Daily Sector Snapshot — 3/7/23
Chart of the Day – Most Inverted Since 1981
Bespoke Stock Scores — 3/7/23
Fedspeak Review as Powell Goes to Capitol Hill
Fed Chair Powell’s testimony on Capitol Hill over the next couple of days will be the main focus of the market, and with perceived hawkish commentary today, things don’t appear to be off to a good start. As Chair Powell highlighted, stronger-than-expected economic and inflation data has lifted expectations for interest rates which has resulted in the S&P 500 erasing earlier gains and trading down 1% on the session as of late morning.
Using data from our Fedspeak Monitor, in the chart below we show the historical average performance of the S&P 500 on days in which there is Fedspeak going back to 2018 when Powell took over as Chair (that only looks at actual Fed speakers and excludes any reports like the Beige Book, FOMC Meetings, and Meeting Minute releases which we also cover in our Fedspeak Monitor). As might be expected, hawkish commentary generally tends to be received poorly by the market with the S&P falling an average of 7.5 bps on those days compared to a 9.2 bps gain on days with dovish commentary. As for times when the speaker is Chair Powell, a hawkish tone tends to see the S&P 500 react with a decline, however, the 5.8 bps drop is smaller than the norm. That contrasts with Powell’s dovish commentary having been far more well-received by the market. More broadly, and perhaps more surprisingly, any time an active voting member of the FOMC is the speaker the average move in the S&P 500 tends to be smaller in magnitude than when it is a non-voter speaker regardless of whether the tones are hawkish or dovish. ratesd Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 3/7/23 – Powell Takes the Mound
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“Observation is a dying art.” – Stanley Kubrick
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.
It’s been a wild ride for natural gas over the last two trading days. After an 8% rally Friday, natural gas plunged more than 14% on Monday for its largest one-day decline since June 30th and its 15th worst day since 1990. 2023 is barely more than two months old, but yesterday’s decline was the 5th time this year that natural gas had a single-day move (up or down) of 10%+, and that follows last year when there were a record 18 daily 10%+ moves. If the pace of volatility that natural gas has seen so far this year were to continue for the remainder of the year, there would be 28 single-day moves of 10%+. For some perspective, before last year there were just three years (1996, 2001, and 2009) where natural gas experienced ten or more single-day moves of 10%+.
The record volatility of natural gas can be further illustrated by looking at the commodity’s average daily move over a rolling 200-trading day period. Before 2022, the average daily percentage move in natural gas prices never exceeded 3.8% and from 2012 right up until COVID, the average daily move never exceeded 2.6%. Covid and the war in Ukraine changed all that, and nowadays, on any given day, a daily move of 4.6% in natural gas has become the norm as this degree of volatility in the commodity has never been experienced before.
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Daily Sector Snapshot — 3/6/23
Chart of the Day – Industrials Closing in on 52-Week Highs
B.I.G. Tips – Q4 2022 Earnings; Triple Plays
Today we published our newest Earnings Triple Plays report. This season there were a total of 105 earnings triple plays out of just under 2,000 individual quarterly earnings reports from US-listed stocks.
What is a triple play? When a stock reports quarterly earnings, it registers a “triple play” when it beats analyst EPS estimates, beats analyst revenue estimates, and raises forward guidance. We coined the term back in the mid-2000s, and you can read more about it at Investopedia.com. We consider triple plays to be the cream of the crop of earnings season, and we’re constantly finding new long-term opportunities from this basket of names each quarter. You can track the newest earnings triple plays on a daily basis at our Triple Plays page if you’re a Bespoke Premium or Bespoke Institutional member. To read our newest report and see some of the triple plays with intriguing charts at the moment, start a two-week trial to Bespoke Premium!
Bespoke’s Morning Lineup – 3/6/23 – Take Two of These and Call Me in the Morning
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“Nothing a couple of aspirin can’t cure.” – Peggy Olson, Mad Men
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.
The headlines say that the market’s fate all comes down to the next 13 trading days, but this ‘important’ period for the market is starting off slowly. Equity futures are oscillating around the unchanged line even as Treasury yields and commodities have pulled back. Crude oil down over 1% while natural gas plunges more than 12% on little news. Just to illustrate how quiet things are this morning, bitcoin is down less than 5 dollars – not percent – but dollars!
It may be quiet this morning, but the market has been giving headaches to both bears and bulls in the last several weeks. A quick look at a chart of the S&P 500 illustrates the frustration being felt on both sides. On a side note, it was ironic to see this morning that Bayer filed its patent for the ultimate headache cure (or at least one of them), aspirin, on this day in 1899.
In late January/early February, the S&P 500 broke above its December highs and its 200-day moving average forming what looked like the first real higher high since the peak in early January. At that point, the S&P 500 was further above its 200-DMA than at any point since it first broke below that level early last year. Then, the January employment report was released.
January’s much stronger-than-expected employment report coupled with a strong Retail Sales report and higher-than-expected inflation data, shifted the narrative quickly back to one where things were overheating and inflation was going to turn higher. The market quickly reacted with a radical shift in market pricing for Fed policy as Treasury yields surged. Stocks immediately reversed much of the gains from January, and the Dow actually ticked into the red for the year. The S&P 500’s pullback wasn’t as bad, but late in the month, it was back below its 50-DMA and once again testing its 200-DMA.
An intraday bounce on that first test briefly rekindled some optimism, but by last Thursday morning, the S&P 500 was back below its 200-DMA and both bears and bulls started to prepare for another leg lower. As hope was fading, stocks staged an intraday rebound that continued right into Friday. Now, heading into the new trading week, the S&P 500 is back above its 200-DMA and 3% above Thursday’s lows. Bulls are feeling confident again, but with Jay Powell scheduled to testify tomorrow, the employment report coming out Friday, and then CPI next week, don’t start snorting at the bears just yet, they may just need that aspirin back by next week.
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Bespoke Brunch Reads: 3/5/23
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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Climate Disruption
As Oil Companies Stay Lean, Workers Move to Renewable Energy by Clifford Krauss (NYT)
While energy companies avoid adding headcount and keep a laser focus on cashflows, renewables are rapidly scaling up and are poaching talent in the process, meaning American jobs are rapidly shifting from the oilpatch to wind and solar farms. [Link; soft paywall]
California senate pushes to stabilize the homeowners insurance market by Morgan Rynor (MSN/KFMB San Diego)
After a catastrophic run of forest fires, fire insurance in California is either not available at all or becoming prohibitively expensive, making homeowners far more vulnerable to the still-significant fire risk that has beset much of the state. [Link]
Prices
Column: With winter almost over, Europe’s gas stocks are at seasonal record high by John Kemp (Reuters)
With winter winding down, EU and UK gas storage is still 61% full, with more than 680 terawatt hours worth of gas in inventory. That offers hope that building supplies ahead of next winter will be a much easier task. [Link]
Sellers’ Inflation, Profits and Conflict: Why can Large Firms Hike Prices in an Emergency? by Isabella M. Weber and Evan Wasner (UMass Amherst Economics Working Papers)
New research that argues post-COVID inflation is mostly about expanding market power and margins rather than excessive demand. [Link]
Lilly to cut some list prices by 70% and offer $25 insulin by Bhanvi Satija and Patrick Wingrove (Reuters)
After a $35 price cap on insulin was extended to most Americans who have insurance, drugmakers have made equivalent cuts to the out-of-pocket costs of their drugs in a move that will make it much easier for diabetics to access insulin. [Link; registration required]
Ukraine
In an Epic Battle of Tanks, Russia Was Routed, Repeating Earlier Mistakes by Andrew E. Kramer (NYT)
The latest egregious blunder from Russian war planners: massed tank attacks with little infantry support or tactical flexibility to deal with ambushes, mines, and Ukrainian anti-tank doctrine. [Link; soft paywall]
Trapped In The Trenches In Ukraine by Luke Mogelson (NYer)
Remarkable dispatches from the front lines of the war in Ukraine. A very long read, but filled with incredible and engaging detail about the soldiers and environment on the battlefield. [Link; soft paywall]
National Defense
‘Havana Syndrome’ Not Caused By Energy Weapon Or Foreign Adversary, Intelligence Review Finds by Shane Harris and John Hudson (WaPo)
The malady blamed on some sort of energy weapon wielded by foreign adversaries is much more quotidian than science fiction, an embarrassing challenge to a narrative that had treated ‘Havana syndrome’ as some sort technological wonder. [Link; soft paywall]
The First Battle of the Next War by Mark F. Cancian, Matthew Cancian, and Eric Heginbotham (CSIS International Security Program)
This report summarizes the findings of a wargame run by the CSIS and designed to simulate Chinese invasion of Taiwan. The result of US/Taiwanese/Japanese resistance to a Chinese invasion is typically success but at massive cost; generally, the failure is thanks to stiff Taiwanese resistance once Chinese troops have landed. [Link; 165 pg PDF]
Crypto
Crypto Companies Behind Tether Used Falsified Documents and Shell Companies to Get Bank Accounts by Ben Foldy and Ada Hui (WSJ)
One of the owners of Tether Holdings, issuer of the tether stablecoin, admitted an effort to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal” per emails review by the WSJ. [Link; paywall]
ETFs
Are you short Jim or long Jim? by Alexandra Scaggs (FTAV)
Want to bet on or against the stocks that are mentioned by CNBC personality Jim Cramer? Luckily there are now ETFs for each. [Link; soft paywall]
Time Marches On
US senators reintroduce bill to make daylight saving time permanent by David Shepardson (Reuters)
A bipartisan group of 12 Senators wants to do away with twice-per-year clock changes in favor of a year-round constant time. [Link; registration required]
Guns
74,000 & growing: Some NC police departments stockpile guns rather than release them by Virginia Bridges (The Charlotte Observer)
Police departments in the 10 largest cities across North Carolina number 74,000 and counting as firearms seized during police actions sit in storage. State law bans cops from destroying guns for any reason. [Link; soft paywall]
Social Media
I Gave Into The New Twitter Algorithm And I Went Way Too Viral by Ryan Broderick (Garbage Day)
An anecdotal but convincing analysis of what is making Twitter’s algorithm tick these days, and a depressing accounting of how much the site has deteriorated. [Link]
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Have a great weekend!