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“How you finish, is what they will remember.” – Unknown

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

Markets are in rebound mode this morning as they look to recoup the losses from the last hour of trading. Crude oil is higher but still below $80, and the 10-year yield is unchanged.  This morning’s economic data has been mixed with jobless claims coming in lower than expected, but Unit Labor Costs rising more than expected (4.7% vs 4.0%) although last quarter’s reading was revised lower. As labor costs increased, Non-Farm Productivity was weaker than expected rising just 0.3% compared to forecasts for an increase of 0.5%.

When people look back on Super Bowl LI, most will only remember that the Patriots won their fifth championship in an unbelievable comeback against the Falcons.  The Falcons, who were up by 25 in the second half, won’t be remembered for being so close, but instead for one of the biggest choke jobs in Super Bowl history. At one point in the second half, they had a 99% probability of winning. It was guaranteed.

Similarly for the market, people will not look back on yesterday as being a day when the S&P 500 was up over 1% with less than an hour left in the session. Most people will just remember it as a day when the S&P 500 finished moderately lower (-0.34%), and for those more involved in the day-to-day moves, they’ll remember that the S&P 500 collapsed into the close falling over 1% in the final hour and more than 0.50% in the last ten minutes of trading! As we noted in the Closer last night, at one point yesterday, the S&P 500 had a 99% probability of finishing the day with a gain. Choke job indeed.

What’s even crazier about yesterday’s tank into the close, is that it was the second day in a row where it happened.  Below we show the S&P 500’s intraday charts for Tuesday (4/30) and Wednesday (5/1).  While the patterns heading into the last ten minutes of both days were almost the opposite, the last ten minutes were nearly identical; The S&P 500 dropped 0.59% in the final ten minutes on Tuesday and 0.60% on Wednesday.  These late-day declines are uncommon enough on their own, but to occur on back-to-back days is extremely rare.

The chart below shows streaks where the S&P 500 declined 0.50% or more in the final ten minutes of trading going back to 1985, and there have only been nine other periods where there were back-to-back occurrences (with two extending to an unheard-of third day).  The most recent occurrence was in February 2018 during the Volmageddon meltdown. The next before that was in August 2015 when China devalued the yuan and before that August 2011 when the US lost its AAA credit rating from S&P. There were also a few occurrences during the Financial Crisis and also in October 1987 during the market crash.  You probably get the point; these types of back-to-back declines normally occur during periods of intense market stress.

For an analysis of how the market performed following these periods, read today’s entire Morning Lineup.

For much more analysis of global equities and economic readings released this morning, read today’s full Morning Lineup with a two-week Bespoke Premium trial.