Bespoke’s Morning Lineup – 6/28/24 – The Aftermath
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.
“The end may justify the means as long as there is something that justifies the end.” – Leon Trotsky
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Was there a debate last night? Futures are modestly positive this morning despite a very weak earnings report from Nike (NKE) where the stock is down over 15% in the pre-market in what would be the worst one-day reaction to an earnings report since at least 2001. Several economic reports were just released, and the results have generally been positive. Personal Income was slightly stronger than expected, Personal Spending was slightly weaker, and PCE inflation data was right in line with estimates.
In yesterday’s Morning Lineup note we noted that “barring something completely unexpected, it’s hard to see this night being looked back at as a major milestone come November.” Last night’s debate met the bar. Politico called it the “worst performance of any general election presidential candidate in any debate in modern American history.” NBC News noted that it sent “Democrats into a panic”. A New York Times headline described it as “frightening”, “shaky”, and “halting”. CNN referred to it as ‘disastrous”. On the other side of the Atlantic, Sky News called it “excruciating” and said that some Democrats described it as a “car crash”, BBC called Biden’s performance “incoherent”, and The Economist described it as “horrific” and “casts his entire candidacy into doubt”. Keep in mind, that these aren’t publications that are typically known as leaning conservative.
The initial reaction in the betting markets was swift. As shown in the snapshot from electionbettingodds.com, while Trump’s odds of winning increased 4 percentage points to 59.7%, Biden’s chances plummeted by nearly 15 percentage points to 21.3%. Interestingly, though, on a generic party basis, Democratics odds declined by just 3.2 percentage points as the chances for a candidate other than Biden on the Democratic side grow.
While the Democratic versus Republican party matchup didn’t move nearly as much as Biden’s odds, it was a big move relative to history. As shown in the chart below, the odds of a Republican victory in November are right near the highest levels since at least 2022, and the only time the odds were higher was in late 2023.
The reason Biden’s odds had such a large decline relative to Trump’s increase comes down basically to one person- Gavin Newsom. As shown in the chart below, overnight, Newsom’s odds of being elected in November shot up to 10% for the first time, and he’s now nearly half as likely to be elected in November as Biden! Obviously, it’s still early and a lot can and will likely change between now and November. If you identify as Democrat, Republican, or unaffiliated with either party, if you watched last night’s debate, you won’t forget it.
Bespoke’s Weekly Sector Snapshot — 6/27/24
Chart of the Day – First Solar (FSLR)
The Bespoke 50 Growth Stocks — 6/27/24
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Bespoke’s Morning Lineup – 6/27/24 – Data Tsunami
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.
“It is in knowledge that man has found his greatness and his happiness.” – James Smithson
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There’s a monster list of economic data on the calendar this morning, and most of it will be hitting the tape at 8:30, so good luck trying to keep track of it. In a nutshell, initial jobless claims were basically in line with forecasts while continuing claims were modestly higher than expected. Inflation data was a bit higher than expected, and Durable Goods were better than expected. Ahead of the data, futures were modestly lower following overnight weakness in Asia and Europe. Crude oil is higher and above $81 per barrel, while the 10-year yield is unchanged at 4.33%. One of the biggest drivers of the weakness this morning comes from Micron (MU) which is down 6% in the premarket after reporting better-than-expected earnings but merely reaffirming guidance. The weakness in MU has overflowed into the entire semiconductor space, including Nvidia (NVDA) which is down 2%.
Outside of India, major Asian equity indices traded lower overnight as Hong Kong led the losses with the Hang Seng down over 2%. China’s Shanghai Composite finished down 0.9%, and the Nikkei was down 0.8%. In China, Industrial profits were down 3.4% YTD and improved from April’s YTD reading of 4.3% while Retail Sales in Japan rose more than expected (3.0% y/y vs 2.0% estimate). Following the lead of Asia, European stocks are also lower this morning, but not by as much as their peers in Asia. The STOXX 600 is down 0.3% with the biggest losses in France (-0.7%) and Spain (-0.7%) while Germany is slightly higher.
With the S&P 500’s price and net daily breadth moving in opposite directions for five trading days in a row now, the daily divergences have started to add up and the gap between the S&P 500 and its cumulative A/D line has widened. While price and breadth tracked each other very closely for the eleven-month ending about a month ago, the last month has seen each move in opposite directions.
With the first half ending tomorrow, we wanted to see how the recent daily breadth divergences this year compared to the first half of prior years. Through yesterday’s close, the S&P 500’s price and daily breadth readings moved in opposite directions on 23% of all trading days. Dating back to 1990, that level is tied for the most ever. The only other year where there were as many daily breadth divergences was in 1995, and the only other year that was even close was 2000. While 1995 and 2000 may have been similar in terms of breath divergences, from a market perspective, that’s about where the similarities end.
The Closer – Price and Breadth on Different Wavelengths – 6/26/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start out with a note on the latest earnings and the Nasdaq 100 (page 1) followed by a dive into today’s new home sales (page 2) with commentary regarding affordability and homebuilders (page 3). We then look into the historic divergence between price and breadth (pages 4 and 5). Afterward, we show the relative strength of market cap versus equal weight sector ETFs (page 6). We then turn over to the latest EIA data (page 7) and the latest 5 year note auction (page 8).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Daily Sector Snapshot — 6/26/24
New Highs for Home Prices in 13 of 20 Cities
The latest monthly data on home prices from S&P CoreLogic’s Case Shiller indices was released yesterday. These indices track home prices in 20 major cities/regions around the US.
At the national level, home prices hit another all-time high in April (the data is released on a two-month lag). Month-over-month, the National index rose 1.2%, and it’s up 6.3% year-over-year.
Below is a look at the Case Shiller National home price index since 1990 compared to inflation as measured by CPI. As shown, home prices are up more than 300% over this time frame, which is good enough for just over double the rate of inflation.
Below is a table showing the change in home prices over various points in time for the Case Shiller indices. Boston and San Francisco were up the most month-over-month with 2% gains. The only cities that weren’t up at least 1% month-over-month were DC, Miami, Tampa, and Phoenix, but even these cities all gained at least 0.5%. On a year-over-year basis, all twenty cities are up at least 1.5%, while the composite indices are up 6-8%.
In late 2022/early 2023, we saw a pullback in home prices following an initial post-COVID surge in 2020 and 2021. At this point, though, 13 of 20 cities are back to new highs after prices have gone back up 10%+ for most cities since their 2023 lows. San Francisco, Seattle, Phoenix, Portland, Dallas, Las Vegas, and Denver are the seven cities that aren’t back to new highs yet. As you probably noticed, most of these are cities on the west coast where inventories are a lot higher than they are in areas like the northeast.
Since just before COVID hit in February 2020, home prices are currently up about 50% nationally. Miami and Tampa are up the most since COVID with gains of 70%+, while San Francisco, Minneapolis, Portland, and DC are up the least.
Below are Case Shiller home price charts for the twenty cities and three composite indices. Cities highlighted in green are trading at all-time highs.
Chart of the Day – July Seasonality
China Struggles
Nowadays, it doesn’t surprise anyone to see Chinese stocks underperforming as the country’s stock market has been mired in a long and steady downtrend for several years. Back in February, there was a brief respite from the selling as the Shanghai Composite bounced just over 20% through May. While Chinese stocks met the technical threshold for a bull market based on an intraday basis (based on closing prices, the Shanghai Composite was up just 17.4%), the rally was capped at the knees with a 7.6% decline over the next five weeks.
While a decline of less than 8% over five weeks isn’t necessarily an extreme move, how Chinese stocks have pulled back stands out. When looking at price charts, trends of lower highs suggest a heavy tape, and by this logic, Chinese stocks have never been heavier. While it’s hard to see in the chart above, over the last 20 trading days, the Shanghai Composite’s intraday high has been lower than the prior session’s intraday high 18 times! China joined the World Trade Organization in December 2001. During that time, there has never been another 20-day period before now where there were as few days where the Shanghai Composite had just two or fewer days that an intraday high was higher than the previous session!
