Daily Sector Snapshot — 2/17/23
Bespoke’s Morning Lineup – 2/17/23 – Another Down Friday
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“The man who reads nothing at all is better educated than the man who reads nothing but newspapers.” – Thomas Jefferson
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After yesterday afternoon’s plunge, equity futures have picked up right where they left off and are indicated to open the last trading day of the week lower. Treasury yields are higher across the curve, and crude oil is plunging as the dollar rallies. Today will be a test for the buy the dippers who failed to step in yesterday. Will they show up today, or did they start their holiday weekend early.
Heading into the last trading day of the week, the market has grown increasingly concerned that the economy and inflation is too strong for the Fed’s liking. This week’s CPI and PPI reports certainly did not provide any ammo to the camp that’s expecting inflation to quickly revert to pre-COVID norms, but they also covered a month where gas prices surged 9%. As we noted in last week’s Bespoke Report, months where national average gas prices increase 9% or more have historically seen an average monthly increase of 0.5% in CPI which is exactly how much CPI increased in January. February is only half over, but gas prices this month have actually declined over 2%, which would be one of the weaker Februarys for gas prices dating back to 2004, so that has the potential to act as a tailwind next month.
Regarding the economy, Retail Sales came in significantly better than expected this week, but with three straight significantly stronger-than-expected Januarys in a row, seasonal adjustments may not be entirely accurate in the post-COVID world. Outside of the consumer, this week’s data wasn’t entirely indicative of a booming economy either. While Jobless Claims remain near historical lows, indicators like Small Business Optimism, New York and Philadelphia Fed manufacturing reports, Industrial Production, Capacity Utilization, Building Permits, and Housing Starts weren’t exactly positive this week.
During the month of January, Housing Starts fell over 4% on a m/m basis and more than 20% y/y. Single-family units, which tend to have a greater economic impact than multi-family units, were even weaker falling by 27% while single-family Building Permits fell 40% y/y. When looking at the 12-month moving average of Housing Starts, what started as a gradual deterioration has turned into a more dramatic decline that looks increasingly reminiscent of prior rollovers that occurred during or leading up to recessions.
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Bespoke’s Weekly Sector Snapshot — 2/16/23
Bulls Step Back
The S&P 500 hasn’t moved decisively in any direction over the past week, and as a result, sentiment saw little change. 34.1% of respondents to the weekly AAII sentiment survey reported as bullish this week, down from a high of 37.5% last week.
Bearish sentiment took from those bullish losses as the reading rose up to 28.8% from 25%. Even though that is a higher reading, it is still the only other reading below 30% since last March.
Additionally, the pickup in bearish sentiment was not enough to make bears outnumber bulls. As such, the bull-bear spread saw its first back-to-back positive readings since November 2021.
Although over a third of respondents reported as bullish, this week’s predominant sentiment level was neutral. 37.1% reported as such this week. That reading has now been above its historical average of 31.4% for seven straight weeks; the longest streak since January 2021.
Other sentiment surveys have likewise taken more optimistic tones lately despite a modest pullback in bullish sentiment this week. Factoring in the Investors Intelligence and NAAIM sentiment readings, our sentiment composite remains positive but is off from its short-term peak last week. Click here to learn more about Bespoke’s premium stock market research service.
Chart of the Day: Stocks Shrug Off Terminal Rate Surge
Claims Still Below 200K
Jobless claims continue to impress in the new year. For the fifth week in a row, seasonally adjusted initial claims have come in with a sub-200K reading. That is the longest streak since a 10 week long stretch ending in April of last year. Although claims have remained at a healthy level, there hasn’t been much in the way of improvement over the last few weeks with claims yet to move below the 183K low at the end of January.
On a non-seasonally adjusted basis, the first few months of the year tends to see a sharp unwind in claims, albeit with some moderation during the current week of the year which is being observed currently with fairly flat readings in claims over the past few weeks. At current levels, this year’s reading was roughly in line with the comparable week of the past several years with the exception of the much more elevated reading in 2021.
While not to say the reading is at unhealthy levels, continuing claims have not been as strong as initial claims. Claims have risen in each of the past two weeks, totaling 1.696 million in the most recent print. That is the highest level since the week of December 24th. Overall, both initial and continuing claims continue to show healthy readings without much in the way of rapid improvement or deterioration. Click here to learn more about Bespoke’s premium stock market research service.
The Bespoke 50 Growth Stocks — 2/16/23
The “Bespoke 50” is a basket of noteworthy growth stocks in the Russell 3,000. To make the list, a stock must have strong earnings growth prospects along with an attractive price chart based on Bespoke’s analysis. The Bespoke 50 is updated weekly on Thursday unless otherwise noted. There were no changes to the list this week.
The Bespoke 50 is available with a Bespoke Premium subscription or a Bespoke Institutional subscription. You can learn more about our subscription offerings at our Membership Options page, or simply start a two-week trial at our sign-up page.
The Bespoke 50 performance chart shown does not represent actual investment results. The Bespoke 50 is updated weekly on Thursday. Performance is based on equally weighting each of the 50 stocks (2% each) and is calculated using each stock’s opening price as of Friday morning each week. Entry prices and exit prices used for stocks that are added or removed from the Bespoke 50 are based on Friday’s opening price. Any potential commissions, brokerage fees, or dividends are not included in the Bespoke 50 performance calculation, but the performance shown is net of a hypothetical annual advisory fee of 0.85%. Performance tracking for the Bespoke 50 and the Russell 3,000 total return index begins on March 5th, 2012 when the Bespoke 50 was first published. Past performance is not a guarantee of future results. The Bespoke 50 is meant to be an idea generator for investors and not a recommendation to buy or sell any specific securities. It is not personalized advice because it in no way takes into account an investor’s individual needs. As always, investors should conduct their own research when buying or selling individual securities. Click here to read our full disclosure on hypothetical performance tracking. Bespoke representatives or wealth management clients may have positions in securities discussed or mentioned in its published content.
Bespoke’s Morning Lineup – 2/16/23 – More Data
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“Like it or not, life is a game. Whoever denies that truth, whoever simply refuses to play, gets left on the sidelines.” – Phil Knight
Below is a snippet of content from today’s Morning Lineup for Bespoke Premium members. Start a two-week trial to Bespoke Premium now to access the full report.
There’s a tone of weakness in the market this morning ahead of another busy morning for economic data with PPI, Housing Starts, Building Permits, Jobless Claims, and the Philly Fed all being released at 8:30. The S&P 500 is poised to open down about 40 basis points (bps) while the Nasdaq is down closer to 0.5%. Despite the weakness in equities, Treasuries are actually trading modestly higher as crude sees modest gains. The only real asset class showing strength is crypto as bitcoin is up nearly 2%.
Overshadowed somewhat by the much stronger-than-expected Retail Sales report, yesterday’s update on Industrial Production for January missed forecasts by a wide margin showing no growth in January versus forecasts for an increase of 0.5%. January’s report marked the second straight month that Industrial Production was 1.5% or more below a 12-month high which is the largest decline from a peak since the COVID crash. Looking at the chart below, there have been plenty of other times when Industrial Production showed larger declines. That being said, in the majority of instances where Industrial Production dropped this much or more, a recession wasn’t far behind. There were exceptions but not a lot of them.
This doesn’t mean that a recession is imminent. Every period is different. What the current period has going for it is that consumer balance sheets were in great shape heading into the current FOMC tightening cycle, and the employment backdrop remains positive. The hope is that these factors will provide a long enough bridge to get over the valley of the manufacturing sector’s slowdown.
Our Morning Lineup keeps readers on top of earnings data, economic news, global headlines, and market internals. We’re biased (of course!), but we think it’s the best and most helpful pre-market report in existence!
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