Bespoke’s Morning Lineup – 5/24/22 – Anti-Social Media
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 can be terribly dangerous, even perilous, to assume that because people hold positions of responsibility they are therefore acting responsibly.” – David McCullough
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.
That rally lasted long. After bouncing from the last hour on Friday through yesterday, US stocks are set to open down by over 1% this morning following Snap’s (SNAP) earnings warning and its comments regarding the weakening broader macroeconomic environment. Adding to the concerns regarding the economy, preliminary PMI readings out of Europe also came in lower than expected. The US versions of these reports will be released later this morning. Given these growth concerns, treasuries are rallying as the 10-year yield drops back down to 2.82%. Oil prices, however, are largely unchanged on the day.
In today’s Morning Lineup, we recap on the latest declines in the tech sector (pg 4), Asian and European markets (pg 4), COVID case numbers (pg 5), the latest economic data out of Asia and Europe (pg 5), and a lot more.
After a 1.87% gain for the S&P 500 (SPY) yesterday, we’re seeing the inverse of a “Turnaround Tuesday” this morning with SPY set to open lower by just over 1%. Since 1993 when SPY began trading, there have only been five prior instances in which SPY rose 1%+ on a Monday and then gapped lower by more than 1% the next morning. As shown below, SPY continued lower from the open to the close on four of the five prior Tuesdays, and one week from the Tuesday open, SPY was down all five times for an average decline of 2.3%. One step forward, two steps back.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Massive Sector Performance Spreads
There’s no questioning that the equity market has been extremely volatile this year. So far in 2022, the S&P 500 has averaged an absolute daily move of 121 basis points (bps). Although the broader index has been incredibly weak over the last 100 trading days (down 17.1%), performance among individual sectors has diverged widely, as Energy has gained 50.7% while the Communication Services sector has declined 32.0%. The 82.7 percentage point performance spread between the two sectors is one of the highest on record. Only July of 2009 and March of 2000 saw higher readings.
Since 1990, there have only been six times in which the best-worst 100-day performance spread crossed above 70 ppts for the first time in at least 50 trading days. This tends to occur amidst a volatile market environment. In the late 90’s, investors flooded into technology stocks while dumping ‘traditional’ stocks, which led to the Technology sector outperforming Energy by 70.2 percentage points in a 100-trading day span ending on 1/28/1999. When the dot-com bubble began to burst, the inverse occurred, and Materials outperformed Technology by 71.3% in the 100 trading days ending 3/9/2001. Coming out of the Global Financial Crisis, the Financials sector roared off of a depressed base, leading to outperformance against the Communication Services sector of 89.7 ppts. In late February of 2021, the Energy sector began to bounce back after the demand shock in the industry began to abate, while the Utilities sector remained relatively weak, leading to a 100-day performance spread of 71.1 ppts. This year, the sky-rocketing price of oil has propelled energy stocks higher while the Communication Services sector has been hampered by concerns that a peak demand environment was reached in 2020 and 2021 while valuation multiples have simultaneously contracted (largely due to the Fed’s hawkish pivot) pushing the 100-trading day performance spread out to 82.7 ppts.
As investors, we must remain forward-looking. So, what typically happens after dramatic performance spreads are reached between the best and worst sectors? It’s a small sample size, but based on the previous five occurrences, investors should consider rotating out of the best performing sector (which in this case would be Energy) after the spread hits 70 percentage points and move into the worst performing sector (Communication Services).
Three months after these occurrences, the worst-performing sector over the prior 100 trading days has booked a median gain of 12.1%, which is nine ppts better than that of the best performing sector. Six months later, the median performance of the worst-performing sector in the initial 100 trading days outperformed the best performing sector by 15.5 ppts. Interestingly, twelve months later, the best performing sector in the initial 100 trading days regained the lead over the worst-performing sector outperforming on a median basis by a margin of 17.2% to 8.3%. In terms of consistency, three and six months later, the previously worst performing sector outperformed the best performing sector three out of five times, but a year later, the previously best performing sector outperformed the worst-performing sector four out of five times. Click here to become a Bespoke premium member today!
Breaking “the Mondays”
We’ve talked a lot in the past about how the overwhelming majority of the equity market’s gains in the last several decades have come outside of regular trading hours. When you consider the fact that active trading in US equity markets is less than 20% of all the time in a given week, it would make sense that most news occurs outside of trading hours. Therefore, when good news breaks outside of trading hours, stocks typically gap higher in response, and when there’s bad news, they gap lower at the next open.
So far, 2022 has generally been a case of the latter. With issues like rising prices, tighter monetary and fiscal policy, and the war in Europe, there really hasn’t been much in the way of good news for investors to digest over the weekends, and therefore, when markets do start a new week of trading, performance has been anemic at best. Three charts illustrate this trend.
This morning the S&P 500 tracking ETF (SPY) gapped up 0.80% which was the largest upside gap in SPY to kick off a new trading week since late November. Today’s strong open also broke a streak of 20 straight weeks where SPY’s opening gap to kick off a week was negative or a gain of less than 0.30%. The chart below shows historical streaks where SPY’s opening gap on the first trading day of the week was negative or below 0.30%. The streak that just ended was the third-longest in SPY’s history, behind the 30-week streak ending August 2005 and the 22-week streak in June 2006. Both of those streaks came in the middle of the Fed’s early 2000s rate hike cycle where it raised rates by 25 bps for 17 straight meetings spanning June 2004 through June 2006 and took the Fed Funds Rate from 1.0% to 5.25% in the process.
Not only has there been a general lack of significant upside pressure to markets to kick off the trading week lately, but the trend has actually been in the opposite direction. Heading into today, SPY gapped lower to kick off the trading week 15 times in the last 19 weeks, and over the last six months, there were only 17 weeks where SPY gapped higher to kick off a week. In the entire history of SPY since the early 1990s, there have only been five other periods where there was a higher frequency of downside gaps to kick off a trading week in a six-month span, and they all peaked at 18.
Lastly, with the S&P 500 consistently opening lower to kick off the week, it would only make sense that the six-month average opening gap of the trading week would also be negative, and that’s exactly what we have seen. Over the last six months (26-weeks), SPY’s average opening gap to kick off a trading week has been a decline of 0.28% which is the weakest reading since the COVID crash (when there was a lot of bad news) and before that, the only two other weaker periods were in the six months ending in July 2009 and February 2002. If you were involved in the market in either of those periods, you remember that there was not a lot to be optimistic about in either period…sort of like now. They call it “the Mondays” for a reason, and lately, equities have had a bad case of them. Click here to become a Bespoke member today!
Bespoke’s Morning Lineup – 5/23/22 – A Positive Start to the Week For a Change
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.
“A library outranks any other one thing a community can do to benefit its people. It is a never-failing spring in the desert.” – Andrew Carnegie
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.
There’s no need to adjust your screens this morning. Equity futures are actually trading higher. After flirting with bear market territory again last week, the S&P 500 is on pace to open up by about 1%. There’s little in the way of a positive catalyst to point to this morning, but bulls will take what they can get. Whether it can last until the closing bell is an entirely different question altogether.
The economic calendar is quiet today with the Chicago Fed National Activity Index the only report of note. Fed Presidents Bostic and George will be speaking later today, and there will be a number of retail-related earnings reports throughout the week. The only notable reports on the calendar today, though, are Advanced Auto (AAP) and Zoom Video (ZM) which are both after the close.
In today’s Morning Lineup, we recap events in the Russia-Ukraine war (pg 4), Asian markets (pg 4), other economic data out of Europe and Asia (pg 5), and a lot more.
Last week was a rough one for US equities, but it was horrendous for consumer stocks. Consumer Staples, which was modestly higher YTD heading into the week, plunged more than 8%, while Consumer Discretionary, which was already one of the worst-performing sectors YTD, got even worse falling just under 8%. Two other sectors (Industrials and Technology) were down over 3.5% while only three sectors (Energy, Health Care, and Utilities) managed to post gains. The YTD performance gap between Energy and Consumer Discretionary continues to get more ludicrous with each passing week as the gap now stands at just under 80 percentage points, and no other sector is within 40 percentage points of Energy!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
Bespoke Brunch Reads: 5/22/22
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 free trial!
Sentiment Check
Stock Market Is Top-Heavy, but Carnage Is Widespread by Karen Langley (WSJ)
The drop in stocks this year has been acute among the largest companies, but plenty of stocks beneath the surface are getting punished heavily as well. [Link; paywall]
Wall Street is heading into a summer from hell — and top investors say it’s going to bring a near-biblical reckoning to the market by Linette Lopez (Business Insider)
Always worth noting when adjectives like “biblical” get unleashed to talk about stock market declines; this kind of extreme sentiment is usually something you see closer to bottoms than tops. [Link]
This Could Be a Lost Decade for Stocks by Spencer Jakob (WSJ)
While the near-term headwinds for stocks are well-understood, we are starting to see extrapolations of those headwinds forward over the long-term, another sign of a sentiment extreme that should be of note to contrarians. [Link; paywall]
US CEO Confidence (The Conference Board)
The outlook for chief executives surveyed by The Conference Board and The Business Council has collapsed over the last several quarters, though it remains above the lows from 2019 and 2009. [Link]
Child Rearing
Asia’s advanced economies now have lower birth rates than Japan (The Economist)
Extremely high housing costs have driven down the fertility rate across Asia. Worries about Japan’s low birth rate now look somewhat antiquated given the country has one of the highest birth rates in the region as-of 2020. [Link; soft paywall]
Teen Babysitters Are Charging $30 an Hour Now, Because They Can by Rachel Wolfe (WSJ)
Wage growth is soaring for babysitters as hourly rates roughly double versus pre-pandemic and bargaining power is exerted by the scarce supply of willing sitters. [Link; paywall]
Supply Chains
Giant container ships are ruining everything by Rachel Premack (FreightWaves)
Since the 1980s, ship size has risen by a factor of more than 5 since the early 1980s. Larger ships are a sign of concentrated market power, port congestion, and excess capacity investment during weaker periods of the global shipping industry. [Link]
Critical minerals threaten a decades-long trend of cost declines for clean energy technologies by Tae-Yoon Kim (IEA)
Given the IEA’s history of over-estimating renewables costs and under-estimating renewables installation capacity, this analysis should be taken with a grain of salt. That said, it’s indisputable that many of the inputs for renewable energy supply have gotten significantly more expensive. [Link]
Civil Asset Forfeiture
Michigan Couple Says Town Seized Their Building and Offered To Return It if They Bought Two Cars for Police by C.J. Ciaramella (Reason)
A town in Michigan illegally seized a building, then tried to shake down the owners for two new police vehicles before they would return the stolen property. [Link]
Short-Sightedness
HSBC AM global head of responsible investing: ‘Who cares if Miami is six metres under water in 100 years?’ by James Baxter-Darrington (Investment Week)
The head of HSBC’s asset management division thinks the real problem with climate change is “the amount of work these people make me do”. [Link]
The Fed
Why the Fed matters to regular Americans, in one stunning chart: Morning Brief by Myles Udland (Yahoo! Finance)
The median listed home price’s carrying cost has risen over 40% in the past year as the Federal Reserve’s move into tightening and soaring home prices drive massive increases in mortgage payments for new buyers. [Link; auto-playing video]
Dressing Up
Leave the Sweatshirt at Home. Dining Dress Codes Are Back. by Priya Krishna (NYT)
Restauranteurs are starting to demand more of their patrons, especially when it comes to the attire they don for their dining experience. [Link; soft paywall]
Read Bespoke’s most actionable market research by joining Bespoke Premium today! Get started here.
Have a great weekend!
Q1 Earnings Rhetoric
In our Conference Call Recaps, which are available to institutional subscribers, we summarize the conference calls and earnings releases of the most important earnings reports. Not only do we summarize the earnings results and the guidance, but we also relay each company’s macro and longer-term outlook to help subscribers keep up to date on the ever-changing landscape in topics spanning the US consumer, supply chains, inflation, labor, travel, technological developments, housing, foreign exchange, and capital markets. Click here to become a Bespoke member today!
Below we have provided some of the interesting insights we heard during the Q1 earnings season. We find that they are a helpful way to keep abreast of the major macro themes. Enjoy!
Summary
The Russia-Ukraine conflict only exacerbated an already strained supply chain environment and pushed commodity inflation even higher. Investors can reasonably assume that the constraints faced by the broader economy will persist throughout the fiscal year with some slight easing in the back half. The labor situation seems to have improved substantially, and certain companies even had a glut of labor supply. The consumer still appears quite strong, which means that price hikes will likely be taken in stride. View a complimentary sample of our Conference Call Recaps by clicking on the thumbnail below:
US Spending/Consumer
American Express (AXP) saw “increased engagement across our customer categories, led by strong spending by Millennial and Gen Z Card Members and small and medium-sized businesses, which were up 56 percent and 30 percent, respectively.”
“In terms of the North American business… we feel strong about the consumer demand.” – Whirlpool (WHR)
“Consumer spending… is quite robust [and] the labor market is almost fully recovered.” – Automatic Data Processing (ADP)
McDonald’s (MCD) is “keeping a close watch on lower-end consumers,” but “food at home has been increasing even more than food away from home.” The US consumer is in “good shape”.
United Rentals (URI) saw strong “customer sentiment and robust project activity.”
“We remain optimistic on the economy, at least for the short term – consumer and business balance sheets as well as consumer spending remain at healthy levels – but see significant geopolitical and economic challenges ahead due to high inflation, supply chain issues and the war in Ukraine.” – JP Morgan (JPM)
In the domestic parks segment, Disney’s (DIS) 2022 results will be “powered by strong demand coupled with customized and personalized guest experience enhancements that grew per capita spending by more than 40% versus 2019.”
Walmart’s (WMT) full-year guidance assumes “a generally stable consumer in the US, higher supply chain costs [and] continued pressure from inflation.”
Although inflation contributed to the rise in the average ticket price, customers “continue to trade up for premium innovative products.” – Home Depot (HD)
“As I sit here today, I’m not seeing any sign of a consumer slowdown.” – Target (TGT)
“When we talk to our guests, they often express their concerns about a host of rapidly changing conditions, ranging from geopolitics to high-end persistent inflation… particularly in food and energy.” – Target (TGT)
Supply Chain
“After a promising start the year, the operating environment soon changed with very significant geopolitical conflict, a resurgence of COVID in various places, record-high inflation and continued challenges on [the] supply chain front.” –Coca-Cola (KO)
“We are still seeing… inflated costs [and] quite a bit of disruption in our supply base.” – Whirlpool (WHR)
United Parcel Service (UPS) has been focused on digitization. Their new technology “enables [smaller customers] to begin shipping in under two minutes instead of… an average of 10 days.”
Microsoft (MSFT) is experiencing “constraints from the shutdowns in China.”
Apple (AAPL) noted that supply chain issues were “significantly lower” than they were in the December quarter before China began shutting down cities and factories again.
Management at Tesla (TSLA) maintained their volume growth target of 50% per annum over a multiyear horizon. However, over the last several quarters, “supply chain became the main limiting factor, which is likely to continue through the rest of 2022.”
“External challenges include limited availability and rising prices of certain commodities; as well as increased costs for labor, energy and transportation. These impacts are pervasive across the enterprise, but most notable in Consumer Health. We expect these pressures will continue to some degree throughout the remainder of 2022.” – Johnson & Johnson (JNJ)
JB Hunt (JBHT) gave clarity on the Chinese supply-chain situation, stating that the situation in Shanghai “looks just like a lot of ships and a little bit of water,” which will likely reach the US in the summer. Management expects ports to be relatively clogged in July.
As per Snap (SNAP), “supply chain shortages and labor disruptions, rising inflation, and geopolitical unrest” are impacting advertising budgets.
Constellation Brands (STZ) said that the company is facing numerous headwinds, such as “various supply chain challenges, adverse weather events, rising inflation [and] rapidly shifting consumer preferences.”
Lululemon (LULU) “continues to experience delays across [the] global network, particularly related to transporting products via ocean freight.”
KB Home (KBH) commented: “We underestimated the degree to which the Omicron variant would exacerbate an already constrained supply chain and workforce… While we take responsibility for our deliveries being below our prior expectations… we acknowledge that the variant was a significant contributing factor.”
Amazon (AMZN) is “no longer chasing physical or staffing capacity, our teams are squarely focused on improving productivity and cost efficiencies throughout our fulfillment network.”
“Simply said, [SBUX does] not have the adequate capacity to meet the growth demand.”
“We saw much higher than expected freight and transportation costs and a more dramatic change in our sales mix than we anticipated. This resulted in excess inventory, much of it in bulky categories which put additional strain on our already stretched supply chain.” – Target (TGT)
Inflation
“Pricing… has to be earning for the brands… When you go into high inflation, consumers come under pressure. There’s clearly reductions in real purchasing power going on for some segments of the population, if not everyone around the world.” – Coca Cola (KO)
“Restaurant-level margins continue to be impacted by unprecedented levels of inflation,” As per Chipotle (CMG)
Chipotle (CMG) saw “very little resistance to the pricing so far,” as menu prices were raised by over 4%.
“There are component costs that are falling and ones that are rising, and so not all of them are moving in the same direction.” – Apple (AAPL)
Pool Corp (POOL) added that the “tight labor market” is holding back installations, maintenance and repairs. On the bright side, the company has “seen some improvements in… supply chain issues.” POOL has “anticipated price increases” baked into their forecasts.
“Based on current prices, Alcoa (AA) expects both alumina and aluminum realized third-party prices to be higher than the first quarter, with that benefit partly offset by… higher energy and raw materials costs.”
Walgreens (WBA) stated: “inflation is on the rise… we expect to pass through most of that.”
Albemarle’s (ALB) guidance raise was largely due to higher “pricing in its Lithium and Bromine businesses… partially offset by inflationary cost pressures, particularly for natural gas in Europe.”
“Price leadership is especially important right now and one-stop shopping becomes more than just convenience when people are paying over $4 a gallon for fuel.” – Walmart (WMT)
Labor
“We are seeing hybrid approaches to learning and working are here to stay.” – Alphabet (GOOGL)
“The restaurants are staffed, we’re seeing performance in throughput.” – Chipotle (CMG)
“Strong overall economic activity continues to keep demand for labor high and we’ve been pleased to see labor force participation gradually recover over the course of the year.” – Automatic Data Processing (ADP)
Omicron led to “fairly meaningful labor challenges at the start of the quarter… as driver availability and productivity were impacted.” – JB Hunt Transport (JBHT)
“Labor continues to be an area with the greatest inflationary pressure in both professional driver and non-driver salary wages and benefits and we expect that trend to continue throughout the remainder of the year.” – JB Hunt Transport (JBHT)
“Associates that were out on COVID leave came back to work faster than we expected.” – Walmart (WMT)
Travel
“Travel and Entertainment spending was up 121 percent… and essentially reached pre-pandemic levels globally for the first time in March, driven by continued strength in consumer travel.” – American Express (AXP)
JPMorgan Chase (JPM) noted a “pick-up in credit card spending on travel and dining,” which is expected to continue into the next several quarters.
The travel industry is experiencing “robust consumer demand and an accelerating return of business and international travel.” – Delta (DAL)
According to Delta (DAL): “As demand continues to recover and we restore additional capacity in the second half of the year, we expect our non-fuel unit cost comparisons to 2019 will improve to up mid-single digits.”
Delta’s (DAL) press release stated: “Consumer demand accelerated through the quarter, highlighted by strong spring break performance. As Omicron faded, offices reopened and travel restrictions were lifted, resulting in an improvement in business travel demand and a stronger fare environment.”
In March, Hilton’s (HLT) system-wide rates “were up 3% compared to 2019 levels” due to “strong leisure trends”. Additionally, overall business transient now comprises 45% of total segment mix, just shy of pre-pandemic levels.”
In China, “re-imposed lockdowns suppressed demand [but] the rest of the Asia Pacific region saw a modest improvement in demand recovery as more countries loosen border and arrival controls in March.” – Hilton (HLT)
Technological Developments
This year, UPS will begin to implement “automated bagging, automated label application and robotic small sort… to drive increased productivity”.
“Waymo became the first company to run fully autonomous ride-hailing operations in multiple locations simultaneously.” – Alphabet (GOOGL)
Alphabet (GOOGL) also launched multi-search this quarter, which is “a new way people can find what they need using both images and words.”
Tech spend “As a percentage of GDP [is], by the end of the decade, going to double.” – Microsoft (MSFT)
Horizon, Meta’s (FB) metaverse platform, will launch through a web version “later this year.”
Meta (FB) is planning to launch a new headset (codenamed Project Cambria), “which will be more focused on work use cases and eventually [replace] your laptop or work setup.”
In order to mitigate semiconductor supply chain constraints, Apple (AAPL) developed “the world’s most powerful chip for a personal computer,” which is named M1 Ultra.
Due to extremely high commodity prices, the Tesla (TSLA) investor presentation stated that “diversification of battery chemistries is critical for long-term capacity growth” and nearly half of the vehicles produced in Q1 utilized lithium iron phosphate batteries, “containing no nickel or cobalt.”
According to Elon Musk, Tesla (TSLA) is working on a “dedicated robotaxi that’s highly optimized for autonomy, meaning it would not have a steering wheel or pedals.” TSLA is targeting 2024 for volume production of the robotaxi. TSLA also “remains on track to reach volume production of the Cybertruck next year.”
“Harnessing the power of technologies such as hybrid cloud and AI remains essential as our clients face a number of strategic challenges and opportunities, whether it’s competing for talent, supply chain issues, inflation, cybersecurity or geopolitical instability.” – International Business Machines (IBM)
JPMorgan Chase (JPM) is building out “real-time payments [and] certain blockchain type things” to build out wholesale capabilities.
CarMax (KMX) recently unveiled online technology that allows the company to make instant cash offers for used vehicles. CEO Bill Nash stated that “the rollout and rapid adoption of our online instant appraisal offer has solidified our position as the nation’s largest buyer of vehicles from consumers, nearly doubling our fiscal 2022 inventory self-sufficiency and propelling our wholesale business to new heights.”
Walgreens (WBA) recently acquired VillageMD and Shields in an effort to deliver “consumer-centric, technology-enabled healthcare” to local communities.
According to Micron (MU), new DRAM and NAND products are “achieving excellent yields, providing [MU] with solid front-end cost reductions and contributing meaningful revenue. [MU] qualified additional products on the advanced notes with a broad set of customers.”
Lululemon (LULU) is “partnering with and investing in Genomatica to create the first-ever plant-based alternative to nylon.”
“Everywhere we look, whether it is in entertainment, education or the enterprise, content is fueling the global economy. The democratization of creativity, the emergence of new ways to work and learn from anywhere, and the business mandate for personalized customer experiences underscore the immense opportunities we have as a company.” – Adobe (ADBE)
“New technologies will continue to shrink geographic distances, but countries and companies are reevaluating their interdependencies in a way that we have not seen since the end of the Cold War.” – Blackrock (BLK)
Amazon.com (AMZN) users can now “ask Alexa about symptoms for common health ailments… and virtually connect to health care professionals through a new collaboration with Teladoc.” In addition, AMZN’s virtual health services are now available 24/7 in the US.
“We made a lot of progress on both the wafer side and significant investments on the substrates… we continue to get…very good support from our suppliers.” – Advanced Micro Devices (AMD)
Starbucks (SBUX) is planning to launch “a unique platform for NFTs” on web 3.0 that will create “new revenue streams for SBUX.”
Construction/Housing
United Rentals (URI) is “starting to have conversations with customers about federal [infrastructure] projects that should kick off in 2023.”
“It’s hard to find a leading construction indicator that isn’t flashing green right now.” – United Rentals (URI)
According to POOL Corp (POOL): “outdoor living remains a priority with homeowners across North America.”
JPMorgan Chase (JPM) saw home lending originations decline by 37% y/y, “primarily due to the rising rate environment.”
In the guidance provided by KB Homes (KBH), the average selling price per home is expected to be $495,000 at the midpoint of FY 2022. This would translate to a y/y increase of 17.1%, so don’t expect a pullback in home values any time soon.
“The medium-to-longer term underpinnings of demand for home improvement have never been stronger.” – Home Depot (HD)
Foreign Exchange Rates
“With the stronger U.S. dollar and based on current rates, we now expect FX to decrease total company revenue growth by approximately two points.” – Microsoft (MSFT)
“We are reiterating our currency outlook of a two- to three-point currency headwind to [sales] a three- to four-point currency headwind to [EPS] for full year 2022.” – Coca-Cola (KO)
Capital Markets
BlackRock (BLK) commented, “we’re not seeing any real panic at all in the fixed income market, despite the worst performance in fixed income in 30-plus years in one quarter.”
Blackrock (BLK) added: “breadth and resilience enable us to play offense when others may be pulling back. Our agility in responding to opportunities and continued investments across market cycles have driven our industry-leading growth, our consistent growth, and generated value for our shareholders.”
JPMorgan Chase (JPM) “cannot foresee any scenario at all, where you’re not going to have a lot of volatility in markets going forward.” This prediction is due to the high inflationary environment, quantitative tightening, and elevated commodity prices.
“Gross investment banking revenue of $729 million was down 35% driven by both fewer large deals and less flow activity.” – JPMorgan Chase (JPM)
Click here to become a Bespoke member today!
B.I.G. Tips – Decile Analysis Since the Nasdaq’s Peak
The Bespoke Report – 5/20/22 – Could Use a Little Help From Lady Luck
This week’s Bespoke Report newsletter is now available for members.
How’s the glass? Half-full? No way. It’s not even half empty. It’s been emptied, put in the recycling machine, and crushed to pieces. We have a Fed chair talking about a ‘painful’ period of policy normalization, and a Treasury Secretary telling the public that a soft-landing is ‘conceivable’ with a little bit of ‘skill and luck.’ Somebody get us a rabbit’s foot and some four-leaf clovers, the fate of the world’s largest economy hinges on it! Need they be reminded of the famous quote: “Hope is not a strategy”?
We’re trying something a little different this week. With no economic data and little in the way of earnings news to speak of today, we’re sending out this week’s Bespoke Report early. Given the volatility in the market lately, we’re sure to miss some big moves throughout the trading day, but they’re unlikely to have a major impact on this year’s trends (famous last words).
Barring a 3.1% rally on Friday, this week will mark the seventh straight week that the S&P 500 finished the week in the red. That would be the longest streak of weekly losses for the index since March 2001 and just the fourth streak of seven or more weekly losses in the post-WWII period. It’s a small sample size, but these types of streaks haven’t occurred during particularly positive periods for the equity market.
The snippet above is pulled from a page from this week’s Bespoke Report newsletter. If you’re not a Bespoke subscriber and you want to read this week’s full Bespoke Report (and access everything else Bespoke’s research platform has to offer), start a two-week trial to one of our three membership levels.
Bespoke’s Morning Lineup – 5/20/22 – Good Riddance
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.
“You make most of your money in a bear market, you just don’t realize it at the time.” – Shelby M.C. Davis
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.
While an up week is pretty much out of the question, can we at least get a positive close to the week? Futures have been higher for most of the overnight session following a larger than expected interest rate cut out of China. Retail earnings have been a big drag on the market this week with Walmart (WMT) and Target (TGT) declines impacting overall confidence. This morning, Ross Stores (ROST) is also down 25% in reaction to its earnings report which cited some of the same issues, but being the third big retailer blowup this week makes it lose some of the shock value. There’s only so much the market can go down on the same issues.
There’s no economic data or Fed speakers on the calendar today, so the market will have to find other excuses in order to whip around between gains and losses.
In today’s Morning Lineup, we recap overnight trading in Asia and Europe (pg 4), Taiwan Export Orders (pg 4), and other economic data out of Europe and Asia (pg 5), and a lot more.
Earnings season is over, and all we can say is good riddance. There weren’t a lot of winners this earnings season, but the list of losers is long. The table below lists each of the S&P 500 companies that experienced earnings reaction day declines of 10% or more over the course of the last three months. In total, 20 companies made the list. Again, these aren’t a bunch of rinky-dink penny stocks, they are some of the largest companies in the world.
Topping the list, Netflix (NFLX) reported weaker than expected revenues and lowered guidance, and in reaction saw its stock lose more than a third of its value in a single day! More recently, just this week Target (TGT) missed EPS forecasts and saw its stock lose nearly a quarter of its value. Some of the other more notable losers include Amazon.com (AMZN) which declined 14.1% while Walmart (WMT) saw its stock decline by more than 11%. GE falling 10% isn’t really a surprise these days, but the fact that it has become so much less relevant in the market than it used to still surprises us. In total, 20 companies – or 4% of the index – saw their stocks decline 10% or more in reaction to earnings over the last three months.
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.
The Bespoke 50 Growth Stocks — 5/19/22
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.