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“The best argument against democracy is a five-minute conversation with the average voter.” – Winston Churchill

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

The rally continues to roll this morning as positive earnings from Netflix (NFLX) and ASML drag the rest of the market up along with it. Even with the positive tone from NFLX, there are several high-profile duds this morning as DuPont (DD), Kimberly Clark (KMB), and Texas Instruments (TXN) are all down either in reaction to earnings or due to lowered guidance. Besides the earnings news, China cut interest rates by 50 bps in a somewhat surprising move.

In terms of economic data, PMI Manufacturing readings out of major European countries topped estimates even as they remain in contraction territory. Here in the US, mortgage applications increased 3.7% last week, and we’ll get flash PMI readings for the Manufacturing and the Services sector later this morning.

Following yesterday’s gain, the S&P 500 has risen in each of the last four trading days notching three all-time closing highs in the process. The index is now up 2% YTD, in what has been a rally driven by Technology and Communication Services which are both up over 5% YTD. Besides those two sectors, Health Care is the only other one outperforming the market. On the downside, six sectors are lower YTD, and five of them are down at least 2% on the year. It’s somewhat interesting to note that of the eleven sectors, the only two that are up or down less than 1% are Consumer Staples (+0.75%) and Industrials (-0.63%).

There’s quite a bit of disparity in sector performance among large caps, but in the small-cap space, performance is more uniform, but unfortunately, it’s to the downside. The S&P 600 is down 2.3% YTD and all but three sectors are down at least 2%, including Energy (-6.2%), Utilities (-4.2%), and Consumer Discretionary (-3.3%).

The lower chart shows the YTD performance spread between large-cap sectors and their small-cap peers. Sectors where there has been the largest disparity in favor of large caps are Communications Services and Technology. These are also the two sectors that have the largest concentration of mega-caps, and that illustrates how even within the large-cap space, performance is centered towards the companies with the largest market caps. While large caps have largely outperformed small caps YTD, there have been a couple of exceptions. As shown in the chart, in both the Real Estate and Materials sectors large caps have underperformed their smaller-cap peers.

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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 more they actually know, the less confident they become.” – Charles Dow

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

It’s been a very quiet morning in the futures market as the Dow is indicated to open higher by less than 20 points while the S&P 500 is expected to gain less than three points.  The Nasdaq is looking stronger, as it has all year, and is currently looking at a gain of 45 points. Europe has been just as quiet as things here in the US are as most major averages in the region are up or down less than five basis points (bps). The economic calendar is quiet again this morning as the Richmond Fed Manufacturing survey is the only report on the calendar.

On the earnings front, the pace of reports has picked up this morning with several Dow components reporting (discussed in the commentary section of this morning’s report), and after the close, we’ll hear from Baker Hughes (BKR), Intuitive Surgical (ISRG), Netflix (NFLX), Steel Dynamics (STLD), and Texas Instruments (TXN).

Just 40 days after crossing 37,000 for the first time in the first half of December, the Dow Jones Industrial Average, “America’s stock market index” never looked back and crossed 38,000 yesterday for the first time. The path from 37,000 to 38,000 was certainly smoother than the run from 36,000 to 37,000 which took almost 20 times longer than the latest 1,000-point run.  Even though the run from 36,000 to 37,000 was a move of less than 3%, it was the longest period between 1,000-point thresholds since the 2,119-day gap between 14,000 and 15,000 (a move of over 7%) and the sixth longest ever. Meanwhile, this latest 1,000-point move was the eighth fastest. Lastly, while it’s entirely possible and even likely that the DJIA will at some point pullback below 37,000, at this point the only other 1,000-point threshold that has never been crossed to the downside is Dow 5,000.

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