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“I try not to worry about things I can’t do anything about.” – Christopher Walken

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

Sometimes the headlines make you scratch your head. This morning, equity futures are sharply higher with the rally attributed to a Wall Street Journal report that “Trump Tells Aides He’s Willing to End War Without Reopening Hormuz”. As we highlight below, stocks have been following the lead of oil prices at an unprecedented rate over the last several weeks, and if the US just walked away from the Middle East with the Strait still blockaded, energy markets would likely remain incredibly supply-constrained, keeping prices high. The longer prices are high and supplies are limited, the worse it’s going to be for the global economy and ultimately stock prices.

Just today, the national average price of a gallon of gas is above $4 for the first time since 2022, and as shown in the image below, it has increased by more than a dollar in just the last month.

Regardless of the reason, equity futures are up about 1% this morning, treasury yields are lower, and crude oil is slightly higher. Again, higher oil prices in this environment are negative for equity prices, and the gains we are seeing in futures may be nothing more than rebalancing ahead of quarter-end. Gold prices are up over 1%, and Bitcoin has seen a fractional gain.

We’re still in the ‘shoulder season’ for earnings, but it’s a busy day for economic data. At 9:45, we’ll get the Chicago PMI for March, followed by Consumer Confidence and JOLTS at 10 AM. The Chicago PMI and Consumer Confidence reports are both for March, so they will give some of the first reads on how the war has impacted economic and consumer sentiment.

If you want to know the direction of the equity market these days, look at crude oil and go with the opposite. It’s become cliché, but it also hasn’t been truer at any point in at least the last 20 years. Just look at the performance of the SPDR S&P 500 ETF (SPY) compared to the US Oil Fund (USO) over the last six months. The two series have mirrored each other.

USO launched in 2006, and we compared the daily direction of the ETF and SPY for every trading day since its inception. The chart below shows the rolling 50-day total of the number of days that the two ETFs moved in opposite directions on the day. In the most recent 50-trading-day period, when USO zigged, SPY zagged 38 times, or 76% of all trading days. In the ETF’s history, its daily moves have never been more inversely correlated to the direction of SPY. The only other time the number of occurrences even approached current levels was back in August 2008. Ironically, that was also part of the price spike when crude oil first crossed $100, ultimately peaking above $147.

One sector that has felt the pain of higher oil prices is the traditional auto OEMS. Just moving alphabetically down the list, shares of Ford (F) had performed exceptionally well leading up to the war, with shares in a steady uptrend and trading at 52-week highs on the eve of the first missiles being fired. Since then, it’s down 20%.

General Motors (GM) performance leading to the war was also very strong, and even though it wasn’t’ right at 52-week highs, shares were up more than 70% in the prior year. Shares have declined more than 17% from their peak and are down 8% since the war started.

Unlike F and GM, Stellantis (STLA) was already weak leading up to the war and down sharply from its 52-week highs. Since then, it’s only got worse as shares are down 17% this month.

When you think of car stocks, Winnebago (WGO) may not be the first stock that comes to mind, but boy, is it ever exposed to higher gas prices. Right before the war, the stock was right at 52-week highs, perhaps on optimism that many Americans would take road trips to celebrate America turning 250. A month later, with gas prices at $4 per gallon nationwide, and suddenly that 10-mile-per-gallon gas guzzler doesn’t seem nearly as good an idea.

While traditional car companies with a focus on internal combustion engines have had a rough March, what about EV companies? Well, RIVN hasn’t rallied this month, but in this market, a decline of 1% is basically a win.

Until gas prices at the very least stop going up as quickly as they have, it’s going to be hard for these traditional auto stocks to get out of their own way.

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.

“The circumstances of the world are so variable that an irrevocable purpose or opinion is almost synonymous with a foolish one.” William H. Seward

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

After a rough finish to the week for bulls last Thursday and Friday, futures are looking to rally this morning after the President posted that “The United States of America is in serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran. Great progress has been made.”

As optimistic as those statements are, the President has made a habit of making positive early-week comments to try and soothe the market. It’s become so predictable that the Speaker of Iran’s Parliament posted on X last night that “ Pre-market so-called “news” or “Truth” is often just a setup for profit-taking. Basically, it’s a reverse indicator. Do the opposite: If they pump it, short it. If they dump it, go long.” So that’s where we are now.

Regardless of the investment advice from Iran, futures remain positive with the S&P 500 and Nasdaq both indicated to open up 0.6%, even as crude oil is higher (but off the overnight peak). Treasury yields are also sharply lower as the 10-year yield dips down to 4.37% from 4.44% last Friday. Gold prices are also 1.4% higher, and both moves could be taken as a sign that investors are becoming more aware of potential recessionary risks if the war drags on.

In economic data today, the Dallas Fed Manufacturing is the only report on the calendar, and economists expect a modest rebound from last month’s modestly positive report.

US futures may be higher this morning, but it was a rough night in Asia, with the only green shoot being China, where the Shanghai Composite eked out a 0.2% gain. Other indices in the region were all down roughly 1% or more, with the steepest declines coming in South Korea (-3.0%) and Japan (-2.8%).  The yen briefly slumped to its lowest level versus the dollar in nearly two years, but rebounded to finish off its lows of the day after BoJ officials hinted that intervention could be on the way.

European equities are in a more jovial mood this morning as the STOXX 600 trades up 0.4% in the early going, while the FTSE 100 leads the region with a gain of 0.9%, but the rally has been broad with every major benchmark in positive territory, at least for now.

The S&P 500 traded down another 2.1% last week, extending its weekly losing streak to five and taking the total decline over this period to 7.8%. After breaking below its 200-day moving average the week before last, the intensity of selling picked up steam last week, taking the S&P 500 down to the lowest level since August 7. For anyone who argued that the market had gotten ahead of itself and needed a rest late last year, you got what you wanted. Despite all the weakness, though, the S&P 500 is still more than 30% above its intraday tariff-tantrum low from last April.

The current five-week losing streak in the S&P 500 ranks as the first such streak for the index in nearly four years (May 2022) and the 30th such streak since 1953, when the five-day trading week in its current form started in late 1952.  With a decline of 7.8% during the last five weeks, the current decline has been less than the average of 8.4% for all streaks since 1952. The deepest decline was 17.5% in June 1962, while the mildest was in July 2004 when the S&P 500 declined just 3.1%.

The long-term chart of the S&P 500 below shows when each prior streak occurred with a red dot. It’s interesting to see in the chart how these streaks were relatively common for much of the period from the early 1950s up through the Financial Crisis. Since the end of 2008, though, there have only been two other streaks in the last 17 years. Finally, in terms of whether these types of streaks represent buying opportunities or not, a look at the chart shows an inconclusive picture. Some of these streaks marked short-term lows for the market, but several others occurred right in the middle of longer-term downtrends.