The AAII’s weekly sentiment survey saw an equal percentage (30.6%) of respondents report as bullish and bearish last week. This week saw a much more optimistic pivot as 36.2% of respondents reported bullish sentiment.  While higher, bullish sentiment is still at one of the lowest levels since last fall. At 36.2%, bullish sentiment is also now just below the historical average of 38%. While the AAII reading on bullish sentiment was higher but still muted, the Investors Intelligence survey of newsletter writers showed bullish sentiment fall 8.1 percentage points to 53.1%. While that is not a particularly low reading (the lowest since only the end of May), it was the largest one week decline since October 2019. In other words, bullish sentiment is not necessarily collapsing, but it has lost some footing.

With more bulls in the AAII survey, fewer respondents reported bearish sentiment. In fact, less than a quarter of investors reported bearish sentiment this week. That is down 6.5 percentage points from the prior week; the largest one-week decline since a 6.6 percentage point decline in the first week of June.

The inverse moves in bullish and bearish sentiment resulted in the bull-bear spread to rise 12.1 points.  While off the lows, it is still not as strong of a reading as has been seen for most of this year. In fact, the current reading is 5.5 points below the average since the start of the year.

The most impressive sentiment reading this week was neutral sentiment.  Over the past four weeks, neutral sentiment has risen 10.5 percentage points without a single decline in that time. That is the biggest four-week rise since mid-May when it had risen 14.9 percentage points. Now as the predominant sentiment with just below 40% of respondents reporting as such, neutral sentiment is at the highest level since the first week of 2020 when this reading was 1.2 percentage points higher. Click here to view Bespoke’s premium membership options.

While last week’s jobless claims number was already disappointing on account of increases in layoffs in the manufacturing and automobile industries in Michigan, Texas, Missouri, Illinois, and Ohio, and this week that reading was revised higher by 5K to 424K.  Fortunately, the most recent print saw an improvement with claims falling to 400K.  That compares to expectations of a drop back below 400K to 385K.

While the seasonally adjusted number did not improve by as much as expected, the non-seasonally adjusted number was much stronger at 344.7K.  That leaves initial claims within 100K of the last sub-one million claims print from March 13th of last year.  Given that disconnect between the seasonally adjusted and unadjusted numbers, it goes without saying that drops in the NSA number are due to seasonality and typical for this time of year. In fact, as shown in the second chart below, since 1967 when the data begins, claims have risen only 11% of the time during the current week (30th) of the year. That ranks sixth as the week of the year in which claims have most often fallen week over week.

Since mid-June, PUA claims have been fluctuating around 100K. Last week saw a rise up to 109.9K thanks to a big jump in Indiana following a judge’s order for the program to be restarted. Indiana claims started to normalize this week and saw the largest drop of any state, national PUA claims came in back below 100K at 95.17K.  That is the lowest level since the first week of June when PUA claims put in a low of 71.23K.

Lagged an additional week to initial claims, continuing claims snapped a streak of three weeks of improvement.  Continuing claims rose to 3.269 million from 3.262 million in the prior week.  That is only the highest level since the end of June.

Factoring in all other programs creates an additional week of lag making the most recent reading through July 9th. Continuing claims broadly saw a move higher across programs that week bringing total claims to 13.17 million from 12.59 million.  That brought to an end a streak of ten consecutive weeks of declines. As for which programs, in particular, accounted for that uptick in claims, the biggest contributor was the Extended Benefits program.  This program saw claims go from under 100K all the way up to 343.5K. While we cannot point to any particular reason for each state’s increase, that large move higher was particularly thanks to two of the most populous states: Texas and California which saw weekly claims rise 180K and 67.1K, respectively. Throughout recent claims reports, there have been a handful of state-level idiosyncracies which impact aggregate claims counts, but overall the trend of improving claims on a national level remains in place. Click here to view Bespoke’s premium membership options.

Looking at the styles screen of our Trend Analyzer, growth stocks have been clear winners of late, but that does not necessarily include all growth stocks.  Whereas the Growth ETF (VUG) or S&P 500 Growth ETF (IVW) are up over 2% over the past five days through yesterday’s close and are sitting on year to date percentage gains in the high teens, the small-cap focused Russell 2000 Growth ETF (IWO) is actually down over the past week and is barely up on the year.

Taking a closer look at the dynamic between small and large-cap growth, as shown below IWO has been trending lower for basically all of 2021 after a strong run higher at the end of last year.  Meanwhile, IVW has been trending in a steady, largely uninterrupted, uptrend.  Given that strong run at the end of last year, IWO had been outperforming IVW by a large degree for most of the past year.  But small-cap weakness and large-cap strength has meant the two are now up by roughly the same amount (~40%) versus one year ago.

A massive degree of that outperformance has come in the past month alone.  In the bottom right-hand chart below, we show the rolling one-month performance spread of the two ETFs.  While it has come back down slightly today, at yesterday’s close, there was a 10.9 percentage point spread between the one-month performance of IVW and IWO. That is the widest dispersion between the one-month performance of the two ETFs since April’s record level when the spread reached 12.82 percentage points. Since the Russell 2000 Growth ETF began trading exactly 21 years ago, there have only been a handful of other periods in which small-cap growth underperformed by such a wide degree. The other most recent period was March of last year, October 2008, and then late summer of 2002.  Click here to view Bespoke’s premium membership options.

After three straight quarters where the stock has declined in reaction to earnings, shares of Advanced Micro (AMD) are surging over 6% today bring the share price within striking distance of the $100 level.  Despite the stock’s strong reaction to earnings today, what’s perhaps even more notable regarding AMD share’s price is that remains stuck in the range it has traded in for a full year now since spiking higher on earnings last July.  With an intraday peak of $99.23 in January and an intraday low of $72.5 back in May, AMD has traded in a one-year range of 36.9%.

For most stocks, a one-year range of over 35% wouldn’t raise eyebrows.  For a stock like AMD, however, 36.9% is not only narrow but it’s the most narrow in the history of the stock.  Since 1991, the average spread between AMD’s 52-week high and 52-week low has been over 200%, and there are multiple periods where the spread topped 500%.  On the downside, though, prior to the current period, there was never another period where the one-year range was even less than 50% as in 1995, the spread only dropped down as low as 52%.  A one-year range of 36.9% may not exactly be like watching paint dry, but for AMD stockholders, it has been a snoozefest. Click here to view Bespoke’s premium membership options.

May 2021 S&P CoreLogic Case-Shiller home price numbers were released today, and they showed a continued surge in home prices all around the country.  The month-over-month gains of 2-3% are similar to what we used to see on a year-over-year basis prior to COVID, but now the year-over-year gains all stand in the teens and twenties.  At the top of the list is Phoenix which saw home prices rise 3.75% from April to May and 25.86% from May 2020 to May 2021.  Below is a table showing MoM and YoY gains for the twenty cities and the composite indices tracked by S&P CoreLogic Case-Shiller.

Home prices have surged nearly uniformly across the country since COVID first hit.  As shown below, since February 2020, the composite indices are up 18-19%, while most cities are up between 14% and 21%.  Chicago and New York have seen a slightly smaller jump in prices than the rest of the country.  Miami, LA, Portland, Charlotte, Dallas, Tampa, Denver, San Francisco, and Boston are all up between 19-21% since COVID.  Three cities stand out for even bigger price jumps.  As shown, Phoenix, Seattle, and San Diego are up quite a bit more than the rest of the group with gains between 28-30%.

Below we show where home price levels are now versus their low-points after the mid-2000s housing bubble burst.  Most lows for home prices were seen sometime between 2010 and 2012.  As shown, the composite indices are now up 88-96% from their lows, while 13 of 20 cities are up more than 100% off of their lows.  San Francisco is up the most at +177%, followed by Phoenix, Seattle, and Las Vegas (all up 150%+).  At the other end of the spectrum, New York is up the least off its lows at +49%.

Notably, the post-COVID surge in home prices has left all but two cities above their prior all-time highs made during the mid-2000s housing bubble.  Las Vegas and Chicago are the only two cities that have yet to eclipse their prior highs, but they’re now very close at just -1% and -3%, respectively.  Miami, New York, and Washington DC are the three cities that have most recently made new highs.

Below are charts showing historical levels of home prices across the S&P CoreLogic Case-Shiller indices.  These really show how much prices have spiked post-COVID.  Prices were already trending higher coming into the pandemic, but over the past 17 months, they look more like a rocket does at take-off than a passenger jet!  Click here to view Bespoke’s premium membership options.

Source: S&P CoreLogic Case-Shiller

As we noted in our update of our Five Fed Manufacturing Composite featured in last night’s Closer, July regional Fed manufacturing indices have been showing broadly strong readings. The fifth and final Fed bank’s index released today out of, coincidentally enough, the fifth district added some fuel to the fire.  The Richmond Fed’s composite reading was anticipating a 2 point decline from 22 last month. Instead, last month’s reading was revised higher by 4 points, and July saw another uptick to 27. That is the second-highest reading on record behind March 2008 when the composite came in a single point higher.

While the composite index as well as multiple other sub-indices like those for employment, prices, and inventories were at or just off of records, breadth in terms of the month-over-month changes was more mixed.  Of the 17 sub-indices, 9 were higher, 1 was unchanged, and 6 were lower.

The area of the report to have seen the most significant deterioration in July was New Orders.  The index fell 11 points to 25. Granted, that is coming off of a record high, and the July reading remained in the top 5% of all months. Order Backlogs also fell m/m although the decline was much smaller at only a single point.  One interesting dynamic of the readings on Backlog of Orders is the difference between current conditions and expectations. Whereas the current conditions index is in the top 2% of all readings, the expectations component saw an 8 point decline and is now in the bottom decile of readings.  Overall, while order growth decelerated, it is still running at a very strong clip.

As such, shipments were higher with that index rising 6 points to 21; the highest level since March. While shipments rose, there still appear to be significant disruptions to supply chains.  Vendor Lead Times were unchanged in July just off of the record high from two months ago.  While that reading has yet to see much improvement, the region’s businesses do seem optimistic that the lead times will improve but not necessarily return to normal down the road as expectations plummeted 12 points.

Given those supply chain disruptions, inventories continue to decline at record rates.  The indices for both raw materials and finished goods fell to fresh record lows.

Meanwhile, unlike other regional Fed reports, prices paid have gotten little relief accelerating to an 11.16% annualized rate. Prices Received also rose to a record high of 6.9%.

In addition to input and final good prices, wages also came in at a record high alongside the index for Number of Employees.  Forward-looking indicators point to continued strong labor demand going forward too as expectations for the Number of Employees also set a new record. Granted, that did not coincide with a record in the reading on wage expectations. In other words, higher pay has appeared to have enticed more workers but we are potentially hitting a limit on firms’ willingness (or ability) to pay higher wages.  Additionally, alongside the higher wages and an increase in employment, there was an improvement in the Availability of Skills index which has been around record lows of late (meaning there has been a lack of candidates with necessary skills).   Click here to view Bespoke’s premium membership options.

Manufacturing activity in the Dallas Fed’s region continued to expand at a strong clip in July albeit with some slowing.  The index for General Business Activity came in at 27.3 rather than the expected increase from 31.1 to 31.6.   That decline marked the third month in a row that the index has fallen since the multi-year high of 37.3 in April. While current conditions deteriorated, expectations have held up better with a modest decline of 0.2 points this month.

Most of the individual areas of the report saw a decline month over month in July with 12 of the 16 indices falling.  Although most were lower, current levels remain broadly healthy with many in the top decile of their historic ranges.  Expectations saw more broad declines with the only index to move higher month over month being Delivery Times. There were some particularly large double-digit declines in expectations for Shipments, Capacity Utilization, Inventories, and Prices Received.

One of the few areas of the report to see a move higher in July concerned new orders.  The indices for New Orders and New Order Growth rate rose 0.1 and 2.4 points, respectively. Granted, those upticks still left both indices below their highs from earlier in the sping and expectations saw significant turns lower.  While that could imply some slowing in demand, historic backlogs still exist.  As shown in the bottom left chart below, outside of the spike in September 2005 and the past few months, the index for Unfilled Orders has never been higher even taking into account the declines over the past few months. Shipments also saw a small turn lower in July while the bigger move was in regards to expectations.  Last month, expectations for shipments surged to the highest level since February 2006. This month, that reading reversed by 12.4 points; a month-over-month decline that ranks in the bottom 3% of all monthly moves.

Ironically, even though the reading on shipments worsened, supply chains appeared to have improved to some degree. Higher readings in the Delivery Time index indicate that products are facing longer lead times.  Earlier this year the index surged to unprecedented levels, and while it still has a ways to go until it is back to normal, it did fall 7.2 points in July following a 3.2 point decline in June.

As with Delivery Times, prices have also found some respite after flying higher over the past several months.  Prices Paid fell from a record high to 73.5 which is still the third-highest level of any month to date.  Expectations also saw a sharp pivot lower falling 9.8 points to 43.8.  That is at a similar level to three years ago. Prices Received are a similar picture pulling back from a record high to 40.9. Again even though this reading shows some slowing in price increases, there is no historical precedent for as high of a reading in the index.  Additionally, expectations saw an even more dramatic decline as the index fell 15 points. Click here to view Bespoke’s premium membership options.