S&P 500 Up 2% At Noon
After a tumultuous week, the S&P 500 gapped higher this morning and continued to rip throughout the morning. As of noon, the S&P 500 was up 2.2%, a much-needed rally after a week of pain. Since the start of 1983, the S&P 500 has been up by 2%+ at noon 110 different times, 22 of which have occurred in the pandemic era. There has been only one occurrence this year (3/9) and two in 2021 (3/1/21 and 12/7/21). On a median basis, the S&P 500 averages a noon-to-close gain of 54 basis points (bps) when it rallies 2%+ in the morning, which is over ten times the median of all periods (5 bps). However, looking at just Friday occurrences, the S&P 500 has had a median drawdown of 9 bps from noon to the close, which is 11 bps weaker than that of all periods. Additionally, Friday was the only weekday with median noon-to-close returns below that of all periods when the index had gained at least 2% by noon.
Friday is also the only day of the week with lower than average positivity rates following 2%+ morning rallies. Thursday is the strongest with a positivity rate of 83%. Overall, the index has performed positively from noon to close 70% of the time following these occurrences. click here to become a Bespoke premium member today!
Stocks Near Pre-COVID Highs – 5/13/22
Two days ago, we outlined the percentage of stocks in each S&P 500 sector that were below their pre-COVID highs to show that many of the stocks that surged due to pandemic effects have significantly fallen off, netting long-term holders a negative return since the onslaught of the pandemic. Over the course of the next few weeks, we will be outlining the S&P 500 stocks that are breaking below/above their pre-COVID highs, as we did yesterday. Yesterday, the S&P 500 fell by 10 basis points to close at a new 52-week low, but the index is still up over 15% relative to pre-COVID highs. As of yesterday’s close, 40.4% of S&P 500 stocks were below this critical level, an 80 basis point improvement relative to the close on 5/11. 71.4% of utilities and 66.7% of communication services stocks were below their respective pre-COVID highs as of yesterday’s close. On the other hand, only 18.5% and 23.8% of S&P 500 stocks in the materials and energy sectors were below their respective highs between the start of 2019 and the end of February 2020. Additionally, 7.8% of S&P 500 stocks were between 0-5% above their pre-COVID highs (39 members).
Only one stock crossed below its pre-COVID highs for the first time since breaking above that level: MGM Resorts (MGM). However, the stock gapped higher by over 3% today, thus returning above this level. The weak performance as of late is due to a variety of factors including China’s zero-Covid policy, the broader market drawdown, and a weak reaction to the latest earnings report, even though the company beat on the top and bottom line.
One stock traded lower to enter a +2% channel relative to pre-COVID highs for the first time in a couple of months: Jack Henry (JKHY). JKHY is a payment processing and lending firm and competes with the likes of Block (SQ) and Toast (TOST). To gain access to our chart scanner tool, click here to become a Bespoke premium member today!
Bespoke’s Morning Lineup – 5/13/22 – Six in a Row
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“I’d be a bum on the street with a tin cup if the markets were always efficient.” – Warren Buffett
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.
Futures are higher this morning, so the only question investors have at the moment is, what time does the sell-off begin? Treasury yields are sharply higher across the board this morning as the 10-year yield is back above 2.9%. Crude oil is up over 1%, while gold declines to around $1,800 per ounce. In the crypto space, we’ve seen some stabilization as bitcoin is trading back above $30K.
On the COVID front, there are some signs that Shanghai will start lifting its lockdown measures at the end of next week, and the government has also denied rumors that similar lockdowns are in store for Beijing.
There was some good news on the economic front as Import Prices were unchanged versus expectations for an increase of 0.6%. The only other report on the calendar is the Michigan Sentiment at 10 AM.
In today’s Morning Lineup, we recap the continued developments in the crypto space (pg 4), overnight economic data out of China and Europe (pg 5), and a lot more.
Barring an epic rally on the final trading day of the week, both the S&P 500 and Nasdaq will put in their sixth straight week of losses today. In the case of both the S&P 500 and Nasdaq, it will be tied with four other periods for the longest weekly losing streak since 2001. Below we show historical weekly losing streaks for the Nasdaq since 1971. While there have been a number of streaks that have been as long, just five have been longer, and only one (1973) lasted longer than seven weeks.
Even more notable than the fact that the Nasdaq has been down for six weeks in a row is the fact that every down week in the last six has been a decline of at least 1.5%. In the Nasdaq’s entire history, there have only been four other periods where the Nasdaq was down for six or more straight weeks and every one of those weeks was a decline of at least 1%. Three (1973, 1980, and 2001) lasted seven weeks, while the streak in 1990 lasted six weeks. In the Nasdaq’s history, losing streaks of this magnitude have been extremely uncommon.
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Chart of the Day: The Glass is Two-Thirds Empty
Bespoke’s Weekly Sector Snapshot — 5/12/22
Stocks Near Pre-COVID Highs
Yesterday, we outlined the percentage of stocks in each S&P 500 sector that were below their pre-COVID highs to show that many of the stocks that surged due to pandemic effects have significantly fallen off, netting long-term holders a negative return since the onslaught of the pandemic. Yesterday, the S&P 500 by 1.6% to a new 52-week low on a closing basis, but the index was still up over 15% relative to the pre-COVID highs. Along with this move from the broader index, three stocks broke below their pre-COVID highs for the first time. As things currently stand, 41.2% of S&P 500 members are now below their pre-COVID highs, and an additional 18 stocks (3.6% of members) are just 2% or less above their closing high prices between the start of 2019 and the end of February 2020.
Below we show the six-month price charts of the three stocks that traded below their pre-COVID highs for the first time yesterday. Click here to view Bespoke’s premium membership options.
As mentioned above, there are 18 stocks that were trading within 2% of their pre-COVID highs as of yesterday’s close, and charts of each one are highlighted below. Looking through them, some have already traded well below their pre-COVID highs but have since rebounded while a number of others haven’t traded at these levels in months. In fact, six of them closed at new six-month lows yesterday (AOS, BR, LEN, MGM, NVR, and SYK).
Sentiment Just Like Bear Markets
The past week may have seen the S&P 500 and other major US indices breach to fresh lows on steep declines that are nearing bear market territory, but the AAII sentiment survey has not fallen to its own lows as might have been expected. Bullish sentiment fell back below 25% this week but is still several percentage points above the lows in the teens from only a few weeks prior.
Historically, when the S&P 500 has hit 52-week lows as it has in the past week, bullish sentiment has usually been even higher with an average reading of 29.15%. The chart below shows the levels of bearish, bullish, and neutral sentiment in the AAII survey at the time the S&P 500 first traded into bear market territory (down 20% from a prior peak) for each bear market since the survey began in 1987. At 24.3% now, the current reading of bullish sentiment is on the low side compared to prior bear markets. The only two bear markets where bullish sentiment was lower were July 2008 and February 2009.
Although bullish sentiment declined, bearish sentiment also pulled back below 50% for the first time since the week of April 20th. Even with the decline, though, bearish sentiment remains at a historically high level.
Given the moves, the bull-bear spread was higher for a second week in a row after it had reached the lowest level since March 2009 two weeks ago. Again, in spite of those improvements, the current level remains in the bottom 5% of all weeks on record.
The year is already a third over, and sentiment has found no respite after multiple months of declines in equity prices. In fact, bullish sentiment has not seen a single week with a reading above its historical average, and there has only been one such week for bearish sentiment. In the charts below, we show the average bullish and bearish sentiment reading by year since the start of the survey in 1987. While there’s still a lot of time left for things to change, with an average bullish sentiment reading of just 24.42% at this point in 2022, this year ranks as the worst year for bullish sentiment in the history of the survey (since 1987), although 1988 and 1990 have come close with average readings of around 27%. Meanwhile, the average reading on bearish sentiment has been 44.3% this year. 2008 is the only other year with a higher average reading at 45%. In other words, it is hard to find a comparable year since the late 1980s where optimism has been this low and pessimism this high. Click here to learn more about Bespoke’s premium stock market research service.
The Bespoke 50 Growth Stocks — 5/12/22
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 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.
Continuing Claims Reach More Multi-Decade Lows
Initial jobless claims came in weaker than expected this week rising to 203K instead of the expected decline to 193K. Additionally, last week’s print was revised up to 202K. While that brings claims back above the 200K level for the first time since February, the current level remains historically impressive.
On a non-seasonally adjusted basis, claims still have seasonal tailwinds at their back, though, the winds will shift in the next few weeks. On an unadjusted basis, claims are still below 200K, dropping another 6.6K w/w to 191.8K. Behind the 182.3K reading from late March, that is the strongest reading on initial claims since 2019 and is in line with the readings for the comparable week of the year in the few years prior to the pandemic.
Unlike initial claims, continuing claims have continued to head lower unabated. Claims fell to 1.343 million in the most recent week marking the fifth consecutive weekly decline. Claims have not been at such a low level since late 1969/the first weeks of 1970. Click here to learn more about Bespoke’s premium stock market research service.
Bespoke’s Morning Lineup – Down: What Else is New?
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“Money does not buy you happiness, but lack of money certainly buys you misery.” – Daniel Kahneman
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.
Today, the futures aren’t even attempting to sucker traders in with a rally, so maybe today, we’ll actually get a bounce. Treasuries are continuing to rally again this morning, while crude oil trades modestly lower and crypto plunges. Overnight, China pledged further support to its economy. On the geopolitical front, Finland has said it is preparing to apply for membership in NATO, and Russia has responded by threatening retaliatory steps of both military and ‘other’ measures.
We just got a chunk of economic data in the form of PPI and jobless claims. In terms of PPI. headline CPI was in line with forecasts at a m/m gain of 0.5%. Core PPI rose much less than expected at 0.4% vs 0.7%, but data for March was revised higher. In terms of jobless claims, initial claims came in 10K higher than expected 203K vs 193K while continuing claims showed another drop falling to 1.343 million versus forecasts for 1.372 million. Equity futures have seen little in the way of a reaction to the news while treasury yields remain lower.
In today’s Morning Lineup, we recap the recent developments in the crypto space (pg 4), overnight earnings (pg 5), economic data out of Europe (pg 6), and a lot more.
The year is barely more than a third over, but already the Nasdaq has had 24 different over the course of just 90 trading days. That works out to more than once a week! Again, we still have nearly two-thirds of the year left ahead of us, but already, the number of 2%+ daily declines this year ranks as the 8th highest in the Nasdaq’s history. The only years that were higher were 1999, 2000, 2001, 2002, 2008, 2009, and 2020. If, and this is a big if, the current pace of 2% declines continues, 2022 wouldn’t quite catch 2000 for the record number of 2% declines in a single year, but it would be a close second.
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