Best and Worst Performing Stocks Since Rate Hikes Began
The S&P 500 is down a little more than 12% since the close on March 16th after Fed Chair Powell hiked rates off the zero bound for the first time of this cycle. We’ve seen 300 basis points of hikes so far, and today we’re set for another hike of 75 bps.
Looking at the S&P 1500, which includes large-caps, mid-caps, and small-caps, the average stock in the index is down 7.1% since the close on March 16th after the first rate hike. As shown below, Real Estate stocks (REITs) have been hit the hardest by the rate hikes with the average stock in the sector down 20.6%. Communication Services stocks are down the second most with an average decline of 18.4%. Consumer Discretionary stocks have averaged a decline of 13.1% since 3/16, while Technology stocks are down 10.6%. On the upside, we’ve seen two sectors average gains since the Powell rate hike cycle began: Energy and Consumer Staples. Consumer Staples stocks are up an average of 5.6%, while Energy stocks have averaged a huge gain of 24.8%. Click here to learn more about Bespoke’s premium stock market research service.
Below is a list of the stocks in the S&P 1500 with market caps above $2 billion that have done the best since rate hikes began back in March. PBF Energy (PBF) is up the most with a gain of 135.99%, while CONSOL Energy (CEIX) ranks second with a gain of 114.49%. Other notable stocks on the list of big winners include First Solar (FSLR), Constellation Energy (CEG), Shockwave Medical (SWAV), Enphase Energy (ENPH), Lamb Weston (LW), H&R Block (HRB), TreeHouse Foods (THS), Exxon Mobil (XOM), and Albemarle (ALB).
On the flip side, below is a list of the stocks with market caps still above $2 billion that have fallen the most since the rate hike cycle began. Leading the list is portable generator maker Generac (GNRC) with a decline of 62.45%, followed by two more stocks down more than 60%: Scotts Miracle-Gro (SMG) and Neogen (NEOG). Other notables on the list of rate-hike losers include Under Armour (UAA), Align Tech (ALGN), Meta Platforms (META), Carnival (CCL), Kohl’s (KSS), Expedia (EXPE), Cleveland-Cliffs (CLF), VF Corp (VFC), AMD, Paramount (PARA), and Yeti (YETI). Click here to learn more about Bespoke’s premium stock market research service.
Fixed Income Weekly: 11/2/22
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.
In this week’s report we discuss how sensitive the stock market is to near-term rate changes versus terminal rate changes.
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Bespoke’s Morning Lineup – 11/2/22 – All You Can Eat 75 Bps
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“A 75-basis point increase is not something that the committee is actively considering” – Jerome Powell
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Futures have been fluctuating around the unchanged line this morning, and a stronger-than-expected ADP Private Payrolls report earlier currently has them on the south end of the flatline. Treasury yields are also in a holding pattern ahead of the Fed later today and the 10-year yield is a few basis points above 4%.
In his post-meeting press conference on May 4th, Jerome Powell, after hiking rates by what at the time was an abnormally large 50 basis points (bps), put investors at ease by telling CNBC’s Steve Liesman that the committee wasn’t’ actively considering a 75-bps rate hike. As the headlines the next day read, 75 bps was ‘off the table’. In the six months since those comments were made, it has been an all-you-can-eat buffet of 75 bps hike, and the overwhelming consensus is that today will be the fourth such hike of that magnitude. In fact, CME’s FedWatch tool currently puts the odds of a hike of less than 75 bps at just 12.5%.
What changed after May 4th that caused the Fed to shift direction so sharply? Well, it all started back in early to mid-June when gas prices were up over 50% YTD and a University of Michigan preliminary report showed a surge in inflation expectations. Fed officials became increasingly worried that expectations were becoming unmoored raising fears of a 1970s-type spiral. Since the committee was in a blackout period, they ‘leaked’ news to the WSJ that a 75-bps hike was the likely course of action at its meeting later that week. On the 15th of June, the FOMC did in fact hike rates 75 bps in what would become the first in a run of hikes of that magnitude.
It turns out that June 13th marked the YTD peak in gas prices (they have since declined 25%), and the spike in inflation expectations from the preliminary Michigan Confidence report was revised away. In the historical data, it doesn’t even exist anymore! Even compared to the revised reading for both the 1-year and 5-10 year periods, inflation expectations are lower now than they were in June. In other words, the two primary catalysts for the Fed put a 75 bps hike back on the table have reversed, and yet, the FOMC not only hiked rates 75 bps once but is on pace to hike rates by that amount for a fourth time today.
Who knows where interest rates should or shouldn’t be, but the inconsistency between comments made just six months ago and their actions since then is stark. Markets will likely have notable moves in either direction today based on what Powell and the committee say today, but don’t be too quick to chisel anything into stone.
What we can say for sure is that over the last six months, the move in the 3-month US Treasury yield has been extreme. With an increase of over 325 bps, it has been the largest six-month increase in the yield since May 1981. Going back to 1961, there have only been 147 trading days (less than 1% of all days) where the six-month rate of change was higher than it is now. As shown in the chart below, those readings were from a brief period in 1973 and then intermittently throughout a two-year period from 1979 to 1981.
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Bespoke Market Calendar — November 2022
Please click the image below to view our November 2022 market calendar. This calendar includes the S&P 500’s average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Click here to view Bespoke’s premium membership options.
Wild Monthly Moves
Talk about a wild year. Check out the monthly moves in the S&P 500 so far this year. You probabably thought it was volatile in Q1 when the S&P 500 had two declines of 5.3% and 3.1% followed by a gain of 3.6%. Q2 saw even bigger swings with two declines of over 8% sandwiched between the month of May when the S&P 500 was up by the smallest amount possible (0.01%). In Q3, the S&P 500 rallied 9.1% in July, but then gave back all of those gains and more in the subsequent two months. Q4 started off on a positive note with a gain of nearly 8%, but there’s still two months left to give back all of those gains as well.
It’s not often that you see moves of such a large magnitude in the S&P 500, especially when they’re to both the downside and upside. Let’s start with the up moves. October was the second month this year that the S&P 500 rallied 7.5% or more, and while that may not sound like much, it is enough to be tied (with several other years) with the most in the post-WWII period. While there were three years with a higher frequency of 7.5%+ monthly gains in the 1930s (1933, 1935, and 1938), the only other years with as many 7.5%+ monthly moves in the post-WWII period were in 1948, 1954, 1982, 2001, 2009, and 2020.
In terms of downside 7.5%+ months, this year has been even more extreme. With three monthly declines of 7.5%+, 2022 is tied with only 1974 and 2008 for the most in any post-WWII year. The only years with more were all in the 1930s (1932, 1933, 1934, and 1938).
Combining the two series together is where things really start to get interesting. With five monthly moves of at least 7.5% in either direction, there hasn’t been a single year in the post-WWII period with more- and there are still two months left to go. The only years with a higher number of 7.5% monthly moves were 1931, 1932, and 1932. While market-makers (are there any of those anymore) may be loving the volatile trading environment of 2022, most investors probably can’t wait to wipe the slate clean in 2023. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 11/1/22 – Even the Yen is Up
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“For every moment of triumph, for every instance of beauty, many souls must be trampled.” – Hunter Thompson
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After the best month for the DJIA since 1976 (and a strong but not nearly as notable month for the S&P 500 and Nasdaq), the markets are looking to kick off November on the same bullish footing as both the S&P 500 and Nasdaq are on pace to open higher by over 1%. It’s not just US stocks that are rallying either. Chinese stocks surged overnight on rumors that the country would relax its COVID restrictions, and the gains followed right into the European markets as major averages on the continent are up over 1% across the board. Bond yields are also lower and commodities are rallying. In fact, just about everything except for the dollar is trading higher this morning. Even the yen is up!
There are three economic reports on the calendar this morning, and they’re all at 10 AM. The JOLTS report is lagged a month (September), but that will be an important indicator to watch to see if there’s any follow-through from last month’s big drop. A decline well below 10 million would be just what the Fed would want to see heading into this week’s meeting. Also at 10 AM, we’ll get September Construction Spending which is expected to fall by 0.6% compared to last month’s decline of 0.7%, and most importantly, the ISM Manufacturing report is expected to decline right to 50.0. Anything below that would indicate a contraction in the manufacturing sector.
Earnings season is barely half over, but already it’s been a memorable one. Think about this for a minute. While Apple (AAPL) managed to buck the trend and rally over 7% in reaction to its earnings report last week, the other mega-caps in the S&P 500 like Alphabet (GOOGL), Amazon.com (AMZN), Microsoft (MSFT), and Tesla (TSLA) all fell 7% or more in reaction to their reports. Additionally, Meta (META), which is no longer a mega-cap because it fell so much, lost a quarter of its market cap in a single day! Despite the pummeling in the S&P 500’s largest stocks, the index is still up over 6% this earnings season. Talk about resilience!
The chart below compares the performance of the S&P 500 at this point in earnings season to the same point (24 calendar days) in each prior earnings season since the start of 2009. The 6.4% rally so far ranks as the best since Q3 2011. Going back to the start of 2009, there have only been two other earnings seasons where the S&P 500 was up more at this point in the reporting period, and there were only a total of five where it was up more than 5%. Now, just because equities have done well this reporting period doesn’t mean it’s off to the races from here (last earnings season the S&P 500 also performed well only to crater from late August through early October), but the market’s ability to rally with no help from its ‘generals’ is impressive.
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Best October Since…
You’ve likely heard it a number of times in the last several days, but the Dow’s gain of 13.95% this month ranks as the best month for the index since January 1976 and the best October since at least 1900, and it’s not even close. Prior to this October, the DJIA’s best October since 1900 had been a gain of 10.65%.
The DJIA may have had its best October in over 120 years, but it wasn’t nearly as momentous of a month for the S&P 500. With its gain of 7.99% this month, the S&P 500 only had its best October since 2015 when the index rallied 8.30%.
For the Nasdaq, this month’s gain was pedestrian when compared to the Dow or S&P 500. With its gain of 3.90% in October, the Nasdaq’s rally was barely more than half of the rally seen last October (7.30%). While the general trend of major equity indices tends to be highly correlated in the long term, as this month’s returns indicate, shorter-term performance can vary widely. Click here to learn more about Bespoke’s premium stock market research service.
Record Inflow into High Yield (JNK)
High yield bonds proxied by the third largest ETF tracking the space, the SPDR Bloomberg High Yield Bond ETF (JNK), went on a solid 3% run last week. That ranks as the fifth best performing fixed income ETF in our Trend Analyzer. That resulted in the ETF to close above its 50-DMA for the first time since late August. Today, the ETF has reversed those gains and is hovering slightly back below that moving average.
Although from a technical standpoint that could mean Friday’s breakout was a pump fake, the move was backed by near record volumes hence a record single day inflow. As shown below, roughly $980 million went into JNK on Friday, surpassing the previous record of $774 million set this past January. While total assets have been on the downswing for the past couple of years leaving plenty of room to go until the ETF is back up to its size from its peak in the summer of 2020, that single day inflow did put an impressive dent in those recent outflows. Click here to learn more about Bespoke’s premium stock market research service.
Gold Tarnished
The end of October is now here and barring a massive turnaround by the close, gold is on pace to once again end the month lower. Gold peaked back in August of 2020, but since the spring it has taken a more dramatic leg lower. In spite of a high inflationary environment, the often-considered to be go-to inflation hedge has been on a relentless streak of declines. With October’s lower close month to date, gold has now dropped for a record seven months in a row. Going back to 1975, there have been a handful of other streaks lasting for five or six months, but none until now extended out to seven.
Although the current decline has been a record in length, the degree to which gold has fallen during it has not been as severe as some of the prior streaks of 5 months or more. For example, in 1976, 1981, and 1982 gold fell well over 20% compared to the current 16.1% decline. While we do not have a crystal ball to see if gold will end this streak in November, we would note that during the month that snaps these streaks, gold’s performance tends to be particularly strong with an average gain of 5.5% compared to the norm of only a 0.5% rally for all months since 1975. Similarly, gold tends to find itself higher three, six, and twelve months later with stronger than normal performance. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 10/31/22 – Giving Some Back
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“It’s better to burn out than to fade away.” – Neil Young
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After an exceptionally strong end to last week, equities are in a bit of a letdown mode to close out October as S&P 500 futures are down about 0.30% with the Nasdaq weaker. A number of weak data points out of China and Europe along with continued geo-political concerns haven’t helped sentiment. The 10-year yield is firmly above 4% again this morning and crude oil prices are nearly 2% lower and back below their 50-DMA. It’s been nice over the last several sessions not to have to contend with the FOMC, but that will all change on Wednesday when they will likely raise rates by 75 bps for an unprecedented fourth straight meeting.
We’ve seen some wild finishes to the trading week lately. Over the last 12 weeks, there has only been one Friday where the S&P 500 didn’t finish up or down at least 1% (9/16), and over the last six weeks, the last trading day of the week has seen a gain or loss of at least 1%. Not only that, but the last trading day of the week has become even more volatile over the last four weeks. Of the four Fridays this October, the S&P 500 has rallied or declined at least 2% each time. The first two Fridays of the month experienced declines of 2.8% and 2.4%, respectively and the last two Fridays have seen gains of 2.4% and 2.5%.
Prior to this month, going back to 1952 when the five-trading day week was established on the New York Stock Exchange, there were only four times when the last trading day of the week had a daily move of +/-2% for three straight weeks, but none of those streaks never extended to four. There’s a first for everything, though, and this month’s streak is the first time in over 70 years that the S&P 500 has ever had four straight 2% gains or losses to end a trading week.
Last Friday’s 2%+ gain for the S&P 500 capped off what was a weekly gain of just under 4% for the S&P 500 in what was a broad rally. Sectors leading the way higher were Industrials, Utilities, Financials, Real Estate, and Consumer Staples which all had gains of over 6%. Health Care and Technology also marginally outperformed the S&P 500 gaining over 4%. On the downside, Communications Services was by itself the to downside as negative reactions to earnings from Alphabet (GOOGL) and Meta (META) weighed on the sector. Lastly, even though they all rallied over 1.5%, Consumer Discretionary, Energy, and Materials all underperformed.
As far as the major indices are concerned, the chart patterns for both the Nasdaq 100 and the S&P 500 look very similar. The key difference between the two is that while the S&P 500 managed to rally back above its 50-DMA last week, the Nasdaq 100, weighed down by weakness in mega-cap stocks and their reactions to earnings, has yet to break above that critical level.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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