Morning Lineup – Futures Fly on Boeing
Big earnings from Apple (AAPL) last night after the close and Boeing (BA) this morning have pushed the Dow futures sharply higher. While the gains aren’t as large in the S&P 500 and Nasdaq, they are also both pointing in the right direction for bulls. Now, all we have to do is get through this afternoon’s rate decision from the FOMC and the subsequent press conference. The number one wish from the bulls for Fed Chair Powell? Stick to the script and end the record streak of declines on FOMC days since he became the Chair! Read today’s Bespoke Morning Lineup for more on what’s driving the markets this morning.
Bespoke Morning Lineup – 1/30/19
Even as the equity market has recovered in January, the percentage of consumers who are bullish on the market declined to 30.9%, which is the lowest reading since July 2016. Even more extreme, the percentage of consumers who are negative on stock prices increased to 38.6%, which is the highest reading since December 2012!
Like a lot of sentiment measures, this reading from the Consumer Confidence report also tends to be contrarian in nature. The last time the spread was this skewed to the bearish side was in February 2016, and if you don’t remember, that was right around the lows of the 2015/2016 market correction.
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B.I.G. Tips – Fed Days January 2019
Jerome Powell has been in charge of the Fed for seven FOMC meetings at this point, but he has yet to see the S&P 500 experience an up day on any of his Fed Days! The current streak of 7 Fed Days without an up day is by far the longest losing streak on record. In our newest B.I.G. Tips report available to Bespoke Premium and Bespoke Institutional members, we look at current odds for rate hikes (or cuts) over the next year, and we update our charts and tables showing historical stock market performance on and around Fed Days. Be sure to give it a read ahead of tomorrow’s 2 PM ET FOMC announcement.
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Bespoke Consumer Pulse Report — January 2019
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.
Intra-Sector Performance of Technology
After a horrendous Q4 where every industry within the Technology sector fell more than 10% (and in many cases much more), the sector has gotten off to a positive start in 2019 with a YTD gain of 5.2%. Within the sector, though, the gains haven’t been balanced. The matrix below shows the performance of each of the industries within the Technology sector YTD, in 2018, as well as in the fourth quarter of 2018. For each industry we also show its weight in the S&P 500, the YTD performance of the largest stocks in the industry, and then finally where the industry is currently trading with respect to its 52-week range (the tails show how the sector’s position within its 52-week range has changed since the end of 2018).
Leading the way higher so far in 2019, the Electronic Equipment industry has rallied 8.7%, led by gains in TE Connectivity (TEL), Corning (GLW), and Amphenol (APH). Behind Electronic Equipment, IT Services, which is primarily made up of Visa (V), Mastercard (MA), and IBM, has rallied 6.7%, but behind these two, no other industry is up more than 5% YTD, and Technology Hardware, which is basically Apple (AAPL), is barely holding onto YTD gains. That could change in a big way (in either direction) after the close today when AAPL reports.
Technology has so far put in a decent performance in 2019 which is important given that it still makes up nearly 20% of the S&P 500. What is interesting, though, is that the leadership hasn’t necessarily come from the areas of the sector that would normally first come to mind.
Chart of the Day: Big Drop in Consumer Expectations
In today’s Chart of the Day available to Bespoke subscribers, we analyze historical levels of the Present Conditions and Expectations components of the monthly Consumer Confidence report from the Conference Board. Not only did overall Consumer Confidence drop in January, but consumer expectations towards the future have plummeted.
In spite of the shutdown, consumer sentiment towards their current situation remained right near the highs of the cycle, falling by less than 0.2%. Relative to the cycle high back in August, this reading is down less than 2%. Where confidence has really taken a hit, however, is in expectations towards the future. That component fell almost 11% in January after a decline of 13% in December, putting it down over 24% from its cycle high in October 2018.
Historically, a big gap in the Present vs. Expectations components of Consumer Confidence has been very telling for the direction of the economy. Start a two-week free trial to any Bespoke membership level to read our in-depth analysis by accessing today’s Chart of the Day.
Semis Hold Support
Yesterday’s earnings warning from Nvidia (NVDA) caught the overall semiconductor group by surprise. After a nice rally off the lows in late December, the group had really stabilized in recent weeks, but the warning and NVDA’s subsequent 15%+ decline at the open threatened the fragile recovery. While the group finished down on the day, things didn’t get much worse after the opening bell. As shown in the chart below, while the group opened weaker, it held support at the short-term uptrend off the December lows and finished the day up nearly 2% from its early lows.
The same can be said for just about every stock in the semiconductor group. The table below shows the open to close percentage change for each of the sixteen stocks in the S&P 500 Semiconductor and Semiconductor Equipment Index. Of the 16 stocks listed, the only one that finished the day lower than it opened was AMD, and the other 15 stocks in the group actually rallied slightly more than 2% from their prices at the opening bell.
Trend Analyzer – 1/29/19 – Pulling Back
Upward momentum has somewhat faltered in the past week as the S&P 500 continues to attempt to break out of its several month long downtrend. The S&P 500 ETFs (SPY and VOO) are both down over 1% in the past week. In fact, each major index ETF, except for the Russell Mid-Cap (IWR), is now down over the past week; ranging from just barely negative to sizable losses. The mid-caps continue to show the most relative strength (IWR, IJH, and MDY). Conversely, the large cap S&P 100 (OEF) has taken it on the chin and is now down 1.45% in the past five days. The Nasdaq (QQQ) and Micro-Cap (IWC) are not much better, with each down over 1%. Despite these losses and while they all still remain in downtrends, the indices have held firm in neutral territory and above their 50-DMAs.
Morning Lineup – Shaking Off Bad News
The pace of earnings reports continues to pick up steam, and what we’ve seen in many instances so far is an ability by the market to shake off weakness. The latest example today is 3M (MMM), which reported weaker than expected EPS and revenues and also lowered guidance. So, how much is MMM trading down in the pre-market? It’s actually up 2.5%. Overall, this earnings season we have also seen a trend where companies beating EPS forecasts are being rewarded considerably more in magnitude than companies who are missing EPS forecasts are being punished. In the last two weeks, the 129 companies that have reported better than expected EPS are up an average of 2.5% on their earnings reaction days, while the 60 companies that have missed EPS forecasts have declined just 1.6% Read today’s Bespoke Morning Lineup for more on what’s driving the markets this morning.
Bespoke Morning Lineup – 1/29/19
After yesterday’s warnings from Nvidia (NVDA), there’s been some dueling analyst commentary in the stock this morning. While UBS upgraded the stock to a buy rating, both Morgan Stanley and Needham downgraded the stock. Needham even thinks the stock could drop below $100. While the analysts disagree on NVDA, the semis held up reasonably well yesterday given the warning. As shown in the chart below, while the group opened weaker on the day yesterday, it held support at the short-term uptrend off the December lows and finished the day up nearly 2% from its early lows.
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B.I.G. Tips — Apple (AAPL), Amazon (AMZN), Facebook (FB) to Report This Week
In this B.I.G. Tips report available to Bespoke Premium and Bespoke Institutional members, we take a deep dive into historical earnings reports for Apple (AAPL), Facebook (FB), and Amazon.com (AMZN), all of which are reporting earnings over the next three days. Below is an example of what we’re analyzing in this report. We look at historical beat rates, guidance, and how these three FAANG stocks typically perform in reaction to their Q4 earnings reports.
To unlock the full report, start a two-week free trial to either Bespoke Premium or Bespoke Institutional.