The Bespoke 50 Growth Stocks — 6/27/24
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. There were 14 changes to the list this week.
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The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated monthly on Thursdays unless otherwise noted. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning after publication. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 6/27/24 – Data Tsunami
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.
“It is in knowledge that man has found his greatness and his happiness.” – James Smithson
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’s a monster list of economic data on the calendar this morning, and most of it will be hitting the tape at 8:30, so good luck trying to keep track of it. In a nutshell, initial jobless claims were basically in line with forecasts while continuing claims were modestly higher than expected. Inflation data was a bit higher than expected, and Durable Goods were better than expected. Ahead of the data, futures were modestly lower following overnight weakness in Asia and Europe. Crude oil is higher and above $81 per barrel, while the 10-year yield is unchanged at 4.33%. One of the biggest drivers of the weakness this morning comes from Micron (MU) which is down 6% in the premarket after reporting better-than-expected earnings but merely reaffirming guidance. The weakness in MU has overflowed into the entire semiconductor space, including Nvidia (NVDA) which is down 2%.
Outside of India, major Asian equity indices traded lower overnight as Hong Kong led the losses with the Hang Seng down over 2%. China’s Shanghai Composite finished down 0.9%, and the Nikkei was down 0.8%. In China, Industrial profits were down 3.4% YTD and improved from April’s YTD reading of 4.3% while Retail Sales in Japan rose more than expected (3.0% y/y vs 2.0% estimate). Following the lead of Asia, European stocks are also lower this morning, but not by as much as their peers in Asia. The STOXX 600 is down 0.3% with the biggest losses in France (-0.7%) and Spain (-0.7%) while Germany is slightly higher.
With the S&P 500’s price and net daily breadth moving in opposite directions for five trading days in a row now, the daily divergences have started to add up and the gap between the S&P 500 and its cumulative A/D line has widened. While price and breadth tracked each other very closely for the eleven-month ending about a month ago, the last month has seen each move in opposite directions.
With the first half ending tomorrow, we wanted to see how the recent daily breadth divergences this year compared to the first half of prior years. Through yesterday’s close, the S&P 500’s price and daily breadth readings moved in opposite directions on 23% of all trading days. Dating back to 1990, that level is tied for the most ever. The only other year where there were as many daily breadth divergences was in 1995, and the only other year that was even close was 2000. While 1995 and 2000 may have been similar in terms of breath divergences, from a market perspective, that’s about where the similarities end.
The Closer – Price and Breadth on Different Wavelengths – 6/26/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a note on the latest earnings and the Nasdaq 100 (page 1) followed by a dive into today’s new home sales (page 2) with commentary regarding affordability and homebuilders (page 3). We then look into the historic divergence between price and breadth (pages 4 and 5). Afterward, we show the relative strength of market cap versus equal weight sector ETFs (page 6). We then turn over to the latest EIA data (page 7) and the latest 5 year note auction (page 8).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
New Highs for Home Prices in 13 of 20 Cities
The latest monthly data on home prices from S&P CoreLogic’s Case Shiller indices was released yesterday. These indices track home prices in 20 major cities/regions around the US.
At the national level, home prices hit another all-time high in April (the data is released on a two-month lag). Month-over-month, the National index rose 1.2%, and it’s up 6.3% year-over-year.
Below is a look at the Case Shiller National home price index since 1990 compared to inflation as measured by CPI. As shown, home prices are up more than 300% over this time frame, which is good enough for just over double the rate of inflation.
Below is a table showing the change in home prices over various points in time for the Case Shiller indices. Boston and San Francisco were up the most month-over-month with 2% gains. The only cities that weren’t up at least 1% month-over-month were DC, Miami, Tampa, and Phoenix, but even these cities all gained at least 0.5%. On a year-over-year basis, all twenty cities are up at least 1.5%, while the composite indices are up 6-8%.
In late 2022/early 2023, we saw a pullback in home prices following an initial post-COVID surge in 2020 and 2021. At this point, though, 13 of 20 cities are back to new highs after prices have gone back up 10%+ for most cities since their 2023 lows. San Francisco, Seattle, Phoenix, Portland, Dallas, Las Vegas, and Denver are the seven cities that aren’t back to new highs yet. As you probably noticed, most of these are cities on the west coast where inventories are a lot higher than they are in areas like the northeast.
Since just before COVID hit in February 2020, home prices are currently up about 50% nationally. Miami and Tampa are up the most since COVID with gains of 70%+, while San Francisco, Minneapolis, Portland, and DC are up the least.
Below are Case Shiller home price charts for the twenty cities and three composite indices. Cities highlighted in green are trading at all-time highs.
Chart of the Day – July Seasonality
China Struggles
Nowadays, it doesn’t surprise anyone to see Chinese stocks underperforming as the country’s stock market has been mired in a long and steady downtrend for several years. Back in February, there was a brief respite from the selling as the Shanghai Composite bounced just over 20% through May. While Chinese stocks met the technical threshold for a bull market based on an intraday basis (based on closing prices, the Shanghai Composite was up just 17.4%), the rally was capped at the knees with a 7.6% decline over the next five weeks.
While a decline of less than 8% over five weeks isn’t necessarily an extreme move, how Chinese stocks have pulled back stands out. When looking at price charts, trends of lower highs suggest a heavy tape, and by this logic, Chinese stocks have never been heavier. While it’s hard to see in the chart above, over the last 20 trading days, the Shanghai Composite’s intraday high has been lower than the prior session’s intraday high 18 times! China joined the World Trade Organization in December 2001. During that time, there has never been another 20-day period before now where there were as few days where the Shanghai Composite had just two or fewer days that an intraday high was higher than the previous session!
Bespoke’s Morning Lineup – 6/26/24 – The Germans are Coming!
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.
“I’m afraid what will happen to Europe if it does fail.” – General Lucius D. Clay
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
In the corporate world, you often see scenarios where a company that has done well will use its inflated stock currency to buy beaten-down assets on the cheap. Based on this logic, you would expect US companies, which have steadily outperformed their European peers for years, to be on the prowl in Europe for some cheap bargains. Over less than 24 hours, though, we have seen two major headlines showing the opposite trend. Last night after the close, VW and Rivian announced a deal where the German carmaker will invest up to $5 billion in Rivian. Now, this morning German manufacturing firm Bosch is considering a bid for US appliance maker Whirlpool (WHR)!
The seesaw action in the markets of late is showing up again this morning, and this time, it’s technology, and specifically Nvidia (NVDA) rallying while most of the the rest of the market languishes. One exception in the old economy is FedEx (FDX). Shares are up over 15% this morning following its better-than-expected earnings report after yesterday’s close. On the revenue side, results ended a streak of eight straight weaker-than-expected reports, and it was the first time in seven quarters that sales grew on a y/y basis.
Overnight, equities in Asia were mostly higher even as reports surfaced that the BoJ will consider rate hikes at all of its upcoming meetings and is also expected to announce a reduction in its monthly asset purchases. The yen also fell to its lowest level since Christmas 1986! In Europe, the tone is weaker as the STOXX 600 is down fractionally following weaker-than-expected sentiment reports in Germany and France.
Divergences haven’t just been confined to the stock market lately. In the energy sector, we’ve also seen oil and natural gas follow different patterns. Starting with crude oil, while prices have rallied off the lows from June, the commodity’s price chart has carved out an iron cross formation where the downward sloping 50-DMA crosses down through the 200-DMA which is also sloping downward. Technical analysts view these patterns as a negative technical pattern.
Natural gas, on the other hand, is on the verge of a golden cross, which occurs when the 50-DMA crosses up through the 200-DMA as both are rising, and technical analysts view these patterns as bullish.
To continue reading the rest of today’s morning note, where we show how both crude oil and natural gas performed following iron crosses in crude and golden crosses in natural gas. You’ll also find much more analysis of global equities and economic readings released this morning, so read today’s full Morning Lineup with a two-week Bespoke Premium trial.
Chart of the Day – Back to Back to Back 1%+ Declines in Semis After a 52-Week High
Bespoke’s Morning Lineup – 6/25/24 – Futures Higher Ahead of Housing and Confidence Data
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.
“We do not inherit the Earth from our Ancestors, we borrow it from our Children.” – Crazy Horse
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
US Futures are being led higher by the Nasdaq as Nvidia (NVDA) looks to rebound from its three-day decline of over 10%. After a quiet day of economic data yesterday, today’s calendar looks a little busier with the Chicago Fed National Activity Index which was just released and came in better than expected at +0.18 versus expectations for a decline of 0.3. Still to come, the FHFA House Price Index will be released along with the Case Shiller numbers at 9 AM followed by Consumer Confidence and the Richmond Fed at 10 AM.
Fed Governor Michelle Bowman (a voting member of the FOMC) spoke in London this morning. She noted that it may become appropriate to “gradually lower the federal funds rate” if “incoming data indicate that inflation is moving sustainably toward our 2% goal” but she went on to qualify that statement with the comment that “we are still not yet at the point where it is appropriate to lower the policy rate.” She even left the door open for future increases in the fed funds rate “should progress on inflation stall or even reverse”. While most of her comments were in line with recent commentary from other Fed officials, she took a hawkish turn when she said “I don’t see any rate cuts for 2024”.
With the caveat that market pricing of future levels in the fed funds rate has been extremely inaccurate over the past year, we wanted to look at where traders are positioned ahead of future meetings based on the CME’s FedWatch tool. Starting with the next meeting, a rate cut at the July meeting is basically off the table as the market is priced for an 89.7% likelihood that rates will be left unchanged.
The Fed has historically shied away from changing rates in the months leading up to a Presidential election, but for the September meeting, there is a slightly better than two in three chance of a cut at that meeting.
Two days after this November’s election, the FOMC will conclude another meeting, and hopefully, we’ll know who came out ahead in the Presidential election. If the Fed has historically avoided changing rates leading up to an election, the market expects them to make up for lost time at the November meeting. Not only is there a nearly 80% likelihood of at least one rate cut by then, but the market has also priced in a 30% chance that the fed funds rate will be at least 50 basis points lower. Then, for the December meeting, the market is pricing in better than a 50/50 chance of at least two 25 bps rate cuts and only a 4.7% likelihood of Bowman’s view that there will be no rate cuts by the end of the year.
To continue reading the rest of today’s morning note, where you’ll find 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.
Semis (SMH) Smoked
The theme of the past couple of weeks has been the S&P 500 pressing higher in spite of weak breadth. Today, the script has flipped, as the S&P 500 is down only a few basis points even though breadth is strongly positive with advancers outnumbering decliners better than 3 to 1. The decliners are being led by a key area of the market: the semis. With the likes of NVIDIA (NVDA) down 5% on the day (and down 14% since last Tuesday’s high), the semiconductor ETF (SMH) is testing the uptrend that has been in place since its April lows.
Since its closing high last Tuesday, SMH is down 7.2%. As shown above, although it’s a significant decline, it’s only a small dent in what has been an incredible rally over the past year. In fact, the ETF is still trading in overbought territory relative to its 50-DMA even after its recent decline. That still does not steal from just how large of a drop it has seen. In the chart below, we show the rolling 3-day percent change in the ETF since its inception in 2000. As shown, there was an even larger drop of 9.1% leading to the April bottom, but the current drop still ranks in the 2nd percentile of all 3-day moves on record.
