Chart of the Day – You Don’t See This Very Often
Bespoke’s Morning Lineup – 12/12/23 – Even the Best Can Have a Bad Day
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.
“Alcohol may be man’s worst enemy, but the bible says love your enemy.” – Frank Sinatra
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Heading into the big inflation report this morning, futures were firmly higher and rates were lower as traders anticipated a weak print, and the result was only a very modest disappointment. While the headline print came in slightly higher than expected (0.1% vs 0.0%) m/m, the core reading was right in line with forecasts (0.3%) and the year/year readings were right in line with forecasts. In the immediate aftermath of the report, there has been no change in the tone of equity futures or rates.
Yesterday was an interesting day in the equity market. While the stocks of the seven largest companies by market cap, which collectively account for more than 28% of the entire S&P 500, were all down at least 0.78% and as much as 2.24% in the session, the index itself finished the day higher by 0.39%. For investors in favor of a broadening out of the rally, this was exactly the type of action they wanted to see.
Within the semiconductor industry sector, we witnessed a similar type of move. The Philadelphia Semiconductor Index (SOX) traded sharply higher all day, and for most of the session, all but one of the index’s 30 components was higher. That lone holdout? Nvidia (NVDA). The stock opened lower on the session, and outside of the first half hour of trading, it was down at least 1% the entire day and as much as 3.5%. When the closing bell rang, the SOX finished the day up 3.4%, NVDA was down 1.85%, and the only other stock in the index that finished lower on the day was Wolfspeed (WOLF) which closed down 0.35%.
Like the magnificent seven in the S&P 500, NVDA and its market cap of $1.15 trillion accounts for over 28% of the total market cap in the SOX. For the stock to trade down nearly 2% on a day when the SOX trades significantly higher is extraordinary. Looking back over time, since the start of 2010, there have only been three other days where the SOX rallied at least 2% on the day while NVDA traded down over 1%, and the last occurrence was in January 2021. In each of those periods, NVDA wasn’t even the behemoth in terms of market cap that it is now. The charts below of the SOX and NVDA show each prior occurrence, and while there’s a temptation to read into these types of events as a significant turning point, there was no clear trend of performance for either following these prior occurrences.
Think about it this way. In week 9 of the 2020 NFL season, the Tampa Bay Bucs were creamed 38-3 by the New Orleans Saints for their first home loss of the season. Tom Brady had a lousy day with just 209 passing yards and 3 picks. As bad as that one game was, though, three months later it was the Bucs, who as a three-point underdog, crushed the Chiefs 31-9 in Super Bowl LV. Even the best on the field can have an occasional bad day.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
The Closer – Sector Spreads, Tens Still Terrible, Positioning Volatility – 12/11/23
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 with a look at the dispersion of sector performance (page 1) We then dive into the only economic data of the day: the New York Fed Survey of Consumer Expectations (pages 2 and 3). Afterward, we review today’s disappointing 3 and 10 year note sales (page 4) before finishing with a rundown of the latest positioning data from the CFTC’s Commitments of Traders report (pages 5 – 8).
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 — 12/11/23
Chart of the Day: Dividends in the Doldrums
Bespoke’s Morning Lineup – 12/11/23 – Central Bank Week
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.
“Own only what you can always carry with you: know languages, know countries, know people.” – Alexander Solzhenitsyn
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Are you ready for some central bank decisions? Besides the Fed, which will announce its latest decision on rates this Wednesday, we will also get policy decisions from Brazil, Taiwan, Switzerland, Norway, the UK, the Eurozone, Mexico, Peru, and Russia this week. Then, next Monday Japan will join the fray. Along with the Fed, we’ll have a good amount of economic data to digest with CPI tomorrow and PPI Wednesday. Those aren’t the only reports on the calendar, though. On Tuesday we’ll also have Small Business Optimism from the NFIB, and Thursday will include jobless claims, Retail Sales, Import and Export Prices, and Business Inventories. Then, to close out the week, Friday’s reports will include Empire Manufacturing, Industrial Production, and Capacity Utilization.
While this morning’s economic calendar is light, the one report investors will be watching is the monthly survey of consumer expectations (SCE) from the New York Fed. As inflation has become the market’s primary concern over the last few years, the New York Fed’s SCE, which tracks inflation expectations among other items, has taken on added significance.
Heading into this morning’s 11 AM release, the charts below show historical readings for the SCE’s inflation expectations readings for one and three years ahead. After peaking at 6.8% in June 2022, one-year inflation expectations have been nearly cut in half to the current level of 3.57% which is just modestly above the historical average level of 3.39%. Keep in mind, though, that the average would be a lot lower if it wasn’t for the spike higher during 2021 and the first half of 2022. Before 2021 in fact, one-year inflation expectations were never higher than the current level.
Three-year inflation expectations also spiked higher in 2021 and early 2022. Unlike one-year inflation expectations which are still elevated relative to their pre-Covid levels, three-year expectations are actually below their historical average of 3.00%. Here again, the average is elevated due to the Covid spike, but even before the pandemic, there were several other times when three-year inflation expectations were higher than they are now.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.
Bespoke’s Brunch Reads – 12/10/23
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
While you’re here, join Bespoke Premium with a 30-day trial!
On This Day in History:
On this day in 1964, Martin Luther King Jr. was awarded the Nobel Peace Prize, marking a monumental moment in both civil rights history and the global peace movement. At 35, King was the youngest man at the time to receive this prestigious award, recognizing his tireless efforts to combat racial inequality through nonviolent resistance. His leadership during the Montgomery Bus Boycott and his pivotal role in the March on Washington, where he delivered his iconic “I Have a Dream” speech, were significant factors leading to this honor.
Like Martin Luther King Jr., there have been many well-deserving recipients of the Nobel Peach Prize, while the decision behind other recipients was more puzzling. One of the more puzzling choices was President Barack Obama in 2009, less than a year after he became President. In receiving the award, the President remarked that he was “surprised and deeply humbled” and that “my accomplishments are slight”. Although as Noam Chomsky commented in reaction to the award, “In defense of the committee, we might say that the achievement of doing nothing to advance peace places Obama on a considerably higher moral plane than some of the earlier recipients.”
Securities
What’s a Real-Estate Fund Worth? Depends on Who’s Doing the Math (WSJ)
Nontraded real estate investment trusts (REITs) define net asset value (NAV) differently from mutual funds, leading to comparability and valuation concerns as asset performance may not be accurately represented. These REITs, like Blackstone REIT and Starwood REIT, have flexible NAV calculations not bound by standard accounting rules and are not audited. This practice, diverging from traditional mutual fund NAV definitions, raises questions about the transparency and accuracy of these valuations, potentially confusing investors, especially since higher interest rates have hurt real estate. [Link]
The World’s Most Anonymous CEO Is About to Take Center Stage (WSJ)
Sky Xu, a discreet yet wealthy entrepreneur and the force behind Shein, a globally popular shopping app, is relatively unknown even among his employees. Despite his low profile, Xu’s company has significantly impacted the fashion industry with its ultra-affordable clothing and efficient supply chain. Shein is preparing for a major US IPO, which will likely push Xu into the public eye. Although the company is criticized for environmental and labor issues, Xu and his co-founders have yet to publicly address them, focusing instead on adapting Shein’s designs and services for global markets. [Link]
First Quadruple Leveraged S&P 500 ETN Proposed (Yahoo Finance)
A small ETN issuer, MAX ETNs, is planning to launch the first quadruple leveraged S&P 500 ETN, providing investors with daily compounded four times leveraged exposure to the S&P 500 Total Return Index. While the SEC typically allows only up to three times leveraged products, this ETN could bypass such regulations due to its structure. The launch of such high-risk investment products like this ETN raises questions, especially compared to the ongoing SEC approval process for spot bitcoin ETFs. [Link]
Hundreds of Stocks Have Fallen Below $1. They’re Still Listed on Nasdaq. (WSJ)
The number of US stocks trading below $1 is surging, particularly on the Nasdaq, where 557 stocks are now below this threshold, up from less than 12 in early 2021. The rise is linked to a slump in startup stocks and companies from the 2020-2021 IPO and SPAC boom. Nasdaq rules require a $1 minimum share price, and many companies are employing strategies like reverse stock splits to avoid delisting. The situation raises concerns about market integrity and investor risks as stocks that fall below a buck are often more vulnerable to “catastrophic losses.” [Link]
Economic Trends
Digesting inflation (Briefing Book)
Despite recent disinflation, consumer sentiment remains negative, potentially due to the cumulative effect of significant price increases over the past three years. Even though annual inflation eased to 3.2% this year, the overall increase in prices over the last three years was 18.6%. The University of Michigan’s consumer sentiment index remains low, similar to levels during the Great Recession, despite improvements in inflation and gas prices, as well as a seemingly lower risk of recession. [Link]
The ID.4 Could Be Volkswagen’s First EV Made With U.S. Union Labor (Heatmap News)
UAW president Shawn Fain aims to aims to organize non-union auto workers, starting with Volkswagen’s Chattanooga, Tennessee plant where over 30% of workers have signed union cards. The Chattanooga plant, VW’s only US factory, has been accused of lower pay and poor working conditions. Previous unionization attempts failed in 2014 and 2019. Potential unionization at Tesla’s US factories was also mentioned. This development comes after UAW secured significant raises and benefits with major automakers earlier this year. [Link]
Crime
D.C. restaurants are blowing their budgets on security (Axios)
In Washington DC, rising crime has led many restaurants, including small businesses, to spend significantly on private security. Georgetown Events, for instance, has spent over $450,000 on security this year. While options like hiring off-duty police officers exist, the costs are becoming unsustainable for some businesses, aside from the factor that DC already has an officer shortage. Owners are concerned about this financial burden, especially when they already contribute to public safety through taxes. Some smaller businesses are resorting to less expensive security measures due to these high costs, sometimes at the expense of the safety of their employees and guests. [Link]
US retail lobbyists retract key claim on ‘organized’ retail crime (Reuters)
The National Retail Federation (NRF) retracted its claim that nearly half of all inventory losses in 2021 were due to organized retail crime, after discovering inaccuracies in their data. The original statement had been cited in multiple media reports and used to advocate for stricter crime laws. However, the NRF removed references to this claim from published materials. Some law enforcement officials argue that outside of cities, shoplifting has declined since the beginning of the pandemic. On the other hand, many retailers say that the drops are due to underreporting. The mixed claims highlight the challenges in accurately quantifying inventory losses, which include various factors like shoplifting, shipping errors, and clerical mistakes. [Link]
Screen Time
Boost Mobile founder pushes carriers to back ban on cell phones in schools (New York Post)
CEO of MobileX and founder of Boost Mobile advocates for a ban on cell phone use in schools, citing carriers like Verizon and T-Mobile have a moral responsibility to support this. His call for action in the US is inspired by positive outcomes seen in Australia, where a ban led to improved academic performance and increased social interaction. Several US states and districts have implemented similar bans, addressing issues like distractions, cyberbullying, and declining mental health among young people. The proposal does face opposition though, as some argue that cell phone access is crucial for safety, especially in emergencies. [Link]
Read Bespoke’s most actionable market research by joining Bespoke Premium today! Get started here.
Have a great weekend!
Daily Sector Snapshot — 12/8/23
The Bespoke Report — 12/8/23
To read our weekly Bespoke Report newsletter and access everything else Bespoke’s research platform has to offer, start a two-week trial to Bespoke Premium.
Bespoke’s Morning Lineup – 12/8/23 – Listless into Payrolls
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.
“How can I go forward when I don’t know which way I’m facing?” – John Lennon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
What was looking like a modestly positive day for stocks earlier has reversed modestly lower, but the reality is that there is little direction ahead of the Non-Farm Payrolls report at 8:30 AM. Also, don’t forget about the University of Michigan Sentiment report at 10 AM as well. Overnight in Asia, it was a mostly positive session, although Japan bucked the trend falling more than 1.7% for a 3.4% decline on the week. The culprit there was a weaker-than-expected GDP report coupled with stronger-than-expected inflation (the worst of both worlds). In Europe, the tone is modestly positive as German CPI was right inline with forecasts and employment data in France was stronger than expected.
It’s generally been a positive month so far for US stocks with some small exceptions – and another big one. Leading the way higher, Consumer Discretionary and Real Estate have both rallied more than 2% while Industrials and Utilities are both up over 1%. To the downside, Materials, Consumer Staples, and Technology have all seen modest declines, while Energy has plunged nearly 4%. As a result of Energy’s weakness, while every other sector remains in overbought territory heading into today’s employment report, Energy is not only below its 50-day moving average, but it’s also the only sector that’s oversold.
Sign up for a two-week trial to Bespoke Premium to continue reading more of today’s macro analysis.