Dec 18, 2023
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.
“Why pay a dollar for a bookmark? Why not use the dollar for a bookmark?” – Steven Spielberg
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 seven straight weeks of gains, US equity futures are modestly higher to kick off what bulls are hoping will be the eighth week of gains in a row. Along with the higher equity futures, treasury yields are lower, and crude oil is modestly higher. On the economic calendar, the only report will be the 10 AM release of homebuilder sentiment. With Christmas less than a week away, look for volumes and newsflow to steadily slow as the week progresses.
Besides the US, the rally over the last several weeks has been global. Of the ETFs that track the G7 countries around the world, all seven were up in the latest week, and they’re all starting the week at overbought levels. With its gain of nearly 2%, the S&P 500 tracking ETF (SPY) was the second-best performer last week trailing only the 2.54% gain in the Canadian ETF (EWC). On a YTD basis, the US is one of four ETFs with a gain of over 20% YTD, and only Italy’s 27.8% topped the S&P 500.
Looking at the charts of all seven ETFs representing the G7, they’re all right at or near 52-week highs. One key difference between the US and the rest of the world, though, is that while other countries are still testing or only marginally higher than their summer highs, the US handily took that level out over a week ago as it has been a leader.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 15, 2023
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.
“The only reason they come to see me is that I know that life is great, and they know I know it.” – Clark Gable (Gone with the Wind premiered on this day in 1939)
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US equity futures are once again set for a higher open this morning, with small-caps leading the way. Speaking of small-caps, the Russell 2,000 didn’t make a new all-time high yesterday like the Dow or the S&P 500 Total Return index, but it did make a new 52-week high. In case you missed this stat in last night’s Closer, it took just 48 days for the Russell 2,000 to go from a 52-week low to a 52-week high. Remarkably, that was the shortest turnaround time ever for the Russell to go from 52-week low to 52-week high!
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 14, 2023
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.
“Victory awaits him who has everything in order, luck, people call it.” – Roald Amundsen
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US markets are experiencing a bit of follow-through this morning following the monster rally in stocks and bonds yesterday afternoon. While the Fed was the main event for the week, the ECB just announced no change in rates but moved forward its target date for when it expects to reach 2.0% inflation. Besides the ECB, there are several other central banks announcing decisions today as well. With the Fed now officially on hold, good economic news can be viewed as good again while the market may not be quite as receptive to soft data. We got the first test this morning with Retail Sales (higher than expected), Jobless Claims (lower than expected), and Import Prices (lower than expected) at 8:30 followed by Business Inventories at 10:00. In reaction to this first batch of reports, futures have seen little in the way of a reaction in either direction.
After a cruel summer sell-off that kicked off in August and all but erased the enchanted rally that spanned the months of May, June, and July, the market found itself in a delicate position in late October as the uptrend from the bear market lows in 2022 that we all remembered all too well were being tested. Right around Halloween, all bulls could think was, is it over now?
In reaction to yesterday’s explicit pivot from Fed Chair Powell on interest rates, treasury yields have plunged, crossing some important milestones in the process. We’ll start at the short end of the curve. With the 2-year yield plunging 30 basis points (bps) yesterday, its closing level was 4.43% which is the same level it started the year at. This morning, the 2-year yield is down an additional 10 bps which also puts it within just a couple of basis points of being flat on a year/year basis as well.
The 10-year yield fell 18 bps yesterday to close at 4.02%, and this morning it’s down another eight bps to 3.94%. As shown in the chart below, that’s still up slightly on the year, but crossing below the 4% boundary is an important psychological barrier.
What’s also notable about the decline in the 10-year yield this morning is that it is now down more than 100 bps from its recent closing high on 10/19. Since the FOMC first started talking about hiking rates back in late 2021 the current decline is the largest we have seen to date.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 13, 2023
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.
“Just because you make a good plan, doesn’t mean that’s what’s gonna happen.” – Taylor Swift
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 cruel summer sell-off that kicked off in August and all but erased the enchanted rally that spanned the months of May, June, and July, the market found itself in a delicate position in late October as the uptrend from the bear market lows in 2022 that we all remembered all too well were being tested. Right around Halloween, all bulls could think was, is it over now?
With the start of November, the market found some daylight, and despite the death by a thousand cuts of a strong dollar, higher oil prices, and rising rates in the prior weeks, bulls were able to shake it off in dramatic style and make it out of the woods from the red on hopes that the great war between the Fed and inflation was nearing a truce. It’s far from a love story, but as long as neither side acts up again, the bad blood between them has been set aside. Based on where futures are trading this morning, the S&P 500 Total Return Index will open at an all-time high, and if the rally keeps up, Fed Chair Powell will make the full transition from an anti-hero to mastermind in the eyes of the public. Never in most investors’ wildest dreams would they have thought we would be back to December feeling safe and sound and not far from all-time highs with nothing but blank space above. Were you ready for it?
This morning, it’s a subdued tone on the futures market as the market awaits the FOMC decision at 2 PM. PPI for November was just released and the results were generally weaker across the board. On a year/year basis, headline PPI dropped back down to 2.0%. The reaction from futures has been modestly positive, but how we finish will all depend on the Fed at 2 PM and Powell’s press conference at 2:30.
It hasn’t been the best-performing sector since the S&P 500 late-October low, but the 14.2% gain in the Industrials sector since the 10/27 close puts it modestly ahead of the S&P 500’s gain of 12.8%. As shown in the chart below, the rally puts the sector not only within 1% of its 52-week high but also its all-time high from August 1st.
Along with the steep rally, the Industrials sector is also on the verge of a golden cross formation where its 50-day moving average (DMA) crosses above the 200-DMA as both are rising. Technicians consider these patterns to be positive, but as we have pointed out in the past, returns for other indices and sectors following their own golden crosses have been mixed.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 12, 2023
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.
“Alcohol may be man’s worst enemy, but the bible says love your enemy.” – Frank Sinatra
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Heading into the big inflation report this morning, futures were firmly higher and rates were lower as traders anticipated a weak print, and the result was only a very modest disappointment. While the headline print came in slightly higher than expected (0.1% vs 0.0%) m/m, the core reading was right in line with forecasts (0.3%) and the year/year readings were right in line with forecasts. In the immediate aftermath of the report, there has been no change in the tone of equity futures or rates.
Yesterday was an interesting day in the equity market. While the stocks of the seven largest companies by market cap, which collectively account for more than 28% of the entire S&P 500, were all down at least 0.78% and as much as 2.24% in the session, the index itself finished the day higher by 0.39%. For investors in favor of a broadening out of the rally, this was exactly the type of action they wanted to see.
Within the semiconductor industry sector, we witnessed a similar type of move. The Philadelphia Semiconductor Index (SOX) traded sharply higher all day, and for most of the session, all but one of the index’s 30 components was higher. That lone holdout? Nvidia (NVDA). The stock opened lower on the session, and outside of the first half hour of trading, it was down at least 1% the entire day and as much as 3.5%. When the closing bell rang, the SOX finished the day up 3.4%, NVDA was down 1.85%, and the only other stock in the index that finished lower on the day was Wolfspeed (WOLF) which closed down 0.35%.
Like the magnificent seven in the S&P 500, NVDA and its market cap of $1.15 trillion accounts for over 28% of the total market cap in the SOX. For the stock to trade down nearly 2% on a day when the SOX trades significantly higher is extraordinary. Looking back over time, since the start of 2010, there have only been three other days where the SOX rallied at least 2% on the day while NVDA traded down over 1%, and the last occurrence was in January 2021. In each of those periods, NVDA wasn’t even the behemoth in terms of market cap that it is now. The charts below of the SOX and NVDA show each prior occurrence, and while there’s a temptation to read into these types of events as a significant turning point, there was no clear trend of performance for either following these prior occurrences.
Think about it this way. In week 9 of the 2020 NFL season, the Tampa Bay Bucs were creamed 38-3 by the New Orleans Saints for their first home loss of the season. Tom Brady had a lousy day with just 209 passing yards and 3 picks. As bad as that one game was, though, three months later it was the Bucs, who as a three-point underdog, crushed the Chiefs 31-9 in Super Bowl LV. Even the best on the field can have an occasional bad day.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Dec 11, 2023
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.
“Own only what you can always carry with you: know languages, know countries, know people.” – Alexander Solzhenitsyn
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Are you ready for some central bank decisions? Besides the Fed, which will announce its latest decision on rates this Wednesday, we will also get policy decisions from Brazil, Taiwan, Switzerland, Norway, the UK, the Eurozone, Mexico, Peru, and Russia this week. Then, next Monday Japan will join the fray. Along with the Fed, we’ll have a good amount of economic data to digest with CPI tomorrow and PPI Wednesday. Those aren’t the only reports on the calendar, though. On Tuesday we’ll also have Small Business Optimism from the NFIB, and Thursday will include jobless claims, Retail Sales, Import and Export Prices, and Business Inventories. Then, to close out the week, Friday’s reports will include Empire Manufacturing, Industrial Production, and Capacity Utilization.
While this morning’s economic calendar is light, the one report investors will be watching is the monthly survey of consumer expectations (SCE) from the New York Fed. As inflation has become the market’s primary concern over the last few years, the New York Fed’s SCE, which tracks inflation expectations among other items, has taken on added significance.
Heading into this morning’s 11 AM release, the charts below show historical readings for the SCE’s inflation expectations readings for one and three years ahead. After peaking at 6.8% in June 2022, one-year inflation expectations have been nearly cut in half to the current level of 3.57% which is just modestly above the historical average level of 3.39%. Keep in mind, though, that the average would be a lot lower if it wasn’t for the spike higher during 2021 and the first half of 2022. Before 2021 in fact, one-year inflation expectations were never higher than the current level.
Three-year inflation expectations also spiked higher in 2021 and early 2022. Unlike one-year inflation expectations which are still elevated relative to their pre-Covid levels, three-year expectations are actually below their historical average of 3.00%. Here again, the average is elevated due to the Covid spike, but even before the pandemic, there were several other times when three-year inflation expectations were higher than they are now.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
