Post Earnings Season Stats Relatively Healthy
The third quarter earnings reporting period that spanned from early October through mid-November was a rough one for investors. The broad market struggled quite a bit during this period, and the actual earnings reports coming from corporate America were weaker relative to recent quarters. Since the unofficial earnings season ended with Wal-Mart’s (WMT) report on November 15th, though, earnings have been coming in a little better. Just over 100 companies have reported since the 15th, and below are a few stats worth highlighting.
The first chart below shows the percentage of companies that beat consensus EPS estimates during the Q3 earnings season and since the season ended. As shown, the EPS beat rate since earnings season ended stands at 70%, which is 5.5 percentage points higher than the beat rate seen during the Q3 earnings season.
Top-line beat rates have also improved a bit. During earnings season, only 57.6% of companies beat revenue estimates, while the beat rate stands at 62% for companies that have reported since then.
Finally, stock prices are reacting much more positively to earnings reports as well. During earnings season, the average stock that reported fell 0.14% on its earnings reaction day (the first trading day following the earnings release). Since earnings season ended, the 100+ companies that have reported have averaged a one-day gain of 1.68% in response to earnings.
B.I.G. Tips – December 2018 Seasonality
Dow 30 Trend Analyzer; 10 Overbought, 3 Oversold
While the Dow Jones Industrial Average remains below its 50-day moving average, we’re seeing some internal strength that’s worth pointing out. As shown in our Trend Analyzer snapshot of the Dow 30 members below, 10 stocks are currently overbought while just 3 are oversold. This means that 10 stocks are trading more than one standard deviation above their 50-day moving averages, while 3 are more than one standard deviation below their 50-DMAs. The only 3 stocks that are oversold are United Tech (UTX), Goldman Sachs (GS), and Apple (AAPL).
In addition, more than half of the Dow 30 are trading above their 50-day moving averages, which is another sign of positive underlying breadth.
The most overbought stock in the Dow right now is UnitedHealth (UNH), followed by Pfizer (PFE), and Merck (MRK). All three of these stocks are trading in what we call “extreme” overbought territory — more than 2 standard deviations above their 50-day moving averages.
For UNH, the stock has moved from trading oversold one week ago at this time to trading extremely overbought. Talk about a sharp reversal higher!
Trend Analyzer – 11/30/18 – Powell Surge Not Offset
Comments by Fed Chair Powell sent equity markets surging on Wednesday. Since then, markets have seen a fair amount of red with most major indices declining yesterday and looking to open lower again this morning. Since these declines have not been steep enough to offset the gains from earlier in the week, every ETF that tracks the major US Indices remains neutral and still up from one week ago. One day of big gains would likely push them back above their 50-day moving averages as well, which would be a positive technical development.
Bespoke Morning Lineup – Ten Year Yield Remains Anchored
US equity futures are lower heading into the open, but we’ve seen a real rebound in the last few minutes, and now futures are only indicating the slightest of negative opens as we close out the last trading day of the month. Read today’s Bespoke Morning Lineup below for major macro and stock-specific news events, updated market internals, and detailed analysis and commentary:
Bespoke Morning Lineup – 11/30/18
Strong performance of US duration has continued with another day of bull flattening. Granted, the long end of the curve is down less than 2 bps on the day, but that’s still enough to put rates at a 10-week low. Notably, the 50-DMA looks like its starting to roll over and the 200-day is also slowing. There’s no trend shift yet for 10s, but given dour sentiment on the global economy and a less hawkish Fed, anything is possible.
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The Closer — Sector Dispersion, Crude Vol Reversion, GBP Aversion, PCE Occlusion — 11/29/18
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we take a look at dispersion within S&P 500 sectors, the horrible run for the Mexican stock market that saw a reprieve of 3% gains today, extreme moves in the oil volatility markets, elevated risk premiums for GBP but less so for other GBP-denominated markets, and finally a recap personal income and spending numbers today from BEA (including much softer inflation numbers).
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Health Care Going Strong
The Health Care sector has been on an impressive run this year. While not immune from the downturn this Fall, it has recovered nicely with exceptional relative strength. We update sector relative strength charts each week in our Sector Snapshot report to compare the performance of the various sectors relative to the broader market. Heading into the final month of the year, Health Care is outperforming the S&P 500 by an enormous margin. Granted it had been in a solid uptrend since the spring, but with the S&P 500 seeing a substantial amount of red since the peak on September 20th, it comes as no surprise that investors would flock to a more defensive sector.
Although Health Care’s relative strength may not jump out when looking at the sector’s price chart, the pattern forming since the broader market peak looks promising. Since bottoming in late October, Health Care came back to test resistance at around 1,080. After failing that test, it pulled back making a higher low, and with another day of gains today, it has finally broken out above former resistance.
In the table below, we highlight the 24 stocks within the Health Care sector that are up since the S&P 500’s closing high on 9/20. Cigna (CI) has been the best performer during this time rising 10.83%. Right on CI’s heels are Eli Lilly (LLY) and Merck (MRK) which have also both seen double-digit gains. While the same cannot be said for Cigna, LLY and MRK have also seen extraordinary gains YTD. HCA Healthcare (HCA) has the second-best growth YTD at 65.54% and also ranks the fourth best since the peak.
