In Monday’s Closer, we took a look at data from YouGov’s COVID-19 Public Monitor which surveys people from countries around the globe on various COVID related topics such as if they were worried about contracting COVID-19, do they wear a mask when out in public, and do they avoid crowds.

In the charts below, we show the average readings of these survey results (blue line, left axis) across the countries of each region that have data available compared to the seven day average of total new case counts for those same countries in each region (red line, right axis). Broadly speaking and as could be intuitively expected, as case counts rise, higher shares of people report being more concerned about contracting the virus.  European countries (Denmark, Finland, France, Germany, Italy, Norway, Spain, Sweden, and the UK) perhaps show this relationship the most cleanly as cases fell through the spring alongside concerns of contraction, but from June through the most recent readings earlier this month, concerns and case counts have steadily risen. Since July, APAC countries (Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam) have similarly seen worries over catching COVID climb as the averages for daily new cases for those countries have also risen. Granted, worries were on the decline up through July despite rising cases. Meanwhile, US worries about catching the virus were at their highest levels yet as of early August, and that is even though case counts have been on the decline since the second half of July.

Fortunately, Americans seem to be proactive.  As shown below, as those concerns have risen, a higher share of Americans have reported that they wear a mask when they go out in public.  That potentially could be one of many factors in the recent decline in case counts.  Granted, there has been a growing trend around the globe of more people wearing face masks, and that inverse relationship between masks and new cases is not necessarily shared in regions like Europe.  As shown in the top-right chart, despite a record number of Europeans who say they wear a mask in public, COVID cases are back on the rise.

As for another spread mitigation measure, avoiding crowds, the same can be said for the US.  As case counts have declined more people have been avoiding crowds. In Asia and Europe, though, fewer people have been avoiding crowds compared to earlier in the pandemic which may help to explain why case counts are rising.  Click here to view Bespoke’s premium membership options for our best research available.

With earnings season now in the rearview, the earnings front has been fairly quiet with retailers along with a handful of other big companies like salesforce.com (CRM) taking up the bulk of the calendar. While the new addition to the Dow reported a strong quarter last night with EPS exceeding estimates by $0.77 and sales coming in at $5.151 billion versus estimates of $4.9 billion, another former Dow component, Hewlett Packard Enterprise (HPE), reported a triple play. A triple play is considered the gold standard on earnings and is when a company beats estimates on the top and bottom line as well as raises guidance. For HPE, this was the first triple play since Q4 2018 (as shown in the snapshot of our Earnings Explorer below) as EPS was 9 cents above estimates and sales were $6.8 billion compared to estimates of $6.06 billion. The stock is up over 6.5% in response today. That is the best response to earnings since that last triple play.

As for CRM, the stock is rallying by much more with a gain of over 25% today in response to these strong earnings.  As shown below, those gains put the stock on pace for its best response to earnings on record, exceeding the prior record of a 19% rally back in Q2 of 2006. Of the 20 other top reactions to earnings, only two were triple plays.

A frequent flier in the triple play club, Anaplan (PLAN), also reported in the past 24 hours and the results are basically a combination of HPE and CRM’s earnings. Like HPE, PLAN reported a triple play with a loss of 4 cents per share versus estimates for a loss of 12 cents.  Revenues were up 26% YoY to $106.5 million; roughly $3 million better than expected. But unlike HPE, and more similar to CRM, the stock is getting a massive upwards boost from these results with the stock higher by over 25%.  Just like CRM, that is on pace for the best earnings day reaction to date.

As for where those moves leave these stocks from a technical perspective, HPE is breaking out of the past year’s downtrend thanks to this boost on earnings and is now at the upper end of the range that it has traded in for most of 2020.  Meanwhile, CRM is much more elevated as it has been in a long term uptrend, and today’s gains bring it well into new all-time high territory. PLAN’s big gains, on the other hand, have not even resulted in a 52-week high but is now sandwiched between the post IPO highs from the summer of last year and February of this year. Click here to view Bespoke’s premium membership options for our best research available.

This morning, the Richmond Fed released the results of their monthly manufacturing survey for the month of August.  The report showed a solid expansion of activity in August albeit on waning optimism for the future. General manufacturing activity in the Fifth District continued to expand in August with the index rising 8 points to 18.  That is the highest level since an equivalent reading in October of 2018. That eight-point increase is still fairly large relative to the rest of history (in the 80th percentile of all month over month changes), but it was actually the least volatile move in the index since March.

In the tables below we show the results of this month’s survey for each of the sub-indices of the report for both current conditions and future expectations.  While the indices for current conditions broadly improved—as evident through the headline number’s rise—expectations have declined dramatically. As shown in the second table, last month saw most readings in the top percentiles of all historical readings for the indices for future conditions, but this month every index with the exception of Capital Expenditures has fallen with those declines in the bottom 2.5% or worse of all monthly moves. This was the first time since October of 2015 that all but one of the 17 indices for future expectations fell in the same month.  Sentiment towards the future saw a pretty significant turnaround in the span of a month.

The big divergence between the moves in the indices for future expectations and current conditions can be illustrated in the chart below. In it, we show the spread between the counts of indices for current conditions rising less the number for future expectations that are rising MoM.  With 12 current conditions higher compared to only 1 for future expectations, this spread was at its highest level on record.

Future indices were not alone in experiencing historically big moves though. As shown below, the index for the Current Number of Employees climbed to its highest level since March of last year thanks to a 20 point jump in August. That is the most this index has gained in a single month ever. Additionally, that marked the first expansion in employment since February. But on the other hand, the index for Availability of Skills Needed plummeted by 24 points to a contractionary reading of -21.  That marks a return to contractionary readings after a one month break in July and the lowest level for this index since March.  In other words, businesses are beginning to ramp up hiring, but they are struggling to find workers with the right skills.

Alongside labor, capital is also on the up and up with the indices for Equipment and Software Expenditure and Capital Expenditure both moving into expansionary territory for the first time since March. For Capital Expenditures, this month’s increase was in the top decile of historical moves as well.  Meanwhile, Business Services Expenditure remains weak but likewise improved in August rising from -23 to -18.

In addition to the manufacturing indices, the Richmond Fed also released service counterpart indices.  These have fared far worse throughout the pandemic with most readings continuing to sit in contraction territory, but there has continued to be some improvement.  August saw all but one of these indices for current conditions increase. This brought the indices for Revenues, Employees, and Wages all out of contraction. But, like the manufacturing report, future expectations hit the brakes.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Yesterday’s 1% rally for the S&P 500 was also accompanied by positive breadth (for a change) as 412 stocks in the index finished in positive territory on the day.  On a net basis, subtracting the number of decliners from the number of advancers, yesterday’s A/D reading of +322 was the strongest breadth reading since late July.  Prior to yesterday’s rally, the strongest daily breadth reading for the month of August was +214 on August 7th.  For a month where the index was already up 4% heading into the day, that’s pretty weak.

Breadth in August has been so weak in fact that Monday’s rally was only the 8th day out of 16 trading days in August where the S&P 500 had positive breadth.  There’s still another five trading days left in the month, so breadth still has plenty of room to improve, but at the current rate, this month would go down as just the 12th month since 1990 where the S&P 500 was up over 4% but saw negative daily breadth on at least half of all trading days.  The last time that happened was in July…of this year.  And before that, May.  We’ve already had two months in 2020 where the S&P 500 was up at least 4% and half of all trading days had negative breadth readings, and we’re now on pace for the third.

The chart below shows each of the prior times since 1990 where we saw similarly strong months with lackluster breadth.  Before the two prior occurrences this year, the most recent was March 2009.  Looking at the chart, that occurrence preceded a great time to be long the market.  Before that, though, returns following similar breadth divergences were mixed as there were occurrences right in the middle of the bear markets from 2007-2009 as well as 2000-2002, and before that there were six occurrences in the 18 months leading up to the March 2000 peak.  Click here to view Bespoke’s premium membership options, including the must-have Morning Lineup report.

The summer driving season is typically defined as the period between Memorial Day and Labor Day.  This year, the summer season has been a bit different due to COVID, and while many Americans who would have traveled outside the United States have opted to stay domestic, overall driving is down.  With fewer people driving to work and driving around in general, gas prices have been pushed down to extremely low levels relative to recent history.

The table below shows the historical price of the national average price for a gallon of gas based on AAA data. At the current national average of $2.19, a gallon of gas hasn’t been this cheap at this time of year since at least 2005.  While prices were up on a YTD basis every year from 2005 through 2019 by an average of 18.3%, this year the national average price is down over 15%.

The chart to the right of the table below compares gasoline prices this year (red line) to a composite of gas prices during the ‘average’ year (blue line).  So far this year, the pattern of prices is nearly the exact opposite of the average year.  While prices tend to rise through the first five months of the year, this year they trended lower, bottoming right in late April.  After a decent increase in prices from May through early June, prices have completely flat-lined in the last two months.

While it’s not uncommon for prices to remain steady throughout the summer months, the current flat-lining of prices has been nearly without precedent.  The chart below shows the rolling two-month (60 calendar days) high low range of the national average price of gasoline since early 2004.  With the current two-month range spanning $2.174 to $2.201, or 1.24%, the only other time the range was narrower was in late June/early July 2014.  Throughout the last fifteen years, there has never been a time where gas prices have been this low at this time of year or this stable. Click here to view Bespoke’s premium membership options for full access to our research and interactive tools.

If you want to see an example of where the term winners and losers couldn’t be more applicable, take a look at the performance of S&P 500 sector ETFs on a YTD basis.  The chart below is derived using performance numbers from our Daily Sector Snapshot report, which provides investors with an easy-to-read matrix of technical analysis, breadth and internal readings, and fundamental data points.  It’s the perfect way to get an aerial snapshot of both current readings and the way they’ve been trending for each of the major sectors.  This perspective also allows investors to see how sectors stack up versus each other as well as relative to themselves on a historical basis.

2020 has clearly been a case of the have and have nots.  On the haves side, Technology (XLK) and Consumer Discretionary (XLY), which is basically Amazon (AMZN) and a few other retailers, top the list.  Rounding out the top three, Communication Services (XLC) is the only other sector up over 10% and outperforming the S&P 500.  On the have-nots (or in this case, the ‘nearly halves’) side, we have Energy leading the way lower with a decline of 41%, followed by Financials (XLF) which is down 21.2%.

There was a time not long ago when Energy and Financials were considered the life-blood of a capital intensive economy, but these two sectors have been deemed irrelevant by the market in the current work-from-home world where interest rates are zero and money is practically free.  Instead, Communications, Technology, and Retailers with a strong online infrastructure are the ever-important cogs in the digital economy.  Today, it may seem that this is a secular shift in the shape of our economy, which in many respects is true.  But don’t count out the old leaders just yet.  Someday, ‘going to work’ will once again mean more than just rolling out of bed and over to your desk chair.  In that environment, people and goods will increasingly move, capital intensive infrastructure projects will be undertaken and interest rates just might move higher. Click here to view Bespoke’s premium membership options, including the must-have Daily Sector Snapshot report.

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.

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Biome Stories

‘Murder Hornets’ in the U.S.: The Rush to Stop the Asian Giant Hornet by Mike Baker (NYT)

So-called ‘murder hornets’ get a lot of hype as a threat to humans, but they are a very real threat to already-struggling pollinators like bees, which have suffered massive population loss in recent years and don’t need another competitor. [Link; soft paywall]

How the World’s Largest Garbage Dump Evolved Into a Green Oasis by Robert Sullivan (NYT)

Arthur Kill was the world’s largest garbage dump, but returning the site to nature wasn’t actually that complicated: it was covered up and left for nature to work its magic. The result is a near-paradise after just 20 years of lying fallow. [Link; soft paywall]

Economic Research

Germany is beginning a universal-basic-income trial with people getting $1,400 a month for 3 years by Adam Payne (Business Insider)

120 German volunteers will get a €1,200 monthly payment for three years, with their outcomes studied by social scientists in an effort to assess how the larger population might respond to a more universal policy of the same kind. [Link]

Market Function Purchases by the Federal Reserve by Kenneth D. Garbade and Frank M. Keane (NY Fed Liberty Street Economics)

A history of historical interventions in the US Treasury market by the Federal Reserve, showing that recent purchases to stabilize markets during the COVID shock was unprecedented in size and scope. [Link]

CRE Innovation

WWE Turning Orlando’s Amway Center Into ‘WWE ThunderDome’ for TV Production Going Forward by Just Barrasso (SI)

WWE events are now being held on a semi-permanent basis in Orlando’s Amway Center, which has been upgraded in numerous ways to adapt to the conditions of the COVID pandemic. [Link]

REI looks to sell brand new Seattle-area HQ as pandemic forces retailer to rethink remote work by Taylor Soper (GeekWire)

A brand new Bellevue, WA headquarters for REI is being abandoned thanks to a near-100% work from home policy driven by COVID; specifically, the company says that having a distributed workforce “will have immediate, positive impacts on our ability to attract and retain  a divers and highly skilled workforce”. [Link]

New York Stories

Movers in N.Y.C. Are So Busy They’re Turning People Away by Julie Satow (NYT)

Moving companies report “double the volume of customers – maybe more” this summer thanks to departures from the city for local suburbs, turnover in apartments within the city, and people moving out of the Tristate area entirely. [Link; soft paywall]

What Happened When Homeless Men Moved Into a Liberal Neighborhood by Daniel E. Slotnik (NYT)

COVID’s arrival meant homeless shelters had to reduce capacity, and as a result New York City bid up empty hotel rooms to house people formerly in crowded shelters. But in a deep Democratic stronghold, this modest form of redistribution was met with aggressive and painfully harsh resistance. [Link; soft paywall]

Lost and Found

30-year-old stash of beer and gum found in library’s mystery section by Ben Hooper (UPI)

Stashed in the mystery section of the Walla Walla, WA public library 30 years ago: five cans of beer and a packet of Godzilla Heads gum, untouched for at least three decades. [Link]

‘The mystery is over’: Researchers say they know what happened to ‘Lost Colony’ by Jeff Hampton (The Virginian-Pilot)

The so-called Lost Colony of Roanoke Island likely moved with friendly Croatoan indigenous people, with evidence suggesting that colonists intermarried with their hosts and thrived despite their status as “lost”. [Link]

Voting

The 2018 Voting Experience: Polling Place Lines by Matthew Weil, Charles Stewart III, Tim Harper, and Christopher Thomas (Bipartisan Policy Center)

In 2018 voters faced huge increases in vote times, with lower-income and non-white voters facing substantially longer waits in the first election following the removal of Voting Rights Act protections by the Supreme Court. Voters in precincts that were >90% non-white average wait times of 32.4 minutes, more than six times the 5.1 minute average wait time for voters at precincts that are >90% white. [Link]

Kids These Days

Where Has Your Tween Been During the Pandemic? On This Gaming Site by Kellen Browning (NYT)

Roblox is the most popular online world for children stuck at home during the pandemic with a massive windfall to developers that built games as part of the platform. [Link; soft paywall]

Convenience Business

With Seasonal Products Making an Early Return This Year, Consumers Weigh In on Sweet Spot for Promotions by Alyssa Meyers (Morning Consult)

An amusing poll that shows consumers generally prefer companies hold off on seasonal product promotions until the actual season they’re associated with. [Link]

Jimmy Butler’s $20 coffee hustle is the best business in the NBA bubble by James Dator (SBNation)

The NBA bubble created a unique kind of scarcity, and ballhandling entrepreneurs are stepping into the gap. Jimmy Butler is probably the most successful, running an amusingly simple coffee stand out of his room at Disney World. [Link]

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Have a great weekend!

There have been plenty of jabs thrown between state governors since COVID began back in late February.  While COVID is still ongoing, we can compare state performance numbers at this point by looking at COVID deaths per 100,000 along with state unemployment rates.

In the table below we show state unemployment rates as of July 2020 along with COVID deaths per 100,000 people (as of 8/21/20).  As shown, Massachusetts currently has the highest unemployment rate at 16.1%, followed by Nevada at 14%, New Jersey at 13.8%, Pennsylvania at 13.7%, and New York and Hawaii at 13.1%.

Massachusetts, New Jersey, and New York have some of the highest unemployment rates and by far the highest COVID deaths per 100,000, but Nevada, Pennsylvania, and Hawaii have high unemployment rates yet much lower COVID deaths per 100,000.  While New York and Hawaii have the exact same unemployment rates, New York has 169 COVID deaths per 100,000 while Hawaii is at just 3 deaths per 100,000.

States with the lowest unemployment rates have some of the lowest COVID deaths per 100,000.

If we provide a scatter plot of the data in the table above, you can see a pretty clear trend line between state unemployment rates and COVID deaths per 100,000:

Because of the nature of the virus, it’s obvious that states with higher population densities are more at risk.  New Jersey has the highest population density in the country, and it’s also the state with the highest number of COVID deaths per 100,000.  Rhode Island, Massachusetts, and Connecticut are the next most populated states in terms of people per square mile, and these states all have high COVID deaths per 100,000 as well.  States like Florida, Ohio, and California have managed to keep their COVID deaths per 100,000 under much better control so far even with pretty high population density.  Click here to view Bespoke’s premium membership options for our best research available.

Tesla (TSLA) is now up 50% over the last 10 calendar days dating back to August 11th.  This has propelled the company way up the list of the largest US companies.

Below is a table of the largest stocks in the S&P 500 with Tesla (TSLA) included.  As shown, Tesla’s $382.7 billion market cap would rank it as the 9th largest stock in the S&P 500 were it in the index.

On August 11th, Tesla’s market cap was just $256 billion, so over the last ten days it has leapfrogged companies like Walmart (WMT), Home Depot (HD), JP Morgan (JPM), Procter & Gamble (PG), Mastercard (MA), and NVIDIA (NVDA).  Next up would be Visa (V) and Johnson & Johnson (JNJ), which have market caps just under $400 billion.  Click here to view Bespoke’s premium membership options for our best research available.

On the back on Monday’s weaker Empire Fed survey, today’s release of the Philadelphia Fed’s Business Outlook Survey similarly showed a slowdown in activity during August. The headline index fell 7 points to 17.2. While that is a third consecutive expansionary reading, it also marked back to back declines. That means that the region’s manufacturing sector has continued to grow, but at a decelerating pace in the past two months.

Like the headline number, many of the individual categories also remain in expansion territory but were lower than last month.  The only readings to rise month over month were the indices for Delivery Times, Inventories, and Prices Received. Inventories as well as the index for Unfilled Orders were the only ones to be in contraction in August.

Demand continues to improve with both the indices for New Orders and Shipments showing another expansionary reading in August, but both were also lower indicating demand did slow somewhat. While the index for New Orders remains at a healthy level historically, in the upper quartile of all readings since 1980, Shipments are at a more muted level in just the 38th percentile.

As for employment metrics, there was a slowing in the Number of Employees hired in the region with that index falling from 20.1 to 9.  That 11.1 drop was the biggest change of any sub-index this month and with respect to that index, this month’s decline was in the bottom 5% of all monthly changes. Not only did the index for Number of Employees fall, but so did the index for Average Workweek, although it still remains in the upper end of its historical range. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.