Chart of the Day – 1% Moves Become the Norm
Bespoke’s Morning Lineup – 2/6/23 – Dispersion
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 greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things.” – Ronald Reagan
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 very little data to speak of this morning, or for that matter, the entire week, so investors will have to focus primarily on earnings and Fed Chair Powell’s speech at noon tomorrow. Last week was the peak for earnings season in terms of the market cap of companies reporting, but in terms of quantity, it will be just as busy this week. Markets are starting off on a negative footing as US Treasury yields continue their climb following last Friday’s jobs report. After touching its 200-day moving average on Thursday at 3.29%, the 10-year yield is more than 30 bps higher this morning at 3.60%. Even after the volatility of the last year, that’s quite a big move in a short period of time. Crude oil and natural gas, meanwhile, are both trading up over 1%.
Last week’s market word of the week was dispersion. As shown in the snapshot from our Trend Analyzer, performance was all over the map with Communication Services leading the way higher with a gain of over 5% while Energy trailed falling nearly 6%. As a result of the moves, we finished off the week with two sectors at ‘extreme’ overbought levels (Communication Services and Technology) while Utilities, with its 1.4% decline, finished the week at ‘extreme’ oversold levels.
Energy and Utilities were the only two sectors down over 1% last week, and both of their price charts have been showing signs of deterioration. After stalling out at a lower high earlier this year, Energy stocks have been under pretty significant pressure as both crude oil and especially natural gas have been weak. If the declines continue this week, chart watchers will be focusing on support at the lows from late 2022 which also corresponds to highs from late in the Summer. The picture for Utilities has been even weaker. That sector is now in a well-defined downtrend and last week’s decline resulted in a potential breakdown below support.
It seems strange to say after a year like 2022 but a number of sectors have also been breaking out to six-month highs. Last week, Financials, Industrials, and Materials all managed to trade above multi-month resistance levels and trade to six-month highs.
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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Bespoke Brunch Reads: 2/5/23
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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Going Green
CTR reports on improved lithium extraction from brine (The Desert Review)
A new process for extracting lithium from the water inside geothermal power plant loops is starting to scale up in California’s Salton Sea. [Link]
Cities Would Literally Be Much Cooler With More Trees by Lara Williams (Bloomberg)
Sometimes big problems have remarkably simple solutions. For cities, high temperatures, pollution, and health crises could all be improved by planting a lot more trees. [Link; soft paywall]
Dysportsia
Get Used to Face Recognition in Stadiums by Khari Johnson (Wired)
The dystopian use of facial recognition systems at Madison Square Garden is only the tip of the iceberg as sports venues work to contain fans who get out of hand…and some they just don’t like. [Link]
Sports Illustrated Publisher Taps AI to Generate Articles, Story Ideas by Alexandra Bruell (WSJ)
Arena Group, which publishes a range of finance, sports, and general interest sites, is integrating AI to produce content using AI, sometimes by using inventories of content from the group’s previous articles. [Link; paywall]
ChatGPT
OpenAI launches ChatGPT Plus, a paid version of the popular AI chat by Christianna Silva (Mashable)
For $20 per month, paid users get more reliable uptime and faster access to the popular AI chatbot protocol which has spread widely across the internet in the last few months. [Link]
Are You Smarter Than ChatGPT? OpenAI Tool Aims to Detect AI-Generated Text by Michael Kan (PC Mag)
Amidst concerns that AI-generated text is being misused (especially by students), ChatGPT’s creators at OpenAI have created a tool that claims to be able to detect whether a piece of text was AI-generated or human in origin. [Link]
Chow
Wings and Guacamole Are Cheaper, Just in Time for Your Super Bowl Party by Kevin Simauchi (Yahoo!/Bloomberg)
After a huge surge alongside other commodities over the past couple of years, prices for chicken and avocados are collapsing just in time for the Super Bowl. [Link]
Wave of ‘sushi terrorism’ grips Japan’s restaurant world by Justin McCurry (The Guardian)
Conveyor belt sushi restaurants have become the focus of an unfortunate social media trend which has sent their stocks plunging as a breakdown in basic social decorum threatens to remake the industry in Japan. [Link]
Raising Chickens for Cheaper Eggs Gets Expensive Fast by Rachel Wolfe (WSJ)
If you’re trying to skip the high egg prices at the grocery store by raising your own chickens, watch out: you might be signing up for more than you bargained for. [Link; paywall]
Pandemic
Merck Covid Drug Linked to New Virus Mutations, Study Says by John Lauerman (Bloomberg)
A study has found that a Merck treatment for COVID-19 creates more mutations of the virus, which works by altering the virus’s genome to reduce replication. [Link; soft paywall]
US Offices Reach 50% Occupancy for First Time Since Pandemic Hit by Matthew Boyle (BNN Bloomberg)
For the first time since the pandemic hit, building occupancies across 10 major metro areas moved above 50%, marking a major milestone in the return to normal that has been slowly and steadily emerging. [Link]
Adani
The Adani affair: the fallout for Modi’s India by John Reed and Benjamin Parkin (FT)
A look at the macroeconomic and political milieu that surrounds Gautam Adani and his company in the wake of a catastrophic decline in shares following short seller allegations of stock manipulation and accounting fraud. [Link; paywall]
Balloon
US Downs Alleged Chinese Spy Balloon That Lingered for Days by Christian Hall and Riley Griffin (Bloomberg)
After a Chinese weather balloon (or, depending on who you’re listening too, spy platform) spent a week above the US, an American fighter jet shot it down over the South Carolina coast on Saturday. [Link; soft paywall]
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Have a great weekend!
The Bespoke Report – 2/3/23
This week’s Bespoke Report newsletter is now available for members. (Log in here if you’re already a subscriber.)
In a blockbuster week for labor market data, the FOMC slowed the pace of rate hikes further but kept trying to talk tough about the outlook for rates. Equity, foreign exchange, and credit markets had different ideas both in the US and around the world. We dive deep into quarterly data on wages and productivity, monthly jobs numbers from the blockbuster Employment Situation Report today, PMI data from around the world economy, and other tidbits from the data this week. Earnings are also underway, and we provide qualitative and quantitative highlights from earnings results on both sides of the Atlantic this week.
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Daily Sector Snapshot — 2/3/23
The Bespoke Triple Play Report — 2/3/23
An earnings triple play is a stock that reports earnings and manages to 1) beat analyst EPS estimates, 2) beat analyst sales estimates, and 3) raise forward guidance. You can read more about “triple plays” at Investopedia.com where they’ve given Bespoke credit for popularizing the term. We like triple plays as an indication that a company’s business is firing on all cylinders, with above-expectations results and an improving outlook. A triple play is indicative of positive “fundamental momentum” instead of pure fundamentals, and there are always plenty of names with both high and low valuations on our quarterly list.
Bespoke’s Triple Play Report highlights companies that have recently reported earnings triple plays, and it features commentary from management on triple-play conference calls, company descriptions and analysis, and price charts. Bespoke’s Triple Play Report is available at the Bespoke Institutional level only. You can sign up for Bespoke Institutional now and receive a 14-day trial to read our newest Conference Call recaps. To sign up, choose either the monthly or annual checkout link below:
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January 2023 Headlines
New Chapter in the Meme Stock Mania
We may be just a little more than a month into the new year, but there have already been a handful of Russell 1,000 stocks that have posted absolutely massive moves. There are currently seven Russell 1,000 stocks that have doubled year to date, some of which are more embattled high-growth stocks like Carvana (CVNA) and Peloton (PTON). Breaking down the index into deciles based on which stocks have the highest levels of short interest clearly shows that the top performers have also been those which have been most heavily bet against by investors. Whereas the decile of stocks with the lowest levels of short interest has risen a mere 4.4%, the decile of most heavily shorted names is up a substantial 36.3%.
Expanding to the Russell 3,000, in the chart below we show an equal weight index of the 100 most highly shorted stocks. Over the past month, the group has rallied almost 30%. That is a comparable rally to this past summer and outside of that, the only larger rallies of the past five years were coming out of the COVID Crash and the early 2021 short squeezes. This is not the first rodeo for highly shorted stocks flying higher. Click here to learn more about Bespoke’s premium stock market research service.
Dollar Down, Internationally Exposed Stocks Up
In last night’s Closer, we provided a decile breakdown of Russell 1,000 stocks’ year to date moves. One area in which there has been a clear distinction between winners and losers has been how exposed the companies are internationally. Given the dollar’s decline this year, stocks which generate a higher share of revenues abroad would face less headwinds from the dollar to make them more attractive and vice versa for stocks that are more domestically focused. That has largely appeared to have played out. As shown below, the decile of stocks that have the least international revenue exposure have only risen an average of 4.5% this year whereas most other deciles have seen average gains in the mid-teens. Then there is the 10th decile of stocks that generate the highest share of revenues abroad. That group is up an average of 22.4% this year.
Again, the dollar’s changes are a key reason for the strength in these stocks with heavy international revenue exposure. As shown below, Bloomberg’s trade-weighted dollar index peaked back in the fall and has been on a one-way trip lower, erasing much of the past year’s gains in the process. Over the past few days, the dollar has rebounded, but the steep downtrend is still alive and internationally focused companies may continue to have some fuel. Click here to learn more about Bespoke’s premium stock market research service.
Hot Jobs
The first employment report of 2023 certainly surprised everybody. While economists were expecting an increase of 188K non-farm payrolls, the actual reading came in at 517K, exceeding expectations by 329K. Going back to 1998, that was the fifth-largest beat relative to expectations and the strongest since last January’s Non-Farm Payrolls report (hence the commentary that seasonal adjustments are a factor in the large beat). While January’s report was ‘only’ the fifth strongest relative to expectations going back to 1998, all of the larger beats have come in the post-pandemic period, so COVID has obviously skewed things and in many cases to a large degree. What we can tell you is that Friday morning’s report was the tenth straight better-than-expected report which is a record and easily surpasses the prior peaks in September 2020 and March 2015.
Looking at the pace of job creation over the last year, the US economy has added 4.967 million jobs in the last twelve months, and while that’s well off the peak from prior readings in the last two years, it still remains extremely elevated relative to history. Prior to COVID, for example, the peak total of job creation over a rolling 12-month period was 3.37 million, or just under 1.6 million below current levels. Click here to learn more about Bespoke’s premium stock market research service.
