This morning the Richmond Fed released the fifth and final regional manufacturing report. Consistent with other regional Fed reports released this month, which we discussed through our Five Fed Manufacturing Composite in last night’s Closer and will update with the addition of the Richmond Fed again tonight, manufacturing activity remains in contraction. That being said, the index rose 11 points from a recent low of -16 to -5.

In terms of percentiles, that reading remains in the bottom quartile of its historical range.  However, that is a massive improvement from the bottom 5% reading last month.  Additionally, the month-over-month increase was significant, just shy of a top decile increase. Breadth in this month’s report was solid with only vendor lead times and employment metrics like wages and availability of skills falling further. Most other categories saw higher month-over-month readings with several (like Shipments and New Orders) being historically large.

As mentioned above, demand-related metrics like New Orders, Shipments, and Backlogs of Orders surged in March.  However, coming from very weak readings in February, it is still not a positive picture.  Shipments was the only one of these indices to move back to an expansionary reading.  Shipments expectations were also particularly rosy with the reading of 25 marking the highest level in eleven months. Meanwhile, the Vendor Lead Times index remains around some of the lowest levels on record which indicates firms are reporting rapid declines in the time it takes for products to reach their destination.

Given orders are coming in more slowly and supply chain improvements have made doing business easier, inventories are beginning to build.  Indices tracking both Raw Material Inventories and Finished Good Inventories have rapidly risen over the past several months following deeply contractionary readings throughout 2020 through 2022.  This month, the index for Finished Good Inventories hit a new post-pandemic high while Raw Material Inventories have flattened out after peaking at the end of last year.

Whereas inventory indices have flown higher, price indices are plummeting.  Prices Paid hit a new low of 6.24% with expectations hitting a new low in tow.  Prices Received actually saw a very modest increase following sharp declines since November.

Have you tried Bespoke All Access yet?
Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.
Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.

Home price figures around the country for January were published by S&P CoreLogic today in the form of the updated Case Shiller indices.  Below is a table showing the month-over-month and year-over-year change for the 20 cities tracked along with the three national indices.  For each city, we also include how much home prices are still up from their pre-COVID levels in February 2020 and how much home prices are down from their post-COVID peaks.

For the month of January, the national indices showed home prices down about 0.50% month-over-month (m/m) and still up 2-3% on a year-over-year (y/y) basis.  There were four cities that saw m/m declines of more than 1%: San Francisco, Seattle, Phoenix, and Las Vegas.  Miami was the only city that gained m/m at +0.09%.

Year-over-year, San Francisco is now down 7.60%, while Seattle is down 5.11%.  San Diego and Portland are the only other cities in the red y/y, while Tampa and Miami are the only two cities still up 10%+ y/y.

Home prices have been falling hard in recent months (which hasn’t made its way into the official inflation data yet).  Below is a look at the drop in home prices from their post-COVID highs.  As shown, while some cities like New York, Miami, and Atlanta have yet to fall much at all, cities like San Francisco and Seattle are down more than 15%.

Even with the drops, though, prices are still up across the board from the levels they sat at in February 2020 just before COVID hit.  As shown below, the two best-performing cities post-COVID in terms of home price appreciation are two Florida cities: Tampa and Miami.  Cities that are up the least post-COVID (but still up 20-30%) include Portland, Chicago, DC, Minneapolis, and San Francisco.

Below is a look at the actual levels of the 20 Case Shiller city indices plus the three national indices.  We’ve drawn lines to show when COVID hit so you can see how much prices are up from pre-COVID levels.

Have you tried Bespoke All Access yet?

Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.

Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.

Although equities broadly are starting the new week higher, the most heavily shorted stocks are trading lower today. In the chart below, we show the relative strength of an index of the 100 most heavily shorted stocks versus the Russell 3,000 since January 2021 (the peak of the meme stock mania). Overall, the past couple of years since that period have consistently seen heavily shorted names underperform as seen through the downward trending line below.  Although heavily shorted names saw some outperformance in January, they are making new lows.

On Friday, the latest short interest data as of mid-March was released by FINRA.  Overall, there has not been too much of a change in short interest levels with the average reading on short interest as a percentage of float of Russell 3,000 stocks rising by 5 bps since the start of the year to 5.8%.

Prior to the changes to industry classifications that went into effect one week ago, the formerly labeled “retailing” industry consistently held the highest levels of short interest.  Now, it is the Consumer Discretionary Distribution and Retail industry in the top spot with an average short interest level of 12.7%.  That is up from 12.5% coming into the year and is multiple percentage points higher than the two next highest industries: Pharmaceuticals, Biotechnology & Life Sciences (9.36%) and Autos (9.18%).  In spite of the recent bank closures, the banking industry actually has the lowest average levels of short interest. That being said, the latest data as of March 15th would have only accounted for a few days following the collapse of SVB. As such, the next release scheduled for April 12th with end-of-month data will provide a better read on the recent banking trouble’s impact on short interest levels.

In the table below, we show the individual Russell 3,000 stocks with the highest levels of short interest as of the March 15th data.  The sole two stocks with more than half of shares sold short are both Health Care names: Design Therapeutics (DSGN) and Allogene Therapeutics (ALLO).  Both have seen short interest levels rise mid-single digits year to date.  Other notables with high levels of short interest include some names that were briefly in vogue in recent years like Carvana (CVNA) and Beyond Meat (BYND). While short interest levels remain elevated, those are also two of the stocks listed below that have seen the largest declines in short interest this year which is likely due to solid appreciation in their stock prices. Only Marathon Digital (MARA) has seen a larger drop with its short interest level falling 11.4 percentage points since the end of last year after the stock more than doubled year to date.  We would also note another crypto-related name, MicroStrategy (MSTR), is on the list and has been the second-best performer of the Russell 3,000 stocks with the highest short interest.

Have you tried Bespoke All Access yet?

Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.

Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.

The Federal Reserve’s FRED data on commercial bank deposits was just updated through the week of 3/15.  From the prior week, deposits fell roughly $100 billion, or about 0.56% from $17.6 trillion down to $17.5 trillion.  A week-over-week decline of 0.56% is nothing out of the norm, although it was the biggest decline in percentage terms since last April when deposits fell 0.6% during the week of 4/20.

What is out of the norm is the drop we’ve seen in bank deposits over the last year.  Prior to 2023, the largest year-over-year decline we’d ever seen in bank deposits was a 1.58% drop back in September 1994.  That record drop was broken earlier this year when we got a reading of -1.61% during the week of 2/1.  Since 2/1, the year-over-year decline has only gotten worse.  As of the most recent week (3/15), the year-over-year decline stands at -3.33%.

Below is a chart showing the year-over-year change in commercial bank deposits using data from FRED.  What stands out the most is not just that we’re now at record YoY lows, but that it’s coming after what had been record YoY increases in deposits.  Remember, after COVID hit, the government deposited cash into the bank accounts of Americans multiple times.

Below is a look at the absolute level of commercial bank deposits over the years going back to 1974 when FRED’s data begins.  During the COVID recession from March through May 2020, bank deposits increased roughly $2 trillion.  As you can see in the chart, we’ve never seen a spike anywhere near as large over such a short period of time.  Notably, though, deposits kept on running higher for the next two years, rising another $2.8 trillion by the time they peaked at $18.16 trillion in mid-April 2022.  That peak came a month after the Fed’s first rate hike of the current tightening cycle, and since then we’ve seen deposits fall about $650 billion from their highs.  Given how elevated deposits remain above pre-COVID levels, there’s no reason to think they won’t fall further unless banks really step up the interest they’re paying on deposits given a Fed Funds rate of 5%.

Have you tried Bespoke All Access yet?

Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.

Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.