May 13, 2024
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“When stocks are rising for no better reason than that they have risen, the greater fool is at work.” – Seth Klarman
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Stock futures are higher to kick off the week as the S&P 500 looks to build on the last three weeks of gains and fully erase the declines of April. There will be a lot of news and events investors and traders will have to contend with this week, but so far, the pace of news has been slow. Where things aren’t slow is in GameStop (GME). The stock has rallied sharply, but this morning, it is trading up about 40% on headlines that – wait for it – “‘Roaring Kitty’ returns from three-year hiatus!” That’s right, “Roaring Kitty” returning to X for the first time in a long time with a sketch of someone leaning forward in a chair, is enough to push a stock up 40%!
Last week was another strong one for US stocks, but they took a backseat to Europe. As shown in our snapshot below, the S&P 500 tracking ETF (SPY) rallied a respectable 1.87%, but European equities took the pole position and rallied over 3%. While stocks on both sides of the Atlantic gained, performance in Asia and Emerging Markets was more subdued, and, in some cases, certain areas of those regions were even lower on the week.
Not only did Europe outperform the US last week, but the STOXX 600 managed to break out to a record high and fully roundtrip the declines of April.
The S&P 500 remains just shy of its March highs, and with a busy week of inflation data on tap, everything is going to have to go right in order for to follow Europe to new highs.
While the new high in European stocks is tempting, we’d note that on a relative strength basis, Europe still has more to prove than the US. The chart below shows the relative strength of the STOXX 600 versus the S&P 500, and during that time Europe has underperformed the US (as has been the case for well over ten years now). More recently, European stocks have shown slight signs of life after several months of sideways performance versus the S&P 500. While encouraging, less than a year ago we saw a similar pattern playout only to see European stocks pass the baton back to the US. That doesn’t mean Europe is doomed to the same fate again, but it still has more to prove.
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May 10, 2024
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“In general people put too much faith in the rich, the famous, the politicians, and not enough faith in themselves.” – Bono
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 the pre-market gains hold into the close, today will mark the eighth straight day in a row of gains. While that sounds impressive, there have been two other streaks of as long or longer since last summer, and the current seven-day streak is the fourth since last July. Last July, there was a thirteen-day winning streak (tied for the longest since at least 1953) while in December, the Dow was up nine days in a row. As shown in the chart below, while these types of streaks may not quite be a dime a dozen, with 93 seven-day streaks since 1953 and 51 eight-day streaks, they’ve been common.
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May 9, 2024
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“You don’t get rich writing science fiction. If you want to get rich, you start a religion.” – L. Ron Hubbard
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 a quiet week of economic data, there’s finally a meaningful report this morning with jobless claims at 8:30. Initial claims came in higher than expected (231K vs 212K) and ticked up to the highest level since last August. Continuing claims at 1.785 million were more in line with forecasts and the recent trend. Earnings have still been coming in fast, but the companies reporting aren’t as large from a market cap perspective. That doesn’t mean they’re any less important if you own them, and we continue to see large one-day moves from several companies reporting. Unfortunately, it feels as if most of those big moves have been to the downside.
Moves in the Japanese yen have made headlines recently as the cross broke above resistance taking the yen to multidecade lows versus the dollar. In terms of lead market stories, the yen has started to move off the front pages as investors look for the next shiny object, but recent moves have still been significant. As shown in the chart below, after April’s massive break, the BoJ intervention caused a brief rally which pulled the cross back to levels that had served as major resistance. In a textbook move, the former resistance for USDJPY served as support, and the last few days have seen a return to the upward trend.
The daily moves in the yen have become more subdued this week, but that follows what had been a period of extreme volatility. In the five days ending 5/2, USDJPY’s average intraday range was 2.5% which was tied with a period in November 2022 for the most volatile five stretch since the Covid crash. Since 1989, there have only been a handful of other periods where the cross had a more volatile five-day stretch.
All this volatility in the yen hasn’t been helpful for Japanese stocks. From its high in early March (right before the USDJPY cross broke above resistance at 152) to late April, the Nikkei 225 corrected by more than 10%, and while it bounced with global markets in the last two weeks, the rally has stalled out right at levels that had been acting as support.
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May 8, 2024
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“Leaders get out in front and stay there by raising the standards by which they judge themselves—and by which they are willing to be judged.” – Fred Smith
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 have been drifting lower all morning. First, it was weaker-than-expected earnings reports in the tech/growth area (Shopify, Uber, etc). Then, Intel lowered Q2 sales guidance for the second time in less than two weeks. Now, Tesla (TSLA) is trading lower on reports of a criminal probe into claims it may have made concerning its full self-driving mode. All of these ingredients create a perfect recipe for an excuse for investors to take a step back after the recent bounce and reassess things. Outside of earnings, there’s little in the way of economic news today with Wholesale Inventories (10 AM) being the only report on the calendar.
We’ve become so used to US stocks leading the rest of the world in recent years, but this morning, there’s been a slight shift in the balance of power. Europe’s benchmark STOXX 600 is up 0.25% this morning for its fourth straight day of gains. In the process, the index has taken out its prior record high from late March, erasing all of the declines from April.
Meanwhile, the S&P 500 also closed out yesterday with its fourth straight day of gains but remains 1.5% below its record high from the end of March.
So, what explains the disparity in performance? The chart below shows the performance of STOXX 600 groups since the end of March when it last made a record high. Leading the way, Basic Resources, Banks, Energy, Utilities, and Drug Stores have all rallied over 3%. Most of these groups have larger weightings in the STOXX 600 than in the S&P 500 and therefore, they have provided a bigger ‘kick’ to the index’s performance. Meanwhile, Technology which isn’t nearly as heavily weighted in Europe as it is in the US is down 1.26%.
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May 7, 2024
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“Extremes to the right and to the left of any political dispute are always wrong.” – Dwight Eisenhower
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
S&P 500 futures were just unchanged on the day in what has been a relatively quiet morning. Crude oil is modestly lower and treasury yields are slightly lower. In terms of earnings, Disney is sharply lower after reporting weaker-than-expected sales and dragging the Nasdaq lower, shares of Palantir (PLTR) are down over 8% despite reporting better-than-expected EPS and sales. Dragging the stock lower? A disappointing forecast relative to lofty expectations.
Heading into yesterday’s session to start the week, the setup looked much like the prior Monday. Then, we started the week following a Friday when the S&P 500 rallied but came up just shy of its 50-DMA. While we rallied to start last week, the market couldn’t maintain enough momentum to get back above its 50-DMA. We then followed that failed attempt with a disheartening three straight days of lower intraday highs and lower intraday lows. Last Friday, we rallied again and broke that streak of lower highs and lows and rallied but finished the week just shy of the 50-DMA.
One positive about weakness in the middle of last week around the Fed meeting was that from the lows in mid-April, the S&P 500 maintained a run of higher lows. Fortunately for bulls, Monday wasn’t a Groundhog Day type event, and the S&P 500 not only opened the week above its 50-DMA, but it stayed there the entire session in a run of three straight days of gains of at least 0.91%.
The picture for the Nasdaq looks a lot like the S&P 500. Unlike the S&P 500, though, the Nasdaq finished off last week above its 50-DMA and stayed there to kick off this week. Like the S&P 500, however, it took the Nasdaq two tries to get back above that short-term moving average. As the old saying goes, “If at first you don’t succeed, try again.”
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May 6, 2024
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“Success is having to worry about every damn thing in the world, except money.” – Johnny Cash
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Equities are picking up right where they left off on Friday as futures have been gaining ground all morning. Even the Nasdaq is trading higher despite the disclosure over the weekend that Berkshire Hathaway has cut its stake in Apple (AAPL) by 13%. The stock was down over 1% earlier but has erased most of its pre-market losses. There’s very little in the way of economic data to look forward to this week, but there are still plenty of earnings reports to deal with even though, we’ve passed the peak of the Q1 reporting period.
The S&P 500 eked out its second positive week in a row, and the Nasdaq and Russell 2000 each squeezed out their second week in a row of 1%+ gains. Despite the gains, the S&P 500 still closed the week modestly below its 50-day moving average. If you look at the snapshot of US indices from our Trend Analyzer below, all the major US index ETFs closed out the week clustered right around their 50-day moving averages (DMA). No ETF is more than 0.70% above or below its 50-DMA.
While the indices are all “walking the line” of their 50-DMAs, there’s a little more dispersion at the sector level. Four of eleven sectors are trading at least 1% above or below their 50-DMA. Utilities and Real Estate are the two highest-yielding sectors in the S&P 500, but they have moved in opposite directions this year. As of Friday, Utilities was the most extended relative to its 50-DMA while Real Estate was the furthest below. Besides those two sectors, Health Care and Consumer Staples are the two other sectors trading further than 1% from their 50-DMAs.
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