Oct 16, 2024
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“I took the two most expensive aspirins in history.” – Wally Pipp
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The S&P 500 saw a downside intraday reversal yesterday after European chip-equipment manufacturer ASML reported weaker than expected numbers. As shown below, SPY is currently trading well above its 50-day moving average and is about $16 above key support. We’ll be treating any downside move as simple mean reversion until the point at which support at the $563.5 level breaks.
The semiconductor ETF (SMH) fell more than 5% yesterday on the ASML news, resulting in a large red bar on the ETF’s chart. Remember that even though the broad market has been chugging along making new high after new high recently, the semis — the Transports of the 21st century — have yet to do so.
Oct 15, 2024
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“I always performed out of fear of failure – and that’s a tough way to play. It was as if my back was to the wall and I was constantly surrounded by very dangerous people that were not friendly to me.” – Keith Hernandez
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Major US banks and brokers are in the news once again this morning as all three that reported earnings ahead of today’s open (BAC, C, GS) beat both top and bottom line estimates. Coming into today, this space is already trading extremely overbought, but share prices are rallying again in the pre-market in reaction to the positive earnings news.
As shown below, since earnings season began last week, the “big six” of the banks and brokers are up an average of 6.7% based on where shares are trading in the pre-market this morning.
Oct 14, 2024
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“You can’t stay in your corner of the forest waiting for others to come to you. You have to go to them sometimes.” – A.A. Milne
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Dow futures are trading just south of the flat line this morning, while S&P 500 and Nasdaq futures are trading slightly higher. There are no earnings reports to speak of today, but tomorrow morning we’ll hear from three more of the “big six” US banks and brokers: Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS).
The Q3 earnings season began last Friday with five companies reporting before the open. All five beat consensus EPS estimates, while four of five beat sales estimates (WFC was the lone miss). As shown below, four of the five companies that reported to kicks things off posted strong share-price gains on Friday. While BNY Mellon (BK) posted a “meh” reaction with a small drop of 0.4%, BlackRock (BLK) gained 3.6%, JP Morgan (JPM) gained 4.4%, Wells Fargo (WFC) gained 5.6%, and Fastenal (FAST) gained 9.8%. FAST’s 9.8% gain was its best earnings reaction day in five years, while Wells Fargo had its best earnings day since July 2022.
Oct 11, 2024
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“Age needs the company of youth” – Eleanor Roosevelt
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Welcome to earnings season! The unofficial start to earnings season kicked off this morning, and the overall tone has been positive. Of the five companies reporting, all five exceeded EPS forecasts, and only Wells Fargo (WFC) came up short in revenues. In response to the reports, all five stocks are up in the pre-market with gains ranging from 1.2% for JPMorgan (JPM) to a 5.3% rally for Fastenal (FAST). If first impressions meant anything, this would be a good thing!
The only economic reports on the calendar today are PPI and Michigan Sentiment. Yesterday’s higher-than-expected CPI pushed rates higher and raised concerns of a slower pace of rate cuts, so today’s weaker-than-expected headline number helped to offset the negative sentiment. Headline PPI came in weaker than expected at 0.0% versus expectations for a gain of 0.1%. Core PPI was in line with estimates at 0.2%. On a y/y basis, both readings were 0.2 ppts higher than forecasts at 1.8% for the headline reading and 2.8% on a core basis. A few Fed speakers are also on the calendar today with Goolsbee at 9:45, Logan at 10:45, and Bowman just after 1 PM.
Since tomorrow is Saturday, the market will not be open to celebrate the second anniversary of the bull market but looking at the S&P 500’s performance over the last two years, the gain of slightly more than 60% ranks as the best two-year gain since the two years ending in April 2022 when we were in the early months of the bear market. While the two-year rolling rate of change only briefly dipped into negative territory, it has come roaring back in the last year, and at current levels, the performance ranks in the 95th percentile of all periods since 1954.
The stock market will be open on Monday, but for some of you, it will be a holiday in observance of Columbus Day. The chart below shows the S&P 500’s performance on Columbus Day since it was officially designated as the second Monday of October 1971. During this period, the S&P 500’s median performance has been a gain of 0.16% with positive returns 60% of the time. The best Columbus Day was in 2008 when the S&P 500 rallied 11.6%, and the 3.4% gain in 2011 wasn’t too shabby either. The weakest Columbus Day occurred in 2014 (-1.6%), and in the nine years since then, the S&P 500’s median performance has been a decline of 0.04% with declines in five out of nine years.
Oct 10, 2024
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“At first, dreams seem impossible, then improbable, and eventually inevitable.”– Christopher Reeve
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
As Florida recovers from Hurricane Milton and investors prepare for the latest round of economic data, equity futures are just modestly lower, treasury yields are higher, and crude oil is modestly higher. In Asia, equity markets in the region were higher across the board. Australia and Japan were modestly higher while Hong Kong rallied 3% and China was up just over 1%. In Europe, the tone has been less positive as the STOXX 600 trades down 0.2%, and most individual country benchmarks are also lower. Retail Sales in Germany increased 1.6% y/y versus 1.5% in July. Industrial Production in Italy rose just 0.1% m/m versus expectations for an increase of 0.3% but was still up from a decline of 1% in July.
Economic data just hit the tape, and each report went in the wrong direction in terms of the economic impact. CPI data came in higher than expected on both a headline and core basis. Headline CPI increased 0.2% m/m versus expectations for an increase of 0.1% while core CPI rose 0.3% which was also a tenth higher than expected. Jobless claims, on the other hand, both surpassed expectations. Initial claims came in at 258K versus forecasts for a reading of 230K. That’s a pretty significant miss, but looking at the state-by-state numbers, the ones impacted by Hurricane Helene all saw large increases. North Carolina, for example, saw claims surge by over 8K alone.
Besides today’s CPI report and jobless claims, one big area of focus today will be Tesla Robotaxi Day after the close, and investors are expecting the company to shed light on its plans for a ride-hailing fleet of self-driving Teslas. Expectations are high regarding Musk’s vision, but investors probably aren’t expecting much in the way of an actual ready-for-the-wild vehicle. Tesla still has a way to go before getting approval for full-self driving, and Waymo, which currently holds the lead in this space, only operates a limited fleet in a limited number of areas.
Keep in mind, though, that however pie in the sky the concept of getting in a car without a driver feels today, it’s only a matter of time. iPhones, cloud computing, Uber, and even for most people, remote work, didn’t exist 15 or 20 years ago, and now they’re routine parts of our days. Only a little more than a few years ago, if you left for work and forgot your phone you probably decided to go the day without it. Today, you can’t get very far out the door without it. ChatGPT isn’t even two years old, and already has over 180 million users! As Christopher Reeve said above, the impossible becomes inevitable and the inevitable becomes routine.
The S&P 500 closed at another all-time yesterday for the first time this month after five record closes in September. Record closing highs are starting to feel somewhat routine for the market these days, and this year’s total of 44 already ranks as the 11th most since 1954.
Looking at the chart, nothing is guaranteed, but it will only take a couple more closing all-time highs to crack the top ten. With 56 trading days left in the year, there’s even a decent chance that this year could crack the top five (56) if the market averages one new closing high per week. It’s also technically possible but also unlikely that the record of 77 could be reached, but that would require a record high at a pace of about two every three days. Even reaching the 70 in 2021 would require a pace of about one every other day. New closing highs may feel routine, but they’re unlikely to become that routine.
Oct 9, 2024
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“I believe in everything until it’s disproved.” – John Lennon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There’s not much economic data on the calendar this morning but a ton of Fedpseak scheduled, so there is the potential for some volatility around these speeches throughout the day. Futures indicate a modest decline at the open but they are off their overnight lows after major overnight volatility in China. The Shanghai CSI 300 fell over 7% as the Chinese government looks like it has under-delivered on stimulus expectations. Last night’s decline was the largest since early on in the Covid crash, and the ASHR ETF that trades in the US is on pace to crash 20% in two trading days! The only other time it fell over 20% in two sessions was in the summer of 2015 when the Chinese government devalued the yuan. If you thought crypto was volatile, it looks like a ‘widows and orphans’ asset class compared to the moves in China over the last few weeks.
In today’s Morning Lineup, we covered the latest sales results for Taiwan Semi (TSM) and much of those sales come from Nvidia (NVDA). NVDA has rallied over 14% in the last week taking its market cap back above $3 trillion and ahead of Microsoft (MSFT). With a market cap of $3.26 trillion, the only company with a larger market cap than NVDA is Apple (AAPL) at $3.43 trillion. The gap between the two companies is now roughly $170 billion, or one Disney (DIS).
NVDA’s stock had a pretty rough summer. After peaking in June, the stock made a series of lower highs with each successive rally attempt. After its late August lower high, though, the ensuing pullback bottomed out at a higher low, and the pullbacks became milder as the stock rallied back above its 50-day moving average. After successfully testing its 50-day moving average last week, the stock has rallied, and yesterday’s 4% rally enabled the stock to make its first ‘higher high’ since June.
NVDA’s technical picture may be improving, but the picture for the semiconductor sector isn’t as strong. While the Philadelphia Semiconductor Index (SOX) has rallied above its 50 and 200-day moving averages (DMA), it has been hung up at resistance all summer. One bright spot for the sector is that the early September sell-off wasn’t as deep as in August. So, while the SOX may not yet be at the point of making higher highs, there has been a higher low. It’s a start!
Unfortunately, the relative strength of the SOX versus the S&P 500 doesn’t look as promising. September’s sell-off was deeper than August’s relative to the S&P 500, and the subsequent bounce back has also been weaker. In last week’s quarterly Pros and Cons report, the recent performance of semis showed up on the negative side of the ledger, and this chart is a big reason why.
