See what’s driving market performance around the world in today’s Morning Lineup.  Bespoke’s Morning Lineup is the best way to start your trading day.  Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Nobody goes there anymore. It’s too crowded.” – Yogi Berra

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

If Yogi Berra were alive today, we could only imagine how he would describe Meta Platforms (META). While the company owns the apps that everybody loves to hate, not only are most people on it, but thanks to AI-enhanced algorithms, they’re spending more time on them than ever.  The result is a record high in META’s stock price and an overnight increase in its market cap of $170 billion. According to Bloomberg, that would rank as the fifth largest one-day gain in market cap for a single company on record.  Can you imagine where META would be if people “liked” the product?

Turning to the rest of the market, futures were sharply higher on the back of earnings from META and Amazon.com (AMZN) overnight, while a 2.5% decline in Apple (AAPL) keeps the gains in check. All in, the S&P 500 was indicated to open up by about 0.7% while the Nasdaq was up over 1% as each index erased its declines from the mid-week “Fed-induced” decline.

Almost lost in the shuffle of all the earnings news after the close yesterday and this morning is this morning’s employment report for January.  If you thought the results relative to expectations of AMZN and META knocked the cover off the ball, you may want to sit down for this one. Non-farm payrolls showed a monster increase of 353K relative to forecasts for a gain of just 185K, and the last two months were also revised higher.  Average hourly earnings doubled expectations (0.6% vs 0.3%), and the Unemployment Rate came in at 3.7% versus 3.8%. The only negative in the report was average hourly earnings which dropped to 34.1 hours from 34.3 last month. This was a very strong report and will put the idea of good news being good news for the market to the test.  The immediate reaction in equity futures was a decline as the Dow dipped into the red, while the gains in the S&P 500 and the Nasdaq were more than cut in half.

META’s 15%+ pre-market rally has the stock on pace to have its fifth-best day in reaction to earnings since the IPO in 2012. It will also be the ninth time that the stock rallied at least 10% on an earnings reaction day. A big question for traders is whether the stock tends to build on these gains after gapping up so much or does it give back some of the gains.

The chart below compares the relationship between META’s performance on its earnings reaction day versus its performance from that day up until its next earnings report. When the stock was down on its earnings reaction day or up less than 10% (non-shaded area in chart), its median performance up until its next earnings report was a gain of 5.8% compared to the 10.2% forward performance following the eight days when the stock rallied more than 10% on its earnings reaction day. History is never guaranteed to repeat itself, but when META rallied by double-digit percentages in reaction to earnings it tended to keep the rally going moving forward.

Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.

See what’s driving market performance around the world in today’s Morning Lineup.  Bespoke’s Morning Lineup is the best way to start your trading day.  Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Alexander Hamilton started the U.S. Treasury with nothing, and that was the closest our country has ever been to being even.” – Will Rogers

Below is a snippet of commentary from today’s Morning Lineup.  Start a two-week trial to Bespoke Premium to view the full report.  

Futures are higher this morning as investors look to regroup following yesterday’s FOMC meeting and Powell’s press conference which pooh-poohed the possibility of a March cut.  The S&P 500 finished the day down over 1.5% in what was the worst day in four months.  Powell gets much of the blame for the decline, but equities were already firmly in the red leading up to the announcement, and the market was also trading at overbought levels.  Powell didn’t help, but what he said wasn’t exactly a major surprise.  Just the fact that the chair was openly talking about rate cuts being a matter of when rather than if is a stark difference from the last two years.

The tone right now is positive, but if you think Tuesday was a seminal moment in the earnings season, today promises to be even bigger with Apple (AAPL), Amazon (AMZN), and Meta (META) being just three of the dozens of companies reporting after the close.

On the economic calendar, Jobless Claims, Unit Labor Costs, and Non-Farm Productivity were all just released, and later we’ll get Construction Spending as well as the S&P and ISM Manufacturing PMIs.  Non-Farm Productivity came in stronger than expected (3.2% vs 2.5%) while Unit Labor Costs were weaker than forecasts (0.5% vs 1.2%).  Jobless claims weren’t particularly good as both initial and continuing claims came in higher than expected and at their highest levels since November.  Expectations for the PMIs aren’t particularly positive, and based on the regional Fed Manufacturing reports we got throughout the month, we’ll be lucky to even get an inline reading.

What had been a very strong first month of the year turned into a more modest one as Fed Chair Powell successfully let some of the air out of the market balloon in his press conference yesterday. When the dust settled, the S&P 500 finished January up 1.7% on a total return basis after being up well over 3% heading into yesterday’s session.

On a y/y basis, the S&P 500 is still up over 20% on a total return basis which is nine full percentage points above the long-term historical average of 11.8% ranking the last year in the 69th percentile relative to all one-year periods.  While one-year returns have been very strong, two-year returns have been the complete opposite. At 5.3% annualized, the S&P 500’s two-year performance ranks in just the 28^th percentile relative to all other two-year periods. Looking further out, both five and ten-year annualized returns have been above the historical norm while 20-year returns are still below their long-term average.

Long-term US Treasuries are a completely different story.  Based on returns of the BofA/Merrill 10+ Year US Treasury Index, long-term treasuries were down 1.65%.  You may recall that in December treasuries ended a 34-month streak of negative 12-month returns, but January’s weakness moved the one-year returns back below zero.  As shown in the chart below, annualized returns over the last one, two, and five years are all negative.  On a 10 and 20-year basis, returns are positive, but they are still well below their historical long-term average, and for all periods except the last year, current returns rank in the 3rd percentile or below relative to all other periods. Calling the last decade a dark age for bonds wouldn’t be an understatement.

Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.