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.

“When we have computers that can do more and more jobs, it’s going to change how we think about work. There’s no way around that. You can’t wish it away.” – Larry Page

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 joy in Marketville this morning as investors step up to the place for the opening bell. Nasdaq futures are down nearly 1% while the S&P 500 faces a gap down of 0.75% at the open. Treasury yields are higher across the curve, WTO and Brent crude oil are both up over 4%, gold is down 2.5%, and Bitcoin is down over 2%. Fun morning for the bulls!

With the five-day deadline imposed by the President, Monday fast approaching, and no signs of a diplomatic breakthrough, investors have no incentive to make a stand, and that doesn’t even take into account the government shutdown snarling air traffic. Maybe the only good news is jobless claims. Initial claims came in right inline with expectations, while continuing claims were well below forecasts, falling to a nearly two-year low.

In Asia, stocks reflected the pessimism as the Nikkei fell 0.3%, China declined 1.1%, and South Korea dropped the most, falling 3.2%. European stocks are doing no better. The STOXX 600 is down 1.0% halfway into the session, led lower by Germany and the UK, which are both down over 1.25%. ECB council member and Bundesbank President Joachim Nagel even noted that a rate hike in April is “certainly an option”.

We’re now a month into the war in Iran, where every day’s news has shown images of precise strikes against the Iranian military. With all those weapons, it must be great for the defense contractors, right? Ironically, while aerospace and defense stocks performed well over the last year, they’ve seen a sell-the-news reaction since the war started. As shown in the chart of the iShares Aerospace & Defense ETF (ITA) below, the sector peaked on the first trading day after the first missiles were launched and has declined 10% since. That’s worse than the S&P 500!

Looking through a list of ITA’s 13 largest holdings (all greater than 2% weighting), performance this year has mostly been positive. Nine of the thirteen stocks are up YTD, with an average YTD gain of just under 9%. Like the ETF, though, most of the largest holdings are below their 50-DMAs. In total, their average 50-DMA spread is -4.2%, and they’re down an average of 2% in the last five trading days.

While defense stocks have struggled this month, Energy stocks have been on fire. The SPDR S&P 500 ETF (XLE) started to go parabolic at the turn of the calendar and hasn’t looked back since.

The rally in the sector has been so strong that the spread between XLE’s price and 200-DMA exceeded 30% this week. Since the ETF’s inception in 1999, there have only been a few other periods where the spread exceeded 30%. The most recent was early in the Russia-Ukraine war, and before that, the only other occurrences were in the first half of 2021 as the economy reopened from Covid and then briefly in early 2011 when oil prices spiked due to the Arab Spring and a civil war in Libya.

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.

“It’s the rough side of the mountain that’s the easiest to climb; the smooth side doesn’t have anything for you to hang on to.” – Aretha Franklin

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Paul Hickey appeared on Fox Business yesterday. To view the segment, click on the image below.

Global equity markets are in rally mode this morning after reports of potential negotiations between the US and Iran to end the war. Asian markets surged overnight, and that flowed into the European open and US futures this morning. Some of the air has come out of the balloon as we type this, though, on reports that Iranian officials have rejected the US terms delivered via Pakistan. There’s really no way to know at this point what the facts are regarding the state of negotiations, as neither side has any real incentive to conduct talks via the press, so expect more whipsaw action as things continue to progress. The bottom line is that while Iran still holds some cards, the chips are stacked heavily against them.

Outside of equities, the 10-year yield is down 5 bps, crude oil is down 5%, gold is up nearly 4%, and Bitcoin is up 2.5% to more than $71K.

In economic data, the only report on the calendar was Import Prices, which came in at more than double expectations (1.3% m/m vs 0.6%). If you’re looking for lower rates or a dovish Fed, these are not pretty numbers.

The S&P 500 finished down 0.37% yesterday, but most of the losses were focused in the trillion-dollar stock club, where the damage was much more concentrated. While the ‘average’ stock in the S&P 500 traded slightly higher yesterday, seven of the nine stocks in the trillion-dollar club traded lower, with an average of 1.2%. Stocks like Alphabet (GOOGL) and Microsoft (MSFT) were notably weak with declines of more than 2.5%, and both closed at multi-month lows. Other mega-caps like Broadcom (AVGO), Amazon.com (AMZN), and Meta Platforms (META) all fell more than 1%.  The only mega-caps to buck the trillion-dollar market cap weight were Tesla (TSLA) and Apple (AAPL), which saw modest gains.

While the trillion-dollar stocks have been market leaders, they’re no longer the cool-kids table in the lunchroom. For months, they stood out above the rest of the market as the most popular in terms of where they were trading relative to 52-week highs, but now they no longer stand out.  MSFT, AVGO, META, and TSLA are all down more than 20% from their respective 52-week highs, and the average drawdown from their peaks is just over 20%. That’s flirting with bear market territory and slightly more than the average 19.9% drawdown for all 500 stocks in the S&P 500.

The cap-weighted S&P 500 (SPY) closed down just over 4% for the year yesterday, while the equal-weight version (RSP) is still slightly higher on the year (+0.2%), and their charts have two key differences.

First, as we’re all aware, the cap-weighted S&P 500 has been stuck in a sideways range for several months, forming a gradually curving, rounded top which accelerated when the war started at the turn of the month. The topping process for RSP was much sharper. From the start of the year right up until late February, RSP was steadily making new highs. Once the war broke out, though, the rally was stopped in its tracks, erasing two months’ worth of gains in less than a month.

Second, with RSP still holding on to gains for the year, it has also stayed above its 200-DMA. The same can’t be said for the S&P 500, which broke that level last Thursday. For now, bulls can rationalize SPY’s break of the 200-DMA by pointing to RSP still hanging on to that level. If both indices break that long-term average, though, bulls will have one less arrow in their quiver.

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 don’t trust society to protect us, I have no intention of placing my fate in the hands of men whose only qualification is that they managed to con a block of people to vote for them.” – Mario Puzo, The Godfather

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Paul Hickey will be on Making Money With Charles Payne today on Fox Business between 2 PM  and 3 PM to discuss markets and the latest events in Iran. Check it out if you can!

Equity futures have been ping-ponging between gains and losses since the close yesterday, and they’re now on the red side of the table. Futures on the S&P 500 and Nasdaq are both down 0.1%. The 10-year yield has moved back to 4.36%, gaining 3 basis points. Oil prices moved back above $90 as investors try to figure out how things will play out in Iran. Good luck with that! Gold and other precious metals have seen muted moves this morning, with gains or losses of 1%, while Bitcoin has a fractional gain of 0.5%, taking it back above $71K.

It’s a relatively busy day for data this morning with Non-Farm Productivity and Unit Labor Costs at 8:30, but both reports are stale given the war situation. Investors will probably focus more attention on flash PMIs for March from S&P at 9:45 and the Richmond Fed at 10 AM. All of these reports will take a backseat to whatever geopolitical headlines or “truths” hit the tape.

European stocks were still open for trading yesterday when President Trump made his comments regarding Iran. Therefore, they had the opportunity to adjust, but this morning they’re adding modestly to those gains with the STOXX 600 up 0.3%. Flash PMI readings for March were also released. While manufacturing indices were better than expected, service sector PMIs generally missed.

Asian stocks played catch-up and followed the US lead overnight with gains across the board. Japan was up 1.4% while China rallied nearly 2%, and the Kospi gained 2.7%. The gains weren’t steady, though. In South Korea, for example, the KOSPI started the day with a gain of more than 4% but gave back all those gains early in the session and briefly traded lower before rebounding in the second half of the session. Inflation data in the region was on the light side as Japanese CPI and South Korean PPI for February both rose less than expected. While the lower inflation data was welcome, flash PMIs for Australia and India were both lighter than expected.

After falling more than 50% in price terms from its closing high in August 2020 to its low in October 2023, long-term US Treasuries, as proxied by the iShares 20+ Year US Treasury ETF (TLT), remain in the back half of a lost decade.  As shown in the chart below, while prices remain near their multi-year lows, they have stopped going down, and with the long end of the curve yielding close to 5%, a flat market in price terms isn’t so bad.

Looking at a one-year chart of TLT shows an interesting pattern. We’ve discussed the nowhere direction of the equity markets and some notable stocks like Nvidia (NVDA) extensively over the last several weeks, but the treasury market has also been comatose. Look at TLT’s 50 and 200-day moving averages (zoomed in on the inlay). Over the last several weeks, the two have moved in lockstep.

The two moving averages have been moving in such unison that yesterday was the 36th straight trading day the spread between the two was less than 25 basis points. Looking back at the ETF’s history over the last 20+ years, this current streak ranks as the longest in its history. It’s longer than the next closest one by more than two weeks! With the current spread between the two at less than 4 bps, it doesn’t appear likely to widen out to more than 25 bps any time soon!