Bespoke’s Morning Lineup – 11/23/22 – Full Plate of Data
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“Those who previously claimed they were too old or ill to work embraced the idea of private property once they could enjoy the fruits of their own labor.” – Caroline Baum, “The Story of Thanksgiving – and Proper Incentives”
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.
Investors may be thinking ahead to the Thanksgiving holiday and spending time with friends and family, but there is still a full-day left of trading ahead of us. The earnings calendar is light as Deere (DE) has been the only report on the calendar, but there’s plenty of economic data to tide you over as we try to jam three days worth of reports into one day. Things kick off at 8:30 with Durable Goods and Initial Claims. At 9:45, S&P will release flash PMI readings for the manufacturing and services sector, and then at 10 AM, we’ll get Michigan Sentiment and New Home Sales. Not enough for you? OK. Well, how about we cap it off with some FOMC Minutes at 2 PM? Is that enough for you?
Futures are technically in the green this morning, but they’re pretty much unchanged, and we’ve seen a number of ticks this morning where they were actually unchanged. The same is true in Europe where trading has been uneventful. Economic data in the region, however, has been positive as flash PMI readings for both the manufacturing and services sectors came in higher than expected for the entire Eurozone as well as Germany, the UK, and France individually.
Which of these indices is not like the other? As technicians attempt to divine whether the S&P 500 and other major US equity benchmarks will be able to break above its 200-DMA in this current leg higher, it seems out of place to be talking about the DJIA breaking out to six-month highs. Heading into the Thanksgiving holiday, the DJIA has rallied more than 19% off its Q3 low and is already more than 5% above its 200-DMA. The DJIA isn’t often thought of as a leading indicator for the broader market, but more than a few 401k plans have hopes that the rest of the indices play follow the leader.
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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Daily Sector Snapshot — 11/22/22
Speculators Smelting Shorts
As we do each Monday, in last night’s Closer we recapped the latest Commitments of Traders data from the CFTC. This data set provides a look at how speculators have positioned themselves (long or short) in various futures. We show those readings as a net percentage of open interest. In other words, higher positive values indicate a much larger share of open interest is positioned long and vice versa for negative readings.
In the commodities space, after longs backed out in a big way earlier this year, readings have risen rapidly in gold, silver, copper, and palladium futures. As for how sharp of turnarounds they have been, the increase over the past two weeks rank in the top decile of all periods in data going back to the mid 1980s for each of the previously mentioned metals.
For the most widely followed of these metals (gold, silver, and copper), this is only the 14th time on record each of their two week changes ranked in the 90th percentile or above in the same week without another occurrence in the prior three months. The most recent occurrence of such a large broad increase in major metals positioning was in July of 2014.
Although these readings indicate that speculators are increasingly placing long bets on these futures, such data actually can be a bit of a messy indicator for forward performance. Although these readings indicate bullish sentiment, forward performance is the opposite in the near term with dramatic underperformance relative to the norm one week later (which we have seen play out so far). One month and three month performance tends to see further declines in these commodities as well which is not exactly unheard of for precious metals while it is dramatically weaker for the industrial metals. Six month performance is generally more in line with historical norms while the bullishness in positioning only seems to come through to price action one year out. One year average returns for gold, silver, and copper are much stronger than the norm, although positivity rates are still just barely above 50/50. (Past performance is no guarantee of future results.) Click here to learn more about Bespoke’s premium stock market research service.
Bespoke Stock Scores — 11/22/22
Chart of the Day: Energy and Crude Oil Diverge
Bespoke’s Morning Lineup – 11/22/22 – Getting on the Same Page
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“The one unchangeable certainty is that nothing is certain or unchangeable.” – John F Kennedy
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 been little in the way of major news this morning. In the retail space, we’ve seen some positive earnings reports from Best Buy (BBY) and Dick’s Sporting goods (DKS), although Dollar Tree (DLTR) and Zoom (ZM) are under pressure following disappointing results relative to expectations. There’s little in the way of economic data on the calendar as the Richmond Fed regional report is the only release scheduled (10 AM), but there are a number of Fed speakers slated to speak, including Cleveland Fed President Mester, KC Fed President George, and St Louis Fed President Bullard. Can’t these people take a break for Thanksgiving?
The story of 2022 has been one where the market has been constantly playing catchup to the Fed’s aggressive pace of monetary tightening. Back in May when the market thought 75 bps was off the table, it quickly had to change course as the Fed went on to hike rates by 75 bps at each of the last four meetings. Periods where the market finds itself playing catch up to a tighter reality aren’t a good setup for equities.
With just over three weeks between now and the next Fed meeting, have investors finally caught up to the Fed? Based on comments from Loretta Mester like “I don’t think we’re anywhere near stopping,” you would think that the market is still behind the Fed, but that may not entirely be the case. Even hawkish officials have publicly stated openness to ratcheting down the pace of rate hikes, and that’s a big change from where we were. Throughout all of August, September, and the first half of October, the market was steadily raising its forecasts for policy rates, and not surprisingly, stocks were under pressure. In mid-October, though, the odds of a 75 bps hike at the December meeting peaked at 77% and have been steadily declining to less than 20% today. It’s no coincidence that during that same stretch, equities have rallied. It sounds pretty obvious, but as long as the market remains on the same page as the Fed or finds itself playing catch up to a less aggressively hawkish policy path, equities should benefit from a tailwind.
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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Daily Sector Snapshot — 11/21/22
Thanksgiving Week Performance
The S&P 500 is starting out the holiday-shortened week lower and compared to other years post-WWII, that is not without precedent as the index has often fallen on the Monday of Thanksgiving week. Historically, on the Monday of Thanksgiving week, the S&P 500 has tended to trade slightly lower with a 1 basis point drop. However, in years like 2022 when the index entered the week down at least 10% year to date (12 years), performance has been more positive with a 37 bps average gain, though returns have only been positive half the time.
Performance on Tuesday of Thanksgiving week has tended to be even more mixed with an average gain of 5 bps across all years and a decline of 27 bps in years when the S&P 500 was down 10% YTD heading into Thanksgiving week.
While performance is mixed on Mondays and Tuesdays of Thanksgiving week, the two days surrounding the holiday have tended to see far stronger returns. As shown below, the average gain for all years on Wednesday has been a 0.28% gain and in years that the index was down double digits year to date, it has posted an even more impressive 1.13% gain on that day with positive performance better than 90% of the time. After coming back with full bellies on Friday, traders have continued to push the index higher again with consistently positive performance, especially in years the index entered the week down significantly year to date.
As for where the index goes from there, the S&P 500 has risen from the close of the Wednesday before Thanksgiving through the end of the year roughly three-quarters of the time with an average gain of 1.93%. When momentum has been dragging the index lower year to date, though, rest of year performance has been less positive. Again looking at years in which the index has fallen at least 10% headed into Thanksgiving week as is the case this year, positive returns through the end of the year have been less common only happening half the time with an average decline of 0.1%. Click here to learn more about Bespoke’s premium stock market research service.
Chart of the Day: An Anniversary Few Want to Celebrate
Bespoke’s Morning Lineup – 11/21/22 – Hollywood (and Wall Street) Loves a Sequel
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.
“At its essence, good leadership isn’t about being indispensable; it’s about helping others be prepared to possibly step into your shoes” – Bob Iger
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.
Outside of Disney (DIS), it’s been a very quiet morning in US markets. Futures are down, but they’re off their lows. The Nasdaq is leading the declines with a decline of 0.5%, and the economic calendar is quiet with the Chicago Fed National Activity Index the only report on the calendar. One bright spot this morning has been related to the Fed. While most speakers of late have been hawkish, Atlanta Fed President Bostic said he favors smaller rate hikes and a terminal rate of between 4.75% to 5.00%. Unfortunately, he’s not a voter.
Hollywood loves sequels, and investors are hoping for a good one this morning on the news that Bob Iger is returning to Disney (DIS) to replace Bob Chapek. In response, DIS shares have rallied nearly 10% which would be the best day for the stock in nearly two years. Based on the performance of DIS stock under Iger versus Chapek, you can understand the optimism. During the nearly 15-year tenure of Iger, DIS stock rallied more than fivefold for an annualized gain of 13.9% including dividends versus the S&P 500’s annualized total return of 8.8%. Under the less than three-year tenure of Chapek, DIS stock has declined more than 28% for an annualized decline of more than 11.5% versus an annualized gain of 10.8% for the S&P 500. Put another way, it took less than three years for Chapek to undo all of the outperformance that DIS shares racked up under Iger.
It wouldn’t be fair to put all the blame for Disney’s underperformance on Chapek. Iger stepped down just as COVID was arriving on US shores, so he benefitted from good timing. There’s also been massive disruption in the media space, so who knows how a DIS under Iger would have navigated these storms. Chapek was also Iger’s hand-picked successor, and as Iger himself once said, good leadership is about helping others be prepared to possibly step into your shoes. So Chapek’s disappointing tenure doesn’t exactly reflect all that well on Iger.
Whatever the circumstances were under Chapek’s tenure, you can only play the hand your dealt. The numbers are the numbers, and that’s why investors are so excited this morning. Just like Hollywood, Wall Street loves sequels. Let’s just hope for Disney investors, the Iger sequel is a success more of a Godfather II or Top Gun Maverick than a Jaws 2.
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!
Start a two-week trial to Bespoke Premium to read today’s full Morning Lineup.