Nat Gas All Over The Place
Even for a commodity like natural gas, the last three months have been incredibly volatile. Think about this; over the last month, front-month natural gas futures are up over 40%, but over the last three months, they’re actually down. A 40% rally and it’s still in the red over the last three months. Incredible.
Below we show the one-month rate of change in natural gas over time, and anything over the red line indicates a rally of more than 30%. While there have been plenty of other periods where natural gas rallied a lot more than it has over the last month, the recent move ranks as the largest since late 2022. It’s also a far cry from where the market was a year ago when the commodity was in the middle of its largest ever one-month decline (-52.4%).
The scatter chart below compares rolling one-month moves in natural gas to rolling three-month returns. As you would expect, the relationship is positively correlated- if natural gas is up over the last three months, it’s probably also up over the last month and vice versa. That’s what makes the current performance stick out so much. In the chart below, we have drawn a red box around all the different occurrences where nat gas rallied at least 30% in a month but was down over the prior three months, and there weren’t many.
In the long-term chart of natural gas below, we have included red dots for each of those occurrences when it was up at least 30% in the prior month but down over the prior three months. While there were sporadic occurrences from the late 1990s through 2012, there was nearly a ten-year lull from May 2012 up until 2022 at which point there have been several additional occurrences.
In terms of performance following these periods of extreme divergences between one and three-month returns in natural gas, overall, there hasn’t been much of a clear trend. Before the three most recent occurrences since the start of 2022, the commodity’s performance was generally positive going forward. In the three most recent occurrences, though, natural gas experienced declines of over 40% each time.
Just to illustrate once again how volatile natural gas is, check out the performance following the January 2022 occurrence. While natural gas was up nearly 70% after six months, a year later it was down 44.9% for an overall performance shift of over 110 percentage points!
Bespoke’s Morning Lineup – 1/12/24 – It’s Earnings Season
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.
“He not only made me believe—he made us all believe.” – John Dockery, on Joe Namath’s performance in Super Bowl III
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Earnings season kicked off this morning as the major banks along with Delta (DAL) and UnitedHealth (UNH) have all reported earnings this morning. Concerning bottom-line results, five of the eight companies reporting have exceeded results, but only four of the eight managed to exceed top-line results. Of the companies reporting, only JP Morgan (JPM) is trading higher, and the biggest loser has been UnitedHealth (UNH) which is down over 5%, and given its high share price, that is having a large impact on Dow futures this morning.
Futures for the S&P 500 and Nasdaq are also lower this morning, and that’s partly a result of earnings news but also rising tensions in the Middle East as a US-led group launched airstrikes in Yemen on Houthi targets. As you might guess, oil prices have spiked higher in response, and as of this morning are trading up just about 4%.
In economic news, PPI for December was just released, and unlike yesterday’s CPI, the numbers were weaker than expected. At the headline level, PPI declined 0.1% on a m/m basis (+0.1% expected) and rose 1.0% on a y/y basis (1.3% expected). Core PPI was also weaker with the m/m reading coming in unchanged (0.2% expected) and rising 1.8% y/y (2.0% expected).
Everyone loves a three-day weekend, right? While you would think that, there is not much to like about the equity market’s historical performance during the holiday-shortened week coinciding with Martin Luther King Jr Day. While President Reagan signed the holiday into law as a Federal Holiday in 1983, it wasn’t until 1998 that the stock market started to close in observance of the holiday. The chart below shows the performance of the S&P 500 from the Friday before MLK Jr Day through the Friday after. As shown, the median performance has been a decline of 0.32% with gains just 38% of the time. The worst of those weeks was just two years ago when the S&P 500 declined 5.7% in the four-trading day week. While the holiday week has historically been weak, it is worth pointing out that the period leading up to the holiday has typically been better. On a month-to-date basis through the Friday before MLK Jr Day, the S&P 500’s median performance since 1998 has been a gain of 0.88% with positive returns 59% of the time.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
The Closer – Record Airbus Orders, CPI, Real Wages – 1/11/24
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin by noting Airbus’ record orders in 2023 (page 1). We then dive into today’s CPI data (page 2) and real wage growth (page 3). We finish with a recap of today’s 30 year bond reopening (page 4).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Bespoke’s Weekly Sector Snapshot — 1/11/24
Chart of the Day – Japan Ripping Early
Claims Ratio Spiking
Overshadowed by the hotter than expected CPI print, initial jobless claims at least came in healthier than expected this morning. Initial claims came in at 202K, down 1K from last week’s upwardly revised level of 203K. At current levels, initial claims are down near some of the lowest levels of the past year. Zooming out, those are also some of the lowest levels since the late 1960s which could paint a historically rosy picture for the labor market.
Taking a look at claims before seasonal adjustment, one of the first couple weeks of the year have often marked the annual peak in claims. Assuming this week does in fact mark that seasonal high, it would measure roughly inline with other years since 2018 save for 2021 when claims were working off extremely elevated pandemic levels. Looking forward over the first half of the year, unadjusted claims face seasonal tailwinds.
In addition to initial jobless claims posting a strong reading, continuing claims came in below expectations falling to 1.834 million compared to expectations of an uptick to 1.87 million. That also marks back-to-back weekly declines in continuing claims as current levels are now down 91K versus the mid November high of 1.925 million. That level is also back below last spring’s highs. That means there has been at least some respite in what more generally has been an upward trend in continuing claims over the past year and a quarter.
In all, both initial and continuing claims have come off their best levels put in place in the fall of 2022 but have each seen steady improvement in recent weeks after a lackluster 2023. However, that does not exactly put the two in parity, and there is at least one way of chopping up the data which comes off as less optimistic than the historically strong levels.
Below we take the ratio of the four week moving averages of continuing claims versus initial claims. While far from a perfect recessionary indicator, it has generally spiked during, albeit particularly in the later stages of, past recessions. Given initial claims have returned to historically low levels while the pivot lower in continuing claims has been less pronounced and more recent, this ratio has rocketed higher over the past six months. In fact, it has risen 31% in that span. Prior to 2020, each instance of an increase of that size occurred at the tail ends of recessions, namely those of the 1970s and early 1980s. However, in the post pandemic period, swings of that size have greater precedence with three other even larger increases occurring over the past few years.
Bespoke’s Morning Lineup – 1/11/24 – CPI High, Claims Low
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.
“I hear ya, Ton’, but that was before inflation” – Christopher Moltisanti
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 modestly low this morning, but it could be worse given the stronger-than-expected CPI reading for December where both headline and core CPI topped consensus forecasts. Jobless claims, meanwhile, showed strength with initial claims falling to 202K from last week’s level of 209K and continuing claims falling to 1.843 million from 1.855 million in the prior week.
“Did you see The Sopranos last night?” 25 years ago today, if someone asked you this question at work on Monday morning, you probably had no idea what they were talking about. With each passing week, though, The Sopranos became a show Americans planned their Sunday nights around, and by the time “Made in America” aired eight years and five months later, 12 million people made sure they were in front of their TVs at 9 o’clock eastern to watch it. It seems so arcane now, but this was a time when there were no DVRs, and the term binge-watching didn’t exist. The Sopranos, like Seinfeld, Friends, and a host of other shows before it, was “Must See TV”. If you weren’t in front of your TV to watch them, you missed them, and the next morning you were in the dark. Raise your hand if you remember desperately trying to get home from wherever on a Sunday night only to get stuck in traffic or delayed by a train or bus and missing the first half hour.
Just for kicks, we were curious to see which current members of the S&P 500 have been the best-performing stocks since the first episode of The Sopranos on January 10, 1999. Perhaps the most interesting aspect of this analysis is that 30% of the index’s components didn’t even exist in their current form back in January 1999. Of the ones that did, the list below summarizes the 25 top performers. It’s also worth noting that 25 stocks in the index are down since the first episode of The Sopranos, including AIG, Ford (F), Citigroup (C), and Carnival Cruise (CCL).
Looking at the list of winners, there are a lot of unexpected names. With a gain of over 46,000%, Apple (AAPL) has been the second-best performing stock (and probably the most expected name) in the index, but its gain has been less than half of Monster Beverage’s (MNST) rally of over 108,000%. Then, at number three, shares of Old Dominion Freight (ODFL) have gained over 40,000%. Given all the trucks that Tony and his crew jacked over the years, ODFL must have been paying quite a substantial pizzo to avoid any trouble!
What’s also interesting about the list below is the names that aren’t on it. While mega-cap stocks like Meta (META), Alphabet (GOOGL), and Netflix (NFLX) weren’t public yet, Amazon.com (AMZN) and Microsoft (MSFT) were, but with gains of ‘only’ 3,700% and 920%, respectively, they didn’t make the list. Ironically enough, Nvidia (NVDA) wasn’t public yet either as its IPO wasn’t until 12 days after the Sopranos premiere. “Oh, poor baby. What do you want, a Whitman’s Sampler?”
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
The Closer – Greenhouse Gas, Wage Growth Slowing, Products Building – 1/10/24
Log-in here if you’re a member with access to the Closer.
Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with an update on House voting and Fedspeak (page 1) followed by a dive into greenhouse gas emissions (page 2). We then check in on the Atlanta Fed’s measure of wage growth (page 3). Next, we recap another weak demand 10 year note reopening (page 4) before finishing with a review of the massive build in petroleum product inventories (page 5).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Daily Sector Snapshot — 1/10/24
Fixed Income Weekly — 1/10/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
Click here and start a 14-day free trial to Bespoke Institutional to see our newest Fixed Income Weekly now!