The Closer – PPI, Mega Cap Contribution, EIA is Back – 11/15/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a look at the latest PPI data (page 1) followed by a showcase of how much mega cap stocks have driven the market over the past decade (page 2). We then update the latest EIA data (page 3).
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Daily Sector Snapshot — 11/15/23
Bespoke Baskets Update — November 2023
Bad Expectations Out of New York
The New York Fed gave us the first regional reading on manufacturing conditions this morning with the release of the Empire State Manufacturing Survey. The headline number rose back into expansion at 9.1, well above expectations of an improvement to only -3. Although the current conditions index improved, expectations dropped a massive 24 points month over month. That ranks as the fourth largest one month decline in this reading on record behind September 2001 and January 2009.
Below we show a breakdown of each category of the report for both current conditions and 6-month expectations indices. Although General Business Conditions improved dramatically, breadth was otherwise negative. Of the other categories, only three rose month over month. Expectations likewise had more categories falling than rising leaving multiple categories at or near the bottom of their respective historical ranges dating back to the start of the survey in 2001.
The report indicated weak demand as new orders currently remain in contraction. Meanwhile, Unfilled Orders are far more depressed at -23.2 making the November reading the lowest since December 2014. Shipments have been increasingly choppy during the post-pandemic period, but the November reading did improve up to 10, slightly below the historical median. Meanwhile, Inventories were much more elevated. Rising 11.2 points month over month, inventories are now in the top decile of their historical range with the first expansionary reading in six months.
Employment metrics were also weak with both the number of employees and average workweek indices sitting in contraction. However, these were also two of the strongest categories relative to historical ranges of anywhere in the report. In fact, Average Workweek expectations hit the highest level since March of last year. While those labor expectations remain healthy, the same cannot be said for capital spending. Expected tech spending hit a new post-pandemic low while capital expenditure plans likewise returned to the low end of its range.
Fixed Income Weekly — 11/15/23
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.
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Chart of the Day: S&P 500 Nearing New Total Return All-Time Highs
B.I.G. Tips – Fourth Straight Better Than Expected Retail Sales Report
Bespoke’s Morning Lineup – 11/15/23 – Fire Hose of Economic Data
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.
“Anyone with any degree of mental toughness ought to be able to exist without the things they like most for a few months at least.” – Georgia O’Keefe
Below is some introductory commentary of today’s Morning Lineup. Start a two-week trial to Bespoke Premium to get full access.
After yesterday’s monster rally, futures are still in a celebratory mood as futures are higher across the board. Even bitcoin, which sat out Tuesday’s rally is trading up over 1.5%. A slug of economic data was just released, including PPI, Retail Sales, and Empire Manufacturing. In a nutshell, the inflation data was weaker than expected while Retail Sales and Empire Manufacturing were better than expected. Equity futures are little changed in response to the data while treasury yields are modestly higher which is likely due to the stronger Retail Sales report. That being said, as discussed yesterday, with the door closed on further rate hikes, good economic news is actually good market news!
Bulls went a ‘few months’ where equities did nothing but seemingly go down, and by the end of October, you couldn’t have faulted anyone for becoming frustrated with the way things were going in the market. For those who had the toughness to stick it out, they’ve been rewarded in the last two to three weeks as the S&P 500 has rallied over 9% from its lows.
Investors in small-cap stocks have had an even tougher time of it lately, but they had their day yesterday as the Russell 2000 surged 5.44% which was 3.53 percentage points more than the S&P 500’s gain of 1.91%. Since the Russell 2000’s inception in 1979, yesterday was only the 24th day that the index outperformed the S&P 500 by 2.5 percentage points or more in a single day, and in the chart below we have highlighted each of those days with a blue dot.
As shown, there were several of these occurrences coming out of the COVID lows as investors were flush with cash from all the stimulus sloshing around in the US economy, and before that most, but not all of the other occurrences were clustered around the period coming out of the Financial Crisis, around the peak of the dot-com boom, and after the 1987 crash.
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The Closer – CPI and Reaction, Best of Breed – 11/14/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start with a look into the latest CPI data (pages 1 and 2) followed by a look at the market reaction across rates and the dollar (page 3) as well as stocks (page 4). We then show consumer prices based on geography (page 5). We close by debuting our new best of breed basket (page 6).
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