Chart of the Day – Russell Turns the Tables
Bespoke’s Morning Lineup – 6/7/23 – Slow Drift Higher in Stocks and Rates
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“The Edge… There is no honest way to explain it because the only people who really know where it is are the ones who have gone over.” – Hunter Thompson
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It’s another quiet morning in the markets today as futures are little changed with a positive bias. Crude oil and yields are also higher, although overnight economic data out of China and Europe generally came up short of expectations, and mortgage applications in the US declined 1.4% versus the prior week. Bitcoin is also modestly lower on the morning, but given the SEC’s actions towards the industry this week, one might have thought the sector would be under even more pressure.
With every advancement, the negative side effects tend to get a disproportionate amount of attention even when the societal benefits of the breakthrough dwarf the costs. The bank runs this spring were a perfect example. How many times did we hear that a consumer’s ability to transfer large sums of capital with nothing more than a couple of taps on their smartphone was a threat to the banking system?
The list of benefits these same commentators fail to mention is long and includes the ability to effortlessly move funds around the world with just a couple of taps and how it has radically improved economic efficiency. Besides the benefits, if banks simply offered even something resembling a competitive deposit rate and didn’t load up on long-duration assets when interest rates were near zero, they never would have run into these problems in the first place. And anyway, is a business model built on a foundation of making it difficult for customers to take their business elsewhere really one we all want to get behind? If that’s the case, why wasn’t anyone defending America Online back in the early 2000s when the company made it nearly impossible for customers to cancel their accounts?
The only reason for bringing this up now is that back on this day in 1962 Switzerland opened its first drive-through bank. After seeing that, we wondered if, even with the added convenience, there were similar cries from the Luddite community railing against the fact that customers could now just drive up to the bank and withdraw funds…all while the car was still running. Talk about a bank run!
Regarding banks, we noticed yesterday that the S&P Regional Banking ETF (KRE) closed above its 50-day moving average for the third day in a row which hasn’t happened since late February/early March, before the onset of the regional banking crisis. Who knows if the worst is over, but if it is, it would have been one hell of a quick ‘crisis’.
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B.I.G. Tips – Earnings Triple Play Recap
Today we published our newest Earnings Triple Plays report. This season there were a total of 127 earnings triple plays out of just under 2,000 individual quarterly earnings reports from US-listed stocks.
What is a triple play? When a stock reports quarterly earnings, it registers a “triple play” when it beats analyst EPS estimates, beats analyst revenue estimates, and raises forward guidance. We coined the term back in the mid-2000s, and you can read more about it at Investopedia.com. We consider triple plays to be the cream of the crop of earnings season, and we’re constantly finding new long-term opportunities from this basket of names each quarter. You can track the newest earnings triple plays on a daily basis at our Triple Plays page if you’re a Bespoke Premium or Bespoke Institutional member. To read our newest report and see some of the triple plays with intriguing charts at the moment, start a two-week trial to Bespoke Premium!
Chart of the Day – Stocks Nearing New Highs
Bespoke’s Morning Lineup – 6/6/23 – No News is Good News
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“I’m not in this world to live up to your expectations and you’re not in this world to live up to mine.” – Bruce Lee
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Equity futures have had a quiet session overnight on little news flow. The only major news of note was a surprise 25 bps rate hike in Australia. Investors are still digesting the virtual headset that Apple unveiled at WWDC yesterday, and while a charitable description is that it is a work in progress, hopes are that future versions will show improvement in form, function, and price. After trading lower after the headset was unveiled, shares of AAPL are trading down over 2.5% this morning. In case you missed it yesterday, we published a BIG Tips report on how AAPL stock historically performs before, during, and after the annual WWDC conference.
There’s no economic data to speak of in the US, but in Europe this morning, Retail Sales for the EU were unchanged, which was weaker than 0.2% m/m growth that was expected. Factory Orders in Germany declined 0.4% which was much worse than expectations for 2.8% growth. In Spain, Industrial Production also declined by 0.9% compared to consensus forecasts of 1.7%, so a weak showing overall. Maybe the lack of economic news in the US today is a good thing!
We discussed oil’s lack of ability to rally on what should be considered good news for prices last Wednesday, but considering the commodity’s action in reaction to the weekend news that Saudi Arabia would cut supply, it’s worth updating again. First, OPEC+ announced a surprise production cut in early April which caused prices to immediately spike by over 8% and a total ultimate gain of just over 10%. The gains didn’t last long, though. The rally stalled out just shy of the 200-day moving average, and by the end of the month, the gains had all been erased.
In late May, a Saudi minister warned speculators who were short oil to ‘watch out’. Those comments were good for a rally of less than 4% lasting less than two days, and after stalling out at the 50-day moving average (DMA) the gains were erased within a day. That brings us to the past weekend when Saudi Arabia announced it would cut production by 1 million barrels per day in July. That production cut was good for a 4%+ rally in crude oil when futures markets opened for trading Sunday evening, but by the end of the trading day Monday, crude oil was already below its Friday close, and this morning crude oil is down another 2%.
A key factor behind all three rallies and their ultimate bearish reversals is that they all ended abruptly at a key moving average. During bull markets, moving averages tend to act as support in any pullback, during bear markets, they act to squash any rally right in its tracks.
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Bespoke’s Consumer Pulse – June 2023
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 – ‘Extreme’ Overbought Readings in the S&P 500
Bespoke’s Morning Lineup – 6/5/23 – Sleepy Week
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“Never miss a good chance to shut up.” – Will Rogers
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Crude oil is getting a little bit of a bounce this morning after Saudi Arabia announced over the weekend that it would cut production by a million barrels per day in July. While prices are up nearly 2%, they are well off their highs of the overnight session as resistance at the 200-day moving average (DMA) kicked in. Equity futures are modestly higher following the lead of Europe where stocks are also marginally higher.
Summer doesn’t officially start for another two weeks or so, but when it comes to doldrums, it doesn’t get much quieter than the data slate for the upcoming week. On the economic calendar, two days this week – Tuesday and Friday – will have no scheduled releases, and on the remaining three days, the only reports of note will be ISM Services and Factory Orders (Monday), Consumer Credit (Wednesday), and Jobless Claims (Thursday). The earnings calendar is equally light as the only two earnings reports on the calendar for S&P 500 companies are JM Smucker (SJM) on Tuesday morning and Campbell Soup (CPB) on Wednesday: soup and jelly. So, not only do we have a minuscule number of companies reporting, but they could also be among the most ‘boring’ stocks in the market when it comes to earnings.
Fed speakers and politicians are always good for a few tape bombs throughout the week, but not this week. The Fed entered its blackout period ahead of the June meeting over the weekend, and with the debt deal getting signed into law, there isn’t much for politicians to talk about either. Who knows what the future will bring, but if the calendar is right, prepare for a quiet week.
With the lack of data to focus on here in the US, this morning we wanted to highlight the overnight release of inflation data in Turkey. If you thought we had it bad with inflation here in the US, Consumer Prices in Turkey rose 39.59% on a year-year basis in May, and as bad as that may sound, it was the seventh month in a row of declines and is now down by more than half from its peak of 85.51% in October. Just as inflation on the way up has been a global phenomenon, inflation on the way down (from varying levels) has also been a global trend.
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Bespoke’s Brunch Reads: 6/4/23
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Science and Technology
Could we stop Yellowstone from erupting with a giant geothermal power plant? (Construction Physis)
Yellowstone National Park sits on a massive super volcano that, if it erupted, would be catastrophic for the entire world causing a cloud of ash that would likely lead to the extinction of most species. Some scientists have theorized that a geothermal energy plant could mitigate the risks of an eruption and create a major source of power for the United States. [link]
Measuring the Productivity Impact of Generative AI (NBER)
A study found that customer support agents using AI reported a nearly 14% increase in productivity, with 35% improvements for the lowest skilled and least experienced agents. [link]
Apple’s Headset Has Metaverse Believers Hoping It Can Save Their Industry (WSJ)
Apple is set to unveil its virtual reality headset next week at its World Wide Developer Conference (WWDC), and developers across the industry are counting on its success to help revive the entire space which, to this point, just hasn’t caught on with consumers or enterprises. [link]
Deep-brain stimulation during sleep shown to strengthen memory (Medical Press)
New research from UCLA Health and Tel Aviv University shows how deep-brain stimulation during sleep could help patients with memory disorders. It’s theorized that memory is consolidated by the brain during sleep and this research provides ground-breaking evidence. [link]
Tennessee man eats only McDonald’s food for 100 days straight: Here’s what happened (Fox News)
In an attempt to lose weight, yes, lose weight, a fifty-seven-year-old man in Nashville ate only McDonald’s for 100 consecutive days. After those 100 days, he’s lost 58.5 pounds from his start at 238 pounds. [link]
The big question of how small chips can get (Financial Times)
Experts warn that semiconductor chips won’t be able to get much smaller, even as computing progress has depended on it in the past. [link]
Economy
Macy’s and Costco sound a warning about the economy (CNN)
Big chain stores suggest their consumers are spending less at their stores and shifting their priorities to more essential purchases. In the past, these types of shifts have been common in recessions. [link]
As retailers leave some cities, one grocery chain is trying to stay (Washington Post)
A significant increase in theft and violent crime over the last five years together with decreased urban foot traffic and inflation-related issues are trends that are forcing companies to think hard about closing stores in urban areas. Giant Food is standing firm on its position to not close stores and is attempting to combat these issues with actions. [link]
A Visual Breakdown of America’s Stagnating Number of Births (WSJ)
A multitude of factors are impacting the recent decline in the nation’s birth rate. Included are some economic factors such as housing affordability. In the next ten years, this decline in conjunction with lower levels of immigration and more baby boomer retirements will contribute to effects on the labor force supply. [link]
Here Are The 15 Richest Women Celebrities In America (Forbes)
Forbes presents the fifteen richest women celebrities in America, how they did it, and what they’re up to. Second on the list of musicians is Taylor Swift, as every additional concert ticket you buy, pushes her net worth higher. [link]
Apple Customers Say It’s Hard to Get Money Out of Goldman Sachs Savings Accounts (WSJ)
The Apple savings account has attracted many customers given its attractive interest rate of 4.15% compared to the average of 0.25%. Some customers, however, have experienced delays and other inconveniences regarding transfers out of their accounts despite Goldman’s contradictory claims on the matter. [link]
Travel
TSA records busiest day of pandemic amid smooth holiday for air travel (Washington Post)
Memorial Day Weekend, like many holiday weekends, means increased air travel across the United States. This year saw a major rebound as TSA screened 300,000 more flyers this Memorial Day weekend than they did pre-pandemic in 2019 during the same holiday weekend. [link]
Why You’re Losing More to Casinos on the Las Vegas Strip (WSJ)
With odds already stacked against gamblers, Vegas is subtly making changes to further game odds in their favor. This means lower payouts, riskier bets, and higher minimums to play. Players are already losing billions of dollars annually to the casinos, so find out why they haven’t been so easily deterred from their growing disadvantages. [link]
Airlines Are Weighing Passengers to See if They Got Heavier (Time)
Air New Zealand is the latest airline to jump on the trend of asking its passengers to step on the scales, and it has to do with safety. The airline claims that this survey, running through June, will help it calculate the “weight and balance of the loaded aircraft.” Some airlines are conducting surveys of this kind in part to analyze how “recent factors such as the shift to remote working, war in Ukraine and potential long-term effects of Covid-19 have impacted people’s weight.” [link]
International
App Store developers generated $1.1 trillion in total billings and sales in the App Store ecosystem in 2022 (Apple)
The App Store store has grown over 27% for three straight years and 90% of billing and sales accrued solely to developers, with no commission to Apple, the tech giant announced. The marketplace supports close to 5 million jobs in the United States and Europe. Read about some of the key drivers of its growth. [link]
Everywhere You Look in China Are Signs of More Market Misery (Yahoo Finance)
Chinese stocks entered a bear market after a drop of over 20% from their peak. Weak data, geopolitical risks, and other signals point to a continued downturn in China. [link]
Friends With (Metal) Benefits (Phenomenal World)
The United States is looking to Australia for critical minerals to aid the energy transition. Approval of an earlier signed compact allows American taxpayers to support Australian mineral projects, and the US can benefit against China (Australia’s largest export customer) in obtaining scarce minerals like lithium, nickel, and cobalt. [link]
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Have a great weekend!
The Bespoke Report — Remember When? — 6/2/23
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