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“You never bet on the end of the world, that only happens once, and the odds of something that happens once in an eternity are pretty long.” – Art Cashin
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Futures indicate another trendless morning with extremely modest gains or losses depending on the index you want to examine. The economic calendar is on the light side, with October JOLTS being the only notable report. However, we will also hear comments from Fed Governor Kugler and Chicago Fed President Goolsbee later today.
Overnight in Asia, major equity benchmarks were higher across the board. The most notable economic report in the region was South Korean inflation which increased 1.5% y/y compared to a rate of 1.3% in October but was lower than the 1.7% consensus forecast. On the trade front, the Chinese government retaliated against the increased US export restrictions on advanced chip technologies by saying it would restrict certain rare earth materials to the US.
In Europe, stocks are also higher this morning, with the STOXX 600 trading up over 0.4%. In France, the CAC 40 was up close to 1% despite the political turmoil in the country. Opposition parties are on track to back a no-confidence vote to remove PM Michel Barnier.
Semiconductors make up a large part of the Technology sector, so the fact that the Philadelphia Semiconductor Index (SOX) has declined over 10% in roughly the last six months while shares of Nvidia (NVDA) are flat would lead you to believe that the overall sector has been weak. While it hasn’t been a leader, the Technology sector has rallied over 3% since NVDA and the semis peaked in the summer. A big reason for that strength is that as semis dropped the ball, software jumped in and dribbled it right down the court.
Since the closing high in the SOX on 7/10, the software group, as measured by the iShares Expanded Tech-Software ETF (IGV) has rallied over 20%. Through the close yesterday, IGV was 1.5 standard deviations above its 50-day moving average (DMA), but that’s down from more than three standard deviations above its 50-DMA on 11/11, which was the most overbought level since August 2020. All totaled, IGV has closed at overbought levels (1+ standard deviations above its 50-DMA) for 21 trading days.
The largest component in IGV, accounting for just over 9% of the ETF’s assets, is Salesforce (CRM). CRM had a rough start to 2024, and the bottom fell out of the stock in May when the company reported weaker-than-expected sales for the first time since 2006. As shown in the chart below, the 19.7% decline in reaction to that miss was the most negative reaction to an earnings report for CRM since it went public in 2004. It also marked the low for the stock, and it has rallied more than 56% since then.
While CRM shares are currently not quite as overbought as IGV, yesterday marked the 52nd day in a row that the stock closed at overbought levels. That’s the longest streak of overbought readings since its IPO 20 years ago!
