The Bespoke Report – 8/16/24 – Did I Miss Anything?
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Bespoke’s Morning Lineup – 8/16/24 – The More Things Change
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.
“Don’t think about the start of the race, think about the ending.” – Usain Bolt
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 priced to close out a strong week quietly as equity futures are indicated modestly lower, and they took another modest downturn following the release of Housing Starts and Building Permits which both missed forecasts and dropped to the lowest levels since mid-2020. The only other release on the calendar for today is Michigan Sentiment at 10 AM. Outside of equities, we’ve seen larger moves in the Treasury market where the 10-year yield is down over 6 bps and crude oil is down over 2.5%.
It’s been a very impressive rally around the world since last Monday’s sharp sell-off, but one familiar aspect of the bounce has been that the US is once again leading the way. While the S&P 500 closed marginally above its 50-day moving average (DMA) on Wednesday, it convincingly broke through that level on Thursday, breaking through its short-term downtrend from the July highs and erasing all its August losses.
Over in Europe, the STOXX 600 has also rebounded, but it has yet to convincingly break back above its 50-DMA or its short-term downtrend of lower highs.
Japan was ground zero for last week’s decline and saw larger losses than any other global index. While it has also staged an impressive rebound, the TOPIX finds itself deeper in the hole as the 50-DMA has yet to come into play.
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Bespoke’s Consumer Pulse Report — August 2024
Bespoke’s Consumer Pulse Report is an analysis of a huge consumer survey that we run each month. Our goal with this survey is to track trends across the economic and financial landscape in the US. Using the results from our proprietary monthly survey, we dissect and analyze all of the data and publish the Consumer Pulse Report, which we sell access to on a subscription basis. Sign up for a 30-day free trial to our Bespoke Consumer Pulse subscription service. With a trial, you’ll get coverage of consumer electronics, social media, streaming media, retail, autos, and much more. The report also has numerous proprietary US economic data points that are extremely timely and useful for investors.
We’ve just released our most recent monthly report to Pulse subscribers, and it’s definitely worth the read if you’re curious about the health of the consumer in the current market environment. Start a 30-day free trial for a full breakdown of all of our proprietary Pulse economic indicators.
Chart of the Day – Nike (NKE): Turnaround Time
Bespoke’s Morning Lineup – 8/15/24 – Better Data
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“History is a set of lies agreed upon.” – Napoleon Bonaparte
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Investors came into the day in a positive mood as gains overnight in Asia and a positive morning in Europe flowed through to the pre-market in the US. Crude oil and gold were also up about 1% with WTI trading at a lucky $77.77 per barrel.
One of the biggest catalysts for this morning’s positive tone has been in shares of Wal-Mart (WMT) which is poised to gap up over 7% in reaction to earnings. For perspective, if the gains hold through to the closing bell, it would be the first time since at least 2001 that the stock rallied more than 5% in reaction to back-to-back earnings reports.
A slug of economic data just hit the tape, and nearly all the reports came in better than expected, including Retail Sales which doubled expectations (1.0% vs 0.4%), while initial and continuing claims were better than expected. In response, futures have taken another leg higher as fears of economic weakness have been eased even as a September rate cut remains likely.
Between the monthly Retail Sales report, earnings from Wal-Mart (WMT), and other companies from the sector, it’s been a busy morning for the retail sector. On a non-earnings-related move, shares of Ulta Beauty (ULTA) are surging more than 12% following news after the bell yesterday that Berkshire Hathaway had taken a position of 690K shares worth $266 million in the company as of the end of Q2. To put that in perspective, even after Berkshire cut its stake in Apple (AAPL) by more than half this year, that position is still more than 300 times larger than its current stake in ULTA. Nevertheless, the Buffett seal of approval alone is enough for investors to flock to the stock.
Looking at the performance of ULTA over the last year, Berkshire’s purchase wasn’t the timeliest in the short term. While we have no way of knowing at what point in the quarter the stock was purchased, even after accounting for its pre-market surge, it is trading below where it traded at any point in Q2. From April 1st through June 30th, shares of ULTA traded in a range of $375.31 to $529.67. While it’s unlikely that Berkshire entered the position anywhere near the high end of that range as it only traded there for a couple of days early in the quarter, it’s just as unlikely that Berkshire bottom-ticked it. That’s because the stock doesn’t often trade more than a million shares a day, so a 690K trade would have greatly impacted the stock. The fact that Berkshire remains underwater on the stock doesn’t mean that ULTA won’t end up as a winning stock, but even when it comes to the best investors in the world, timing isn’t always perfect.
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Chart of the Day – Refinance Surge
Bespoke’s Morning Lineup – 8/14/24 – CPI Right on Target
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.
“Talent is never enough. With few exceptions the best players are the hardest workers.” – Magic Johnson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There wasn’t much going on in equity futures this morning as the market awaited the release of the July CPI which came in right on target relative to expectations. Stocks in Asia were mixed with Japan up 0.6% while China was down 0.6%. Yields in China were also lower as the government auctioned off a 20-year bond at a record-low yield. European stocks look more positive with slight gains across the board as GDP came in right in line with forecasts (0.3%) and UK inflation unexpectedly declined.
In financial markets, we almost always emphasize upcoming economic reports and/or Federal Reserve meetings too much. Invariably, the reality of the report rarely lives up to the energy of the anticipation that precedes it. Last month’s CPI report was one of those rare exceptions as market performance practically turned on a dime.
The chart below compares S&P 500 industry group performance on a YTD basis through 7/10 (the close before the June CPI report was released) versus how each group performed since then. Leading up to the report, the S&P 500 had rallied more than 18% on a YTD basis, and since then, it has declined over 3.5%. There has been a clear trend among industry groups where the best performers leading up to the report have been among the worst performers since then while the weakest groups on a YTD report have held up the best since the release.
As an example, the top five performing industry groups on a YTD basis through 7/10 all rank in the bottom ten in terms of performance since then, while three of the five worst performing groups YTD before the June PPI (Consumer Durables, REITS, and Real Estate Mgmt) rank as the top three performing groups since then.
On the upside, only two industry groups rank in the top ten in terms of performance for both periods – Insurance and Telecom Services.
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The Highest Yielding Stocks in the S&P 500
There are currently 21 stocks in the S&P 500 that have dividend yields above 5%, and there are now 61 stocks in the index that have a dividend yield that’s higher than the 3.87% that the 10-Year Treasury Note is currently yielding.
Today we wanted to highlight the two stocks in each S&P 500 sector with the highest dividend yields. Below we highlight the two highest yielders in each sector along with the company’s market cap, its year-to-date total return, distance from its all-time high, and next dividend ex-date (if it’s been announced). Whether or not these dividends are safe is a different story (yes, we’re talking about you…Walgreens), but we hope this is a good starting point for further research!
The sector that stands out the most is Consumer Staples because the two highest yielders in the entire S&P come from this sector. Walgreens Boots (WBA) currently has a dividend yield of 9.8%, while tobacco/nicotine-producer Altria (MO) has a yield of 7.8%. WBA already cut its dividend in half once this year and it still yields nearly 10% because its share price is down 60% year-to-date! Even still, WBA is set to at least make its next $0.25/share quarterly payment after its 8/21 ex-date a week from now. Altria (MO), on the other hand, is yielding 7.8% even though its shares have posted a total return of 30.4% YTD.
The only sector that doesn’t have at least one stock yielding more than the 10-year US Treasury is Technology. As shown in the table, Cisco (CSCO) and IBM are the highest-yielding S&P 500 Tech stocks with yields of just over 3.5%.
In addition to highlighting the two highest-yielding stocks in each S&P 500 sector, below is a look at the two stocks in each sector that are down the most from their all-time share-price highs. On average, these 20 stocks are down 78% from their all-time highs.
Two stocks in the Financial sector that remain a shell of their former selves from before the Financial Crisis are the two that are down the most from all-time highs: AIG and Citigroup (C).
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Chart of the Day – Best of Both Worlds?
Election Sensitivities for Small Business
Among this morning’s economic releases was the NFIB’s Small Business Optimism index. The headline number came in above expectations, rising to 93.7 versus forecasts of an unchanged reading of 91.5. While that would still indicate that small business sentiment remains at the low end of its historical range, it did rise to the highest level in more than two years (February 2022).
Looking under the hood of this month’s report, breadth across categories was solid with half of the inputs to the Optimism Index rising month over month, two falling, and the remaining three going unchanged. A handful of those gainers like Plans to Increase Inventories, Expected Real Sales Higher, and Expectations for the Economy to Improve were notable with top quartile monthly gains. While there were some big month-over-month moves, most indices remain at the low end of historical ranges. Additionally, there are some areas of key weakness. As we noted in today’s Morning Lineup, employment metrics continue to weaken led lower this month by big drops in Compensation and Compensation Plans.
Again, Outlook for General Business Conditions stood out as the category with the largest monthly jump. As shown below, that reading went from a relatively low -25 up to -7. That 18-point jump ranks as the eight largest MoM increase on record with April 2020 being the last time the index rose by as much. Additionally, that leaves the index at the highest level since the last presidential election in November 2020.
It is worth noting that the NFIB data has typically been sensitive to politics (more evidence of this below) with the Outlook for General Business Conditions tending to be stronger during Republican administrations and lower during Democratic administrations. As such, the sharp increase in this index over the past couple of months was concurrent with Republicans gaining favor for winning the upcoming election; a move which has since reversed since mid-July meaning next month’s NFIB release could see this index reverse lower as well.
One other area where political sensitivities have been observed is in the Economic Policy Uncertainty Index. Like the business outlook reading, in July this uncertainty index surged to the most elevated level since November 2020. As shown below, that sort of rise is nothing new. With some exceptions, every presidential election year (November to November, denoted by red lines below) has seen this index run higher.
Even though the business outlook has improved markedly, the percentage of firms reporting that it is a good time to expand hasn’t benefited. The percentage reporting now as a good time to expand is low at only 5% and up only marginally month over month. As shown in the second chart below, economic conditions get most of the blame for the negative outlook with the political climate ranking second.
Looking back historically, in the chart below we show those same reasons for expansion outlook for those reporting negative or uncertain outlooks combined. Again, economic conditions are by far the most common response, but politics are elevated and rising significantly as election season continues to heat up.
