Jul 15, 2024
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“Make every detail perfect and limit the number of details to perfect.” – Jack Dorsey
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Bespoke co-founder Paul Hickey appeared on CNBC’s Squawk Box this morning to discuss potential market impacts from this weekend’s events. To view the segment, click on the image below.
Welcome to adulthood Twitter, now X. 18 years ago today, Jack Dorsey launched Twttr, which then became Twitter, and is now known as X. The social media platform has had a moody existence. As this weekend’s attempted assassination of former President Trump illustrated, though, when news breaks, the first place to find it is on X. With the good comes the bad, and there’s also no shortage of incorrect and misleading information on the platform, but that’s the case just about everywhere now. Who knows, maybe now that it’s an adult, the level of discourse on X will show some maturity. Oh, who are we kidding?
Futures are trading higher this morning as markets price in a higher likelihood of a Trump victory in November along with Republican control of the House and Senate. According to the website electionbettingodds.com, the GOP’s odds of winning the Presidential election have jumped from 60.6% early Saturday afternoon to 67.6% this morning. In the House, Republican odds have jumped from just over 50% to 55.5%. Finally, the Senate was already firmly likely to be controlled by the GOP, and those odds remain high at 76.7%. A lot can change between now and November, though. On February 3rd, 2008, the Patriots were 18-0 and looking to finish an undefeated season against the New York Giants in Super Bowl XLII, and we all know what happened. There’s a reason you still have to play the game.
If the GOP takes full control of DC following this November’s election, it will be just the fourth occurrence in the modern era. The three prior periods were the 108th (2003 – 2004), 109th (2005 – 2006), and 115th (2017 – 2018) sessions of Congress, and below we have included charts showing the performance of the S&P 500 and the 10-year yield during each two years. It’s a small sample size, but the S&P 500 and ten-year yield were up each time. The S&P 500’s median gain was 17% while the 10-year experienced a median increase of about 20 basis points (bps).
Jul 12, 2024
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“Vice president – it has such a nice ring to it!” – Geraldine Ferraro
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 earning season! With the major banks and brokers reporting earnings this morning, Q2 earnings season has begun. Of the four major banks reporting today, they all exceeded EPS and revenue forecasts, and except for Wells Fargo (WFC), they’re also trading higher on the day. WFC’s decline is tied to weaker net interest income and an increase in non-performing loans. The response in the market has been mixed as futures are little changed with the S&P 500 indicated modestly higher while the Nasdaq is modestly lower heading into the June PPI report and then the Michigan Confidence report at 10 AM.
June’s PPI came in higher than expected and May’s results were also revised higher, which has put some downward pressure on equity futures and pushed yields higher, so that should (in theory at least) reverse some of the moves we saw in yesterday’s volatile session
You’ve been living through history over the last few days, and we’re not even talking about political history. We’ve been highlighting the near-record levels of outperformance of mega-caps relative to the rest of the market this year, and earlier in the week we noted that the rubber band can only stretch so much before it snaps back. Yesterday gave a perfect example.
In last night’s Closer and on X yesterday, we noted some of the major one-day extremes we saw in the relative outperformance of small caps versus large caps.
Another major shift was the performance of semiconductors relative to homebuilders. Over the last five years, homebuilders and semiconductors have traded practically step for step with each other. During that time, the correlation between the Philadelphia Semiconductor Index (SOX) and the S&P 500 Homebuilder Sub Industry has been +0.93. Admittedly, the last three months have seen a deviation from that positive correlation, but the two indices have seen similar returns and followed very similar paths.
Yesterday saw the two sectors deviate in a big way. While the SOX fell 3.5%, the homebuilders industry surged 6.7% for the best day since November 2022. As shown in the chart below, the 10+ percentage point outperformance of homebuilders versus semis was the widest since the depth of Covid in March 2020, and there have only been 24 days since 1994 when the one-day performance gap between the two was wider than yesterday.
What makes yesterday so unique is the market environment it occurred. Prior days where homebuilders outperformed semis by such a wide margin took place in extremely volatile environments. While the VIX closed yesterday below 13, on the 24 other days when the performance spread was ten percentage points or wider (in favor of homebuilders), the closing level of VIX ranged from 19.6 up to 70, and the median closing level was 26.5! Similarly, under the reverse scenario when semis outperformed homebuilders by 10 percentage points or more, the VIX closed in a range of 21.5 up to 61.6 with a median reading of 29.4. we’re not exactly sure what to make of the lack of volatility given the moves underneath the surface, but it’s somewhat unprecedented.
Jul 11, 2024
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“People generally see what they look for and hear what they listen for.” – Harper Lee, To Kill a Mockingbird
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 didn’t see yesterday’s segment on CNBC, you can view it here.
Bulls are taking a breather this morning as futures traded modestly lower ahead of the June CPI. We’re starting to get the first batch of earnings results for the season with reports from Pepsi (PEP), Delta (DAL), and Conagra (CAG), and the first impressions aren’t particularly positive. All three stocks are down at least 2% with DAL leading the losses with a decline of 8%.
The big report of the morning, though, was CPI which came in lower than expected at a level of negative 0.1% m/m. That’s the lowest level since May 2020. On a core basis, CPI increased 0.1% which was the lowest level since February 2021. Jobless claims were also lower than expected. While the earnings data left a lot to be desired for bulls, you couldn’t have asked for results in the economic data. In response, futures have erased their earlier losses and are now positive while the 10-year yield plummets to 4.20%. Thinking back to the surge into yesterday’s close, did somebody know something?
In a typical year, a net daily breadth reading of +311 for the S&P 500 wouldn’t raise much in the way of attention, but in 2024 which has been a year when leadership has been extremely narrow, a reading that positive stands out as one of the most positive breadth readings of the year. As shown in the chart below, there have only been six other trading days this year where the net daily advance/decline reading for the S&P 500 was higher. If it wasn’t for yesterday’s surge in the final 15 minutes of yesterday’s session, the breadth reading would have been much weaker at a level closer to +250.
Yesterday was also the sixth straight day that the S&P 500 closed at a record high which now ranks as the longest streak since an eight-day streak that ended in November 2021. Since late 1953, when the five-day trading week in its current form started, the current streak is the 23rd streak of six or more days with the longest being an eleven-day streak that ended on 7/10/1964.
With six record closing highs in a row, the total for 2024 is starting to pile up. With just one record closing high in 2022 (the first trading day of the year) and none in 2023, so far in 2024, there have already been 37 record closing highs. That already ranks as tied for the 14th most since 1954, but if the current pace keeps up between now and year-end (a big if), there would be 70 record closes which would be tied with 2021 for the second most trailing only the 77 records from 1995.
Jul 10, 2024
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“Constantly seek criticism. A well thought out critique of whatever you’re doing is as valuable as gold.” – Elon Musk
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 will look to extend its current winning streak to seven days as markets approach the kickoff to earnings season later this week. Lower yields have provided a tailwind for stocks as the 10-year yield falls three basis points to 4.27%, Crude oil is also lower which doesn’t hurt. Powell will head to the House today for his second day of testimony, but the message will be the same as yesterday.
China released June PPI and CPI data, and as we highlight in today’s Morning Lineup, the country is exporting disinflation worldwide. In Europe, it’s been a quiet morning for data, but stocks are higher with the STOXX 600 up 0.6% and every major benchmark in the region up at least 0.5%.
Less than three months ago, shares of Tesla (TSLA) were down over 44% for the year and trading below $140 per share as sentiment towards the company and EVs in general took a major shift. In the 53 trading days since then, the stock has rallied 89%, yet they’re only up 5.5% YTD. In 2017, Elon Musk promised to build a roller coaster inside the company’s factory to shuttle employees from place to place. Musk may not have delivered on an actual roller coaster, but he’s given his shareholders one.
TSLA hasn’t had a down day yet in July, and you have to go back to June 24th for the last day the stock traded lower. That ten-day winning streak now ranks as tied for the third longest in the stock’s history, trailing only a 13-day streak that ended on June 13th last year and an 11-day streak that ended on January 8th of 2021. In those three prior streaks that lasted at least ten days, shares of TSLA were higher a month later all three times for a median gain of 7.9%, and three months later, the stock was higher two out of three times with returns of +99.1% (April 2020), -17.0% (Jan 2021), and 5.8% (June 2023).
This morning, shares are higher in the pre-market, and we think if there’s any stock that should take its streak “to eleven“, TSLA would be the most fitting. A seven-day streak for the S&P 500 and an eleven-day streak for TSLA? Why do we suddenly have an urge for a Slurpee?
Over that span of ten trading days, shares of TSLA have rallied more than 43% which also ranks as one of the largest 10-day gains in the stock’s history. Over that time, the stock has added more than $250 billion to its market cap, and surprisingly that doesn’t even rank at the top of the list. Back in late 2021 and early 2022, there were three different periods where the stock experienced larger increases in market cap over ten days.
Jul 9, 2024
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“In business, people are judged on results. In Washington, people are measured by their ability to get reelected.” – Ross Perot
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Even with Senate testimony from Fed Chair Powell looming over the market, the S&P 500 and Nasdaq are poised to trade at record highs again this morning. Asian stocks were higher overnight led higher by Japan where the Nikkei jumped 2%. It’s a weaker tone in Europe, though, where the STOXX is down fractionally on little news. Here in the US, small business sentiment from the NFIB came in higher than expected after unexpectedly rising a point relative to last month. In earnings news, the only report of note was Helen of Troy (HELE), but the stock is getting slammed in the pre-market with a decline of 25% as the company noted weak consumer spending.
As the S&P 500 and Nasdaq hit new record highs again yesterday, volatility has been hanging out right near their lowest levels since the Covid pandemic. In a year where Presidential candidates on every side of the aisle have warned that the “future of the country” is at stake, do you think the market would be more edgy?
The fact that volatility isn’t even a teenager is unique. As shown in the chart below, since 1992, the VIX has been higher than its current level of 12.5 as of July 9th in every single election year. In 2020, the VIX was more than double its current level, but that was largely a factor of the Covid outbreak. Before 2020, though, the VIX was also uncharacteristically low in the summer heading into 2016.
The VIX is not only low for this time of year in an election year, but it’s also low relative to all years as of July 9th. As shown in the chart below, the median VIX reading for July 9th since 1990 has been just under 16 and is the lowest for this time of year since 2017 (11.2). It’s also the 6th lowest reading for this time of year since 1990. While low now, though, there’s a good chance that the VIX will move higher leading up to the election. Since 1990, the median maximum increase in the VIX during the four months following July 9th has been 8.9 points whereas in election years, the median increase over the following four months has been 13.1 points.
Jul 8, 2024
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“No matter who you are, the grass is never greener on the other side.” – Venus Williams
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 winds of a negative start to the week have shifted overnight, and futures have turned positive as we approach the opening bell. Major Asian indices were lower last night, but Europe has traded positively. In the French elections, parties aligned with the left were able to outdo Le Pen’s far-right party, and with no party winning an outright majority, the extremes of each side will never materialize. Outside of Europe, cease-fire talks in the Israel-Gaza war have pushed oil prices lower. Back here at home in the US, there’s still a lot of uncertainty over whether President Biden will stay in the race, but calls for him to step aside have been slowly growing. From a market perspective, there seems to be little concern at this point
The economic calendar is quiet this morning with the New York Fed Survey of Consumer Expectations scheduled for 11 AM. Traders will be watching that report for inflation expectations, but unless there is a big move in the number, it shouldn’t have much of a market impact. There’s also not much on the earnings calendar this morning, although Corning (GLW) preannounced better-than-expected Q2 numbers citing strength in AI. Looking ahead, Friday marks the unofficial start to earnings season when the major banks report, but between now and then, we’ll hear from Delta (DAL), Pepsi (PEP), Conagra (CAG), and Progressive (PGR) which all report on Thursday.
Venus Williams may claim that the grass is never greener on the other side, but try telling that to small and mid-cap stocks. The snapshot below from our Trend Analyzer shows where US indices stand relative to their trading ranges. Whether you look at YTD returns, the last five trading days, or where each index finished off last week relative to its 50-day moving average (DMA), it’s a market of large and mega caps and everything else.
Of the fourteen index ETFs shown, seven are up over 15% YTD, were up at least 1% in the last five trading days, and are all at least 4% above their respective 50-DMAs. What do they all have in common? They’re all dominated by mega-cap stocks. The other seven index ETFs have fared much more poorly on both a YTD basis and over the last five trading days, and the key theme across all but one of these ETFs is the complete absence of any large-cap stocks let alone any mega-caps. The one exception is the Dow (DIA), and while mega-caps like Microsoft (MSFT), Apple (AAPL), and Amazon.com (AMZN) are all in that index, their combined weighting is ‘only’ 14% and other stocks like Nvidia (NVDA) and Alphabet (GOOGL) have no showing.
Investors have been waiting for months for the pendulum to shift back in favor of small caps, but like many lawns this summer, any signs of green have quickly faded.
