May 21, 2024
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“The most difficult thing is the decision to act, the rest is merely tenacity.” – Amelia Earhart
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 another quiet morning in terms of economic data this morning with no scheduled reports on the calendar, but a few earnings reports are driving the direction of futures, including reports from Lowe’s (LOW), Macy’s (M), and Palo Alto Networks (PANW). Overnight and this morning, the general tone of equities in Asia and Europe has been to the downside, and oil and gold are trading lower as well. The only real asset class that is moving notably higher is crypto where Bitcoin and Ethereum are both sharply higher. Equity futures are essentially flat, although slightly higher.
While there are no economic reports on the calendar, there’s a ton of Fed speak to contend with this morning, so keep on your toes in terms of any potential tape bombs throughout the morning.
The S&P 500 closed just two cents shy of its closing 52-week high from last week yesterday, but Communications Services and Technology managed to close at their respective highs. As shown in the chart below, the only other sectors that have traded at 52-week highs in the last week were Financials, Consumer Staples, and Utilities. Meanwhile, more than half of the S&P 500’s sectors haven’t traded at a 52-week high in at least a month, and for two sectors – Consumer Discretionary and Real Estate – their respective closing 52-week highs were more than two months ago.
Most sectors may have gone more than a month without a 52-week high, but that doesn’t mean they aren’t knocking on the door. As shown below, Real Estate is the only sector that’s more than 5% from a 52-week high, and only two other sectors (Energy and Consumer Discretionary) are more than 1.5% from a 52-week high. In other words, it won’t take much to put most sectors over the hump.
Below we show the charts for the six sector ETFs whose 52-week highs were at least a month ago. Here again, these charts illustrate just how close most sectors are to 52-week highs with the only exceptions being Energy (XLE), Real Estate (XLRE), and Consumer Discretionary (XLY).
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May 20, 2024
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“If I had my career over again? Maybe I’d say to myself, speed it up a little.” – Jimmy Stewart
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 no economic news on the calendar this morning and earnings season is mostly (but not completely) behind us, which means there’s little news to kick off the week. Things will pick up in the days ahead as we have a ton of Fed speakers on the calendar, but that won’t start until tomorrow. For now, the path of least resistance appears higher, and futures are modestly positive as we approach the opening bell for the week.
Despite initial gains above $80 per barrel in overnight trading following news of Iranian President Raisi’s death in a weekend helicopter crash, WTI crude oil prices have fallen back below that level as we approach the opening bell. The drop comes after WTI also briefly surpassed its 200-day moving average, but then fell back down. The inability to hold these higher levels now calls into question whether WTI can hold above its uptrend from the 2023 lows.
Although the crude oil chart appears concerning, energy stocks look more attractive from a technical perspective. The Energy Select Sector SPDR (XLE) has indeed pulled back, but on Friday it found support at its 50-day moving average (DMA) and even broke the downtrend that has been in place since April 12th. Despite this month-long pullback, XLE remains the second-best performing sector ETF year-to-date, trailing only the 15.2% gain in Utilities (XLU).
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 17, 2024
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“The best way to predict the future is to invent it.” – Alan Kay
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’s 5%+ rally so far in May has left internals overbought for the time being. Below is a quick look at our 50-day moving average spread chart for the S&P over the last 12 months. We’re currently right at two standard deviations above the 50-DMA. Note that this reading got up to three standard deviations above the 50-day last summer before seeing a sharp multi-month pullback.
Of the more than 1,800 stocks that have reported this earnings season, 69% beat EPS estimates, 64% beat sales estimates, 7% raised guidance, and 6% lowered guidance. The average stock that reported saw its shares decline 0.13% on its earnings reaction day.
As shown in the top right charts in the image below, EPS beat rates continue to trend lower, while sales beat rates have been trending sideways.
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 16, 2024
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“The sports page records people’s accomplishments, the front page usually records nothing, but man’s failures.” – Barbara Walters
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equity futures remain in modestly positive territory even after a slug of economic data that was more of the same. Initial and continuing jobless claims came in slightly ahead of forecasts, Housing Starts and Building Permits were both weaker than expected, the Philly Fed Manufacturing report missed forecasts, and the only area of strength was in Import Prices. Essentially, every data point went the opposite of what you would want to see in a strong economy. To be fair, outside of Housing Starts and Import Prices, the deviation from consensus forecasts wasn’t very large.
The snapshot below from our Trend Analyzer shows the performance of each S&P 500 Sector SPDR ETF so far this year and where each one is trading relative to its trading range. The ETF for the Utilities sector (XLU) tops the list with its gain of over 15% on the year. Even more amazing is that while no other ETF closed more than 4.2% above its 50-day moving average (DMA) yesterday, XLU finished more than 10% above its 50-DMA. Outside of one day in April 2022, the last time the sector traded further above its 50-DMA was in 2003!
The chart for XLU looks parabolic with a heavy helping of green. At one point last week, the sector closed higher than it opened in 16 out of 17 trading days, and on a 15-day rolling basis, the only time there was anything near that level of consistently higher closes than opens over three weeks occurred in January 2020.
With the sector performing so well lately and outperforming the S&P 500, you would think finding winners would be like shooting fish in a barrel, but that’s not the case. The chart below shows the YTD performance of the 31 stocks in the S&P 500 Utilities sector, and outside of three stocks, there hasn’t been much in the way of outstanding performance in the sector. While Vistra (VST), Constellation Energy (CEG), and NRG Energy (NRG) have all surged more than 60% this year, only five other stocks in the sector have outperformed the S&P 500 YTD. An additional way to show the disparity in performance this year can be seen in the fact that stocks in the sector have rallied an average of 16.2% this year, while the median gain has been just 8.1%.
Along the lines of Barbara Walters’s comment above, while VST, CEG, and NRG would be on the back page of the NY Post under a headline like “Nuking the Competition”, more stocks from the Utilities sector would likely find themselves on the front page under a headline like “Dim Bulbs”.
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May 15, 2024
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“The world has been very well served with low tariffs and free trade.” – Darren Woods
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
April CPI was just released, and the headline reading came in at 0.3% which was lower than consensus forecasts for an increase of 0.4%. Core CPI was right in line with forecasts as were both the year/year readings for headline and core. That’s the good news. The less good news was that both Empire Manufacturing and Retail Sales came in weaker than expected. Equity futures have rallied sharply in reaction to the news and treasury yields are lower.
On the same day that CPI came in lighter than expected, copper prices, which we will discuss in a report later, are just the latest commodity to rally to an all-time high after prices have gone parabolic in the last few weeks.
With respect to the market, the S&P 500 is firmly back at overbought levels and at 1.3 standard deviations above its 50-DMA, it hasn’t been this overbought since April Fools’ Day. Is that a good or a bad sign?
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May 14, 2024
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“He can’t have his own way, so he’s causing chaos” – 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 little change in futures this morning ahead of the April release of PPI, and the only action seems to be in the meme stocks where the rally in GameStop (GME) from an X post of a guy sitting in a chair has that stock up more than 100% on the week. The results of April’s PPI showed a hotter-than-expected m/m reading with the headline reading rising 0.5% versus forecasts for a 0.3% increase, while the core reading also increased 0.5% compared to estimates for a 0.2% increase. That’s the bad news. On a y/y basis, though, the readings were much closer to expectations as March’s report was revised down to negative 0.1% on both a headline and core basis. The initial reaction from the market was for equities and bonds to both sell-off, but when you consider the revisions, the report was right around expectations.
Just when you think you have it all figured out, life has a way of changing. A lead story in the Wall Street Journal highlighted how Walmart (WMT) is laying off hundreds of employees in its corporate unit and asking staff in remote jobs and small offices throughout the country to relocate to larger central hubs. If we didn’t all live through and experience it we wouldn’t believe it, but less than four years ago the centralized hub approach to work seemed like a bygone relic of the pre-Covid world and companies couldn’t find enough workers to fill open roles. In June 2020, a story in Forbes titled “The Remote Office Is The New Normal” summed up the zeitgeist of the time. Some companies were even encouraging their employees to move wherever they wanted. That became awkward when the same companies ordered those workers back to California or Seattle (or wherever the corporate headquarters was). When times are good and the money’s flowing, the boss doesn’t care where you work, but when things start slowing down, that’s when it starts to get real.
We’ve all heard about complacency lately; investors are too bullish on the market and banking on a soft landing in the economy. Both those outcomes certainly aren’t out of the question, but don’t tell that to the 1,300 households comprising April’s Survey of Consumer Expectations (SCE) from the New York Fed released yesterday. We covered the report in more detail in yesterday’s Closer, but three charts are worth highlighting.
First, the stock market. Just 38.7% of those surveyed expect the stock market to be higher a year from now. That’s more than one percentage point below the survey’s historical average dating back to June 2013.
Sentiment towards the economy was even worse. Just over half of those surveyed said they could find a new job within three months if they lost their job. That reading hasn’t been this low since April 2021, and before Covid, you have to go back to 2014 to find a comparable reading.
While unemployment remains near historically low levels, consumers aren’t particularly confident regarding their finances. Just under 13% reported that they could not make the minimum payment required to keep current on their debts. It’s just one survey, but the results from this month’s SCE from the New York Fed didn’t show complacency towards the market or a ‘booming’ economy.
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