Chart of the Day: May Deciles
Target’s (TGT) Troubles
It’s been a miserable couple of weeks for shares of Target (TGT) as the stock is on pace for its tenth straight day of losses today. Whether or not the stock closes up or down today, the nine-day losing streak heading into Thursday was the longest in more than 23 years, and there have only been three other streaks that were as long or longer than the current one.
While shares of Target (TGT) have been down sharply over the last two weeks (-20.2%), its main competitor Walmart (WMT) hasn’t had nearly as rough of a time as its shares are down just 1.5%. At the current level of -18.7 percentage points, the two-week performance spread between TGT and WMT is at an extreme, and there are only a handful of other periods since 1980 where the spread was wider in WMT’s favor. What’s ironic, however, is that exactly a year ago today, TGT’s two-week underperformance versus WMT was even wider at -22.8 percentage points. Back then it was a disastrous earnings report that caused the stock to crater.
The recent weakness in TGT has been mostly attributed to a negative backlash from the merchandise associated with the company’s Pride campaign, and while that may have accelerated the decline, it’s important to note that the stock has been steadily underperforming WMT for well over a year now. The chart below shows the relative strength of TGT versus WMT over the last five years. While TGT was a big beneficiary relative to WMT during the year after COVID when consumers were flush with cash, once the checks stopped, so too did the outperformance. As of today, the stock’s relative strength versus WMT is at the lowest level since the first half of 2020.
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Bespoke Market Calendar — June 2023
Please click the image below to view our June 2023 market calendar. This calendar includes the S&P 500’s historical average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Click here to view Bespoke’s premium membership options.
May and YTD 2023 Asset Class Performance
May 2023 is now behind us, and below is a look at how various asset classes performed during the month using US-listed exchange-traded products as proxies. We also include YTD and YoY total returns.
May was a month of divergence where Tech/AI soared, and the rest of the market fell. Notably, the Nasdaq 100 ETF (QQQ) gained 7.88% in May while the Dow Jones Dividend ETF (DVY) fell 7.7%. That’s a 15 percentage-point spread!
At the sector level, it was a similar story. While the Tech sector (XLK) rose 8.9%, sectors like Energy (XLE), Consumer Staples (XLP), Materials (XLB), and Utilities (XLU) fell more than 5%. In total, 8 of 11 sectors were in the red for the month.
Outside the US, we saw pullbacks in most areas of the world other than Brazil, India, and Japan. China, Hong Kong, France, Canada, Italy, Spain, and the UK all fell more than 5%.
All of the commodity-related ETFs/ETNs were in the red for May, with oil (USO) and natural gas (UNG) falling the most at more than 10% each.
Finally, fixed-income ETFs also fell in May as interest rates bounced back. The aggregate bond market ETF (AGG) was down 1.14% in May, leaving it up just 2.6% YTD and down 2.2% year-over-year.
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Bespoke’s Morning Lineup – 6/1/23 – Like Oil and Water
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“When people see some things as beautiful, other things become ugly. When people see some things as good, other things become bad.” – Lao Tzu
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Flat on either side of unchanged. That’s where futures stand this morning heading into what is going to be a very busy day for economic data. Things started off with ADP Private Payrolls at 8:15 which came in much stronger than expected at a level of 278K versus forecasts for an increase of 170K. After that, we got updates on Non-Farm Productivity, Unit Labor Costs, as well as Initial and Continuing Claims. Non-Farm Productivity was less bad than feared, falling 2.1% versus forecasts for a decline of 2.5%. Unit Labor Costs were a big bright spot as they only increased 4.2% compared to forecasts for an increase of 6.1%. Jobless claims, meanwhile, were slightly better than expected on both an initial and continuing basis.
We’re still not done yet, though. At 9:45 S&P Manufacturing PMI comes out at 9:45 followed by ISM Manufacturing and Construction Spending at 10 AM.
In Europe, stocks are higher this morning following some positive economic data as most manufacturing PMIs were modestly better than expected but still in contraction. Inflation data also came in lower than consensus forecasts with EU CPI unchanged in May versus expectations for an increase of 0.2%. With that, the y/y change fell to a 14-month low of 6.1% which was the lowest reading since February 2022.
In central bank news, ECB vice president Luis de Guindos noted that the central bank is in the ‘final stretch’ of the current rate-hiking cycle and that hikes in increments of 25 bps are ‘the new norm’. In comments earlier, ECB President Lagarde was more hawkish noting that there is no ‘clear evidence’ that underlying inflation has peaked, and added that she can’t say the ECB is satisfied with the inflation outlook.
It was a tale of many equity markets in May with the great (Nasdaq up 5.8%), the good (S&P 500 up 0.3%), the bad (Russell 2000 down 1.1%), and the ugly (Dow down 3.5%). Comparing the performance difference between the ‘great’ and the ‘ugly’ in May, the Nasdaq outperformed the Dow by 9.29 percentage points which ranks as the 9th widest margin of outperformance for the Nasdaq relative to the Dow in history.
The eight other months where the Nasdaq outperformed the Dow by more than it did in May all occurred in a 35-month span beginning in December 1998 and ending in October 2001. In fact, the Nasdaq outperformed the Dow by more than ten percentage points in back-to-back months twice (Dec 1998 to Jan 1999 and Nov 1999 to Dec 2000). If you think the Nasdaq is in a frenzy now, the period from late 1998 to the early 2000s makes it look like breakfast at Wimbledon.
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Chart of the Day – June Intramonth Seasonality
Bespoke’s Morning Lineup – 5/31/23 – Debt Deal Moves to the House
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“These are the days that must happen to you.” – Walt Whitman
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After opening right near their highs of the day and reversing lower throughout the trading day yesterday, equity futures are staring at a weak open this morning. Treasury yields are lower along with crude oil even as the debt ceiling deal moved out of Committee and is set for a full vote. Investors will be watching the Chicago PMI and JOLTS reports later this morning, but overnight, we had some weak economic data out of China and lower-than-expected inflation data out of Germany where the y/y increase in CPI dropped to 6.1% which was actually the lowest reading since last March. Some of these tech stocks have had a huge run in the last several days/weeks, so a pause should surprise no one.
The last 12 months haven’t been the best of times for crude oil, and the last two days have been no different. After a decline of nearly 4.5% to kick off the week yesterday, WTI is trading down over 2.5% this morning putting it within $1 of a 52-week low. A year ago, prices were coming off a peak of just over $130 per barrel after Russia invaded Ukraine but were still firmly in triple-digit territory. Bulls made another attempt to run crude back near the March 2022 high but came up short, and things only got worse from there. Since then, it’s been a steady march lower, and the price of a barrel of crude has nearly been cut in half.
For crude oil bulls, the last two months specifically have been a major disappointment especially when you consider the fact that China’s reopening was supposed to be a major catalyst. First, on 4/2, OPEC announced a surprise production cut. While the news caused a brief spike in prices, the rally stalled out right at the 200-day moving average (DMA) and prices were back at 52-week lows in a month. Then last week, a Saudi minister publicly noted that oil speculators who were betting against crude oil should ‘watch out’. In a bull market, those comments would have caused a buying frenzy, but in a bear market, jawboning has a very short half-life, and it wasn’t even enough to get WTI back above its 50-day moving average.
With crude failing its attempt to break above the 200-DMA back in April, the extended streak of closes below the 200-DMA has extended further. At 190 trading days through today, the current streak is the longest since the 427 trading day streak ending in April 2016. It would take nearly another year to challenge that streak, but the current streak already ranks as the fifth longest since 1984. Not only that but if the current streak lasts another month, it will move into third place overall.
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Some Good Inflation News
While the market prices in a much higher likelihood of a rate hike at the June meeting, there was actually some decent news on the inflation front today. Starting with the Conference Board’s Consumer Confidence report, in this month’s update, the inflation expectations component fell to 6.1% from a peak of 7.9% fifteen months ago in March 2022 (first time reading touched 7.9%). Looking at the chart below, this reading was also at 6.1% fifteen months before that first peak. In other words, for all the talk about how inflation has been stickier, the pace of decline in this indicator on the way down has been the same as the pace of increase on the way up.
Another notable report was today’s release of the Dallas Fed Manufacturing report. The Prices Paid component of that report showed a decline from 19.5 down to 13.8 which was the lowest reading since July 2020. For the month of May, two of the five components (Empire and Philadelphia) showed modest m/m increases from multi-month lows, and three showed significant declines to multi-month lows. The chart below shows a composite of the Prices Paid component using the z-scores for each of the five individual components going back to 2010. The peak for this component was 19 months ago in November 2021. Unlike the inflation expectations of the Conference Board survey, this reading hasn’t declined quite as fast as it increased in the 19 months leading up to the peak, but at -0.2, it is still below its historical average dating back to 2010 and back down to levels it was at right before the COVID shock hit the economy in early 2020.
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Home Prices Bounce in Hardest Hit Areas
March data on home prices across the country were released today with updated S&P CoreLogic Case Shiller numbers. Case Shiller home prices had been falling rapidly in many of the twenty cities tracked, but in March we actually saw a pretty big month-over-month bounce in some of the hardest-hit areas like San Diego, San Francisco, LA, Denver, and Phoenix. Some cities still saw declines, however. Las Vegas saw a m/m drop of 0.93%, while Miami fell 0.41%, and Seattle fell 0.28%.
On a year-over-year basis, Miami is still up the most with a gain of 10.86%. As shown in the table below, Miami home prices are up 59.87% from pre-COVID levels in February 2020, and they’re only down 2.9% from post-COVID highs. Only Tampa is up more than Miami from pre-COVID levels (+61.04%), but Tampa prices are down more from their post-COVID highs (-4.70%) than Miami (-2.90%).
Four cities are down more than 10% from their post-COVID highs: San Diego (-10.12%), Las Vegas (-10.95%), San Francisco (-16.35%), and Seattle (-16.50%). New York is down the least from post-COVID highs of any city tracked at just -2.9%.
Below we include charts of home price levels across all 20 cities tracked by Case Shiller along with the three composite indices. We’ve included a vertical red line on each chart to highlight pre-COVID levels. When looking through the charts, you can see this month’s small bounce back in most cities after a 6-9 month pullback in prices from peaks seen early last year.
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