Bullish sentiment measured by the weekly AAII survey has been a series of back and forth moves over the past several weeks.  After reaching the highest level in over a month last week, bullish sentiment fell back down to 27.7%.  Even with that decline, bullish sentiment has now managed to hold above 25% for at least three weeks in a row for the first time since the start of the year. We also must note, that the AAII survey collects data from Thursday at 12:01 AM through Wednesday 11:59 PM meaning any boost to sentiment from yesterday’s FOMC post-meeting rally will not necessarily be fully captured in this report.

Whereas bullish sentiment has had its fair share of back and forth moves, bearish sentiment has more consistently fallen with this week being the third sequential decline in a row.  Now at 40%, bearish sentiment is at the lowest level since the first week of June.

Given the drop in bulls was slightly smaller than that of bears this week, the bull-bear spread continued to move in a less negative direction.  However, in spite of any improvement, this week was the 17th negative reading in a row as that streak remains the third longest on record.

Not only have bears outnumbered bulls for 17 straight weeks, but there has actually only been one week this year (the final week of March) in which that was not the case.  As a result, this year is on pace to have averaged the lowest levels of bullish sentiment and the highest levels of bearish sentiment of any year in the survey’s history.

With both bulls and bears lower in the most recent survey, neutral sentiment picked up the difference rising to 32.2%.  That is the most elevated reading since April and back into the middle of the post-pandemic range. Click here to learn more about Bespoke’s premium stock market research service.

Initial jobless claims continue to disappoint. Although this week’s release technically fell down to 256K, it was from a 10K upwardly revised number of 261K last week.  Both this week and last’s readings are the highest since the fall and would also mark the highest readings since the fall of 2017 outside of the historically elevated readings of the pandemic.

The pandemic was a volatile time period for jobless claims data as readings rose into the millions.  As such, revisions over the past couple of years have gotten historically large in turn, albeit less so over the past year.  Although it may not sound like much, last week’s 10K revision was actually sizable.  It was the largest revision since the week of July 4th last year, and prior to the pandemic, the week before Christmas in 2012 was the last time there was a double-digit revision.

In his post meeting presser, Fed Chair Powell mentioned how the rise in initial jobless claims may be seasonal in nature. While we will provide some more in depth analysis to these comments in regards to the data in tonight’s Closer, as we have noted in the past, jobless claims have been roughly following standard historical seasonal patterns this year.  July typically sees a temporary seasonal spike higher, but as we noted last week, that seasonal peak appears to have been put in place a bit later than usual which is rare but not exactly an unprecedented occurrence.  While claims will likely get some seasonal tailwinds in the coming weeks (including this week of the year as claims have fallen around 90% of the time historically), the actual level of claims for the current week of the year is now well above comparable weeks for the few years prior to the pandemic. In other words, before or after seasonal adjustment, claims have come off their strongest levels and revisions have not exactly made things any better.

As for continuing claims, the latest week saw a 25K decline to 1.359 million.  While that does mark some deterioration from the strongest levels, unlike initial claims, continuing claims are still well below levels from prior to the pandemic indicating a still very healthy labor market the likes of which has not been seen in decades as the insured unemployment rate (continuing claims as a percentage of the number of those covered by state insurance programs) continues to hover near 1%. Click here to learn more about Bespoke’s premium stock market research service.

As we do the last Wednesday of each month, today we published our latest update of the Global Macro Dashboard which provides an overview of the major economic data and financial markets of 22 major global economies. Taking a look at the US ETFs tracking these same countries shows a broad move higher in equities around the globe during the month of July.  The US has led the way higher as the S&P 500 ETF (SPY) has rallied just over 5%.  India (INDA), Sweden (EWD), and Singapore (EWS) have seen the next strongest moves with each one rallying 4% or more. That has brought US equities, India, and Singapore back above their 50-DMAs as well.

Given those moves are in the context of much larger pullbacks year to date, most country ETFs also currently remain below their pre-COVID highs (the 52-week high as of the S&P 500 peak on 2/19/20).  In fact, SPY, INDA, Taiwan (EWT), and Canada (EWC) are the only countries meaningfully above prior highs. Switzerland (EWL) is also technically a part of that list, but the one basis point difference is not much of a margin.  At the moment, Brazil is down the most significantly from its pre-COVID high as it is still down 43%.  However, unlike many other countries, the year-to-date decline has been very modest at only 1.76%.

Taking a look at the charts of the four countries that are handily above their pre-COVID highs, the trends of the past year are not exactly positive.  Each one currently sits in a multi-month downtrend, and only India and the US have managed to break above their 50-DMAs.  Even if those moving averages have been taken out, further progress by bulls would be required to eliminate those downtrends. Click here to learn more about Bespoke’s premium stock market research service.

Both Microsoft (MSFT) and Alphabet (GOOG) are trading down over 2% heading into their earnings report amidst broader market weakness and wariness towards the tech sector. On a year-to-date basis, MSFT and GOOG are both down over 25% and are trading near their 52-week lows. The charts below show MSFT and GOOG over the last twelve months. On the bright side, the rate of change in the two stocks does appear to have support near current levels. However, they are both still in sustained downtrends.  Click here to learn more about Bespoke’s premium stock market research service.

Since GOOG went public in 2004, there have only been four days in which the stock traded lower by two percent or more heading into the earnings report. The latest occurrence was on the day of the Q1 2022 report, which was the only time when it also reacted negatively following the earnings report. On average, the stock has gained 2.5% (median: 2.6%) following the report after trading lower by 2%+ leading into earnings. Historically speaking, GOOG has posted gains on its earnings reaction day 58% of the time, gaining an average of 1.7%. While the average and median returns below are positive, we would note that with just four occurrences the sample size is small.

Since October of 2001 (which is as far back as our earnings database goes), MSFT has traded lower by at least two percent in the session heading into an earnings report seven times. Again, the sample size is relatively small, but following every one of these prior occurrences, MSFT gained in the session following its earnings report, booking an average gain of 3.2% (median: 3.5%). For all earnings reports since October of 2001, MSFT has reacted positively to earnings 60% of the time.  Click here to learn more about Bespoke’s premium stock market research service.

Manufacturing data has continued to cool with the Dallas Fed’s monthly survey showing further deterioration in the month of June.  The reading on General Business Outlook dropped another 4.9 points month over month to -22.6; the worst reading since the spring of 2020. Expectations are similarly at some of the lowest levels in over two years, but July did see a modest rebound.

The individual categories of the report were mixed. While most remain in expansionary territory, some of the more important categories like New Orders are in deep contraction.  The month-over-month moves were even more mixed as just over half of the components fell.  As we have seen across other regional Fed reports recently, expectations broadly sit at much more depressed levels, although July did see some big rebounds across categories.

Even though demand has slowed, production expanded at a slightly accelerated rate in July.  At only 3.8, though, the index is in the bottom quartile of its historical range and capacity utilization is only slightly stronger.

Manufacturers reported the worst slowdown in demand since the spring of 2020 as the index for New Orders fell to -9.2.  The 1.9 point sequential decline was actually much smaller than the 10.5 point and 8.9 point declines in June and May, respectively, however that nonetheless expresses demand has been weakening materially.  As new demand is a fraction of what it once was, Unfilled Orders experienced a peculiarly large uptick of 14.9 points. That ranks in the top 2% of all monthly moves on record resulting in the index to flip from a historically weak to a more solid reading.

The Dallas Fed report added to the list of indicators pointing to alleviation on the supply chain front as well.  The Delivery Times index experienced its second-largest one-month decline on record. Even though that brings the index to a barely expansionary level, the move heavily contrasts with expectations.  Future Delivery Times recorded the largest month-over-month gain on record. Given that reading brings the index only to 2.4, it does not mean manufacturers expect delivery times to begin to surge to unprecedented levels as they did earlier in the pandemic.  Rather, they no longer expect the rapid improvement that has been observed over the past several months.

As for other metrics that have fallen off a cliff, likely thanks to the easing of supply chain bottlenecks, both Prices Paid and Received are plummeting across both current and future conditions.

In addition to the decline in prices paid and received, the indices tracking the growth of wages and benefits has also been pulling back sharply. Both current conditions and future expectations saw some of their largest one-month declines on record, although, at current levels, they remain more elevated within their historical range than prices paid and received. The employment index peaked well over one year ago, but it has not experienced that same sharp decline as wages in benefits.  In fact, there was a modest rise in the reading in July meaning firms increased hiring at an accelerated rate.  Contrasting with that higher spending on employment, the capital expenditures index has been consistently grinding lower with this month marking the fourth monthly decline in a row, and at 4.2, it has fallen to the lowest level since October 2020. Click here to learn more about Bespoke’s premium stock market research service.