Bespoke’s Morning Lineup – 10/18/22 – Back to Back 500s
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“Though I am often in the depths of misery, there is still calmness, pure harmony and music inside me.” – Vincent Van Gogh
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.
Stock futures are pointing sharply higher for the second day in a row this morning. While there are no specific catalysts, better-than-expected earnings against a backdrop of extremely oversold markets provide fuel for at least a short-term rally. Sentiment towards the market has been very negative as well. The latest example is the BofA Fund Manager Survey which showed the highest allocations to cash since 2001. Despite the rally in stocks, bonds are behaving as Treasury yields are modestly lower. In the commodities space, crude oil is little changed while gold is down modestly.
In the stock market lately, it’s either the end of the world or the beginning of a new bull market. In yesterday’s rally, the S&P 500’s net advance/decline (A/D) reading came in at +455 which followed a reading of negative -442 on Friday and +438 Thursday. With futures up nearly 2% this morning, it’s looking like another positive day of everything coming up roses (for now). We classify any day where the S&P 500’s net A/D reading is above positive 400 or below minus 400 as an all-or-nothing day. In the 1990s, all-or-nothing days were generally uncommon. There were seven years in the decade where there wasn’t more than one occurrence in an entire calendar year, and there were three with none.
As ETFs became more popular at the turn of the century allowing investors to buy or sell every stock in the index with one trade, the frequency of all-or-nothing days really picked up and peaked during the Financial Crisis when there were four straight years with more than 45. With all-or-nothing days occurring at a much more regular frequency in the last several weeks (and especially days), 2022 is giving some of those years from the Financial Crisis a run for their money. After three straight occurrences in a row (matching the total for all of 2017), the S&P 500 has now had 38 all-or-nothing days this year, putting 2022 on pace for 48. At that rate, this year would rank tied for third with 2010 trailing only 2011’s total of 70 and 2008’s total of 52.
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 – Global Rates Shock, Shrinking Balance Sheets, Decile Analysis – 10/17/22
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out tonight with a check up on crude markets, followed by a check in on the return of various Treasuries (page 1). We then dive into the rise in policy rates globally (page 2) and how central bank balance sheets look (page 3). We follow up with a decile breakdown of today’s price action (page 4), a preview of this week’s Treasury auctions (page 5), and finally a review of last week’s positioning data (pages 6 – 8).
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Daily Sector Snapshot — 10/17/22
Flip Flopping Like a Politician
With Thursday’s 2%+ rally, followed by Friday’s 2%+ decline, and now today’s 2%+ rally, the S&P 500 tracking ETF (SPY) has now rallied or declined 2%+ for the third straight day. Since SPY’s inception in the early 1990s, the current streak is the 26th time that the ETF has been up or down 2%+ for three straight days (and the second this year). Of those 25 prior streaks, eleven extended to a fourth day, so while 2% moves aren’t especially common (less than 8% of all trading days), when SPY has 2%+ daily moves for three straight days, there has been a 2%+ move the following day 44% of the time. There’s a saying in markets that strength begets strength; a corollary to that phrase would be volatility breeds more volatility. Of the five streaks that lasted at least five trading days, one was in July 2002, three were in 2008 (September, October, and December), and the most recent, which ended up being the longest on record was in March 2020.
While we’ve experienced a short burst of volatility in the last few days, SPY’s average daily move recently hasn’t been particularly extreme. Over the last 50 trading days, SPY has averaged a daily move of +/-1.25%, which while well off its lows from early September, is still well below the levels seen back in June. For all the talk about why the VIX hasn’t seen a major spike, one big reason is that we have yet to see a meaningful uptick in day-to-day volatility. Click here to learn more about Bespoke’s premium stock market research service.
B.I.G. Tips – Extreme After Hours Weakness
Chart of the Day – First Hour Surges
Bespoke’s Morning Lineup – 10/17/22 – Maximum Indecision
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.
“There is no more miserable human being than one in whom nothing is habitual but indecision.” – William James
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.
A move by UK finance minister Jeremy Hunt to reverse most of the provisions of his predecessor’s ‘mini-budget’ have global equities and bond prices rallying this morning after Friday’s disappointing negative reversal. No major headlines out of China (good or bad) coming out of the country’s national party congress has also helped to contribute to the positive tone. So far, there hasn’t been much in the way of earnings flow, but earnings from Bank of America (BAC) were better than expected and the stock is trading up a bit more than the broader market. The only economic report of the day was Empire Manufacturing, and that report was weaker than expected coming in at -9.3 versus forecasts for a reading of -1.0. Given the massive swings of the last several days, what do you think an average investor’s confidence level is that the gains hold throughout the day?
For all the fireworks of the last two trading days, neither bulls nor bears really have much to show for it. On Wednesday, the S&P 500 closed at 3,577; by the week’s end, the S&P 500 was just six points higher at 3,583. In between those six points, though, there were some historic swings in equity prices. On Thursday, the S&P 500 gapped down over 2% but then quickly erased those losses before noon and kept rallying throughout the afternoon to finish up over 2.5%. On Friday, it looked as though bulls were going to get some follow-through as the S&P 500 rallied more than 1% in early trading. The positive momentum was fleeting, though, and within an hour of the highs, all the gains were erased, and by the end of the day, equities shed another 2.4% erasing nearly all of the prior day’s gains. In the span of two days, the S&P 500 had two extremely rare reversals in completely opposite directions.
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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Bespoke Brunch Reads: 10/16/22
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Billionaire Whimsy
Elon Musk Has the World’s Strangest Social Calendar by Joseph Bernstein (NYT)
A categorization of the strange and fragmented social life enjoyed – or perhaps, not enjoyed – by the Tesla CEO, who hops from one fragmentary encounter to the next across a sea of private jet flights, galas, and VIP lounges. [Link; soft paywall]
‘I Am Energy’: Inside the Bang Billionaire’s Reeling Empire by Anders Melin (Bloomberg)
A heartrate-popping profile of an energy drink company taking on the giants of the industry fueled by the mashup of hype, energy, and shady dealings that scream “Florida” from top to bottom. [Link; soft paywall]
China
World Bank Cuts China Growth Forecast as Covid-19, Real-Estate Crunch Take Toll by Jason Douglas (WSJ)
The combination of collapsing property activity and restrictions on activity related to COVID-19 are suppressing Chinese growth that is also hampered by Fed tightening. [Link; paywall]
Ocean plastics: How much do rich countries contribute by shipping their waste overseas? by Hannah Ritchie (Our World In Data)
A ban on imports of plastic waste to China has helped push down global plastics trade volumes dramatically, helping to reduce the volume of plastic being transported by sea and therefore plastic waste that makes it in to oceans. [Link]
Labor Relations
Exxon’s Exodus: Employees Have Finally Had Enough of Its Toxic Culture by Kevin Crowley (Bloomberg)
A revealing narrative that illustrates how pressure on companies to decarbonize or behave more ethically often comes internally, rather than externally from investors following the precepts of ESG investing. [Link; soft paywall]
Medical Marvels
Human hibernation is a real possibility – this is how it might work by Alex Wilkins (NewScientist)
Our ancient ancestors may have hibernated, a common survival strategy among mammals. Dormant brain paths may be the key to recovering that ability which has since been lost. [Link; paywall]
How a Diabetes Drug Became the Talk of Hollywood, Tech and the Hamptons by Sara Ashley O’Brien (WSJ)
A drug meant to help manage Type 2 diabetes is being used off-label for weight loss; another drug that uses a similar active ingredient is approved for weight loss among those with clinical weight management challenges. [Link; paywall]
Policy
Biden Proposal Could Lead to Employee Status for Gig Workers by Noam Scheiber (NYT)
A proposed rulemaking by the Labor Department would create a test to determine whether gig workers are employees or contractors, opening up a potential requirement to pay benefits and minimum wages at scale. [Link; soft paywall]
It’s Official: The Fed’s in the Red by Tracy Alloway (Bloomberg)
Rising payouts of interest amidst a stable yield on portfolio securities mean the Federal Reserve is now recording operating losses on a weekly basis. [Link; soft paywall]
How California’s Bullet Train Went Off the Rails by Ralph Vartabedian (NYT)
Good old fashioned corruption turned a laudable effort at building a high speed rail link into a boondoggle of historic proportions. [Link; soft paywall]
Astrophysics
Black Hole Pukes Up Star Years After Eating It by Isaac Schultz (Gizmodo)
After gobbling down a star three years ago, a black hole spit back up material at half the speed of light. Scientists are trying to understand why. [Link]
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Have a great weekend!
The Bespoke Report — Equity Risk Gauge
This week’s Bespoke Report newsletter is now available for members.
In this week’s newsletter, we highlight some absolutely crazy market stats from the last few trading days and then introduce a new “equity market risk gauge” that clients can use to quickly understand our overall market view using eight key components.
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