With the Veteran’s Day holiday tomorrow, the weekly release of jobless claims was pushed up to today.  Initial claims missed expectations falling to only 267K rather than the anticipated drop to 260K.  Last week’s number was also revised higher by 2K to 271K.  The decline this week marked the sixth week in a row of declines as claims are once again at the lowest levels since March 2020. In fact, this week’s level is only 11K above the March 14, 2020, pre-COVID surge level.

On a non-seasonally adjusted basis, claims were actually higher as could be expected given the seasonal headwinds of this time of year.  For the current week of the year, initial claims have historically risen 85% of the time week over week; one of the highest readings of any week. PUA claims meanwhile fell below 2K as the program continues its unwind.

Continuing claims ticked higher this week rising from 2.10 million to 2.16 million on a seasonally adjusted basis.  That is the first increase in six weeks but it is a modest one, especially relative to the past few weeks’ declines.  Even after the increase, continuing claims are still 79K below levels from two weeks ago.

Delayed an extra week, the inclusion of all other programs showed yet another drop in continuing claims on an unadjusted basis. Total claims across all programs fell to 2.57 million, down roughly 100K from the previous week. Essentially that entire decline was on account of regular state claims with the moves in PUA and PEUC claims basically netting out. There continue to be some residual claims from pandemic era programs, but they now account for a significantly smaller share of claims than was the case only a few months ago, and generally, those claim counts have declined.

In the matrix below, we show a state-level breakdown of jobless claims.  For the most part, states currently have claims counts around new lows, but there are a handful of states that are trending higher like Iowa, Kentucky, Minnesota, Tennessee, and Vermont.  As mentioned previously, those reversals in trend are likely a result of seasonal headwinds. Click here to view Bespoke’s premium membership options.

Precious metals and industrial metals have been headed in opposite directions lately.  Throughout 2021, industrial metals have been in a steady uptrend with Bloomberg’s Industrial Metal Index up as much as 38% at its highs in mid-October.  Since then, the group of commodities has been pulling back and are now at the bottom of the past year’s uptrend. Currently, industrial metals are now down to a 22.4% gain on the year. Meanwhile, precious metals have been an underperformer all year, spending the vast majority of 2021 in the red year to date.  Since September 29th, though, precious metals put in a low and have rallied 7.7% whereas industrial metals are essentially flat in the same span of time.

Given the inverse moves in industrial and precious metals, the relative strength line between the two has seen its trend falter.  As shown below, since late summer 2020, industrial metals continuously outperformed precious metals as seen through the uptrend in the relative strength line.  Last month, the line even broke out above the prior high set in June 2018.  The sharp decline since then has resulted in a break of the aforementioned uptrend.  Click here to view Bespoke’s premium membership options.

As we noted in an earlier post, the NFIB’s monthly survey of small businesses showed overall strong labor market conditions with some signs of improving labor market tightness in October.  As shown below, a combined 34% of respondents reported either costs or quality of labor as their biggest issue.  That was down 6 percentage points from the record high last month.

In the table below, we show the full range of problems that the NFIB surveys small businesses on.  While both labor-related problems fell, there was a bigger decline in quality of labor which is now back below a quarter of all respondents.

Concerns appear to have moved away from labor and toward inflation.  The percentage of businesses seeing inflation as their biggest problem has been elevated at levels unseen since the Financial Crisis over the past several months, but there was an improvement in September.  In October, it gained back all that decline and then some as 16% of businesses reported inflation as their biggest issue. That leaves it at the same level as November 2008.

Perhaps one of the most interesting findings of the October report concerned the battle of small vs big business.  In fact, there no longer appears to be any battle.  For the first time on record, zero percent of respondents reported competition from big business as their biggest problem.

On a combined basis, the percentage of respondents reporting government requirements or taxes as their biggest problems remains the most pressing issue behind labor concerns. Businesses did report improved uncertainty regarding economic policy.  As shown below, that index fell sharply to 67 in October, which is now the lowest reading since the start of 2016.  Click here to view Bespoke’s premium membership options.

This morning the NFIB released the results of their October survey of small business sentiment.  The report saw small business sentiment fall for the second month in a row.  At 98.2, the index is now back to the same level it was at this past March.

With the decline in the headline reading, breadth was terrible with only one index that is an input to the optimism index—Plans to Make Capital Outlays—moving higher month over month.  The various indices are now all over the place with regards to their own historical ranges.  For example, Higher Prices, Compensation, and Compensation Plans all hit a record high while Expectations for the Economy to Improve and Credit Conditions for Regular Borrowers are just off of record lows.

Sales and earnings-related topics weighed on optimism in October. A net negative percentage of responding firms reported weaker actual and earnings changes.  Meanwhile, the weakest percentage of respondents reported now as a good time to expand since February.  Alongside that weaker reading, Outlook for General Business Conditions continues to collapse and is now at the second-lowest level on record; only slightly above the low from nine years ago. One potential factor playing into that weak sentiment is higher prices as that index hit another record.

While the headline Small Business Optimism index has declined, it has held up considerably well relative to the massive drop in the Outlook for General Business Conditions.  As shown below, the spread between the two is now at a record high dating back to 1986.

While there were some signs of cooling in October, overall the employment metrics in the report continue to be historically strong. Hiring Plans were unchanged at 26 which is off the late summer peak but still above any pre-pandemic level.  While firms do not plan to take on as many workers as they had planned a few months ago, they are at least paying them better.  Both Compensation and Compensation Plans continue to surge to new record highs. That has appeared to have some effect as the number of firms reporting Job Openings as Hard to Fill fell modestly. Additionally, as we noted in today’s Morning Lineup, fewer businesses are reporting labor problems as their biggest concern.  Click here to view Bespoke’s premium membership options.

Across major US equity indices, regardless of market cap, the picture is the same: extreme overbought. As shown in the snapshot of our Trend Analyzer below, the Russell Mid-Cap ETF (IWR) was the only major index ETF that did not finish last Friday at least two standard deviations above its 50-DMA. With that said, IWR still finished the week at very overbought levels and only slightly below extreme overbought levels.  For the most part, other mid-cap ETFs were some of the most overbought last week like the Core S&P Mid-Cap ETF (IJH) and S&P MidCap 400 ETF (MDY).  Small-caps are even more extended with the Core S&P Small-Cap ETF (IJR), Russell 2,000 ETF (IWM), and Micro-Cap ETF (IWC) all off the chart overbought.

Again, looking across the four major US indices, each one is at ‘extreme’ overbought levels with a z-score reading at the high end of the past decade’s range.  In the charts below, we show charts of how far the S&P 500, NASDAQ Composite, Dow Jones Industrial Average, and Russell 2,000 are trading from their 50-DMAs as measured in standard deviations.  For large caps and the NASDAQ, the current readings are some of the highest since the summer. For the Russell 2,000, no point in the past decade has seen a more elevated reading. In fact, Friday’s close saw the Russell 2,000 finish 3.23 standard deviations above its 50-DMA; the most elevated reading since February 1991. Click here to view Bespoke’s premium membership options.

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!

Logistics

Highly Paid Union Workers Give UPS a Surprise Win in Delivery Wars by Thomas Black (Bloomberg)

While UPS pays a higher wages for its unionized workforce, it’s had no trouble managing the current labor market environment while rival FedEx has racked up hundreds of millions in extra costs. [Link; soft paywall]

I’m A Twenty Year Truck Driver, I Will Tell You Why America’s “Shipping Crisis” Will Not End by Ryan Johnson (Medium)

An inside look at how port snarls are playing out in practical terms. While the analysis is hyperbolic and excessively pessimistic, it does illustrate the challenges at stake in sorting out the logjam of US transportation. [Link]

Long Reads

The posthuman dog by Jessica Pierce (Aeon)

If humans disappeared, dogs would survive. In fact, there’s a case to be made that they might be better off, implausible as that sounds. But the real takeaway: we can make space for our four legged friends to be dogs without disappearing entirely. [Link]

When “Foundation” Gets The Blockbuster Treatment, Isaac Asimov’s Vision Gets Lost by Julian Lucas (The NYer)

A reflection on the challenges of translating a novel series based on a history textbook into a prestige TV show, both in general and thanks to the cultural narratives which swirl in 2020s America. [Link]

Crypto

Eric Adams vows to make NYC crypto-friendly, explore city’s own coin by Will Feuer (NYP)

New York’s new mayor is apparently taking a page out of the Miami playbook and hoping to focus the nation’s largest city on issuing new coins for the masses. [Link]

What Happens to Your Crypto When You Die? (Bloomberg/AP)

A users guide to making sure that the crypto you hold in this life doesn’t go into the grave if you pass on. [Link; soft paywall]

New Business Models

Zillow Shuts Home-Flipping Business After Racking Up Losses by Patrick Clark (Yahoo! Finance/Bloomberg)

After ploughing billions into a business designed to profit from guaranteed offers and quick resales of residential inventory, Zillow has decided to shutter the business after declaring failure. [Link]

A New Generation Leads Chick-fil-A’s Growing Flock by Heather Haddon (WSJ)

An interview with the latest Cathy family scion to lead the fried chicken giant, which is one of the most profitable US fast food businesses. [Link; paywall]

Ford makes classic pickup electric in surprise one-of-a-kind F-Series truck reveal by Phoebe Wall Howard (Detroit Free Press)

In a bid to show off the flexibility of its EV platform with a remodeled F-100 pickup dating to the 1970s…powered entirely with electric motors and batteries. [Link; auto-playing video]

Industry

Steel Is Back by Robinson Meyer (The Atlantic)

A US-EU pact designed to reduce tariffs on steel produced using less carbon-intensive measures was announced this week, with full support of US steel companies and workers. The new approach could represent a path forward for using trade incentives as a way to shift climate policy. [Link; soft paywall]

Poison in the Air by by Lylla Younes, Ava Kofman, Al Shaw and Lisa Song (ProPublica)

While the EPA does a reasonably good job restricting carcinogenic emissions from a single source, it doesn’t always take into account the compounding risks of multiple adjacent plants which can create horrifying cancer and other disease burdens for surrounding residents. [Link]

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Have a great weekend!

The major indices have consistently been hitting new record highs over the past few days with the S&P 500 having now more than doubled off the COVID Crash low on March 23, 2020. As for individual stocks, there are currently only nine S&P 500 stocks that are below their levels from March 23, 2020, and expanding the universe to the S&P 1500 which includes small and mid-caps, there are currently 41 stocks that are below their levels from that date. Obviously, March 23, 2020 may not coincide with a particular high or low point on these individual stocks’ charts, but declines since then would be quite painful to handle given that the broad market has more than doubled over the same time frame.

As shown below, eHealth (EHTH) currently is the biggest decliner versus March 23, 2020 levels having fallen over 60% with a large share of that decline occurring this year. The only other stock that has been more than cut in half since the bear market low is Tabula Rasa HealthCare (STRA). TRHC has been declining since the spring, but a large share of that decline is actually occurring today after it reported an EPS and sales miss in addition to lowered guidance on earnings last night.  Today, the stock has fallen nearly 50% in reaction to those weak earnings. There are a handful of stocks on this list that are up on a year-to-date basis with Fresh Del Monte Produce (FDP), Tootsie Roll Industries (TR), and Gilead Sciences (GILD) the only ones that are up double digits. While below their levels from the bear market low, TR and FDP are also two of the only stocks that are simultaneously above levels from February 19, 2020 which marked the last high prior to the start of COVID Crash bear market.

As for the stocks that have gained the most since the COVID Crash low on 3/23/20, meme mania darling GameStop (GME) still tops the list having rallied 5,492%.  That is twice the rally of the next best performer, SM Energy (SM).  As for the rest of the top performers since the bear market low, there are another 15 that have gained over 1,000%. One of those is a member of the trillion-dollar market cap club: Tesla (TSLA).  Another one of these top performers, Tupperware Brands (TUP), is also one of the only stocks that is actually lower on a year-to-date basis, and those declines are significant at a 43.81% loss.  TUP got below $2/share at its lows during the COVID Crash, but then surged back into the mid-$30s in late 2020.  It has since moved back down into the teens.  Click here to view Bespoke’s premium membership options.