Bespoke’s Morning Lineup – 11/22/23 – Thankful For Lower Rates
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“In a crisis, be aware of the danger–but recognize the opportunity.” – John F Kennedy
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Heading into the last trading day before Thanksgiving (and the last day of the week for many others), equity futures are higher this morning, treasury yields are lower, and crude oil is down sharply following news that Saudi Arabia may cancel this weekend’s meeting citing disappointment with members not aboding by production quotas. There’s also a decent amount of economic data to squeeze into the day with Thursday’s holiday, and those reports include jobless claims, durable goods, and Michigan Sentiment as well as crude oil and natural gas inventories. On the earnings front, shares of NVIDIA (NVDA) are basically flat on the morning even after reporting blowout earnings last night while Deere (DE) is down 6% after dramatically lowering guidance as high-interest rates crimp the financing environment for heavy equipment.
Thanksgiving week has historically been a positive one for stocks, and that has also been true for the day before and the day after Thanksgiving. Since 1945, the S&P 500’s average daily change has been 0.03% while the median gain has been 0.05%. The scatter chart below compares the S&P 500’s performance on the day before Thanksgiving to its YTD performance heading into the week. For all years since 1945, the S&P 500’s median change on the day before Thanksgiving has been a gain of 0.27% with positive returns 74% of the time. When looking at the S&P 500’s YTD performance heading into Thanksgiving week, there has been little impact on how the market performs around Thanksgiving. As shown in the chart, while the median gain on Wednesday has been 0.27%, performance in those years when the S&P 500 was up 18% or more YTD was right around the same at 0.25% with gains 78% of the time.
Like the day before Thanksgiving, performance the day after has also been positive. For all years since 1945, the S&P 500’s average performance the day after Thanksgiving has been a gain of 0.24% with positive returns two-thirds of the time. In those years when the S&P 500 was up 18% or more YTD, the median change has been a gain of 0.20% with positive returns just 58% of the time. That also includes the two worst Fridays after Thanksgiving when the S&P 500 fell 2.27% in 2021 (remember the Omicron scare?) and 1.72% in 2009 (concerns of a debt default in Dubai).
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The Closer – Fed Minutes, Polish Independence, Canada CPI, Housing Markets, 10y TIPS Auction – 11/21/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we review this afternoon’s Fed meeting minutes and how interest rates are moving lately. We then move on to drama over central bank independence in Poland (page 1). Today’s October CPI data from Canada showed disinflation continues, with implications for the US (page 2). Existing home sales volumes have collapsed amidst very low inventories (page 3). We also look at existing home sales affordability (page 4) and the relationship between new and existing home sales (page 5). Finally we take a look at the results of the 10y TIPS auction (page 6).
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Daily Sector Snapshot — 11/21/23
Chart of the Day – When Golden Doesn’t Glitter
Bespoke’s Morning Lineup – 11/21/23 – Thankful for Lower Gas Prices
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“Common sense is not so common.” – Voltaire
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
Outside of a number of retail-related earnings reports with some mixed results, it’s been a quiet morning so far with little in the way of earnings results. The only major report on the calendar today is Existing Home Sales at 10 AM, and that will be followed by the minutes from the latest FOMC meeting at 2 PM. Perhaps the most notable event for today (and the rest of the week for that matter) is NVIDIA’s (NVDA) earnings report after the close.
If you’re one of the millions of Americans traveling by car this weekend, filling up the car has become a lot less painful than it was in the summer. Since Labor Day, the national average price of a gallon of gas has cratered for a total decline of just over 15% through yesterday, and that includes 54 straight days of declines since 9/28. After being up by more than 20% on a YTD basis back in mid-September, average gas prices throughout the country are now up less than 3%. Now, that’s something to be thankful for!
While prices are down sharply since Labor Day, the 13.5% decline isn’t unprecedented. As shown in the chart below, it’s typical for prices to fall at this time of year. Since 2004, the national average price has only risen between Labor Day and Thanksgiving six times, and the average change has been a decline of 8.3%. This year’s decline though is the largest since 2015 and ranks as the sixth-largest decline during this period of the last 20 years.
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The Closer – Turkey Week, Factor Returns, EM FICC, Successful 20y Auction – 11/20/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start with a look at how the returns on the Monday before Thanksgiving influence the rest of the week. We also take a look at year-to-date returns for various quantitative factors in the US equity market (page 1). We then move on to look at the performance of emerging markets yields and interest rates over the course of the last few months (page 2). Today marked the third-straight 20y bond auction that came in stronger than the market had priced, marking a turnaround in the backdrop for that thus far unloved issue (page 3). Today also saw the update of Commitment of Traders positioning data which we cover in detail (page 4).
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Daily Sector Snapshot — 11/20/23
Chart of the Day: MSCI Argentina ETF (ARGT) Surges on Milei Victory
Happy Anniversary
It’s been the worst of times and the best of times for the Nasdaq 100, which marked the two-year anniversary of its record high from 11/19/21 over the weekend. After falling over 35% from the record high through the October 2022 low, the Nasdaq 100 has since rallied over 50%, leaving it down just over 5% from its record high. Like a QB scrambling all over the field only to end up getting sacked a few yards short of the line of scrimmage, the Nasdaq 100 has expended a ton of energy with little to show for it over the last two years.
While the Nasdaq 100 itself is down just over 5% from its record high, stocks in the index are down slightly more than that since 11/19/21 with an average decline of 6.3%. Among individual stocks, though, there have been some big winners and losers. Starting with the winners, the table below lists the 20 Nasdaq 100 stocks that have rallied 20% or more since the November 2021 peak. Leading the way higher, shares of Vertex Pharma (VRTX) have rallied just shy of 92%, followed by Broadcom (AVGO), PACCAR (PCAR), Diamondback Energy (FANG), and O’Reilly Automotive (ORLY), which are all up over 50%. We were surprised to see that while NVDA has been one of the top-performing stocks this year, since the 2021 peak, its 49.5% gain ranks only as the seventh-best performance. Lastly, in terms of sector breakdown, Technology leads the way with six followed by Consumer Discretionary with four, and Health Care and Industrials with three each.
While there are just twenty stocks in the Nasdaq 100 that are up 20% since its peak two years ago, 21 of the index’s components are down 30% or more. We list them in the table below. Topping the list of losers, shares of Lucid (LCIC) have lost their charge with a decline of over 90%. Behind LCID, though, there are another nine stocks that have been cut at least in half, including pandemic darlings Zoom Video (ZM) and Moderna (MRNA). Some of the more notable names on the list include Tesla (TSLA), Netflix (NFLX), and QUALCOMM (QCOM). Finally, at the sector level, just as they topped the list of winners, both Technology and Consumer Discretionary also top the list of losers with seven and five components, respectively. The only other sectors with more than one component were Health Care (4) and Communication Services (3).
Bespoke’s Morning Lineup – 11/20/23 – Thankful for a Quiet Week?
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“We can know only that we know nothing. And that is the highest degree of human wisdom.” – Leo Tolstoy
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
It’s been just over three weeks now that US equities have been in rally mode as we head into a holiday-shortened trading week. Markets are closed on Thursday for Thanksgiving, and Friday is a shortened session with stocks closing for the week at 1 PM on a day. With just three and a half days of trading, the economic calendar is very light, although the earnings calendar will be relatively busy on Tuesday with several retailers, as well as NVIDIA (NVDA), reporting results. Even Fed officials, who seem to love getting in front of a microphone nowadays, are mostly taking the week off.
Over the course of the three-week rally for US stocks, the S&P 500 has been positive all three weeks, and its total gain during that span has been just under 10%. Rallies of this magnitude in a three-week span aren’t unprecedented, but they aren’t common. Prior to the current surge in stocks, the last time the S&P 500 rallied more over a three-week span was back in June 2020.
While the S&P 500’s rally has been impressive, the Nasdaq has rallied even more with its gain of 11.7%. Like the S&P 500, the last time the Nasdaq rallied by a larger amount in a three-week span was back in April 2020, although there were two times in 2022 (April and August) when it rallied by more than 10% over a three-week period.
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