Bespoke’s Morning Lineup – 3/14/23 – The Number You’ve All Been Waiting For
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.
“History is largely a history of inflation, usually inflations engineered by governments for the gain of governments.” – Friedrich August von Hayek
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Futures have been rallying this morning as bond yields move higher as investors breathe a sigh of relief due to the fact that there were no additional bank blowups overnight. Regional banks are seeing the most strength as a stock like First Republic (FRC) is up over 60% in the pre-market. That’s great if you bought the stock yesterday, but it’s still down sharply from where it closed last Friday, let alone where it was coming into the year.
The big number of the morning is obviously the February CPI and that reading came in right in line with forecasts at the headline level (0.4%). Ex Food and Energy, the reading was 0.5% which was slightly higher than expected (0.4%). On a y/y basis, both headline (6.0%) and core (5.5%) were right in line with forecasts. Markets were worried about another hot reading, so the immediate reaction has been a modest bounce in equity futures.
While the moves have been the most pronounced in the Treasury market and regional banks stocks, volatility and extreme reversals have been showing up all over global financial markets in the last several days. Take the equity market of Japan. Last week, the TOPIX finally broke above multi-month resistance to new 52-week highs on Thursday. From a technical standpoint, the action looked like a textbook breakout with well-defined support at former resistance near the 2,000 level. That was Thursday.
In the three days that followed, the TOPX has been down at least 1.5% every day for a total decline of 6%. And that support around the 2,000 level? It was more like Swiss cheese. In last night’s trading, the TOPIX also sliced right through its 50-day moving average (DMA) although it did find some support at the 200-DMA.
Going all the way back to the mid-1980s, the last four trading days for the TOPIX represent just the second time that the index hit a 52-week high and then followed that up with three straight declines of at least 1%. The other period was in October 2003 when the TOPIX hit a 52-week high on 10/20 and then followed that high up with daily declines of 1.1%, 1.8%, and 5.3%, respectively for a total decline of 8.8%. During that correction, the TOPIX’s total decline from that 52-week high pullback was 14.5% before the index went on to recover and resume its upward trend.
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!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
A Look at the Financial Sector’s Weighting
At its YTD high back on February 7th, the S&P Financial sector ETF (XLF) was up more than 8% on the year. Since that high, the sector has fallen more than 13% and is now down more than 6% YTD.
With systemic risk in the Financial system making front-page headlines again, we checked in on the sector’s weighting in the S&P 500 to see how it compares to where things stood back in the mid-2000s ahead of the Financial Crisis. Below is a look at the Financial sector’s weighting in the S&P going back to 1990. As of this writing, the Financial sector has a weighting of 10.73% in the S&P. That’s down a full percentage point from where it was at the end of February.
What’s interesting to note is how much smaller the sector is today compared to its weighting back in early 2006 when we were on the cusp of the Financial Crisis. At its peak in early 2006, the sector’s weight in the S&P had ballooned to 22.4%, which made it the largest sector of the S&P at the time. When the Financial sector, which is a sector meant to service the rest of the economy becomes the largest sector, something’s off! Of course, the Financial Crisis following the bursting of the housing bubble of the mid-2000s corrected this problem, as the Financial sector’s weighting fell from north of 22% down to south of 9% when the bottom was finally put in back in early 2009. During this latest bout of issues for Financials, the sector is still big enough to be the third largest sector in the S&P behind Tech and Health Care, but it’s not nearly as “weighty” as it was before the Financial Crisis, and its weighting has actually been trending lower for the last 7-8 years. Click here to learn more about Bespoke’s premium stock market research service.
Don’t Forget About CPI
With all the worry about the potential for bank runs, you may have forgotten that there’s a CPI report tomorrow morning. After January data came in higher than investors had hoped, consensus forecasts for Tuesday’s February CPI are calling for a 0.4% m/m increase on both a headline and core basis. Based on recent trends, while the bias towards higher-than-expected readings hasn’t been as extreme as it was just a few months ago, lower-than-expected headline readings have been hard to come by over the last year with just three in the last 12 months.
In terms of seasonality, history isn’t really on the side of those who are looking for a lower-than-expected report tomorrow. Going back to 1999, headline CPI reports released in March have been lower than expected just two times which is easily the lowest of any month. In total, of the 24 CPI reports released in March since 1999, 10 have been higher than expected, 12 have been inline, and two have missed forecasts. Will tomorrow be the third time the charm? Click here to learn more about Bespoke’s premium stock market research service.
March Volatility Emerging
The month of March is nearly halfway through and volatility has begun to pick up. Whereas the S&P 500 was up around 2% month to date as of this time last week, currently the index is down over 2.5%. As shown below, since the end of WWII March ranks in the middle of the pack with regards to the average spread between its Intra month high and low (on a closing basis). That compares with months like October—the most volatile of the year—which has averaged an Intra month range of just under 8%.
Although historically March might not be the most volatile month, in recent years that Intra month volatility has kicked up. In the chart below we show the spread between March’s Intra month highs and lows for each year since the end of WWII. Over time, there has consistently been some ebb and flow in this reading with some outlier years in particularly volatile times like the late 1990s and early 2000s and then of course 2020. October has historically been known as a month for market turnarounds, but March has become increasingly active on that front as well. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 3/13/23 – Seven Dangerous Words
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 fundamentals of America’s economy are strong.” – John McCain 4/17/08
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Phrases like the seven words above never seem to be made when markets and the economy are running smoothly, and we’ve heard a number of similar phrases like this made by officials over the weekend and this morning. That’s definitely not to say that the events of the last week and today are a repeat of 2008, but these types of comments almost never have their intended purpose of providing comfort to investors.
What’s happened over the weekend has been notable and will have both intended and unintended ramifications down the line. With deposits at US banks having essentially been backstopped by the actions of the Federal Government, one could argue that the banking system has been de facto nationalized, and the consequences of that are completely unknown, so we won’t even begin to speculate.
The flight to safety has been incredibly pronounced in the Treasury market as the 2-year yield is down nearly 50 basis points (bps) this morning after falling 29 bps on Friday and 20 bps Thursday. What’s truly remarkable about these declines is that they came just after the 2-year yield topped 5% for the first time since June 2007. Going all the way back to 1977, the last time the 2-year yield dropped more than this in a three-day span was just after the 1987 crash, and then before that, it happened in multiple periods from late 1979 through early 1983.
Finally, despite little direct connection between what’s going on with SVB and other US regional banks, European bank stocks have also seen sharp declines in the last two days as the STOXX 600 Bank Index is down over 9%. Analysts are out defending the banks as having ‘limited risk’. That may be true with regards to SVB and other regional US banks specifically, but European banks aren’t immune to the overall trend impacting US banks (a rapid surge in interest rates shortly after central bank officials were assuring markets that any increase in rates would be gradual).
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!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Bespoke Brunch Reads: 3/12/23
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
While you’re here, join Bespoke Premium with a 30-day trial!
Entertainment
WWE in talks with state gambling regulators to legalize betting on scripted match results by Alex Sherman (CNBC)
Seeking to get in on the sports gambling goldrush, wrestling matches (which are scripted with results pre-determined) are trying to become legally sanctioned gambling events. [Link]
Why Are So Many Guys Obsessed With Master and Commander? by Gabriella Paiella (GQ)
An investigation into the enduring popularity of a mid-budget sailing movie set during the Napoleonic Wars which has persisted to become a near-obsession for men of a certain age. [Link]
The Stunt Awards by Bilge Ebiri and Brandon Streussnig (Vulture)
An important corrective to the glaring omissions of the traditional Academy Awards, which conspicuously overlook the stunt professions which make movies great. [Link]
Doom Loops
The Dollar’s Imperial Circle by Ozge Akinci, Gianluca Benigno, Serra Pelin, and Jonathan Turek (Liberty Street Economics)
A new model characterizes the dollar’s role in the global economy as a procyclical force which wrecks factory activity and commodity prices as the greenback gains steam. [Link]
North Carolina trucking company to shut down after top customer pulls out by Clarissa Hawes (FreightWaves)
Demands for “massive rate and volume concessions” from customers led FreightWorks to shutter the doors, laying off 200 employees including 140 drivers. [Link]
Real Estate
Millionaires row no more: Number of houses that cost seven figures nationwide is dropping by Swapna Venugopal Ramaswamy (USAToday)
Only about 7% of the US housing market is worth more than $1mm, a drop of 1.6 percentage points versus the peak of the market but still almost double the 4% at that price level from January of 2020. [Link; auto-playing video]
Ukraine
Dispatch From Kyiv: Ballet in a Time of War by Carol Schaeffer (The Nation)
Ballet, bombs, and the strange world of Kyiv which has been spared Russian occupation but is still a acutely war-time city as the invasion pushes through its second year. [Link; soft paywall]
Renewables
This geothermal startup showed its wells can be used like a giant underground battery by James Temple (MIT Technology Review)
A Nevada geothermal company thinks it may be able to turn its wells into what is in effect a giant battery, with important implications for keeping amperage flowing when renewable generation is no longer operating. [Link]
Unhappy Customers
How ‘Excuseflation’ Is Keeping Prices — and Corporate Profits — High by Tracy Alloway and Joe Wiesenthal (BNN/Bloomberg)
Corporations have been eager to push prices higher and take advantage of unique disruptions, driving prices higher with input costs but not returning the favor after input disruptions calm. [Link]
As Customer Problems Hit a Record High, More People Seek ‘Revenge’ by Katie Deighton (WSJ)
The National Customer Rage Survey has been run since 1976 and its 2023 edition showed a uniquely poisoned relationship between businesses in aggregate and their customers. [Link; paywall]
Elon
Bodyguards Follow Elon Musk Everywhere at Twitter HQ, Even to Restroom, Says Engineer by Philippe Naughton (The Daily Beast)
Employees report Twitter and Tesla CEO Elon Musk gets followed around the social media company’s headquarters by two bodyguards. [Link]
Elon Musk Is Planning a Texas Utopia—His Own Town By Kirsten Grind, Rebecca Elliott, Ted Mann, and Julie Bykowicz (WSJ)
The company town is back, this time plotting itself outside of Austin, TX. A “Texas utopia” is in the cards near SpaceX and Boring Co facilities in the Lone Star State. [Link; paywall]
Read Bespoke’s most actionable market research by joining Bespoke Premium today! Get started here.
Have a great weekend!
This Doesn’t Happen Often
After a surge earlier this week that took the yield on the two-year US Treasury up above 5% for the first time since 2007, concerns over the health of bank balance sheets have caused a sharp reversal lower. From a closing high of 5.07% on Wednesday, the yield on the two-year US Treasury has plummeted to 4.62% and is on pace for its largest two-day decline since September 2008. Remember that?
A 45 basis point (bps) two-day decline in the two-year yield has been extremely uncommon over the last 46 years. Of the 79 prior occurrences, two-thirds occurred during recessions, and the only times that a move of this magnitude did not occur either within six months before or after a recession were during the crash of 1987 (10/19 and 10/20) as well as 10/13/89 when the leveraged buyout of United Airlines fell through, resulting in a collapse of the junk bond market. As you can see from the New York Times headline the day after that 1989 plunge, just as investors are worrying today over whether we’re in for a repeat of the Financial Crisis, back then they were looking at ‘troubling similarities’ to the 1987 crash. The year that followed the October 1989 decline wasn’t a particularly positive period for equities, but a repeat of anything close to the 1987 crash never materialized. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 3/10/23 – Running into the Weekend
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 believe that banking institutions are more dangerous to our liberties than standing armies.” – Thomas Jefferson
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
Futures are lower this morning heading into the 8:30 Non-Farm Payrolls report but given the action in SVB Financial (SIVB) which is trading down over 60% for the second straight day, the biggest surprise may be that futures aren’t even lower.
The February Non-Farm Payrolls report was just released and while it was mixed relative to expectations, it was generally positive for markets. Economists were expecting the headline reading to come in at 225K this morning, but the actual reading came in at 311K. Below the surface, though, the Unemployment rate was higher than expected, average hourly earnings were lower than expected, and average weekly hours were also lower than expected.
Yesterday was one of the worst days for bank stocks in years. In the 17 years that the S&P Regional Banking ETF (KRE) has been trading, Thursday’s 8.11% plunge was only the 22nd single-day decline of 7.5% or more, and it was the first since the COVID shock in early 2020. Before that, you have to go back to the debt limit and US credit rating downgrade of August 2011 to find the next occurrence when there was one day (8/8/11) when the ETF fell just under 10%. During the Financial Crisis, moves like yesterday’s almost seemed common. Whether yesterday was a one-day shock in the bank stocks or not remains to be seen, but based on the history of prior occurrences, like cockroaches, more often than not, when there’s one single-day large decline, others are usually lurking.
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!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
50-DMAs Couldn’t Hold
Worries about banks today left major US index ETFs across the market cap spectrum back below their 50-day moving averages. The uptrend channels that have been formed over the last six months are also getting tested with this week’s move lower. You can see the current set-ups in the snapshot from our Chart Scanner tool below.
Looking at our Trend Analyzer, every sector ETF except for Technology has now moved back below its 50-day moving average. Six of eleven sectors are actually oversold (>1 standard deviation below 50-DMA), with Financials (XLF) and Health Care (XLV) at “extreme oversold” levels. XLF had been up more than 8% on the year about a month ago, but it’s now down 1.93% YTD.
Technology (XLK) and Utilities (XLU) are the only two sectors up over the last week. Interestingly, Utilities (XLU) has been one of the worst performing sectors so far this year, while Tech has been the best.
With Financials seeing such a sharp decline this week, below is a snapshot of various banks and brokers in the sector with the ones highlighted in red all now trading at least 5% below their 50-DMA. As shown, Charles Schwab (SCHW) is down the most over the last week with a decline of 12.6%, which has left it 16.4% below its 50-DMA and down nearly 20% on the year. Other names like Bank of America (BAC), JP Morgan (JPM), and Raymond James (RJF) are in extreme oversold territory as well. Of the major banks and brokers listed, Goldman Sachs (GS) has actually held up the best over the last week with a decline of just 2%. Click here to learn more about Bespoke’s premium stock market research service.
The Bespoke 50 Growth Stocks — 3/9/23
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were no changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.