Although there is only one company reporting earnings today, the earnings calendar ramps up this week with a total of 75 other reports through Friday.  This upcoming earnings season will be closely watched for how individual companies have been impacted by the COVID-19 pandemic. As shown in the charts from our Earnings Explorer below, although some of the period pre-dates the outbreak and recently the number of companies reporting have been low, 3-month rolling beat rates over the past few months have generally remained positive and above their historical averages. On the other hand, more companies have been lowering than raising guidance. In fact, the guidance spread has been gradually approaching its lowest levels since early 2019.

In terms of stock price reactions, companies have been getting crushed on their earnings reaction days (first trading session after their report). In March, the rolling 3 month 1 day median percent change hit its lowest level since 2012.  Granted, part of the reason for that is the sharp declines in February and March regardless of whether or not a company had reported.

In the table below, we show the 30 largest (by market cap) companies scheduled to report earnings through the end of the month.  For each stock, we also show their EPS and revenue beat rates, the percentage of time they raise guidance, and then their average one-day performance in reaction to earnings and historical volatility.  For volatility, we are simply measuring the average percentage move (up or down) on the day of each earnings report.   Johnson and Johnson (JNJ) and Lockheed Martin (LMT) have the strongest EPS beat rates of these companies and Facebook (FB) has topped sales estimates the most consistently. Conversely, Wells Fargo (WFC) has missed EPS the most and NextEra Energy (NEE) has missed sales estimates the most. In terms of stock price reaction, the FANG names—Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG)—have tended to be the most volatile on earnings with NFLX being the most volatile of these averaging a full-day move of 12.5%.  While it has been the most volatile, NFLX has not averaged the best performance on earnings.  FB holds that title with an average earnings reaction day gain of 2.7%.  Bank of America (BAC) on the other hand has averaged the worst performance with a decline of -0.93%.  Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and much more.

In last week’s Sector Snapshot, we noted that each of the eleven sectors as well as the S&P 500 had finally exited oversold territory as shown in the charts below.  Even with the major indices down around 2% today, they have held up in neutral territory so far.  One interesting thing to note of today’s decline is some sectors are turning lower right as they come within reach of their 50-DMAs.

Over the course of this recent market downturn, Health Care has been the only sector to recently close above its 50-DMA which happened last Wednesday and Thursday. Before that, you would have to go all the way back to March 5th to find a sector above its 50-DMA (Utilities).  While Health Care pressed above this average last week, it has failed to hold there with today’s declines bringing it 0.79% below its 50-DMA.  Health Care is not alone in failing at its 50-DMA though. Despite having never taken out these levels, the Materials and Real Estate sectors both came within 1% of their averages as of Friday’s close before turning lower today.  While they did not get as close, Consumer Staples and Utilities have also failed to press higher after closing within 2% of their 50-DMAs on Friday. That gives evidence that the 50-DMA could be the next technical roadblock for the other sectors as well as the broader S&P 500.  Start a two-week free trial to Bespoke Institutional to access our Sector Snapshot and much more.

The outbreak of COVID-19 has put a wide array of sports on hold from the NHL, NBA, and MLB in the US to the Olympics on the global stage. With the operations of these businesses basically shut down for the foreseeable future, it makes sense that they underperformed the S&P 500 during the worst of the sell off.  Whereas the S&P 500 fell 33.92% from 2/19 through 3/23, the average ‘sport stock’ was down 42.35%. The worst decliner of these was Churchill Downs (CHDN) which fell 55.34%. CHDN is the owner of several racetracks and casinos around the US including the track from which it derives its name, Churchill Downs in Kentucky where the Kentucky Derby takes place. On the bright side, CHDN has far outshined its peers since the market’s bottom on 3/23 rising 41.59%. Meanwhile, Liberty Media – Liberty Braves (BATRA), owner of the MLB’s Atlanta Braves and the Premier League soccer team Manchester United (MANU) have only risen 16.61% and 11.94%, respectively since the 3/23 low. Even after those rallies more recently, these stocks are still down 29.28% on average from their levels on 2/19 compared to the S&P 500 which has outperformed by more than 10 percentage points.  As for YTD performance, ‘sport stocks’ are also underperforming the S&P 500 by over 13 percentage points.

We created a custom portfolio of these stocks, and below we show the charts of these stocks from our Chart Scanner. As shown, this group experienced just as sharp of a drop as many other stocks but have been grinding higher more recently.  Every stock has put in a higher low in the past couple of weeks, but Churchill Downs (CHDN) and Madison Square Gardens (MSG) have also broken out above their late March highs which is another constructive technical sign.  The next resistance to watch will be their moving averages. Start a two-week free trial to Bespoke Institutional to access our interactive tools 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.

Natural World

A Google Plan to Wipe Out Mosquitoes Appears to Be Working by Kristen V Brown (Bloomberg/MSN)

In order to prevent the spread of infectious diseases, the Google project has developed a bacterial strain that renders mosquito eggs inert after mating. File under “what could possibly go wrong”. [Link]

400-year-old Greenland shark ‘longest-living vertebrate’ by Rebecca Morelle (BBC)

Radiocarbon dating found a Greenland shark that was swimming during the English Civil War. The species doesn’t reach sexual maturity until it has been swimming for 150 years. [Link]

Great Barrier Reef suffers its most widespread mass bleaching event on record by Maddie Stone (WaPo)

Warm waters lead coral to eject the microbial life they host, “bleaching” the coral. While bleaching does not mean death for reefs, repeated or extended bleaching events can destroy coral permanently. [Link; soft paywall]

Pollution Recedes Amid Lockdown, And A View Of The Himalayas Emerges For The First Time In 30 Years by Marley Coyne (Forbes)

Restrictions on all manner of transportation and other activities have led to massive air quality improvements in Northern India, revealing a view of the Himalayan Mountains. [Link]

COVID Containment

Veterinary scientist hailed for Faroe Islands’ lack of Covid-19 deaths by Daniel Boffey (The Guardian)

The tiny Faroe Islands nation has avoided deaths from coronavirus by introducing a mass testing regime early using a facility designed to diagnose salmon viral infections. [Link]

Michael Burry of ‘The Big Short’ Slams Virus Lockdowns in Tweetstorm by Reed Stevenson (Bloomberg)

In a classic case of “don’t meet your heroes”, the hedge fund investor has taken to Twitter on a crusade to get rid of the social distancing measures which have saved lives around the world. [Link; paywall, auto-playing video]

How the 1957 Flu Pandemic Was Stopped Early In Its Path by Becky Little (History)

A doctor at Walter Reed spotted headlines related to a flu outbreak in Hong Kong, and quickly requisitioned samples before formulating a vaccine then forcing it in to production. [Link]

Recession Effects

Quantifying the Adpocalypse by Value Mule (Medium)

Some interesting figures on the huge blow to ad spending that the recent decline in economic activity, with implications for the broader economic outlook as well. [Link]

The most exposed workers in the coronavirus recession are also key consumers: Making sure they get help is key to fighting the recession by Christina Patterson (Equitable Growth)

The demographic groups who are most likely to lose income during recessions are also the groups most likely to spend (rather than save) additional income. In short, making sure these groups don’t lose income is a powerful tool for keeping consumer spending up. [Link]

Essential Services

New York’s Kings of Clean by Tunk Varadarajan (WSJ)

The physically challenging and critically important work of municipal sanitation workers is coming into new light during a period of extreme stress and dislocation thanks to the coronavirus. [Link; paywall]

Grocery Revolution

‘I Just Need the Comfort’: Processed Foods Make a Pandemic Comeback by Julie Creswell (NYT)

Comfort foods like Chef Boyardee, Spaghetti-Os, lasagna, ice cream, Hamburger Helper, and Yoplait are getting huge demand bumps after years of declining sales. [Link; paywall]

A student created a computer program that tells you when an Amazon Fresh or Whole Foods delivery slot opens up by Todd Haselton (CNBC)

Amazon and other food delivery services often offer no space for pickups, but a quick script written by a Georgetown student allows users to book a delivery slot by constantly watching the sites. [Link]

High Yield

Billionaire Fertitta Offers Record 15% Loan Rate to Save Empire by Davide Scigliuzzo and Jeannine Amodeo (Bloomberg)

The owner of Golden Nugget casinos and Landry’s restaurants is paying a 15% coupon to sustain its business with a $250mm leveraged loan. [Link; soft paywall]

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Have a great weekend!

For a majority of the past year the US dollar has been fairly range bound, but the massive move away from risk assets more recently led to major buying for what is globally considered a safe haven currency.  From its 52 week low and high on March 9th and March 20th, respectively, the dollar index rose 8.28%. But since that peak just before the equity market’s bottom, the dollar index has come back down; currently ~3.25% below that high.

With the dollar lower, another safe haven that tends to trade inversely has benefited: gold. Since late February, the yellow metal had struggled to break out to new highs, but this week it has finally broken out. Currently, gold is at its highest level since late 2012.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Jobless claims were forecast to come in at 5 million this week which actually would have been a significant improvement from last week.  Instead, claims came in much higher at 6.606 million while last week’s number was revised up even higher to 6.867 million.  That 261K decline over the past week surpassed the 141K decline back in July of 1992 for the largest weekly drop in claims on record.  Granted, that does not mean too much given how high claims are and the fact that over the past three weeks there has been a total of over 16.78 million claims reported, or about 5% of the entire US population.  Absolutely devastating.

Before seasonal adjustment, this week’s number looks even worse at 6.203 million. That is slightly higher than the 6.016 million last week which sets a new record.

As the low readings from before the massive claims spike continue to roll off of the four week moving average, the average has reached new record highs rising to 4.266 million. That 1.599 million increase from last week is only slightly smaller than the move the previous week.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.