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.

“If I read as many books as most men do, I would be as dull-witted as they are.” – Thomas Hobbes

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

Markets are looking to start the day positively with several key economic reports and Fed speakers. The ADP Employment report just hit the tape and came in modestly weaker than forecasts. Still coming up, we have the ISM Services report at 10 AM which is expected to fall slightly from 56.0 down to 55.6.  Besides the economic data, we’ll also get the Beige book at 2 PM Eastern and some Fed speakers, including the Chair himself who will appear at the Dealbook Summit at 1:45 Eastern.

There’s a lot of important economic and Fed-related data for the market to navigate today. Still, bulls can only hope that the news comes in as positive as yesterday’s earnings reports after the close.  As mentioned in yesterday’s email, Salesforce (CRM) was the big report of the after-hours session. While expectations were already high, the stock exceeded the bar trading 13% higher in the pre-market.  That puts it on pace for the largest upside gap in reaction to earnings since March 2023. If the gains hold through the end of the session, it would be the best one-day reaction to earnings since August 2020.

CRM may be a company with a market cap of $350 billion, but regarding earnings, it’s extremely volatile. Historically, the stock’s average one-day change in reaction to earnings has been nearly 7%, but as shown in the chart below, two of its last three reports have been followed by double-digit percentage moves in reaction to earnings. Typically, you expect stocks to become less volatile in reaction to earnings as they become larger, but as CRM and other mega-cap stocks have illustrated in recent quarters, that doesn’t always seem to be the case.

We showed this chart yesterday, but we wanted to update it to include yesterday and today. Provided CRM doesn’t reverse course and trade sharply lower on the session, today will be the 54th day in a row that the stock has closed at overbought levels (1+ standard deviations above 50-DMA). That’s already easily a record high, but with CRM trading 2.8 standard deviations above its 50-DMA this morning, there’s the potential for this streak to extend several more days.

What makes yesterday’s after-hours earnings news even more impressive is that CRM’s surge was relatively modest. Of the four companies that reported after the close with sales of $500 million or more, CRM is trading up the least and is the only one that didn’t report an earnings triple play! As shown in the table, Marvell (MRVL) and Okta (OKTA) are both up slightly more in the pre-market, and Pure Storage (PSTG) is trading up over 20%.  It’s hard to remember another time when four mid-to-large companies reported earnings after-hours and they traded up at least 10%. Looking at how these companies traded heading into earnings, it’s not as though they hadn’t rallied into their earnings reports. As of yesterday’s close, all four were above their 50 DMAs, three were at overbought levels, and two were up over 50%!

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.

“You never bet on the end of the world, that only happens once, and the odds of something that happens once in an eternity are pretty long.” –  Art Cashin

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 indicate another trendless morning with extremely modest gains or losses depending on the index you want to examine. The economic calendar is on the light side, with October JOLTS being the only notable report. However, we will also hear comments from Fed Governor Kugler and Chicago Fed President Goolsbee later today.

Overnight in Asia, major equity benchmarks were higher across the board. The most notable economic report in the region was South Korean inflation which increased 1.5% y/y compared to a rate of 1.3% in October but was lower than the 1.7% consensus forecast. On the trade front, the Chinese government retaliated against the increased US export restrictions on advanced chip technologies by saying it would restrict certain rare earth materials to the US.

In Europe, stocks are also higher this morning, with the STOXX 600 trading up over 0.4%. In France, the CAC 40 was up close to 1% despite the political turmoil in the country. Opposition parties are on track to back a no-confidence vote to remove PM Michel Barnier.

Semiconductors make up a large part of the Technology sector, so the fact that the Philadelphia Semiconductor Index (SOX) has declined over 10% in roughly the last six months while shares of Nvidia (NVDA) are flat would lead you to believe that the overall sector has been weak. While it hasn’t been a leader, the Technology sector has rallied over 3% since NVDA and the semis peaked in the summer. A big reason for that strength is that as semis dropped the ball, software jumped in and dribbled it right down the court.

Since the closing high in the SOX on 7/10, the software group, as measured by the iShares Expanded Tech-Software ETF (IGV) has rallied over 20%. Through the close yesterday, IGV was 1.5 standard deviations above its 50-day moving average (DMA), but that’s down from more than three standard deviations above its 50-DMA on 11/11, which was the most overbought level since August 2020. All totaled, IGV has closed at overbought levels (1+ standard deviations above its 50-DMA) for 21 trading days.

The largest component in IGV, accounting for just over 9% of the ETF’s assets, is Salesforce (CRM). CRM had a rough start to 2024, and the bottom fell out of the stock in May when the company reported weaker-than-expected sales for the first time since 2006. As shown in the chart below, the 19.7% decline in reaction to that miss was the most negative reaction to an earnings report for CRM since it went public in 2004. It also marked the low for the stock, and it has rallied more than 56% since then.

While CRM shares are currently not quite as overbought as IGV, yesterday marked the 52nd day in a row that the stock closed at overbought levels. That’s the longest streak of overbought readings since its IPO 20 years ago!