S&P 500 Market Cap Tops $40 Trillion

The S&P 500’s market cap has increased by more than $6 trillion this year, leaving the index’s total market cap above $40 trillion.  As shown below, the Technology sector makes up more than a quarter of the index’s market cap at nearly $11 trillion.  The next closest sectors are all right around the $5 trillion mark — Consumer Discretionary, Health Care, Communication Services, and Financials.  There are also four sectors that barely add up to $4 trillion combined: Energy, Real Estate, Materials, and Utilities.  The four largest stocks in the S&P 500 — Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) — have a combined market cap that is $8.3 trillion, more than two times the size of the four smallest sectors.

While the Technology sector ranks in the middle of the pack in terms of year-to-date performance, on a market cap basis, it has easily increased the most of any sector this year.  As shown below, Tech’s market cap has increased by nearly $1.7 trillion so far in 2021.  The next closest sector is Financials with an increase of $1.1 trillion.  So far this year, every sector has seen an increase in market cap, with the Utilities sector increasing by the smallest amount at roughly $48.5 billion.

Below is a quick snapshot of the 25 largest stocks in the S&P 500 at the moment.  Apple (AAPL) and Microsoft (MSFT) are the two largest and the only members of the “$2 trillion club.”  Alphabet (GOOGL) and Amazon (AMZN) rank 3rd and 4th with market caps of more than $1.7 trillion.  There’s a big drop-off after the “big 4” of AAPL, MSFT, GOOGL, and AMZN.  Facebook (FB) ranks 5th with a market cap of $916 billion, while Tesla (TSLA) has moved up to the #6 spot at $845 billion.  With Facebook declining recently and Tesla rallying, the market cap spread between the two is now at just $71 billion.  Berkshire (BRK/B), NVIDIA (NVDA), Visa (V), and JP Morgan (JPM) round out the top ten.

As you can see, all of the stocks on the top 25 list now have market caps of $250 billion or more.

In terms of the biggest market cap gainers so far this year, there’s Alphabet (GOOGL) and Microsoft (MSFT), and there’s everyone else.  GOOGL has seen the biggest gain in market cap with an increase of $702 billion.  There are only six stocks in the S&P 500 that currently have total market caps of more than that amount!  The $702 billion gain for GOOGL is also larger than the total YTD gains in market cap for seven of the eleven S&P 500 sectors.

As shown, nine stocks in the S&P have seen their market caps increase by more than $100 billion so far in 2021.  Of the 500 stocks in the S&P 500, 411 (more than 80%) of them have total market caps of less than $100 billion.  Click here to learn more about Bespoke’s premium subscription services.

Bespoke’s Morning Lineup – 10/18/21 – China Growth Slows

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.

“Uneasy lies the head that wears a crown.” – William Shakespeare

It’s looking like a weak start to trading for the week as futures are firmly lower ahead of the opening bell.  We’ve seen a big jump in interest rates over the last two trading sessions as BoE Governor Bailey came out with some hawkish comments related to inflation.  In economic data, Chinese GDP came in below forecasts with Q3 growth coming in at just 0.2 on a quarter/quarter basis.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

Outside of Communication Services which fell nearly 1%, every other sector within the S&P 500 finished last week higher, and in some cases, a lot higher.  Materials, Real Estate, and Consumer Discretionary all rallied more than 3% with the latter also hitting a new high.  Every other sector besides Health Care (and Communication Services) were all up by over 1%.  In terms of where each sector finished the week relative to its 50-day moving average, they are currently all over the map.  Sectors like Consumer Discretionary, Energy, and Financials are all at ‘extreme’ overbought levels while Health Care and Communication Services are still below their 50-DMAs.  Even Real Estate, which was the second-best performing sector, still finished the week below its 50-DMA.


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Bespoke Brunch Reads: 10/17/21

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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California

California moves toward ban on gas lawn mowers and leaf blowers by Phil Willon (LAT)

Gasoline-powered lawn equipment motors are extremely inefficient and produce shocking amounts of pollutants. California is responding by banning their sale (though operating them will still be legal in the state). [Link; soft paywall]

More than half of Bay Area residents plan to leave permanently: poll by Jordan Williams (The Hill)

As the saying goes, talk is cheap, and it’s a lot easier to grouse about where you live than actually leave, but there certainly are a lot of people near the Golden Gate who would rather be somewhere else. [Link]

Logistics

Crews Are Abandoned on Ships in Record Numbers Without Pay, Food or a Way Home by Drew Hinshaw and Joe Parkinson (WSJ)

Dozens of ships are being abandoned with their crews left unpaid and far from home as maintenance, left without resources to make their own way home from the locations their ships have in some cases literally washed up. [Link; paywall]

Amazon Seeks Used Long-Range Cargo Jets Able to Fly From China by Matt Day and Julie Johnsson (Bloomberg)

With passenger flights down sharply and therefore huge amounts of cargo capacity missing from the trans-Pacific trade network, Amazon is buying long haul jets in order to fill the gap and rush high value shipments from Asia to the US. [Link; soft paywall]

Biggest U.S. Retailers Charter Private Cargo Ships to Sail Around Port Delays by Sarah Nassauer (WSJ)

Large stores like Home Depot (HD), Costco (COST), and Walmart (WMT) are chartering their own ships in the hopes they can avoid the chaos in the freight forwarding industry and get goods to US consumers on time for the holidays. [Link; paywall]

Culture

Netflix’s ‘Squid Game’ Is Slammed by Kim Jong Un’s Propagandists as ‘Beastly’ by Dasl Yoon (WSJ)

The most successful Netflix show ever has drawn the ire of North Korean propagandists, who are spinning the show as a realistic depiction of South Korean society (it is not). [Link; paywall]

I Was a Lifelong Vegetarian. I Decided to Taste What I Was Missing by Rajesh Parameswaran (Bon Appetit)

When in Argentina, get a steak. That’s the upshot of this wonderful personal essay about breaking in to beef from the perspective of a lifelong vegetarian. [Link]

Manufacturing

How Morocco transformed itself into a carmaking hub by David Pilling (FT)

An unlikely powerhouse in the global auto manufacturing industry is Morocco, which produces more than twice as many cars as it purchases thanks to an aggressive industrial policy that has supported the development of car making infrastructure and value chains. [Link; soft paywall]

History

Christopher Columbus And The Replacement-Level Historical Figure by Patrick Wyman (Defector)

While Columbus is a culture war focal point in the US these days, the larger context of his role in history puts the lie to the idea that he was either a unique hero or a specific villain, as opposed to a direct product of his time and circumstances. [Link]

Astronomy

Dark matter’s shadowy effect on Earth by Michael R. Rampino (Astronomy)

One possible explanation for what appear to be periodic cataclysms throughout geological history is the influence of Earth’s passage through the central plane of the galaxy, an area that may be rife with dark matter and create increased likelihoods of major impacts or geological disasters. [Link]

Real Estate

Soaring Home Prices Are Roiling Appraisals and Upending Sales by Nicole Freidman (WSJ)

With home prices soaring, appraisers are skeptical, and many new home deals are falling apart as lenders balk at the prices their potential borrowers are agreeing to. [Link; paywall]

Pay To Play

Is Stock Index Membership for Sale? by Kun Li, Xin (Kelly) Liu, and Shang-Jin Wei (NBER)

This novel paper documents a relationship between companies purchasing credit ratings from Standard & Poors and their inclusion in the flagship S&P 500 index. [Link; registration required]

Labor Market

A Year After a Jobs Bust, College Students Find a Boom by Nelson D. Schwartz and Coral Murphy Marcos (NYT)

College seniors are finding lots of interest from employers as companies scramble to fill positions in a hot, high turnover labor market that has shifted the balance towards students who a year ago were staring into the abyss of a COVID recession. [Link]

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Have a great weekend!

The Bespoke Report Newsletter – 10/15/21 – Whipping Up Worries Over Punchy Prices

This week’s Bespoke Report newsletter is now available for members.

Markets and economic data are starting focus more tightly on rising inflation. Energy prices are soaring, industrial metals are at record levels, and employers are faced with an avalanche of quits and job openings. But supply responses are underway, with oil rigs spinning up, natural gas output rising, and millions of Americans piling into the labor market to meet the demand for workers. Earnings are also starting off strong this season with much better results from Wall Street trading firms and less cost of credit from money center banks. Consumer goods are also rolling in from China as the bilateral trade deficit reported by that country this week. We discuss all of this and more in this week’s Bespoke Report.

To read this week’s full Bespoke Report newsletter and access everything else Bespoke’s research platform has to offer, start a two-week trial to one of our three membership levels.

Empire Fed Moderation

Last month, the New York Fed’s Empire Fed survey saw the index for General Business Conditions come in at the seventh-highest reading on record. With the most recent update this morning, the index showed significant moderation in the pace of activity.  The index plummeted 14.5 points MoM which ranks in the bottom decile of monthly moves and is now in the 77th percentile of readings going back to the start of the survey in 2001.

The big drop in the headline index can be attributed to big drops throughout the report.  New Orders, Shipments, Unfilled Orders, Prices Received, Number of Employees, and Average Workweek were all lower with those declines historically large. With that said, most indices remain at historically strong levels with only the headline number and Shipments not in the top decile of their historical ranges.   Expectations also broadly remain at historically healthy levels.

Demand decelerated as New Orders fell 9.4 points to 24.3 and in turn, Unfilled Orders pulled back 2.4 points to 18.5. As previously mentioned, even though those declines were large, the current levels of these indices continue to sit in the upper 10% of all readings. Shipments are another story though.  That index plummeted 18 points in October and is now only in the 38th percentile of historical readings.

As for why Shipments stand out as a far weaker area of the report, supply chain issues can likely receive the blame and that is backed up with the index for Delivery Times setting yet another record high after three months of increases in a row.

Price pressures remain extremely elevated from a historical context. Prices Paid accelerated this month but remain off the record high from a few months ago. Prices Received, on the other hand, moved lower in October falling off of its record high.

Employment metrics also deteriorated this month with both the indices for Number of Employees and Average Workweek pivoting lower.  With regards to the Number of Employees, New York area firms continue to appear to be exceptionally willing and optimistic on hiring with a very elevated, albeit rolling over, reading in 6-month expectations. Meanwhile, the current conditions index is more muted, but also at the high end of its historical range even after a falling 3.4 points this month.  Average Workweek experienced a larger decline this month, but the index remains at a stronger level respective to its historical range.  Click here to view Bespoke’s premium membership options.

Bespoke’s Morning Lineup – 10/15/21 – Priced In?

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.

“Success usually comes to those who are too busy to be looking for it.” – Henry David Thoreau

There’s a decent amount of economic data on the calendar this morning with Empire Manufacturing, Retail Sales, and Import Prices just hitting the wires.  Empire Manufacturing came in a bit shy of forecasts, but Retail Sales came in higher across the board.  Not only that but August’s reading was also revised higher. While Import Prices aren’t as widely followed as CPI and PPI, the headline reading showed lower than expected increases.

The increase in risk appetite from yesterday appears to be in place again this morning as futures are firmly positive (and higher now then before the data hit) and interest rates are higher.  Goldman earnings just hit and the headline numbers were all much better than expected and the stock is trading up nearly 2%.

Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.

We’re seeing it again this morning where some companies are reporting weaker results or guidance citing the impact of supply chain issues, labor shortages, and inflation.  Perhaps the biggest question heading into this earnings season is whether these issues, which are impacting just about every company out there, have been sufficiently priced into the market.

In looking at Google Trends search data for these three terms, it’s not as if they aren’t front and center.  The chart below shows the frequency of search results for the three terms (Inflation, Labor Shortage, and Supply Chain) going back to 2004, and all three have spiked enormously this year to levels not seen in the history of the data.  In the case of ‘labor shortage’ and ‘supply chain’ searches for these two terms hit a record this month.

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The Closer – Commodity Term Structure, Transportation Price & Volume, CFOs – 10/14/21

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Looking for deeper insight into markets?  In tonight’s Closer sent to Bespoke Institutional clients, we begin tonight with an update of Hugo Boss earnings and Fedspeak before looking at WTI and copper’s term structure.  Next, we take a look at PPI numbers then delve into transportation figures like air freight activity, truck tonnage, and rail freight volumes. We then take a look at the insights on supply chains and labor shortages through the Duke CFO survey. We close out with a recap of this week’s petroleum stockpile data from the EIA.

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Most Volatile Stocks on Earnings

As earnings season lurks around the corner, we took a look into the most volatile stocks on earnings that are reporting between now and the end of November, as we do ahead of each earnings season. These stocks have historically experienced the largest one-day moves in reaction to their earnings reports.

The number of daily earnings reports ramps up next week but doesn’t hit full-stride until two weeks from now, which is the end of October.  Earnings season continues into the start of November as well.  (You can track upcoming earnings reports and monitor earnings-related trends using our Earnings Explorer tool.)

In the table below you will find the stocks that have historically seen the biggest share-price reactions to earnings that have at least 8 quarters (2 years) of earnings reports. On the trading day following their respective earnings reports, these companies have had the highest average absolute percentage change in share price. (For stocks that report before the open, we are looking at its one-day change on that trading day.  For stocks that report after the close, we are looking at its one-day change on the next trading day.)

Of the companies reporting between now and the end of November, Cardlytics (CDLX) has the highest average absolute one-day change of +/-18.62%. Snap (SNAP) and Pinterest (PINS) have average one-day moves of over +/-17%. Roku (ROKU) and Fastly (FSLY) average one-day moves of over +/-16%. Other notable stocks on this list include The Trade Desk (TTD), Groupon (GRPN), Zoom Video (ZM), LendingTree (TREE), Twitter (TWTR), and Netflix (NFLX).  All names on this list average one-day moves of over +/-10% on their earnings reaction days.

To show you the volatility of these names, let’s take a look at the earnings results for the top name of this list, CDLX.  Below, you will see that the stock has typically seen dramatic moves on its earnings reaction days.  Specifically, the stock has experienced the largest drawdowns when it has lowered guidance. The maximum one-day earnings drawdown since CDLX’s IPO was 36.7%.  Conversely, its maximum upside was a gain of 42.9% back in November 2019.  CDLX is heading into its upcoming earnings report on a two-quarter losing streak.  On its earnings reaction day in May, CDLX fell 16.96%, while it fell 27.61% on its last earnings report in August.

The table below examines the most volatile stocks on earnings that have at least five years (20 reports) of quarterly reports.  Over time, stocks tend to decrease in volatility around earnings because of the increase in available data points.

Of the stocks with at least five years of quarterly earnings data that are reporting between now and the end of November, The Trade Desk (TTD) has been the most volatile with average absolute one-day price movements of +/-15.19%. Impinj (PI) has averaged a move of over +/-15% as well.  Groupon (GRPN), Infinera (INFN), and Enphase Energy (ENPH) follow with average price moves of over +/-14%. Other notable members of this list include Wayfair (W), iRobot (IRBT), Chegg (CHGG), and Crocs (CROX).

The top name on the list above, TTD, has had interesting earnings reactions and is far from predictable. Over the last 8 earnings periods, the company has beaten on EPS and revenues every single time, and it has only failed to raise guidance once.  However, the stock dropped 26% after beating both EPS and sales and raising guidance back in May.  The market seems to set its own expectations apart from the street for this name.

On the final list, we will only be looking at names that have at least 10 years (40 quarterly reports) of earnings history.  Although these are well established companies, they still experience absolute average price moves of +/-10% on earnings reaction days.

The names at the top of this list are Infinera (INFN), Netflix (NFLX), WW (WW), iRobot (IRBT), and 3D Systems (DDD).  Other notable names include First Solar (FSLR), Overstock.com (OSTK), Sketchers USA (SKX), Guess? (GES), and Green Dot (GDOT).

While all of the stocks listed on these tables have historically seen violent moves in reaction to earnings, there is of course no way to know whether the large moves will be to the upside or downside, so tread lightly!

The volatility leader of the above list, INFN, has experienced a lower level of volatility after its four most recent reports in comparison to historical averages.  During the last four periods, INFN has averaged an absolute average one-day change of just under 4%. This is significantly below its overall average of +/-14.24% on its 56 historical reports dating back to 2007.  Since the start of historical data, the stock has only booked four straight absolute one-day price changes of under 10% one other time, which occurred in the last three quarters of 2012 and the first quarter of 2013.

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