Bespoke’s Weekly Sector Snapshot — 10/27/22
The Bespoke 50 Growth Stocks — 10/27/22
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 eight changes to the list this week.
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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.
Chart of the Day: Dow Strength
Bespoke’s Morning Lineup — 10/27/22
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“You should welcome a bear market, since it puts stocks back on sale.” – Jason Zweig
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It’s a very mixed picture for equity futures this morning with the Dow indicated up pretty sharply while the Nasdaq is down by a similar magnitude driven in large part by shares of Meta Platforms (META) which is down over 20% and struggling to hang on to triple-digits. The ECB just announced its policy decision and hiked rates by 75 bps (as expected). Here in the US, we have a busy morning of economic data, plus big earnings reports from Amazon.com (AMZN) and Apple (AAPL) after the close.
The US Dollar index peaked about a month ago, and its move lower has coincided with the bounce that we’ve seen in US equity indices. The same trend has played out over a shorter one-week time frame as well, which you can see in the Trend Analyzer snapshot below. Over the last five days, the US Dollar Bullish ETN has fallen 2.8% and broken below its 50-day moving average. At the same time, every other area of financial markets has moved higher within its trading range.
Yesterday, the US Dollar Index broke below its 50-DMA for the first time since August, and it traded the farthest below its 50-DMA since early January. As shown below, the August break did not last long, as the Dollar’s uptrend resumed almost immediately.
This morning the Dollar is back up, and a resumption of its uptrend will almost assuredly coincide with a resumption of the equity market’s downtrend. We’ll certainly be keeping an eye on FX today.
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Daily Sector Snapshot — 10/26/22
Chart of the Day – Another Curve Bites the Dust
Bespoke’s Morning Lineup — 10/26/22
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“Solving big problems is easier than solving little problems.” – Google Co-Founder Larry Page
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.
Bulls have finally seen some green over the last couple of weeks. In fact, the S&P 500 has gained 1%+ on six of the last nine trading days. Below is a log chart of the S&P 500 since 1952 (when the 5-day trading week began) with red dots showing prior times the index has gained 1%+ on six of the prior nine trading days (the first occurrence in at least three months). As you can see, it is not common, and aside from the occurrence in March of this year, prior periods where this happened saw massive gains over the next six and twelve months.
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Bespoke Stock Scores — 10/25/22
Near Record Volatility in the 10-Year Yield*
The 10-year is having another one of those days. After trading up near 4.3% intraday yesterday, the yield got as low as 4.05% this morning and is currently resting at 4.09% for a decline of 14 basis points on the day. In a normal year, we’d be talking about a move of that magnitude as a volatile day, but in 2022, it has become commonplace. Today is actually the 40th trading day this year that the 10-year yield has moved 10 bps or more relative to the prior day’s close. Relative to history, this year’s total of daily 10 bps moves (through 10/25) ranks as the highest since 2009 when there were 54. As shown in the chart below, there have been plenty of other years where the 10-year yield had a much larger frequency of 10 bps daily moves, including 2008 (66) and the early 1980s when both 1980 and 1981 had a total of 123, or roughly once every other trading day.
Based on the chart above, 2022 may look unremarkable in terms of daily volatility, but it’s leaving out a key variable and that’s the actual level of the yield on the 10-year at the time of the move. A 10 bps daily move is a lot more significant when the average yield on the 10-year is 2.8% as it has been this year compared to a year like 1980 or 1981 when the average yields were 11.4% and 13.9%, respectively. In order to adjust for the level of yield, the chart below shows the ratio of the number of days where the 10-year yield moved 10 bps versus the average yield of the 10-year during the specific year. After making that adjustment, 2022 still isn’t at a record, but it’s close. In both 2008 and 2020, the ratio was 1,812, and in 2009 it was 1,664. At 1,444, the ratio for 2022 ranks as the fourth highest on record. Already this year, 2022 ranks as one of the most volatile, in terms of daily yield changes, but there are still over two months left in the year. If the current pace continues through year-end, we could revisit this chart in just over two months and find that the ratio for this year was higher than any other year on record. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – 10/25/22 – The Marshall Move
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“There are a lot of mistakes made in games. That one just happened to be more visible than some of the others.” – Jim Marshall
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58 years ago today, Vikings defensive end Jim Marshall recovered a 49ers fumble and ran it back to the endzone for a defensive touchdown. At least he thought it was. Unfortunately for Marshall, he ran into the wrong endzone turning what he thought was a Vikings touchdown into a safety. The Vikings still ended up winning the game, so the only people potentially impacted by Marshall’s bonehead play were the gamblers.
Less than two weeks ago, the S&P 500 closed at a new low for the year the day before what was widely anticipated as the most important economic report in weeks with the release of the September CPI on 10/13. That report was a ‘big play’ for the bears as both the headline and core readings came in higher than expected, and the y/y core reading hit a new cycle high of 6.6%. Stocks opened the day of the 13th sharply lower, and bears continued to run with it from there. Like Jim Marshall, though, they went the wrong way! The S&P 500 finished the day of the 13th up 2.6% and is now up 6.3% from its closing low on 10/12.
Despite the rally, 2022 is still a blowout as the S&P 500 remains down over 20% YTD with the Nasdaq down nearly 30%, so, like the “Purple People Eaters” of the early 1960s, the bears can still laugh about the wrong way move. The chances for Bulls this year are still slimmer than they are of Lloyd Christmas ending up with Mary Swanson, but stranger things have happened. Back in Super Bowl LI, the Falcons were up 28-3, and we all remember how that one ended. So “there’s a chance” however slim it may be.
The ‘wrong way rally’ has taken a breather this morning as futures are moderately lower ahead of a relatively busy day for economic data with Case Shiller housing numbers at 9 AM and then Consumer Confidence the Richmond Fed report at 10 AM. With the weakness in equities, treasury yields are lower and crude oil is down about 1%. The pace of earnings reports has really picked up steam and the results this morning have been somewhat lackluster. Of the nearly 40 reports so far this morning, 64% have exceeded EPS forecasts, and 62% of exceeded revenue estimates. Also slightly more companies have lowered guidance than raised it. The first big test of the earnings season will start after the close, though, when Alphabet (GOOGL) and Microsoft (MSFT) report after the close.
It seems as though this year stock prices have been driven entirely by interest rates, but a close look shows that in recent weeks that hasn’t entirely been the case. Take a look at the chart of the S&P 500. While it briefly broke below its June lows in late September and early October, it has recently rebounded and yesterday actually closed more than 3% above its June low.
If interest rates were the primary driver of stock prices, given where the S&P 500 is trading, you would expect to see the US Treasury yields right around or maybe even below the levels it was at in mid-June. That hasn’t been the case though. Take the 10-year yield, for example. At the S&P 500 lows in June, the yield on the 10-year peaked at 3.47%. It eventually fell back down to as low as 2.57% in early August, but since then has surged right through the June highs all the way up to yesterday’s high of 4.27%, or 80 basis points more than the June high. The fact that equities have been able to hang in relatively well despite the surge higher in yields suggests that stocks may be starting to look past the pressure from higher rates.
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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