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.

“Being an intellectual creates a lot of questions and no answers.” – Janis Joplin

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

Call it the calm before the jobs storm, but equity futures have drifted into positive territory as we approach the September non-farm payrolls report. A tentative agreement on the port strike has also helped sentiment.  In Asia, Chinese markets remain closed for the National Holiday, but the Hang Seng was open, and it rallied another 2.8% taking its weekly gain to 10.2%. Hong Kong’s Manufacturing PMI for September ticked up to 50.0% from 49.4 in August, so that helped investor sentiment heading into the weekend. The Nikkei gained a more modest 0.2% in Japan and finished the week down 3%. India finished the day down 1.0% as the September Services PMI fell more than expected to 57.7 from 60.9 in August.

In Europe this morning, the tone is mostly positive as markets look to end a negative week (STOXX 600 down over 2%) on a positive note. While French Industrial Production came in higher than expected (1.4% vs 0.3% forecast), Retail Sales in Italy and Spanish Industrial Production unexpectedly declined.

For a Federal Reserve that is more concerned about the job market than inflation, it feels as though this morning’s employment report hasn’t had quite the buildup of other reports in the past. Be that as it may, history would suggest a weak report. As shown in the chart below, since 1998, the September change in non-farm payrolls (reported in early October) has consistently come in weaker than expected. Of the 26 prior reports, the initial headline reading has missed expectations nearly 70% of the time, and the median spread relative to expectations has been a miss of 47K.

With economists expecting a headline reading of 150K, history would suggest a possibility of a sub-100K number. That would be just the second such reading since the start of 2021 and the last three months! So does that mean a weaker-than-expected print is in the bag?  Nothing is ever that easy, and while the September report has historically been weak, last year’s initially reported number was the biggest beat relative to expectations since at least 1998 (although it was ultimately revised down by 90K in the ensuing months).

It has been over two weeks since the Fed cut rates, so we wanted to step back and see how various asset classes and market sectors have performed.  Starting with asset classes, commodities have been the biggest winners with gold up over 4% and crude oil rallying 3.8%. After that, the Nasdaq, US Dollar Index, Bitcoin, and the S&P 500 have rallied between 1% and 2%.  Lastly, on the downside, US Treasuries and the Russell 2000 have declined.

At the sector level, given the surge in oil prices, the Energy sector has been the top-performing sector with a gain of over 6%.  Communication Services and Utilities have followed with a rally of over 3.5%. No matter what the environment has been this year, it seems there’s no stopping the Utilities sector.  On the downside, Consumer Staples, Health Care, and Real Estate have all declined over 2%  as interest rate-sensitive sectors (besides Utilities) have felt the pressure of rising rates.

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 corporate grip on opinion in the United States is one of the wonders of the Western world. No First World country has ever managed to eliminate so entirely from its media all objectivity—much less dissent.” – Gore Vidal    

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

While investors await tomorrow’s non-farm payrolls report, there’s a lot of economic data to get through this morning with jobless claims at 8:30 and the ISM Services at 10:00 which should not be overlooked. Heading into these reports, futures are modestly lower but off their overnight lows as tensions in the Middle East weigh on sentiment. Jobless claims came in mixed relative to expectations as initial claims were 4K higher than expected while continuing claims were 4K lower.

Overnight and this morning, markets in Asia were mixed as China remains closed for the National Holiday. The Nikkei rallied over 2% continuing its roller coaster week while the Hang Seng dropped 1.5%. Service sector PMIs for Japan and Australia were in expansion territory, but both came in weaker than expected and decelerated relative to August.

In Europe, stocks are mostly lower as the STOXX 600 fell about 0.5%. PMI readings for the Services sector were mixed. For the region, activity slowed less than expected. Germany was generally in line with expectations, the UK and Italy missed expectations, and France and Spain expanded more than expected.

It’s still hard to get used to this chart below where we have a market up about 20% YTD.  Yet the market’s most defensive sector, Utilities, is the top-performing sector. Granted, Communication Services and Technology aren’t far behind, but it’s like a Mustang struggling to pass a Corolla on the highway. You don’t see it often.

Utilities stocks often get lumped together as somewhat interchangeable, but if this year has taught us anything, not all Utilities are created equal. Take the two most common barometers of performance for the sector – the Dow Jones Utilities and the S&P 500 Utilities sector. While the S&P 500 Utilities sector has racked up a gain of 28.5%, the Dow Jones Utilities Index is up a much more modest 20.8. Both are respectable gains, but going back to 1990, the 27.5% gain for the S&P 500 Utilities sector through the end of Q3 ranks as the second best trailing only the 47.0% gain in the first three quarters of 2000, while for the Dow Jones Utilities Index, it ranks as just the fourth best since 1990.

In terms of consistency, the S&P 500 Utilities sector has been much better than the Dow Jones Utilities Index. While both indices have historically risen on 53% of all trading days, the S&P 500 Utilities sector has rallied on 59.4% of all trading days this year (second best since 1990) while the Dow Jones Utilities Index has risen on a much more modest 55.8% of all trading days (ninth best since 1999).

Returning to the performance spread, through the end of Q3, the S&P 500 Utilities Sector outperformed the Dow Jones Utilities Index by a record 7.2 percentage points.  The only two other years that were even close were 1991 (6.7 ppts) and 2000 (6.4 ppts).