Chart of the Day – An Unfamiliar Position for European Stocks
Bespoke’s Morning Lineup – 3/8/23 – Powell, Round Two
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“Impossible is not a fact. It’s an opinion.” – Muhammad Ali
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.
After modest gains overnight and earlier this morning, futures have slipped modestly into the red following yesterday’s Powell-induced decline. While past declines in response to Powell’s comments have sometimes been justified due to seemingly abrupt changes in policy, moving targets, and/or inconsistencies in his remarks, yesterday’s testimony in front of the Senate contained essentially nothing Fed officials haven’t been saying for the last several weeks, so either the markets didn’t believe what they were hearing for the last month or yesterday was an overreaction.
Markets in Europe are modestly lower at the moment in a follow-through from yesterday and more hawkish commentary from an ECB official who noted that the bank will continue hiking rates for a period of time after the March meeting. These comments came as Q4 GDP was weaker than expected, and German Retail Sales unexpectedly declined.
Speaking of Europe, while its economy has been lagging behind the US, stocks in the region have continued their recent outperformance of stocks here in the US. The first chart below shows the performance of the FTSE Europe ETF (VGK). After a sharp rally off its October lows, VGK has been in a sideways range for most of 2023 but has still managed to trade within a close range of its 52-week high. After yesterday’s decline, in fact, VGK was just 7% from a 52-week high.
US stocks, meanwhile, have been much weaker. While the rally in VGK took it back near its highs from last Spring, the rally in the S&P 500 ETF (SPY) barely even took it back above its December highs let alone the peaks from August and April. After yesterday’s decline, SPY was twice as far below its 52-week high (-14%) as VGK.
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Daily Sector Snapshot — 3/7/23
The Closer – Powell Surprises Congress – 3/7/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with commentary on Fed Chair Powell’s hawkish surprise on Capitol Hill (page 1) and the subsequent market reaction including how 2 year yields topped 5% and the 2s10s curve reached the most inverted level since 1981 (page 2). We then pivot over to look at the latest consumer credit numbers (page 3) followed by a rundown of today’s 3 year note auction (page 4). We finish with an update of the latest supply chain data (pages 5 – 7).
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Chart of the Day – Most Inverted Since 1981
Bespoke Stock Scores — 3/7/23
Fedspeak Review as Powell Goes to Capitol Hill
Fed Chair Powell’s testimony on Capitol Hill over the next couple of days will be the main focus of the market, and with perceived hawkish commentary today, things don’t appear to be off to a good start. As Chair Powell highlighted, stronger-than-expected economic and inflation data has lifted expectations for interest rates which has resulted in the S&P 500 erasing earlier gains and trading down 1% on the session as of late morning.
Using data from our Fedspeak Monitor, in the chart below we show the historical average performance of the S&P 500 on days in which there is Fedspeak going back to 2018 when Powell took over as Chair (that only looks at actual Fed speakers and excludes any reports like the Beige Book, FOMC Meetings, and Meeting Minute releases which we also cover in our Fedspeak Monitor). As might be expected, hawkish commentary generally tends to be received poorly by the market with the S&P falling an average of 7.5 bps on those days compared to a 9.2 bps gain on days with dovish commentary. As for times when the speaker is Chair Powell, a hawkish tone tends to see the S&P 500 react with a decline, however, the 5.8 bps drop is smaller than the norm. That contrasts with Powell’s dovish commentary having been far more well-received by the market. More broadly, and perhaps more surprisingly, any time an active voting member of the FOMC is the speaker the average move in the S&P 500 tends to be smaller in magnitude than when it is a non-voter speaker regardless of whether the tones are hawkish or dovish. ratesd Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 3/7/23 – Powell Takes the Mound
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“Observation is a dying art.” – Stanley Kubrick
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.
It’s been a wild ride for natural gas over the last two trading days. After an 8% rally Friday, natural gas plunged more than 14% on Monday for its largest one-day decline since June 30th and its 15th worst day since 1990. 2023 is barely more than two months old, but yesterday’s decline was the 5th time this year that natural gas had a single-day move (up or down) of 10%+, and that follows last year when there were a record 18 daily 10%+ moves. If the pace of volatility that natural gas has seen so far this year were to continue for the remainder of the year, there would be 28 single-day moves of 10%+. For some perspective, before last year there were just three years (1996, 2001, and 2009) where natural gas experienced ten or more single-day moves of 10%+.
The record volatility of natural gas can be further illustrated by looking at the commodity’s average daily move over a rolling 200-trading day period. Before 2022, the average daily percentage move in natural gas prices never exceeded 3.8% and from 2012 right up until COVID, the average daily move never exceeded 2.6%. Covid and the war in Ukraine changed all that, and nowadays, on any given day, a daily move of 4.6% in natural gas has become the norm as this degree of volatility in the commodity has never been experienced before.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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The Closer – Record Collapse For Gas, Coal Plant Closures, Minerals, Onshoring – 3/6/23
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a decile breakdown of Russell 1,000 stocks in today’s session (page 1) followed by some commentary on natural gas’s worst day in history (page 1). We then turn over to a look US electrical capacity (page 2) and EV battery inputs (page 3). We then show the latest data on Mexican fixed investment (page 4) before closing with a preview of this week’s Treasury auctions (page 5) and the latest mortgage delinquency data (page 6).
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