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“When you sell your great companies and add to the losers, it’s like watering the weeds and cutting the flowers.” – Peter Lynch
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Make sure to check out Paul Hickey on CNBC’s Squawk on the Street today at 10:30 Eastern.
It looks like a two-day losing streak was all the Nasdaq needed to recharge from the impressive 13-day streak the index ripped off from the March lows. Following news that President Trump extended the ceasefire with Iran, Nasdaq futures point 0.75% higher while the S&P 500 looks to gap up 0.60% at the open. Treasury yields are lower, with the 10-year hovering near 4.27%, while crude oil and gold rally by 0.50% to 1.0%. The star of the show this morning is Bitcoin, which is up over 4% and trading back above $78K, the highest level since early February.
In Asia, it was a mixed session overnight with the Nikkei up 0.4% and the Kospi adding 0.5%. Hong Kong and India, however, both finished down over 1%. European stocks aren’t looking as positive. The STOXX 600 is slightly lower, with Spain leading the losses, declining 0.5%. In both regions, the key driver of the moves has been Iran and its impact on energy prices.
Here in the US, it will be a quiet session for economic data, but the pace of earnings continues to pick up steam. Some of the more notable reports since the close yesterday include Boeing (BA), Capital One (COF), GE (GE), and United (UAL), and after the close, IBM, Tesla (TSLA), Texas Instruments (TXN), and United Rentals (URI) will be the headliners.
The fact that equity futures and crude oil are trading higher this morning is uncommon relative to recent history, especially since the war started. Over the last 50 trading days, the crude oil ETF (USO) and the S&P 500 ETF (SPY) have traded in the opposite direction (up or down) 37 times (74%). Since the ETF launched in 2006, this is right near the record high of 76%, reached less than two weeks ago on April 9th. Before this current period, the last time the correlation between the two ETFs was at comparable levels was in the summer of 2008, during the early stages of the financial crisis.
Shifting from crude oil, the fuel of the physical economy, to the fuel of the digital economy, semiconductors continued to roll yesterday as the Philadelphia Semiconductor Index (SOX) traded higher for the 15th straight day, tying the record from June 2014. Besides these two periods, there have only been three other periods where the SOX even had a ten-day winning streak.
Below we show a long-term chart of the SOX showing when the prior 15-day winning streak occurred with a red dot. That streak capped off a longer run of gains for the index, and while it continued to rally, the pace of the ascent started to slow. From a longer-term perspective, though, it’s amazing to think that in the 12 years since that streak, the SOX has doubled and then doubled again and then doubled again and doubled once more for a total gain of 1,500%. Not bad for 12 years!
What’s just as impressive as the SOX’s 15-day winning streak is the 34% rally it has experienced during that span. That’s the largest 15-day gain for the index since October 2002, coming out of the dot-com lows. As shown in the chart, these types of moves were somewhat more common during the late 1990s and early 2000s, but have been very uncommon since.
Again, looking at these occurrences on a long-term chart of the SOX shows that most were exclusive to the period after the 1998 Russian Debt Crisis through the lows of the dot-com crash. Since then, the only two others were coming out of Covid and the tariff-tantrum. What has also been uncommon is for these moves to cap off rallies to all-time highs. That only occurred in late 1999 and early 2000. Gulp.
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