Jun 7, 2024
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“Tell me a musician who’s got rich off digital sales. Apple’s doing pretty good though, right?” – Prince
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 recent market trend in non-farm payrolls reports has been positive. Over the last nine months, the headline report came in stronger than expected seven times, and the S&P 500 has been higher eight times on the day of the report. Even including the one day that the S&P 500 was down on a “Payrolls Friday”, its average change on the day of the report was a gain of 0.63%, and the Financial sector has been positive on the day of the report for nine straight months.
We’ve been discussing weak market breadth for a couple of weeks now, including yesterday’s Closer report where we compared the weakness in the cumulative advance/decline (A/D) line to the new high in the S&P 500. Another example is the fact that while yesterday was the only day this week that the S&P 500 was down (and barely at that), the S&P 500’s net A/D line has been negative in three of the last four trading days.
While weak breadth has become especially pronounced in recent days, the trend is not new. Look at the chart below which shows the performance of the S&P 500 market cap-weighted index versus its equalweight counterpart over the last two years. While the S&P 500 has rallied 30.3%, the equalweight index is up by just a little more than a third of that (11.3%).
Below we show the rolling two-year performance spread between the two indices over time. At the current level of 19 percentage points, the spread has reached its widest level in nearly 24 years (6/30/00) putting it in the 95th percentile relative to all other two-year periods since 1992. The last time the spread was this wide, it came just ahead of what ended up being a period of massive long-term underperformance for the cap-weighted index. That being said, the period during which the cap-weighted index had outperformed leading up to that lasted for years.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Jun 6, 2024
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“You get your ass on the beach. I’ll be there waiting for you and I’ll tell you what to do. There ain’t anything in this plan that is going to go right.” – Col. Paul R. Goode, June 1944
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 expected by everyone, the ECB just cut rates by 25 bps in its latest policy decision. Still, within its statement, it made some hawkish comments noting that “domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.” The statement added, “The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.” In looking at their words versus actions, there’s the appearance of a wide disconnect, but actions always speak louder than words. We’ll be looking for more color in the 8:45 press conference.
Looking at the moves in financial markets over the last several minutes, you wouldn’t have even noticed there was a major policy decision from a major central bank. Equity futures have seen little reaction and remain modestly higher, while the dollar is little changed, and yields are modestly higher. In the US, Non-Farm Productivity came in higher than expected while Unit Labor Costs were a bit lower. That’s all good news, but jobless claims did come in slightly higher than expected on both an initial and continuing basis.
Even accounting for last Thursday’s 0.6% decline, the last week of trading has seen stocks put in healthy gains as the S&P 500 rallied 1.7% and hit a record high yesterday. The rally has also been broad-based. As shown in the snapshot below, every sector except for Energy has notched gains, and surprisingly, Technology has not been the leader. It’s basically the only other sector that isn’t up 1%. Leading the way higher, Real Estate, Health Care, and Communication Services have rallied more than 2.5%. Five out of eleven sectors finished yesterday at overbought levels while seven are above their 50-day moving average, and only Energy is oversold.
The Energy sector has been in a steady and well-defined downtrend since its high in early April, and if the sector is going to see at least a short-term bounce, now would be the time as the sector closed yesterday right near the bottom end of that channel after bouncing right near its 200-DMA.
Not surprisingly, the Energy sector has been tracking the performance of crude oil which has also been weak. The sector broke its uptrend in early May, and after failing multiple times to get back above that uptrend line in the middle of the month, crude saw extreme weakness to close out the month. While the price decline has been bad for energy stocks, it has been great news for drivers. According to AAA, the national average price of a gallon of gas has dropped below $3.50 for the first time since March 18th and is down over 5% from its April high.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Jun 5, 2024
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“If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” – Milton Friedman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
This morning, we’re seeing a modestly positive tone in equity markets as treasury yields have barely moved. The risk-on mentality can be seen in Bitcoin where prices cracked back above $70K yesterday and now sit right around $71K. Overnight in Asia, India bounced over 3% while Japan and China both traded down nearly 1%. Service sector PMIs for both countries were better than expected. In Europe, the tone is more positive as Services sector PMIs were close to expectations indicating a modest expansion in that sector.
Back here in the US, the ADP Employment report for May just came out, and it came in weaker than expected at 152K versus forecasts for a reading of 175K. As shown below, the monthly reading has been right around these levels for ten months now, but it is well below the four-year average of 308K. With ADP out of the way, the only other report on the calendar is ISM Services at 10 AM.
Investors are closely watching a stream of employment data this week, including the just-released ADP report. But another insightful source often flies under the radar: Indeed’s job posting report.
This report provides valuable details on various employment trends, as we explored in last night’s Closer. One metric we find very useful is the percentage of industries on Indeed with job postings below their pre-pandemic baseline.
In the wake of COVID, job postings plummeted across all industries. However, from summer 2020 to summer 2021, this percentage steadily decreased. Remarkably, from August 2021 to early 2023, no industries fell below their baseline, reflecting an exceptionally tight labor market.
Over the past year, however, the labor market has begun to loosen. In recent weeks, the percentage of industries with below-baseline postings has reached 32%. While that means two-thirds of industries still have above-normal job postings, the trend suggests easing.
This aligns with other labor market indicators – employment remains strong but not strengthening. If the trend in Indeed job postings over the last several months continues, over half of all industries could see fewer job postings by year’s end compared to pre-pandemic levels.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Jun 4, 2024
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“Never make excuses. Your friends don’t need them and your foes won’t believe them.” – John Wooden
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures continue to show weakness from Monday as the S&P 500 and Nasdaq are indicated to open down by about 0.25%. Overnight in Asia and this morning in Europe, stocks also traded lower even as CPI in South Korea rose less than expected and employment data in Europe was weaker than expected. While the losses in Mexico on Monday were notable, stocks in India fell over 5.7% for the worst day since May 2020, more than erasing Monday’s gain of nearly 4% as initial optimism over the margin of victory for Prime Mister Modi receded.
We called it the Mexico Massacre in yesterday’s Closer report, which wasn’t an overstatement. Following the landslide victory for Claudia Sheinbaum and big gains for the Morena party, investors sold the peso and Mexican stocks on fears that the ruling party will pass constitutional reforms without any checks from the opposition leading to a less business-friendly environment.
Stocks in Mexico responded as you might expect, posting sharp declines. In local currency terms, the S&P/BMV IPC benchmark index tanked 6.11% for its worst day since the Covid crash and its 12th worst day on record.
After adjusting for the declines in the peso, US investors in Mexico lost 10% in a single day, or at least pretty darn close at 9.99%. That was also the worst day for the index since 3/9/2020 and the 12th worst since 1994.
It may not have been the worst day on record for Mexican stocks, but when the dust settled, Mexican stocks closed 4.43 standard deviations below their 50-day moving average (DMA), which works out to the most oversold level for the index on record!
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Jun 3, 2024
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“My father was frightened of his mother; I was frightened of my father, and I am damned well going to see to it that my children are frightened of me.” – King George V
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 an unusual surge into the close on Friday, futures have seen some follow-through this morning with Nasdaq futures leading the way as Asia and Europe traded higher overnight and this morning. It’s a busy week for economic data, so we should get a good read by the end of the week whether the economy is really starting to see a summer slowdown or starting to reheat after a cooldown. That in turn will greatly impact the thermostat for interest rates.
As mentioned above, Friday’s late-day surge was unusual as the S&P 500 was slightly lower heading into the final half-hour of trading but then surged 0.90% to close the session.
Since 1990, Friday’s last half-hour gain of 0.90% was the 132nd time that that index rallied 0.75% or more in the final 30 minutes of trading which isn’t uncommon. What is unusual, however, is the environment it occurred in. While these types of moves are commonplace during volatile periods like the Financial Crisis or Covid, it was the first time it ever occurred when the VIX was under 15. Including Friday’s move, the average VIX reading on these days was 37.5!
Not only was it the first time there was a rally of 0.75% in the last half hour when the VIX was under 15, but it was only the fifth time a rally of that magnitude occurred when the VIX was under 20. The table below shows the S&P 500’s performance following each of the prior four days. Unfortunately, if you are looking for a pattern following these prior occurrences, there isn’t one. A year later, the S&P 500 was down once, up modestly once, and up by double-digit percentages twice.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
May 31, 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.
“I could stand in the middle of 5th Avenue and shoot somebody, and I wouldn’t lose voters.” – Donald Trump
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Just kidding. We’ll keep the political discussion to a minimum. While last night’s verdict in the Trump hush money trial made for a big news event, its impact on the market has been negligible. Futures are modestly lower in the pre-market, but that’s likely more a factor of the 16% decline in Dell (DELL). There are also several notable economic reports at 8:30, including Personal Income, Personal Spending, and the PCE Deflator. Then, at 9:45 we’ll get a read of the manufacturing sector in May with the Chicago PMI. How these reports shake out relative to expectations will have a larger impact on the last trading day of May than last night’s verdict.
The verdict is only 15 hours old, but Trump’s odds of winning the November election have only declined modestly according to the site electionbettingodds.com. He still holds a 50.1% to 40.9% lead over President Biden in a head-to-head matchup, but on a generic party vote, the betting markets are much closer at 52.1% to 46.9%. These numbers are still very close, and the betting markets have about as much accuracy as Fed forecasts, so keep that in mind. However, whether you find yourself ecstatic or downtrodden over the results, there are still 158 days between now and Election Day, so find a hobby to keep yourself occupied.
Yesterday, Salesforce (CRM) had a reservation with the woodshed, and today it is DELL’s turn as the stock plunged over 15% in reaction to its earnings report after the close. At current levels, it ranks as the sixth worst one-day reaction among S&P 500 companies to earnings since earnings season started in April.
Concerning DELL itself, if the current pre-market decline holds, this will be the stock’s worst one-day reaction to earnings since May 2012. If it declines just a little bit more during the trading day, it could go down as the worst one-day reaction to earnings for the stock in its history as a public company since 2001.
CRM’s decline exacerbated what was already a period of weakness for the stock, but shares of DELL were on fire heading into the report. The stock had doubled since late February and was trading at ‘extreme’ overbought levels, so expectations were lofty, to say the least. Even after today’s decline, it is still well above its 50 and 200-day moving averages and is only back to levels it was trading at last week.
To continue reading the rest of today’s morning note, where you’ll find much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.
