Homebuilders Breaking Out Like It’s…
It’s hard to get over how well the homebuilder stocks have been performing lately. As shown in the charts below of stocks in the S&P 1500 Homebuilder group, these names are nearly universally in steep six-month uptrends and breaking out as we type.
Below is another way to see just how crazy the run has been for the S&P 1500 Homebuilder stocks lately. Most names are now up 30-40% year-to-date after rallying 5-10% over the last week. This has pushed them ~10% above their 50-DMAs, and many are trading more than two (or even three for some) standard deviations above their 50-DMAs in extreme overbought territory.
“Mr. Market” has either lost its mind or it’s predicting that all the current worries about housing in the months and quarters ahead are misguided.
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The Closer – Claims Surge, Bad Data Day, 5y TIPS – 4/20/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a review of the latest earnings including the massive drop in AT&T (T) (page 1). We then dive into an income breakdown of unemployment benefits (page 2) and Fed liquidity (page 3). Afterward, we provide an update of our Five Fed Composite (page 4), existing home sales (page 5), leading indicators (page 6), and the 5 year TIPS auction (page 7).
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Bespoke’s Weekly Sector Snapshot — 4/20/23
The Bespoke 50 Growth Stocks — 4/20/23
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were no changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
To see all 50 stocks that currently make up the Bespoke 50, simply start a two-week trial to Bespoke Premium or Bespoke Institutional.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Chart of the Day: Analysts Slightly Less Bullish
Jobless Claims Nearing New Highs
Jobless claims have continued to weaken with this week’s release, rising by 5K to 245K versus expectations of no change from last week’s upwardly revised 240K print. At current levels, claims sit at the high end of the range since the start of 2022 and only a couple thousand below last month’s high.
Prior to seasonal adjustment, claims have essentially come in right inline with the reading for the same week last year and the few years prior to the pandemic. As shown in the second chart below, claims tend to experience a little bit of a bounce around this point of the year before resuming a move lower through the late spring.
Continuing claims were equally disappointing this week rising to 1.865 million, 40K above expectations. Although the increase to initial claims has not resulted in a new high, the 61K increase for continuing claims leaves the indicator at the highest level since late November 2021.
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Bulls Keep Coming Back
The S&P 500 has been little changed in the past week resulting in little change to sentiment according to the latest AAII survey. 27.2% of respondents reported as bullish this week, up 1.1 percentage points versus the previous week. Albeit higher, that does not result in any sort of new high as bullish sentiment sits right in the middle of the past year’s range
Bearish sentiment likewise picked up this week rising from 34.5% to 35.1%. That is only the highest level in three weeks as bearish sentiment remains relatively muted versus the significantly elevated readings of the past year.
With that said, sentiment continued to favor bearishness with the bull-bear spread sitting at -7.9. This week marks the ninth in a row in which bearish sentiment outweighed bullish sentiment.
Given both bullish and bearish readings rose, each group borrowed from the neutral pool which pivoted off of a recent high of 39.5% down to a still elevated 37.7%.
Factoring in other sentiment surveys, there was more bullish tones. The NAAIM Exposure index indicated active managers added long exposure to equities and the Investors Intelligence survey showed the highest bull-bear spread since the first week of 2022. That leaves the AAII survey as the only one of the three with sentiment readings that are more bearish than historically normal.
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Bespoke’s Morning Lineup – 4/20/23 – Claims High, Philly Blunted
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“Computers are magnificent tools for the realization of our dreams, but no machine can replace the human spark of spirit, compassion, love, and understanding.” – Lou Gerstner
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
There was nothing especially insightful or controversial about the above quote from Lou Gerstner, former Chairman and CEO of IBM, when he made it years ago, and it has been applicable for the entire history of computers – that is until now. With the rise of AI tools, whether computers have sentience has become a topic of debate, and as the technology improves, those on the side that believes computers can in fact express compassion, love, and understanding will only grow.
You can ponder what computers with feelings will mean for mankind later (maybe, if you observe, as you celebrate 4/20 day later on), but for now, we have the thick of earnings season to deal with, and this morning, investors aren’t particularly pleased with what they see. The major driver of market weakness this morning is Tesla (TSLA) which is down over 7% after reporting weaker-than-expected margins.
Outside of TSLA yesterday, most earnings reports after the close were better than expected with three-quarters of companies reporting topping EPS forecasts. This morning has been another story, though, as only half of the companies reporting have beat estimates on the bottom line. One trend that could be weighing on markets this morning is guidance. Since yesterday’s close, eight companies have lowered guidance while just two (Calix Networks and D.R. Horton) have managed to raise guidance. It’s only a one-day snapshot, but if it becomes a more persistent trend, it would be a cautionary sign for the economy.
Economic data just released showed that jobless claims came in higher than expected on both an initial and continuing basis, and both are either at or near 52-week highs. The Philly Fed report on manufacturing also came in much weaker than expected and fell to a post-Covid low. Not only that but Prices Paid also dropped sharply falling to its lowest level since June 2020 while Prices Received actually went negative for the first time since May 2020. Later on, we’ll get updates on Existing Home Sales and Leading Indicators.
Related to the broader economy, crude oil just can’t seem to trade and stay above $80 per barrel. Earlier this month, it looked like crude would finally get the push it needed to get there when OPEC+ announced its surprise production cut. In immediate response to that news, prices spiked from the mid $70 to above $80 per barrel, but then completely stalled and traded in a sideways range through the Easter holiday. The fact that there was no follow-through to the announcement was a warning sign.
After Easter, prices traded to build on their gains from earlier in the month, but any upside was completely squashed at the 200-day moving average (DMA) this week. Yesterday, crude oil traded back down below $80 per barrel, and this morning, it is trading down even further and within a dollar of its 50-DMA. The fact that prices can’t catch and hold on to a bid for more than a few days doesn’t say much for the fundamental backdrop of crude.
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The Closer – EV Margin Pressure, Diesel Compression – 4/19/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients,we begin with a review of the latest earnings (page 1) followed by an update of our quantitative look at the Beige Book (page 2). We then switch to a review of the latest EIA petroleum stockpile data (page 3) and crack spreads (page 4). We finish with a recap of the 20 year bond reopening (page 5).
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