistance going forward, but you have to start somewhere!
Feb 25, 2025
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“What you’re thinking is what you’re becoming.” – Muhammad Ali
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Thankfully for US financial markets, they don’t work for the government. Elon Musk told all government employees that they must document five things they’ve accomplished over the last week or resign, so we thought it would be good to see what the markets have accomplished over the last week. Tuesday saw the S&P 500 close at a new all-time high which was followed by another new high on Wednesday. That’s two quick accomplishments. Now, let’s see what else the market has done.
Equities have taken a series of body blows in the three trading days since Wednesday’s high, and like a heavyweight fighter hoping to hang on to the end of the 12th round, the S&P 500 looked likely to make it to the end of the day yesterday and hold above its 50-day moving average (DMA). With less than ten minutes to go in the session, though, sellers unleashed a burst of blows knocking the market down to the mat and finishing the session right near its lows of the day. Holding the 50-DMA for the S&P 500? Not accomplished.
For the Nasdaq 100, a similar song. Unlike the S&P 500, which traded higher for much of the session, the Nasdaq opened positive but almost immediately moved into negative territory and stayed in a standing eight count for much of the session. The late-day decline only pushed it further below its 50-DMA by the time the closing bell rang. Holding the 50-DMA for the Nasdaq 100? Not accomplished.
The 50-DMA has never really been in question for small caps as the Russell 2000 closed below that level in almost every session for the last two months! It’s made attempt after unsuccessful attempt to break above its 50-DMA, but after Friday’s plunge, yesterday it was the 200-DMA that gave way. Back in August and January, the 200-DMA acted as support and the launchpad for a bounce, but this time around, the Russell had no such luck. Holding the 200-DMA for the Russell 2000? Not accomplished.
While not a major index, semiconductors are an import sector for the market, and yesterday the Van Eck Semiconductor ETF (SMH) one-upped the major averages by breaking below both its 50 and 200-DMA. The ETF has been essentially rangebound for the last five months and remains that way even after breaking below both moving averages yesterday. Even if it does set the bar lower heading into the report, this type of weakness heading into Nvidia’s (NVDA) earnings report Wednesday isn’t particularly encouraging, Holding the 50 and 200-DMA for semiconductors? Not accomplished.
Hey Elon, can the market get an extension on that email?
Feb 24, 2025
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“I never look at where a candidate has gone to school. Never!” – Warren Buffett
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s been a tough couple of days for bulls as the S&P 500 pulled back over 2% Thursday and Friday after hitting record highs the day before. Bulls will look to make a stand this morning, but the real tell will be to see how much staying power they have. It’s a quiet day for earnings, but Wednesday will bring about a very important report from Nvidia (NVDA). The economic calendar is also quiet today with the Dallas Fed Manufacturing Business Survey, the only report on the calendar.
The college admissions process has never been more competitive (and it’s harder than ever for the richest Americans to bribe their kids into the top colleges). Still, the quote above from Warren Buffett in this year’s Berkshire Hathaway annual letter should provide comfort to any high school seniors (or their parents) who didn’t get into their first choice. That line is only one of many parts of what has become required reading over the last few decades. Another good one: “Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability”.
Berkshire’s annual letter also serves as a reminder of what a money-making machine the company has been over the last 60 years. The first chart below shows the annual percentage change in market value of Berkshire Hathaway versus the S&P 500 from 1965 to 2024. As the company has become larger over the years, its margin of outperformance versus the S&P 500 has narrowed as the company has become so large that it’s harder to move the needle on a relative basis. Back in the 1970s and 1980s, though, the size of some of the blue bars dwarfs the red ones.
In Buffett’s first 11 years at the helm of Berkshire, the company ‘only’ outperformed the S&P 500 in six years, but from 1976 to 1983, the company outperformed for an epic eight straight years taking its cumulative percentage of years of outperformance above 70%. Since then, the pace of outperformance has leveled off with time, and through 2024, Buffett has outperformed the S&P 500 in two-thirds of all years.
Outperforming in two-thirds of all years may not sound all that impressive at face value, but like a snowball, it adds up. The chart below shows the cumulative total return of the S&P 500 and Berkshire since 1965. The S&P 500’s cumulative gain during this period is over 39,000%, but it’s barely noticeable compared to Berkshire’s gain of more than 5,000,000%!
Given its size, it has become more difficult for Berkshire to significantly outperform the S&P 500, especially during bull markets. However, given the company’s track record under Buffett’s leadership, most investors are willing to give him the benefit of the doubt. With that in mind, the stock’s modest underperformance versus the S&P 500 over the last year hasn’t caused concern for investors. The last two sessions also serve as a reminder that when the times get tough, Berkshire usually hangs in as it only declined 1% relative to the 2%+ decline for the S&P 500.
Feb 21, 2025
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“You will become way less concerned with what other people think of you when you realize how seldom they do.” – David Foster Wallace
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If you’re looking at futures on the Dow, it’s not looking like a positive start to the last trading day of the week. Futures on that index are down nearly half of a percent on news that the index’s second most heavily weighted component – UnitedHealth Group (UNH) – is down over 10% following a WSJ report that the Department of Justice has launched an investigation into the company for its billing practices related to its Medicare Advantage plans. Outside of the Dow, though, S&P 500 futures are flat, and the Nasdaq is on pace to open 0.35% higher.
Overnight, Asian markets traded higher to close the week with broad-based gains as Japanese CPI rose 0.5% m/m versus an increase of 0.6% in December. In Europe, stocks have also bounced back from yesterday’s decline with the STOXX 600 trading up over 0.5% putting it back into the black for the week. The gains come despite some mixed PMI readings where the Manufacturing index came in higher than expected (but still in contraction territory). At the same time, the Services PMI, which was above 50, missed expectations.
The S&P 500 and Nasdaq were down less than 0.5% yesterday, but there were some big moves in individual stocks as some of the market’s highest flyers in recent weeks/months were taken out to the woodshed. Among the largest US banks and brokers, the percentage declines may not have been as large as some of the other market areas, but relative to their normal price moves, the declines were large. Of the six large US banks shown below, all of them were down at least 1%, with four down over 3%; JPMorgan Chase (JPM) and Morgan Stanley (MS) both fell more than 4%.
The moves may have been painful, but putting them in perspective, most of these stocks have seen large gains in recent months. On a six-month chart, they don’t look especially significant. Besides Bank of America (BAC), they were all either at or right near 52-week highs heading into yesterday’s decline.
Feb 20, 2025
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“High expectations are the key to everything.” – Sam Walton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Walmart (WMT) marked the unofficial end to earnings season this morning by reporting slightly better than expected earnings on inline revenues. The company also lowered guidance for Q1 and the full year. As a result of the lowered guidance, the stock is getting pummeled in the pre-market and is on pace to gap down close to 9%. For many high-growth stocks, a 9% gap down in reaction to earnings may not sound extreme, but WMT has historically been a much less volatile stock. Since 2001, its average one-day move in reaction to earnings has been 2.9%, so if current levels hold through the end of the trading day, today’s move would be more than triple its historical average move.
The table below shows prior earnings reports since 2001 when WMT gapped down by at least 5%. It’s only happened five other times, and it has never gapped down more than 8%, so that would put today’s downside gap on pace to be the most negative gap opening in reaction to earnings since at least 2001. As Sam Walton’s quote above says, high expectations are the key to everything, and when a stock like WMT heads into an earnings report trading for over 37 times earnings and lowers guidance, reactions like this aren’t surprising.
For the broader market this morning, S&P 500 futures indicate a decline of about 0.3% at the open and trade near their lows of the day. Today’s weakness, however, comes just hours after the S&P 500 closed at an all-time high yesterday – its third record closing high of the year. The market doesn’t look like it’s done much since its high in December, but YTD, the S&P 500 has managed a rally of over 4%. We’ve seen some weak housing-related data this week, but today’s economic focus will shift to jobless claims and the Philly Fed at 8:30 and leading indicators at 10 AM. Also on the calendar, we’ll hear from various Fed officials throughout the day, starting with Chicago Fed President Goolsbee just after the opening bell.
