There’s been a number of eyebrow-raising moves in the market this week, and while some of the more extreme moves have subsided today, we’re still seeing some big ones.  Take the performance of the dollar and stocks tied to the dollar.  From its highs last week through yesterday, the Bloomberg US Dollar Index was down over 1%, but today the greenback is getting a bit of a respite from the selling with a rally of 0.2%.

As you would expect, the Dollar Index’s pullback has benefited companies that derive the bulk of their sales outside of the United States.  From last week’s peak through the close yesterday, our index of S&P 500 stocks that generate more than half of their sales outside of the US rallied over 3.6%, while our index of S&P 500 companies that generate more than 90% of their sales domestically was up just 1.6%.

With the dollar rallying today, one would expect our index of Internationals to be down or, at the very least, underperforming.  As shown in the chart below, though, the Internationals are both up today and handily outperforming their domestically focused peers. In fact, while the Internationals are up nearly a full percent today, the S&P 500 is up less than half of one percent while the Domestics are actually down fractionally. Not what you would expect on a down day for the dollar.Start a two-week free trial to Bespoke Premium to access our International Revenues Database so you can track the revenue exposure of individual companies in the Russell 1000.

Rotation into recent underperformers has been discussed at length this week, but video game stocks are just one more example of this dynamic.  Video game stocks like Activision Blizzard (ATVI), Electronic Arts (EA), and Take-Two Interactive (TTWO) saw a rough finish to 2018, and unlike other parts of the market, they never managed to retake their previous highs.  Although it has been a slow climb back in 2019, the S&P 500 GICS Level 4 Interactive Home Entertainment Sub-Industry which is comprised entirely of these three major video game stocks has begun to rise more rapidly. In fact, the industry has started to outperform the broader market (S&P 500) since the end of July with this outperformance accelerating more recently, as shown in the chart below.

Perhaps the most notable of these stocks has been ATVI.  Late last year, the stock saw a massive gap down followed by nearly a year of moving sideways with some marginally higher lows. In the past week, though, ATVI has surged nearly 10%, breaking out of this range, and reaching resistance where the stock gapped down to last year. There is plenty of room to run to the upside if the stock manages to break above this critical resistance level.

The yield on the dividend is far from high at just 0.66%, but Activision Blizzard has been paying a consistent and growing annual dividend since 2010; increasing on average over 10% per year in this time.  While the opportunity to catch the annual $0.37 per share dividend has passed as the stock went ex-dividend back in March (as it has almost every year), the company is forecasted to raise next year’s dividend up to $0.40.

Looking forward, the company has plenty of catalysts that could prove beneficial to both the stock price as well as earnings.  For starters, the company has some seasonal strength as consumers purchase their games heading into the holiday season; Q4 revenues have generally been the annual peak for the company.  Additionally, the fall is usually when the company releases some of its biggest franchises. For example, the company’s newest installment of World of Warcraft was just released in the past few weeks with a warm reception and another major title, Call of Duty, is scheduled to come out in October.

The hype may not be over a chicken sandwich, but Wendy’s (WEN) is the latest fast-food company to make headlines after announcing a new breakfast menu. Unlike the well-received all-day McDonald’s (MCD) breakfast from a few years ago, Wendy’s announcement has been met with a frosty reaction from investors. WEN is down over 10% today, which has also dragged on the Restaurants group.

This week we’ve seen massive rotation out of this year’s winners and into the year’s losers.  The trend is very apparent in the Restaurant space as we show in the table below.  Fast-food stocks like Wendy’s (WEN), Shake Shack (SHAK), Chipotle (CMG), Starbuck’s (SBUX), and McDonald’s (MCD) are up huge year-to-date, but they’re getting crushed today.  On the flip side, stocks like Fiesta (FRGI), Brinker (EAT), Ruth’s (RUTH), and BJ’s (BJRI) that have been beaten down YTD are up big on the day.  Start a two-week free trial to one of Bespoke’s three premium membership levels.

Below are links to two recent CNBC segments with Bespoke co-founder Paul Hickey.  To view the segments, click on the links below.

Trading Nation – 9/6/19 – Special Chart Suggest the Market is Starting a Hot Streak

Squawk Box – 9/10/19