Earlier today, we updated our weekly Stock Scores with major US airliner JetBlue (JBLU) taking the number one spot.  Our Stock Scores ranks every company in the S&P 1500 based on a fusion approach, combining proprietary ratings across fundamental, technical, and sentiment analysis.  JBLU is one of the smaller US airlines with a total market cap of $5.2 bn compared to competitors like Delta (DAL), Southwest (LUV), United (UAL), and American Airlines (AAL), which all have market caps between $10 bn and $32.8 bn.  While earnings for this industry have not necessarily been weak, those companies exposed to the ongoing Boeing 737 MAX saga have continued to report headwinds, and shutdowns on account of the coronavirus have added more uncertainty to the overall outlook of the industry.  But for JBLU, the picture is a bit rosier.  Unlike some of its larger competitors, JBLU does not fly the 737 MAX, and its flights to Asia are limited when compared to other airlines as it focuses on the domestic, Caribbean, and Latin American markets.  This contributed to a solid quarter recently as the company exceeded EPS estimates and reported stronger than expected revenues which were up 3.2% YoY.

Headed into its most recent earnings report on January 23rd, JBLU reached the upper end of the past two year’s range as shown in the chart below. The 6.41% rally on earnings lifted the stock back above the $20 resistance level which it has since come back and successfully retested.

Meanwhile, the charts of other airline stocks are not looking as strong with many having broken down or sitting in short term downtrends.  Members can view the charts of all of these airline stocks using this custom portfolio we created.

Again, JBLU’s breakout has been more of an exception rather than the rule for the industry. The chart below of the U.S. Global Jets ETF (JETS), which tracks the global airline industry including operators and manufacturers, shows exactly this.  Like JBLU, in the first weeks of this year, the ETF had been testing the past year’s highs, but once coronavirus fears began to ramp up (namely as Delta, American Airlines, and United Airlines began to suspend service to China), JETS turned sharply lower and has fallen out of the past few months’ range.

After these declines, the average airline stock in the S&P 1500 now has the lowest P/E ratio of all GICS Level 3 Industries. Given this, JETS has one of the cheaper valuations of the ETF universe. The fund’s P/E ratio is now only 8.76 which is also especially cheap when compared to a 23.12 P/E for the broader Industrial Sector ETF (XLI). Overall, although the 737 MAX and more recent coronavirus headwinds have not gone away, the airline industry is now looking relatively cheap to the rest of the market and JBLU appears to be the best of breed of these stocks.  Start a two-week free trial to Bespoke Institutional to access our Stock Scores, Custom Portfolios, and much more.

The average stock in the S&P 500 is currently down 0.65% year-to-date.  There are 34 stocks in the index up 10%+ year-to-date, while there are 61 stocks that are down 10%+.  As shown, L Brands (LB) ranks first at this point in 2020 with a year-to-date return of 26.2%.  (Note that while Tesla (TSLA) is up 85% year-to-date and has a market cap that’s larger than 90% of the index, it’s not yet in the S&P 500.)  Paycom (PAYC) and ServiceNow (NOW) rank 2nd and 3rd with gains of more than 20%, while Lennar (LEN) and TransDigm (TDG) round out the top five.  Other notables on the list of this year’s biggest winners include Progressive (PGR), PulteGroup (PHM), salesforce.com (CRM), Albemarle (ALB), and Amazon.com (AMZN).

While there are three stocks up 20%+ YTD, there are four that are already down 20%+.  TechnipFMC (FTI) is down the most at -21.85%, but Capri Holdings (CPRI) is not far behind at -21.32%.  Diamondback Energy (FANG) and ViacomCBS (VIAC) are the other two stocks down 20%+.  Other notables on the list of biggest losers so far in 2020 include DuPont (DD), Phillips 66 (PSX), Advance Auto Parts (AAP), Schlumberger (SLB), VF Corp (VFC), Dow (DOW), Kohl’s (KSS), Carnival Corp (CCL), and United Airlines (UAL).

One month ago, ISM released its monthly reading on the manufacturing sector which we noted was fortunately overshadowed by the headlines surrounding the geopolitical tensions in the Middle East. That December ISM Manufacturing report fell to 47.2 which was the lowest headline level since June 2009.  One month later, the headline number has more than bounced, rising 3.7 points to 50.9.  As shown in the second chart below, that 3.7 increase is one of the largest one month increases of the past 20 years. Ironically, while last month saw the weakest reading since June 2009, the 3.7 point bounce off of those lows was the largest month-over-month jump for the headline number since May 2009.

The big jump in January far exceeded forecasts for a continued contractionary reading of 48.5.  Now back above 50, this was not only the strongest but also the first expansionary reading for the headline index since July 2019. That five-month stretch from July to December was the longest run of consecutive contractionary readings since another five-month streak ending in February 2016; the longest such streaks of the current cycle.

Glancing at the commentary section, the index’s uptick certainly shows itself with Computer & Electronic Products mentioning suppliers are at or above capacity, though, there are also a fair share of negative comments. The headwinds that have been prominent for over a year now have by no means dissolved as multiple comments address adverse effects of tariffs and/or weakened demand. Computer and Electronic Products as well as Food, Beverage and Tobacco products make mention of hurt margins. In other words, although the data has improved dramatically, qualitatively there is still some weakness present.

In the table below, we break down the changes over the past month and year of the individual sub-indices. Breadth was very strong in January with every sub-index rising with the exception of Supplier Deliveries. Not only did a vast majority rise month-over-month, but now seven of the eleven indices have expansionary (>50) readings compared to just two last month.  By far the biggest winner has been Production which follows it being one of the biggest decliners last month. But even with the surge it is still lower than where it stood one year ago. But that is more broadly the norm as Customer Inventories, Prices Paid, and Export Orders were the only ones to have risen since last January.

As previously mentioned, the 11.1 jump for production was a massive improvement.  Now at 54.3, it is at its highest level since March 2019. As shown in the second chart below, these types of massive moves in one month have been pretty rare.  Over the past two decades, there has only been one other time, May 2009, that this sub-index has risen by more than 10 points in a single month.  Expanding the horizon and looking back to 1948 when data begins, there have been a total of just 11 (including this most recent occurrence) months in which the Production sub-index has risen by 10 points or more.

New orders was another sub-index that experienced a notable improvement rising 5.2 points to 52.0.  Although the month-over-month rise was not nearly as large as that of production, for the New Orders index it was the largest one month increase since January of last year and it is now at its highest level since May of last year.

Employment for the manufacturing sector has been notably weak with last month’s reading the lowest since January of 2016. Although it improved to 46.6 from 45.1, the improvement was much more modest when compared to the headline number.

Given the recency of the issue, the full effects are unlikely to show in the January data, but the coronavirus has not yet put a damper on trade activity.  Both export and import orders have been on the rise over the past few months and January was no exception as both sit at their strongest levels around a year or more.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Super Bowl LIV kicks off later this afternoon in Miami, and this year’s game is important for the AFC as a win by the Chiefs would put it in a tie with the NFC for Super Bowl victories at 27 each.  Interestingly enough, the last time both conferences had the same number of Super Bowl wins was all the way back in 1990 when they each had twelve.  That was also right in the middle of the 13-year stretch where the NFC defeated the AFC every year in what was the longest run of Super Bowl dominance by either conference. Looking at the chart, it’s interesting to see the various runs by each conference.  From Super Bowl III to XV, the NFC only won twice.  Then from XVI to XXXI, the AFC won only once, while in the twelve years from XXXII to XVIII, the NFC won only three times.  It’s only in the last ten years that there has been some parity in the games as each conference has won five times.

Most people have already heard about the Super Bowl indicator and its implications for the stock market.  While no one in their right mind would ever make stock market investments based on the outcome of a football game (although we’ve heard of crazier theories), it makes for good conversation while you’re watching the game.

The table below summarizes the historical performance of the S&P 500 after the Super Bowl based on which conference came out on top.  In the 26 years that the AFC hoisted the Lombardi trophy, the S&P 500 averaged a gain of 6.6% for the remainder of the year with positive returns 69.2% of the time.  For the NFC, though, returns are more impressive with an average gain of 10.5% and positive returns 77.8% of the time. Broadly speaking, the NFC has been better for stocks, so as much as Andy Reid may be the sentimental favorite, your wallet should be rooting for the NFC.

Another reason you should be rooting for the 49ers tonight is because of their past record.  In the five prior years where they won the Super Bowl, the S&P 500 was up for the remainder of the year every time by an average of 20.2%!  The individual rest-of-year returns in those five years were 21.9% (1982), 23.3% (1985), 23.3% (1989), 1.4% (1990), and 30.9% (1995).  Given all the concerns surrounding the coronavirus in the last two weeks, we think a number of investors would even sign up for 1.4%!  Besides the 49ers, there are only three other teams who have won the Super Bowl at least three times and also seen positive market returns following each of their wins (Broncos-3, Steelers-6, and Redskins-3).  The Chiefs, on the other hand, have not had such a lucky record.  The one time they won the Super Bowl was back in 1970 (Super Bowl IV), and after that win, the S&P 500 was modestly down for the remainder of the year with a decline of 0.3%.  Another positive?  The Chiefs have also been on the losing end of the Super Bowl once.  That was in the first Super Bowl when they lost to the Packers.  After that loss, the S&P 500 went on to rally 14.1% for the remainder of the year.  Go Niners!  Start a two-week free trial to Bespoke Institutional for full access to our market research and interactive trading tools.