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.

“High expectations are the key to everything.” – Sam Walton

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Walmart (WMT) marked the unofficial end to earnings season this morning by reporting slightly better than expected earnings on inline revenues. The company also lowered guidance for Q1 and the full year. As a result of the lowered guidance, the stock is getting pummeled in the pre-market and is on pace to gap down close to 9%. For many high-growth stocks, a 9% gap down in reaction to earnings may not sound extreme, but WMT has historically been a much less volatile stock. Since 2001, its average one-day move in reaction to earnings has been 2.9%, so if current levels hold through the end of the trading day, today’s move would be more than triple its historical average move.

The table below shows prior earnings reports since 2001 when WMT gapped down by at least 5%. It’s only happened five other times, and it has never gapped down more than 8%, so that would put today’s downside gap on pace to be the most negative gap opening in reaction to earnings since at least 2001. As Sam Walton’s quote above says, high expectations are the key to everything, and when a stock like WMT heads into an earnings report trading for over 37 times earnings and lowers guidance, reactions like this aren’t surprising.

For the broader market this morning, S&P 500 futures indicate a decline of about 0.3% at the open and trade near their lows of the day. Today’s weakness, however, comes just hours after the S&P 500 closed at an all-time high yesterday – its third record closing high of the year. The market doesn’t look like it’s done much since its high in December, but YTD, the S&P 500 has managed a rally of over 4%. We’ve seen some weak housing-related data this week, but today’s economic focus will shift to jobless claims and the Philly Fed at 8:30 and leading indicators at 10 AM. Also on the calendar, we’ll hear from various Fed officials throughout the day, starting with Chicago Fed President Goolsbee just after the opening bell.

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.

“There are no rules here — we’re trying to accomplish something.” – Thomas Edison

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Asian stocks had a mixed showing overnight with Japan down fractionally, and China’s Shanghai Composite rising by 0.8%.  Economic data in the region, though, was weak with Home Prices in China falling 5.0% y/y in January versus a decline of 5.3% in December. In Japan, Core Machinery Orders fell 1.2% on a m/m basis which was well below the forecast of an increase of 0.4%.

In Europe, stocks are trading down for a change as the STOXX 600 is down by over 0.5%. Contributing to the weakness there are both micro and macro factors. On the micro side, a weaker-than-expected earnings report from Philips, where sales came in weaker than expected and guidance was weak, has that stock trading down over 10%. On the macro side, UK inflation for January came in at 3%, which was above the consensus forecast of 2.8%. Core inflation, meanwhile, surged up to 3.7% from 3.2% in December.

Here, futures are modestly lower ahead of Building Permits and Housing Starts at 8:30 and FOMC Minutes at 2 PM. Treasury yields, crude oil, and gold are all higher on the day, reversing some of the losses from late last week while Bitcoin has bounced back over 2% to get back above $96K.

With a dozen eggs becoming as popular as a Furby circa Christmas 1998 and what seems like half a paycheck going to fund your daily bacon, egg, and cheese habit, egg prices have become a national nightmare. In last week’s CPI report, egg prices rose over 15% in January representing the largest monthly increase since June 2015. The chart of egg prices makes it look more like the Palantir (PLTR) of the CPI report than a boring old breakfast staple.

Egg prices have caused a frenzy online as Google searches have spiked. The chart below shows Google Trends results for eggs going back to 2004. At first glance, it doesn’t look like the spike has been all that extreme. Searches tend to have a seasonal aspect, but there have been many months in the last ten years when the frequency of searches was higher.

Taking seasonality into account, though, searches are easily at extremes. The chart below is the same as the one above, except that we have included red dots for February of each year. Comparing these February readings, searches have been 30% higher this February than any other February in history.  The spikes you see in the chart come every year in either March or April coinciding with Easter. If the recent trends in egg prices continue, we can only imagine what the chart above will look like in two months when Easter arrives.

A headline last week from animal health care company Zoetis (ZTS) provides some hope, though. On Friday, the company announced that it had received conditional approval for a bird flu vaccine from the USDA for use in chickens. While the stock of ZTS saw little reaction, the stock of Cal-Maine Foods (CALM), the largest producer of eggs in the US, has been shelled. CALM has been a big winner from the bird flu, more than doubling in the year leading up to last Friday, but it has declined more than 16% in the last two sessions for its largest two-day decline since December 2022.

Markets are forward-looking, so is CALM’s decline the canary in the coalmine signaling that the worst of this wave of bird flu is behind us?  Who knows, maybe by the summer, we’ll be able to afford two eggs on our beacon, egg, and cheese, or maybe even an omelet! Seriously, though, since the recent low in egg prices in September 2023, total CPI is up 3.8%. With egg prices up 63% over that same span and having a weighting of 0.172% in the total CPI index, ex eggs prices, total CPI would be up 9 basis points less at 3.72%. So, in terms of a direct impact, egg prices haven’t had a major impact on inflation over the last 16 months. They haven’t helped, though!