Bespoke Morning Lineup — 1/17/25
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“You may delay, but time will not.” – Benjamin Franklin
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Late last week and early this week we noted how extended the yield on the 10-year Treasury had gotten, and since then we’ve gotten a few cooler-than-expected inflation prints that finally caused the 10-year yield to not only stop going up, but also start pulling back. The pullback in yields has coincided with a rally in equities, but the bulls still have work to do. Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) have made a series of lower highs and lower lows since early December, and we’ve yet to see a break of that trend on the most recent bounce. As shown below, SPY has yet to get back above its 50-DMA and is sitting right below the top of its short-term downtrend channel. QQQ traded above its 50-DMA yesterday morning but pulled back intraday right when it touched the top of its own downtrend channel.
For both SPY and QQQ, one day of solid gains that hold into the close would break the recent downtrend, so we’ll see if the bulls have it in them today.
The Closer – Hearings, Rates, Remodeling – 1/16/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we kick off with some commentary regarding topics covered at today’s Senate hearing for Scott Bessent’s appointment for Treasury Secretary (pages 1 and 2). We then update our Five Fed Manufacturing Composite and discuss the moves in rates (page 3) before closing with a note on home remodeling data (page 4).
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Bespoke’s Weekly Sector Snapshot — 1/16/25
B.I.G. Tips – Retail Sales Mixed
Homebuilder Sentiment Improves and a Death Cross Nears
One of the later data releases this morning was homebuilder sentiment from the NAHB. The NAHB’s Housing Market Index was expected to come in slightly weaker versus last month, falling to 45 versus 46 in December. Instead, it rose one point, which marks the highest reading since April.
At current levels, homebuilder sentiment is basically in the middle of the past three years range, but that also ranks only in the 31st percentile of all months in the index’s 40 years of history. This month’s improvement in the headline number came on increases in both present sales and traffic. But countering that was future sales plummeting six points to a three-month low.
Below we show the spread between future and present sales indices. In December, that spread surged to the highest level on record, meaning it was a historically optimistic outlook from homebuilders contrary to what was being reported for present sales. The inverse moves this month marks a reversal in that spread, although it is still at one of the highest levels in over a decade.
Geographically, homebuilder sentiment was mixed in January with declines in the South and Midwest countered by an increase in the West and a big jump in the Northeast. As shown below, sentiment is currently the highest in the Northeast. In fact, that index is now at the most elevated level since May 2022. That compares to other regions in which current readings are more middling versus recent years’ readings.
Turning over to homebuilder stocks, the group proxied by the iShares Home Construction ETF (ITB) had opened lower and hit intraday lows right before the NAHB report was released, but the stronger than expected reading has sent shares higher as it is now up 0.23% on the day. Albeit ITB is up today, that is only putting a small dent in what has been a dramatic drop recently.
As shown below, the ETF was hit hard during the recent run up in rates over the past two months and at points was trading at historically oversold levels. The first of homebuilder earnings earlier this week offered some respite as KB Homes (KBH) reported a top and bottom line beat after the closing bell Monday (we also covered the company’s conference call in one of our latest Conference Call Recaps). The stock is up over 7% since reporting and the broader group using ITB is up a similar degree in that time. With that said, recent declines have done their damage. The 200-DMA has begun to roll over and the 50-DMA has already been falling sharply. Currently, ITB’s 50-DMA is only 36 bps above that longer term 200-day moving average, putting the ETF on watch for its first death cross since March 2022.
The homebuilders are a rate sensitive area, meaning price action recently and in the near future is likely to be heavily impacted by where rates go. With that said, earnings are also always a catalyst. Below we show a snapshot of our Earnings Explorer and the next S&P 1500 Homebuilder stocks scheduled to report. As shown, these names have generally seen positive price action on earnings and for three of the five, guidance has impressively been raised over 10% of the time historically with solid EPS and sales beat rates to boot.
Q4 2024 Earnings Conference Call Recaps: UnitedHealth (UNH)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers UnitedHealth’s (UNH) Q4 2024 earnings call.
UnitedHealth (UNH) is the largest healthcare company by market cap, serving over 150 million people worldwide through its two main divisions: UnitedHealthcare, providing health benefits, and Optum, focusing on health services like pharmacy benefit management, care delivery, and health technology. Key topics on this quarter’s earnings call to wrap up 2024 included Medicare Advantage, where strong retention and growth in managed offerings positioned the company to add 800,000 members in 2025. Digital engagement soared, with app visits up 66% YoY, reflecting consumer demand for seamless healthcare. OptumRx reported $130 billion in revenue, passing 98% of drug rebates to clients, with full transparency commitments by 2028. Regulatory impacts, including CMS (Centers for Medicare & Medicaid Services) rate cuts and IRA-related drug pricing pressures, weighed on margins, but AI-driven efficiency gains began yielding results. UNH highlighted the need for systemic reforms following the murder of Brian Thompson in New York City, citing US healthcare’s reliance on high pricing versus utilization as a cost driver. UNH missed on the top line but beat EPS estimates as the stock bell around 5% on 1/16…
Continue reading our Conference Call Recap for UNH by becoming a Bespoke Institutional subscriber. You can sign up for Bespoke Institutional now and receive a 14-day trial to read our newest Conference Call Recap. To sign up, choose either the monthly or annual checkout link below:
Chart of the Day: Wall Street Earnings
Q4 2024 Earnings Conference Call Recaps: Taiwan Semiconductor (TSM)
Bespoke’s Conference Call Recaps use AI to summarize lengthy earnings calls. The commentary below is AI-generated and then edited by Bespoke for quality control. As always, none of these summaries should be construed as recommendations to buy or sell any securities, and investors should do their own research and/or consult with a financial professional before making any investment decisions.
Our latest recap available to Bespoke subscribers covers Taiwan Semiconductor’s (TSM) Q4 2024 earnings call.
Taiwan Semiconductor (TSM) is the world’s largest and most advanced contract chip manufacturer, producing semiconductors for tech giants like Apple, NVIDIA, and AMD. Specializing in cutting-edge process technologies such as 3nm and 5nm nodes, TSM is a major player in AI, 5G, high-performance computing (HPC), and automotive industries. To finish 2024, TSM reported an earnings triple play, and management noted strong demand for its 3nm and 5nm technologies, with 3nm accounting for 26% of wafer revenue. Total revenue rose 14.3% sequentially, with HPC and smartphone platforms up 19% and 17%, respectively. AI-related revenue tripled in 2024 and is projected to double in 2025, with AI accelerators forecast to grow at a 40% CAGR over five years. Despite inflationary pressures and overseas fab ramp-up costs, the company plans $38-42 billion in capex for 2025, focusing on advanced technologies. Geopolitical shifts, including US export restrictions on AI chips, were noted as manageable. Expansion efforts in the US, Japan, and Europe highlight TSM’s growing global footprint. On the earnings triple play, TSM shares were up around 4.5% on Thursday morning, 1/16, which puts the stock up more than 110% over the last 52 weeks…
Continue reading our Conference Call Recap for TSM by becoming a Bespoke Institutional subscriber. You can sign up for Bespoke Institutional now and receive a 14-day trial to read our newest Conference Call Recap. To sign up, choose either the monthly or annual checkout link below:
Bespoke’s Morning Lineup – 1/16/25 – More 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.
“Mothers are often fondest of the child which has caused them the greatest pain.” ― Victor Hugo, The Hunchback of Notre-Dame
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
With the major inflation reports behind us, today’s pre-market session is much more muted than yesterday. S&P 500 futures are basically flat, while the Nasdaq is indicated to open modestly higher. The biggest of the inflation reports for the week may be behind us, but there’s still plenty of data on the calendar today with the Philly Fed, Retail Sales, Import Prices, and jobless claims all at 8:30 while homebuilder sentiment will hit the tape at 10 AM.
Retail Sales came in modestly weaker than expected, and jobless claims came in modestly higher than forecasts. Unfortunately Import Prices unexpectedly increase rising by 0.1%. But the big surprise was in the regional Philly Fed Manufacturing report which came in at +44.3 versus expectations for a reading of -5.0. That was the biggest beat relative to expectations in that report since at least 1998. The market reaction to all the data has been minimal as S&P 500 futures remain little changed.
Bulls couldn’t have asked for a better way to kick off the first ‘real’ day of earnings seasons as the major financials kicked things off with a bang. Of the six major financials reporting, all six rallied on the day, and all but JP Morgan Chase was up over 5%!
With an average daily gain of 5.74% yesterday, the six financials that reported yesterday had their best average earnings day reaction performance of any quarter since at least the financial crisis. These companies don’t always report on the same day, so it’s not entirely an apples-to-apples comparison. Still, it illustrates how strong the reactions to these earnings reports were yesterday (even if a softer-than-expected CPI report helped to goose the returns).
The Closer – Beige Book, CPI, Rates & Rotation – 1/15/25
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a quantitative look at the Beige Book (page 1) followed by a dive into the CPI data (pages 2 and 3). We then look at the subsequent reaction in markets including the sharp drop in rates (page 4) and which areas of equities saw the biggest gains (page 5). We close out with a rundown of the latest EIA data (page 6).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!