Jan 14, 2025
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“I took a negative and I turned it into a positive.” – Garo Yepremian
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
52 years ago today, the Miami Dolphins were on the verge of a perfect season and icing a win in Super Bowl VII. They were up 14-0 over the Washington Redskins, and it was fourth and four on the Washington 25-yard line with just about two minutes left in the game. Dolphin kicker Garo Yepremian came out to kick a 42-yard field goal which would have taken the score to a fitting 17-0 capping off Miami’s season with a 17-0 record.
It should have been a pretty easy field goal, but Washington’s defensive end Bill Brundige blocked the kick. Yepremian recovered it, but rather than fall on it, he made the boneheaded decision to pick it up and make a play. When he tried to pass it, the ball slipped out and into the hands of Washington’s cornerback Mike Bass who ran it back for a touchdown. Instead of 17-0, the score was 14-7, sending a scare down the Miami bench. With just two minutes left, Miami still had the lead and with a 14-7 was still likely to win. After the fact, they were even able to laugh about it. At the moment, though, it was anything but a joke and illustrated that even a “perfect season” can have its ugly moments.
The markets are experiencing a Yepremian scare right now. Since early December, nothing has seemingly gone right for equities where breadth has weakened, the dollar and yields have surged, and now even oil is on the rise. Like everything else, this too shall pass. At some point, we’ll be able to look back without a lot of concern regarding the last six weeks. The only question is when. Weeks? Months? Even longer?
For the very short-term, yesterday’s intraday rebound followed through to Asian markets overnight as Chinese stocks rallied over 2% after government officials pledged that measures would be taken to stabilize the market. Other countries in the region were also higher, although Japan was an outlier as the Nikkei fell over 1.5% (it was closed on Monday). In Europe, the STOXX 600 bounced 0.5%, and every country in the region except for the UK is trading higher.
Ahead of the US open, equity futures are higher this morning but off their highs as yields have reversed higher with the 10-year pushing close to 4.8%. Small business optimism continued its post-election surge rising to 105.1 which was the highest reading since late 2018 and was three full points ahead of consensus expectations. The report du jour, though, is the December PPI. That report will dictate the market’s direction today, but even that will only be an appetizer for tomorrow’s CPI.
The December PPI just hit the tape and at both the headline and core readings, the reported data came in well below forecasts, and the immediate reaction in markets has been for yields to fall and pre-market equity futures to build on their gains.
Semiconductors are a key area we’ll be watching for signs of where the market is going. While the broader market has only recently started to succumb to weakness, semiconductors started to roll over way back in July and fell 25% from early July to early August. After recovering half of those losses late in the summer, the Philadelphia Semiconductor Index (SOX) has been essentially trading in a sideways range for the last four months. As shown in the chart below, that range has resulted in a convergence between the 50 and 200-day moving averages.
What makes the recent convergence even more unique is that yesterday broke a streak of 14 trading days where the percentage spread between the level of these two moving averages was less than 0.50%. The chart below shows prior periods when the spread between the SOX’s 50 and 200-day moving average was less than 0.5%, and the just-ended streak was the second longest on record. The only streak lasting longer ended at 20 days in July 2005, and two other streaks lasted 13 trading days (one in March 2005 and another in January 2016).
Jan 13, 2025
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“There is no compression algorithm for experience.” – Andy Jassy
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Global equities stumbled into the weekend on Friday, and they’re bumbling out of the gate to kick off the week. While Japan was closed, other Asian markets started off the week on a down note with the Hang Seng falling 1%, while India South Korea, and Australia all also saw at least 1% declines. Europe was open during much of Friday’s US sell-off, so it didn’t have as much to ‘catch up’ from this morning, but the STOXX 600 is still down close to 1% which is right in line with where US futures are trading this morning. The culprit behind the global weakness has primarily been interest rates as yields have been increasing worldwide. Add to that the relentless run in the dollar, and now oil prices moving up towards $80 per barrel, and it isn’t a good recipe for higher stock prices.
Large-cap tech was notably weak on Friday as it was the first day since September 11th, that the Nasdaq 100 ETF (QQQ) opened and traded the entire session below its 50-day moving average. It’s been less than a month, but QQQ has established a relatively well-defined trend of lower highs and lower lows.
Jan 10, 2025
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“It’s equal can not be seen on this earth.” – Anthony Lucas
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
These words describe the image of oil soaring into the sky from beneath the clay Texas surface at the first major oil discovery in US history. It occurred 124 years ago today when Anthony Lucas and his partners struck black gold, starting the US oil industry. Lucas and company tried and failed for years to find oil underneath the Texas, but January 10th, 1901, was the day their dreams were finally realized.
Like the dog that catches the car, right after finally finding success, the question quickly became “Now what?” Once oil started flowing and launched the pipe they were drilling with 100s of feet in the air, they realized they had nowhere to put it or no way to stop it from flowing. First, they tried a 2.5-foot-high wall around the perimeter of the well, but it overflowed within 24 hours. They built a second wall at a wider circumference, but that quickly became overwhelmed too. A third wall covered 50 acres, but it wasn’t long before that was overflowing too. Talk about a good problem to have! Eventually, they got things under control and so began the modern-day US oil industry.
The chart below shows how US crude oil production started to take off after 1901. According to the Department of Energy, in 1900, the US produced 63 million barrels of crude oil annually. Within 10 years, production tripled. Another 10 years later, it more than doubled again and kept rising from there until peaking in 1970. Production was nearly cut in half from 1970 through 2008 as analysts started to fear the world was running out of oil and prices shot well into the triple-digits. Then, proving the adage, that the cure for higher prices is higher prices, the shale boom arrived, and production since then has rebounded to a historic degree. So much for running out of oil.
Even as the US oil industry exploded in the early 1900s, exports were practically non-existent until more than 100 years after Lucas’ first discovery. Beginning in the 2010s, though, exports surged like nothing ever seen before and now total a record 4+ million barrels per day.
When it comes to recent crude oil performance, prices were weak for most of the second half of 2024 after prices peaked in the high 80s during the spring. Over the next six months, WTI sank into the mid-60s where it started to stabilize. Since early December, though, prices have started to rebound with a rally this morning taking it above $75 per barrel and back above its 50-day moving average for the first time since October. While one level of resistance has been cleared, another remains at the downtrend line in the high $70s. If those levels get taken out, markets will find it increasingly difficult to prevent concerns over inflation from getting louder.
For the next couple of hours, though, December’s non-farm payrolls will be the market’s main area of focus, and the much higher-than-headline forecast has yields surging and equity futures plunging. At 4.78%, the 10-year yield is now at its highest level since November 2023.
Jan 8, 2025
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“When things go wrong, don’t go with them.” – Elvis Presley
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
We had the wrong kind of “turnaround Tuesday” yesterday. Equities opened positively and then sold off throughout the trading day as the better-than-expected ISM Services and higher-than-expected Prices Paid component pushed yields higher and stock prices lower. That weakness flowed into Asia overnight and Europe this morning where equities have been trading lower. The picture for today looks dicey again as yields continue to move higher. The 10-year yield is firmly above 4.7% and, in the UK, the 10-year yield has moved to its highest level since October 2008! There was just a brief respite in the selling of bonds as comments from Fed Governor Waller hit the tape where he said he supports rate cuts in 2025 provided the economy and inflation play out as expected, but it lasted less than a few minutes before yields were back near their highs of the day.
The ADP Employment report came in weaker than expected as total payrolls increased 122K versus forecasts for an increase of 136K. While weaker than expected, it was still a steady number and has helped to alleviate some of the pressure in bonds and stocks. Jobless claims also just hit the tape, and initial claims fell to 201K which was below forecasts while continuing claims came in higher than expected. Given the holidays, though, some of these claims numbers could be distorted.
Nowhere was yesterday’s negative reversal more pronounced than in Nvidia (NVDA). The stock opened at record highs and looked like it was going to breakout of its six-month trading range after Monday night’s keynote speech from CEO Jensen Huang. It quickly reversed lower throughout the session, though, and finished down by over 6% on the day and over 8% from its intraday high. As shown in the chart below, yesterday was the sixth time in the last year that NVDA hit an all-time high intraday but then sold off at least 4% during the trading day. While the first three are almost hard to notice given they occurred during steady uptrends for the stock, the last two marked short-term tops. While NVDA managed to stay above its 50-day moving average in yesterday’s decline, it closed closer to that level than any of the other prior reversals.
Jan 7, 2025
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“The most contrarian thing of all is not to oppose the crowd but to think for yourself.” – Peter Thiel
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Below is a quick look at the performance of stocks so far in 2025 based on how they performed in 2024 using our decile analysis. We broke the Russell 1,000 into deciles (10 groups of 100 stocks each) based on 2024 total returns and then calculated the average YTD performance over the first three trading days of 2025 for the stocks in each decile. Interestingly, both the best performing stocks and worst performing stocks in 2024 have done well so far in 2025, while the stocks in the middle of the performance distribution in 2024 have lagged. As shown below, the decile of 2024’s best performing stocks are already up another 3.88% on average in 2025, while the decile of 2024’s worst performing stocks are up the second-most of any decile with an average 2025 gain of 2.7%.
Jan 6, 2025
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“.– …. .- – / …. .- – …. / –. — -.. / .– .-. — ..- –. …. – -.-.–” – Samuel Morse
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
How many times have you looked at your cell phone already today? It’s probably the first thing you did today. Whether you looked up scores, stock quotes, messages, or even got some work done, the fact that you are reading this right now all traces back to a meeting in Morristown, NJ 187 years ago where Samuel Morse demonstrated his idea of sending electrical impulses over a wire that could then be translated into text, or as he called it, the Telegraph. While that meeting in 1838 was the first telegraph demonstration, the first official telegram wouldn’t come for another six years in May 1844 when Morse sent a message from Washington, DC to Baltimore. Even though he was the first person to ever send a message over wires which ultimately led to the mass proliferation of content, if he were alive today looking at all that the telegraph has spawned, Morse would probably be at a loss for words. His thoughts would probably echo the message he sent in that first telegram, “What hath God wrought!”
Friday’s 1.26% rally was the best day for the S&P 500 since 11/6, the day after November’s election. It was also the third 1%+ daily gain in that span. The other two days were a 1.10% gain on Christmas Eve and a 1.09% gain on 12/20. While there continues to be a near constant focus on the Fed, we think it’s notable that two of the three best days since the election have come when Congress passed the continuing resolution to keep the government open and last Friday when Mike Johnson was re-elected speaker on the first vote.
While Friday’s gains sent the bulls home in an optimistic mood, it wasn’t perfect. After briefly trading back above its 50-DMA, the market pulled back in the afternoon and finished slightly below that level. It was the fourth day in a row that the S&P 500 made a run towards its 50-DMA, but also the fourth day in a row that it finished off its intraday highs. As we start the trading week, the S&P 500 is poised once again to trade back above that level, so now all it needs to do is hold it. Until then, the burden of proof is on the bulls.
