Over the past few days, there have been some notable breakouts for some of the largest fixed-income ETFs.  The High Yield Corporate Bond ETF (HYG) currently is only in the middle of its range that has been in place since early April. In the past couple of weeks, HYG broke above the downtrend line off its pre-COVID highs, but. In the past few sessions, it has successfully retested that downtrend line before surging higher this week.

As for investment-grade corporate bonds (LQD), after reaching a new high on March 6th, the ETF plummeted over 21% through March 19th but quickly recovered much of those losses and was within two percentage points of that prior high as soon as April 9th. It never quite reached those levels, though, and had been in a downtrend since then.  After successfully testing support at its 200-DMA last Monday, a day before the Fed’s corporate bond ETF buying program began, LQD has consistently been on the rise and is breaking above that downtrend this week.

Action by the Fed definitely played a role in alleviating issues in the corporate bond space, but for municipal bonds the aid has been slower to come. The Fed’s announced facility for munis is not projected to be fully up and running until the end of the month. Despite that, the Muni Bond ETF (MUB) is also eyeing a breakout above its mid-April high.

While all of these ETFs are breaking out, their performance since March 23rd when the equity market found a bottom and the Fed announced corporate credit facilities has varied a bit. HYG and LQD managed to rise 16.86% and 12.87%, respectively, as of yesterday’s close.  Meanwhile, without the same central bank aid up until more recently, MUB has underperformed only rising 9.2% as shown below.

Credit spreads echo the outperformance of corporates.  Again since 3/23, corporate credit has been rallying versus UST, but the opposite holds true when it comes to munis as spreads have been consistently on the rise in that same time frame. Start a two-week free trial to Bespoke Institutional to access our Fixed Income Weekly and much more.

Home improvement retailer Lowe’s (LOW) reported quarterly earnings this morning and blew away numbers.  EPS came in at $1.77 versus a consensus estimate of $1.32, while revenues came in at $19.675 billion versus a consensus estimate of $18.28 billion.  In pre-market trading, LOW is up 5.7%, and shares are within $3 of all-time highs that were made on February 20th (one day after the S&P 500 peaked).

The price chart of Lowe’s is one to behold, and it really makes you wonder how “the market” could have gotten it so wrong.  Prior to the stock’s collapse at the height of the COVID scare, it had been in a strong, long-term uptrend.  LOW last reported earnings on February 26th, just a few trading days after its last all-time high was made.  In between today’s earnings report and its last earnings report three months ago, the stock experienced a 48% decline — essentially cut in half — followed by a 90% rally.  During its 48% rout in less than a month, investors certainly weren’t thinking that LOW would turn out to be a huge winner from the COVID lockdowns.  But just as quickly as it declined, the stock surged back as more investors realized that lockdowns and stay at home orders meant consumers would use the period to do all the things around the house that had been put off over the years.  It also helped that most residential construction projects were not put on hold throughout the lockdowns, and that home improvement was one of the few “lucky” areas in retail that was deemed “essential.”  Start a two-week free trial to one of Bespoke’s premium research memberships for our best market anaysis.

A couple of weeks ago, we highlighted how the Tech sector has been the only sector whose relative strength has been in a strong uptrend for the entirety of the past year meaning it has outperformed the S&P 500. That is still very much the case, but other sectors have shown some interesting patterns.

Energy has gotten a lot of attention over the past several months for how badly it was beaten down during the bear market and crude oil’s rout a little later.  Despite that, it has actually outperformed the S&P 500 with its relative strength line rising since mid-March. Part of the reason for this is it has been more volatile, so the gains have been larger than other sectors while it is also still down substantially more YTD than other sectors. Materials is another laggard that seems to have seen its relative strength line versus the S&P 500 bottom roughly around the same time.

While those two sectors have turned things around by this measure, Financials and Industrials have found little respite.  Both sectors have seen a continued grind lower in their relative strength.  Consumer Staples, Utilities, and Real Estate are in a similar boat after these defensive sectors saw their outperformance begin to subside as the market rebounded.  Start a two-week free trial to Bespoke Institutional to access our Daily Sector Snapshot and much more.

With equities continuing to rally, more and more stocks have been moving above their 50-DMAs.  As of yesterday’s close, 81.78% of stocks in the S&P 500 closed above their 50-DMAs.  That is the highest reading since January 17th of this year.  That’s a pretty impressive reading.  For example, even at the February 19th all-time high the reading wasn’t this high!  As for the individual sectors, Consumer Discretionary, Health Care, Financials, Industrials, Real Estate, Technology, and Utilities are all at their highest level by this measure since the start of the bear market. While not necessarily at new highs, the other sectors are similarly around some of their strongest readings of the past few months.

For most of the new bull market, Health Care has been a leader in having the largest share of stocks above their 50-DMAs. The current reading for the sector remains at an impressive 98%.  Meanwhile, one market leader and one market laggard, Technology and Energy, also boast more than 90% of stocks above their 50-DMAs.  On the other end of the spectrum, Real Estate is the only group with less than half of its stocks below their 50-DMA.  Utilities is similarly weak with only a little more than half of its components above their respective moving averages. Rounding out the bottom three, Financials is the only other sector with less than three-quarters of its stocks above its moving averages.  Start a two-week free trial to Bespoke Institutional to access our Sector Snapshot and much more.

Stocks ripped higher yesterday with the S&P 500 rising over 3% on the day.  For some stocks in the index, this surge in buying helped to finally push price above their ranges that have been in place over the past several weeks. While not every stock in the index that is experiencing this pattern is shown, in the charts from our Chart Scanner tool below, we show 20 S&P 500 stocks that saw this type of breakout from a sideways trend yesterday. These breakouts were not specific to any one group but could be found across the various sectors.  While they still have a ways to go until they reach their prior highs, these bullish breakouts also marked the highest levels of these stocks since bottoming in March.  For a few stocks, the sideways trends of the past several weeks also coincided with the 200-day and 50-day moving averages which have acted as either support or resistance. That was the case with stocks like Align (ALGN), Best Buy (BBY), CH Robinson Worldwide (CHRW) and Masco (MAS) to name a few.

Not only are some stocks hitting their highest level of the past few weeks but some are also reaching their highest levels of the past year.  From our 52-week high screen in our Chart Scanner, the charts below show a dozen S&P 500 stocks that rose to fresh 52-week highs as of yesterday.  Again these are not bound to any single group instead showing participation across sectors and industries.  Start a two-week free trial to Bespoke Institutional to access our interactive Chart Scanner tool and much more.

We’ve been monitoring Google search trends over the last couple of months, and today we noticed that searches are picking up for things like trucks and jeeps.  Below are five-year charts of search trends for “F150” — the most popular truck in the country made by Ford — as well as “jeep.”  Searches for both hit multi-year lows in the middle of the Covid lockdowns, but they’ve really picked up in recent weeks and are now at pre-Covid levels.  Commercial air travel and public transportation will likely remain less appealing options than driving in the post-Covid economy, which is at least one thing the auto industry has going for it.  Start a two-week free trial to Bespoke Premium to access our full range of equity market research and interactive tools.

It is no secret that airlines have taken it on the chin just about worse than any other industry during the ongoing pandemic. The nine airlines stocks in the S&P 1500 are down 58.86% on average since the February 19th equity market peak. Whereas the total market cap of these nine stocks stood at well over $100 billion throughout the past year, now it is less than half of that at $44.24 billion. Meanwhile, as consumers adapted to the new economy trading plane rides for video conferences, Zoom Video (ZM) surged over 65% since the 2/19 high. That massive divergence in performance led the company’s market cap to reach $49.29 billion. As of last Wednesday, for the first time the market cap of ZM actually surpassed the total market cap of those nine major airlines as shown in the chart below. But with that comes a very lofty valuation for ZM and deep discount for airlines.  Whereas the average forward price to sales ratio for airlines is at only 0.55, Zoom’s is at 47.72.  Start a two-week free trial to Bespoke Institutional to access our full range of research and interactive tools.

Today’s release of homebuilder sentiment for the month of May from the NAHB helped to confirm that housing data continues to hold up better than other areas of macroeconomic data.  Like most other economic data of late, NAHB’s Housing Market Index has collapsed over the past few months and is sitting around some of its lowest levels in years.  But unlike other data, it never reached any sort of new drastic low and there was even a significant improvement in May as the index rose from 30 in April to 37.  That 7 point month over month increase was the largest monthly increase for the index since another 7 point gain in June of 2013.  Outside of that 2013 occurrence and a few other 7 point increases in 2001, 1991, and 1986, there have only been six other months in the history of the survey that have seen the headline index increases by more.

After experiencing record declines across the board in April, as shown in the table below, breadth was pretty strong this month with the only sub-index to fall further being that for the Northeast.  Of the sub-indices, expectations for sales for the next six months saw the biggest pickup in May rising 10 points. That is tied with four other months (March of 1991, December 2001, November 1987, and July of 2012) for the second largest monthly increase on record. Traffic also improved significantly rising 8 points.  For that sub-index, that was the fourth largest month over month increase on record.  Meanwhile present sales also rose, albeit by a lesser degree. In other words, homebuilders appear more optimistic for the future than the current situation.

Looking across the regions, after each one experienced their largest drop ever last month, the Northeast, which remains one of the hardest hit areas of the country by the coronavirus, was the only one to see sentiment fall even further in May.  Sentiment in the region is now down to its lowest level since December of 2011 after falling another 2 points.  Meanwhile in every other region, sentiment saw significant improvement with the month over month changes for the Midwest, South, and West all being in the 90th percentile or better of all monthly increases.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

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 for 3 months for just $95 with our 2020 Annual Outlook special offer.

Code Problems

Facebook will pay $52 million in settlement with moderators who developed PTSD on the job by Casey Newton (The Verge)

After widespread reports of PTSD were reported by workers on the team responsible for moderating Facebook content, a preliminary settlement will grant $52mm in relief, working out to at least $1,000 per worker. [Link]

The Confessions of Marcus Hutchins, the Hacker Who Saved the Internet by Andy Greenberg (Wired)

The young Brit who became a hero in white hat hacker circles for stopping the WannaCry malware mess was arrested by the FBI for writing code that would later become its own malware package. [Link]

Health Care

Hospitals Knew How to Make Money. Then Coronavirus Happened. by Sarah Kliff (NYT)

As surgeries and other procedures were suspended in the wake of the COVID-19 outbreak, hospitals’ biggest source of revenue dried up and threatens to wreck the industry. [Link; soft paywall]

Doctors are turning to GoFundMe to stay afloat during the pandemic by Brooke Borel-Undark (Fast Company)

As practices have been shuttered and patients pause activity, doctors are asking for cash on GoFundMe in order to keep afloat despite the pandemic. [Link]

Baseball

Prince Fielder Could End Up Being MLB’s Highest Paid Player in 2020 by Dan Gartland (SI)

Retired slugger Fielder retired four years ago but his contract still entitles him to cash after a neck injury ended his career back in 2016. [Link]

More than 40 youth baseball teams participate in Missouri tournament during pandemic by Dawson White (The Kansas City Star)

Despite the risks of COVID transmission, more than five hundred baseball players under the age of 15 took to fields in west St. Louis over Mother’s Day weekend. [Link; auto-playing video]

COVID Markets

Home-Buying Demand Passes Pre-Coronavirus Levels; Inventory Down 24% by Adam Wiener (Redfin)

Interest in buying homes (which to be sure does not mean actual sales) measured by Redfin has surged as buyers look outside of major cities amidst low interest rates and tight inventories. [Link]

The Car Is Staging a Comeback, Spurring Oil’s Recovery (Bloomberg)

With public transit seen as risky, low gas prices, and rebounding economic activity, car travel is becoming increasingly attractive around the world. [Link; soft paywall]

Remote Work

Manhattan Faces a Reckoning if Working From Home Becomes the Norm by Matthew Haag (NYT)

How might real estate markets adapt if firms stick with flexible work arrangements that the COVID crisis has made a necessary part of keeping businesses running? [Link; soft paywall]

Twitter Will Allow Employees To Work At Home Forever by Alex Kantrowitz (BuzzFeed)

After two months of remote work, Twitter employees have been given the all-clear to work from home indefinitely, a huge change for a major tech organization. [Link]

OnlyFans, Influencers, And The Politics Of Selling Nudes During A Pandemic by Claire Downs (Elle)

The pandemic is leading to an increase in remote sex work on the popular site OnlyFans, but some of the new arrivals are drawing scorn for their approach. [Link]

COVID Concerns

JetBlue’s Founder Helped Fund A Stanford Study That Said The Coronavirus Wasn’t That Deadly by Stephanie M. Lee (BuzzFeed)

A widely-cited study that gave the impression COVID-19’s death rate was much lower than had previously been estimated was funded by an airline executive, creating a massive conflict of interest. [Link]

The Case for Reopening Schools by David Zweig (Wired)

One side of the debate about school reopening, which claims children are much less likely to be hurt by COVID-19 and don’t transmit it at the same pace as adults. On the other side of the coin, New York continues to investigate a rare expression of the disease that has a brutal impact on children specifically. [Link]

Food Fights

A private chef quarantined with his wealthy bosses in the Hamptons. He reveals what it’s like to shop for groceries in a ‘war zone’ and make ‘drug deals’ for flour to cook for 17 people. by Hilary Hoffower (BI)

Imagine getting locked into quarantine with your bosses, their family, and taking on the task of cooking to-order for their friends every day. [Link]

There’s Plenty of Meat in America — For Those Who Can Afford It by Lydia Mulvany, Deena Shanker, and Kim Chipman (Bloomberg)

While the conventional meat supply has bent to the breaking point thanks to COVID outbreaks in meatpacking plants around the country, higher-end meats that don’t get processed at the same scale are still widely available…for a price. [Link; soft paywall]

Even If You’re Trying To Avoid Grubhub By Calling Your Favorite Restaurant Directly, Grubhub Could Still Be Charging It A Fee by Venessa Wong (BuzzFeed)

The online delivery platform (which has had merger talks with Uber for a buyout) reaches its hand into the pocket of restaurants by creating phone numbers for them. [Link]

Movie Stories

‘Mad Max: Fury Road’: The Oral History of a Modern Action Classic by Kyle Buchanan (NYT)

A long, detailed look back at the most ambitious and iconic action movie of the 2010s, five years later, with fascinating stories about the actors, producers, and set. [Link; soft paywall]

Weird Science

The Bicycle Is Still A Scientific Mystery: Here’s Why by Charlie Sorrel (Fast Company)

It may be surprising to discover, but the physics of the bicycle are poorly understood, with competing theories and mixed evidence about why bikes are so stable. [Link]

Corporate Taxes

Companies Start Reaping Billions in Tax Breaks to Ride Out Economic Slump by Richard Rubin and Theo Francis (WSJ)

The CARES Act (Washington’s first major bill addressing COVID relief) included $650bn in total tax benefits for US businesses; so far 50 different public companies have disclosed deferrals (which eventually must be paid) and savings totaling $2.8bn. [Link; paywall]

Weird Markets

Traders scratch their heads as financial stock soars 2,800% by Filipe Pacheo (MSN/Bloomberg)

An Emirati fish farm is trading at a market cap of $14bn for no obvious reason; its gain over the past year is the biggest in the world for companies with more than $1bn market cap. [Link]

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Have a great weekend!