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“Observation is a dying art.” – Stanley Kubrick

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

Yesterday’s bounce continued to a second morning as both S&P 500 and Nasdaq futures were in the green ahead of the just-released reports on weekly jobless claims, Q4 productivity, and Q4 unit labor costs at 8:30. Productivity numbers were revised slightly higher, Unit Labor Costs were lower than expected, and jobless claims were just slightly higher than expected.

Overnight, Asian stocks were mostly lower with Japan leading the way down as the Nikkei fell over 1% as the yen rallied on speculation that the BoJ would abandon its negative policy rate. What Asia taketh away, though, Europe has giveth, and the tone there is more positive as the STOXX 600 rallies 0.4% with Spain leading the way with a gain of 0.6%. In Germany, Factory Orders dropped 11.3%, which was nearly twice the 6% decline that was expected. The ECB just announced its latest policy decision, and as expected, they left rates on hold. You can read more about it in the full Morning Lineup report.

In discussions about inflation this week, we’ve heard multiple references to rising prices at the pump as a sign that inflation is poised to take another leg higher. Based on AAA’s tracking of the national average price of a gallon of gas, prices have taken a turn higher. In mid-January, the price was as low as $3.07 per gallon, but as of today, it’s up to just under $3.40 per gallon and at the highest level since early November.

While the rise in gas prices looks like a concern in isolation, proper context is in order. What if we told you that gas prices almost always rise in the early months of a new year? Going back to 2005, there have only been three years when prices were down on a year-to-date basis through 3/7, and the average YTD change is 8.3%.  Given that history, this year’s 9.2% increase doesn’t seem so extreme or worrying.

Look at the chart below where we compare this year’s change in gas prices to a composite of the average YTD change for all years since 2005. They track each other perfectly.  Gas prices have increased this year, but they nearly always do at this time of year.  When prices start to decline after Memorial Day, as almost always occurs at that time of year, do you think the people crying today about higher gas prices being a canary for higher inflation will also be screaming about a ‘deflationary’ warning then? Something tells us, probably not.

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

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.

“The greatest danger for most of us is not that our aim is too high and we miss it, but that it is too low and we reach it.” – Michelangelo

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

After a relatively rough day yesterday, futures have been bouncing back this morning with the Nasdaq trading up about 0.8% and the S&P 500 up by a more modest 0.4%.  The ADP Employment report for February just came out, and it showed modestly lower-than-expected job growth (140K vs 150K), but investors are more focused on the 10 AM testimony of Fed Chair Powell before Congress.  Will he say anything to jawbone the markets?

We’ve highlighted a version of the chart below multiple times in our discussion of Fed rate cuts and the market, and it illustrates the fact that as much as people want to credit (or blame) the Fed for the market rally since the October lows, it hasn’t been the case.  While the early stages of the rally did coincide with the market pricing in a higher number of 25 basis point (bps) rate cuts by the December 2024 meeting, that reading peaked in early January at just under seven.  In the nearly two months since then, the number of cuts priced in for December has been more than cut in half, yet stocks kept rallying.  If the rally was just about rate cuts, we’d be closer to 4,000 on the S&P 500 now rather than above 5,000.

Back in early December, when the market was pricing in cuts as soon as April, we noted that no rate cuts by then would be “the best thing for the market”. The reasoning was that by the Fed just pivoting and moving to the sidelines and no longer actively looking to kneecap economic growth, it was enough for the market to embrace the good news is good again mentality.  If the Fed had to come in and cut rates so soon, it would have only meant that something was going wrong in the economy.

This brings us to yesterday’s market decline. While stocks opened the day lower, the weakness was modest…until just after the 10 AM release of Factory Orders, Durable Goods, and ISM Services.  All the reports were weaker than expected, including the ISM Services report which showed a contraction in employment.  Immediately, after the release, the market had a Pavlovian response of briefly trading higher, but within seconds, stocks reversed and traded lower throughout the day, finishing down just over 1% in what was the third weakest day this year. The market was overbought and due for a breather heading into yesterday, but the weaker-than-expected slug of economic data didn’t help.

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

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.

“Nothing in life is as important as you think it is when you are thinking about it.” – Daniel Kahneman

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 a bit of a hangover this morning as futures are lower across the board.  S&P 500 futures suggest a 33 bps decline at the open while the Nasdaq is down over 50 bps.  There’s not much in the way of a catalyst for the move lower besides the fact that the market has come so far so fast, and investors appear to be looking over their shoulders for Fed Chair Powell’s congressional testimony tomorrow and Thursday.  Since the Fed started hiking rates in 2022, Powell has been known to take a crowbar to the knees of any rally, so some apprehension is understandable.

The key economic data this morning will be the ISM Services report at 10 AM, and the headline index is expected to decline modestly, falling from 53.4 down to 53.0. That would follow last Friday’s weaker-than-expected report for the Manufacturing sector which remains stuck in contraction territory. While not an economic report, Target (TGT) is trading higher this morning after reporting better-than-expected EPS.  In response, the stock is trading up over 8%.

Several of the top-performing stocks this year are also the largest in the S&P 500 (think Nvidia, Meta, and Eli Lilly), but over 60% of stocks in the index are up YTD and 45% are up over 5%, so underlying breadth has also been positive.  Looking through our Daily Sector Snapshot report, you can see the positive breadth in the cumulative A/D line which has been regularly hitting record highs, along with the percentage of S&P 500 stocks trading above their 50 and 200-day moving averages (DMA) which has also been well over 50%.

Another signal of strong breadth is in the percentage of stocks hitting 52-week highs.  Just yesterday, 19.5% of stocks in the S&P 500 hit 52-week highs which is the highest single-day reading in at least a year after it took out the prior high of 19.3% from early January.

When looking at the individual sectors driving the expansion of new highs, there are some modestly surprising trends. Leading the charge in new highs was the Industrials sector where 42% of the sector’s components traded at their highest levels in at least a year yesterday.

The Materials sector has also seen a steady widening in the number of new highs as its reading has steadily increased from less than 10% in late January to more than 30% yesterday.

The Consumer Discretionary sector didn’t see a new high in new highs yesterday, but at nearly 23%, only a couple of days in mid-December had a higher percentage of new highs.

Whenever we’re talking about market strength, you expect to hear Technology as part of the conversation.  While nearly 30% of the Technology sector hit 52-week highs yesterday, that reading was lower than Friday’s level of 34%. As shown in the chart below, there have been several days in the last few months where a higher percentage of Technology sector stocks hit 52-week highs.  Is Tech finally starting to pass the baton?

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