Chart of the Day – Gravity-Defying Equities
Bespoke’s Morning Lineup – 4/26/21 – Earnings Deluge
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Focus and simplicity…once you get there, you can move mountains.” – Steve Jobs
The S&P 500 closed just 0.33% from an all-time high on Friday, and futures are mixed heading into the new trading week. S&P 500 futures are flat, Dow futures are higher, and the Nasdaq is indicated lower.
Whether the week finishes at new highs or not will likely depend on earnings as this week will be the biggest week for earnings of the earnings season, including reports from the largest companies in the S&P 500. To kick off the week, we have seen ten reports cross the wires so far, and not a single one of them missed EPS forecasts. Whether these reports translate into positive returns in each of the company’s stocks, however, is hardly a foregone conclusion the way things have been playing out lately.
The pace of reports will pick up considerably after the close with more than 30 reports, including Tesla (TSLA) and NXP Semi (NXPI).
Read today’s Morning Lineup for a recap of all the major market news and events including the biggest overnight events, some key earnings reports, economic data from around the world, as well as the latest US and international COVID trends including our vaccination trackers, and much more.
Maybe it’s because of the earnings reports that we typically see at this time of year, but historically the period spanning the last few days of April and the first days of May haven’t been particularly friendly for bulls. The snapshot below from our Seasonality Tool shows that over the last ten years the S&P 500’s median performance from the close on 4/26 out through the next week has been a decline of -0.09%. That ranks in just the 30th percentile relative to all other one-week periods throughout the year. Looking out over the next month, the median return has been a gain of 0.56% which, while positive, still ranks in just the 34th percentile relative to other one-month periods. While the short-term returns have been on the weak side, longer-term, the S&P 500’s median return over the upcoming three months has been a gain of 3.71% which actually ranks in the 73rd percentile.
Bespoke Brunch Reads: 4/25/21
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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Conservation
The destructive green fantasy of the bitcoin fanatics by Jamie Powell & Jemima Kelly (FT)
When you’re not assuming an outcome and backfilling whatever it takes to get to there, Bitcoin is very simply a massive, energy intensive polluter fueled by dirty coal power. [Link; paywall]
The Chip Shortage Is Bad. Taiwan’s Drought Threatens to Make It Worse. by Stephanie Yang (WSJ)
With explosive demand driving a massive chip shortage around the world, Taiwan Semi is facing a huge problem: no water, a critical input for semiconductor manufacturing. [Link; paywall]
YOLO
Robinhood, Three Friends and the Fortune That Got Away by Rachel Louise Ensign (WSJ)
Tracking the progress of three amateur investors through the pandemic and the hundreds of trades that were part of a massive boom in retail trading last year. [Link; paywall]
Welcome to the YOLO Economy by Kevin Roose (NYT)
With vaccinations available, equity markets ripping, and crypto booming, early middle-age Millennials are flipping over the carefully arranged tables of their lives to seize the day. [Link]
It’s not NBA Top Shot, Beeple or a tweet, but IBM is about to turn patents into NFTs by Eric Rosenbaum (CNBC)
IBM and intellectual property specialist IPwe are collaborating on an effort to tokenize patents via the company’s blockchain platform, though it’s not entirely clear how tokenization would increase pattern liquidity. [Link]
Credit
A $1 Trillion Liquidity Surge Is Morphing Into a Leverage Boom by Paul Seligson (Bloomberg)
Pandemic borrowing that helped companies fortify their cash position during the pandemic is being redeployed to M&A, stock buybacks, and dividend hikes. [Link; soft paywall]
Vaccines
High Efficacy of a Low Dose Candidate Malaria Vaccine, R21 in 1 Adjuvant Matrix-M™, with Seasonal Administration to Children in Burkina Faso by Mehreen S. Datoo et al (SSRN)
A new malaria vaccine produced in partnership with Novavax has been shown to be 55.8% effective, a major step towards a widely available vaccine for a disease that kills roughly 1mm people per year around the world. [Link]
Vaccines Won’t Protect Millions of Patients With Weakened Immune Systems by Apoorva Mandavilli (NYT)
While vaccines are highly effective for those with functioning immune systems, millions of people won’t be protected by them due to other conditions; for them, monoclonal antibodies may be the only option. [Link; soft paywall]
Sports
New Jersey border towns surpass Las Vegas as sports gambling hotspot by Chris Sheridan (Basketball News)
Legalized sports betting venues in Fort Lee, New Jersey are regularly pulling in more betting action than the entire state of Nevada as bettors flock in from the Empire State. [Link]
Where Do QBs Come From (ESPN)
Louisiana and New York are by far the standouts when it comes to producing quarterbacks, and while Texas may be a football powerhouse by any other definition it ranks far and away the worst of any state when it comes to players under center. [Link]
Clout
Hip-Hop Loves Cash App, and That Might Be Why Jack Dorsey Bought Tidal by Grant Rindner (GQ)
Venmo was first in the free payment app space, but CashApp has been the big winner thanks to wild popularity in the South that was spread and amplified by the affection of hip hop. [Link]
Instagram star cat dies from injuries after boy trips on leash by Craig McCarthy & Jackie Salo (NYP)
A cat with more than 33,000 on Instagram was killed this week after a boy tripped on the feline’s leash, sparking a major brawl which also included the owners’ pet dog and bird. [Link]
Scarcity
Why are Hawaii visitors cruising around in U-Hauls? Blame the pandemic. by Chelsea Davis (Hawaii News Now)
Rental cars are so scarce in Hawaii that tourists are renting U-Hauls to get around the island during visits from the mainland. [Link]
South Florida restaurant buys robots to fight staffing issues by Michael Hollan (NYP)
A crab shack in South Florida has purchased three robots to take over some front-of-house tasks that typically would be performed by human staff. [Link]
Tragedy
The Fort Bragg Murders by Seth Harp (Rolling Stone)
Fort Bragg in Fayetteville, North Carolina has hosted a rash of deaths ranging from suicides to homicides, with more than 40 troops stationed at the base dying in 2020 alone. [Link]
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Have a great weekend!
The Bespoke Report Weekly Newsletter– 4/23/21
This week’s Bespoke Report newsletter is now available for members.
At 1 PM ET on Thursday, the S&P 500 was trading up nicely on the day and then suddenly dropped on news headlines that President Biden’s upcoming infrastructure/tax hike proposal would include an increase in the capital gains tax on high earners from ~20% up to ~40%. It was curious that the market fell at all on this headline given that this type of tax hike was something Biden ran on during his campaign, but nevertheless, major US indices continued to fall for the remainder of the trading day to finish down roughly 1% on the day.
The worries — at least as far as the market is concerned — didn’t last long. 26 hours later at the close on Friday, the S&P 500 tracking SPY ETF closed exactly 1 cent below the level it was trading at as of 1 PM ET on Thursday!
Overall, US index ETFs were slightly lower on the week but remain up 3-6% in April and 8-20% YTD. Most sectors finished the week lower, although Health Care, Industrials, and Materials managed to post gains. China (ASHR) had a strong week, up 4.4%.
As usual, this week’s Bespoke Report covers the major forces that are driving equity markets right now. To read the report and access everything else Bespoke’s research platform has to offer, start a two-week free trial to one of our three membership levels. You won’t be disappointed!
Daily Sector Snapshot — 4/23/21
All Streaks Eventually End
Interest rates have been steadily on the rise ever since last summer as optimism over the economy re-opening and concerns regarding ballooning federal deficits and potential inflation have pushed borrowing costs higher. In recent weeks, we have seen a bit of a reversal in this trend as the yield on the 10-year US Treasury has dropped from about 1.75% to just over 1.5% even as economic data has continued to come in very strong. What’s also notable about the recent decline in yields is that on Thursday, the yield on the 10-year actually closed marginally below its 50-day moving average (DMA) for the first time since August 21st.
At 166 trading days, the just-ended streak of days where the 10-year yield closed above its 50-DMA was the longest on record going back to at least 1962, eclipsing the prior record of 162 trading days from March 1966. Also, since 1962, there have only been five other streaks that lasted even 100 trading days with the last occurring all the way back in 1984.
While the 10-year yield just ended a record streak of closes above its 50-DMA, its current streak of closes above the 200-DMA is much more ‘normal’ relative to history. At 113 trading days, it doesn’t even rank anywhere near the top ten in terms of longest streaks. With the 200-DMA only barely above 1%, though, that streak isn’t in danger of coming to an end any time soon. Click here to view Bespoke’s premium membership options for our best research available.
Bespoke’s Morning Lineup – 4/23/21 – Hesitant into the Weekend
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 free trial to Bespoke Premium. CLICK HERE to learn more and start your free trial.
“Real knowledge is to know the extent of one’s ignorance.” – Confucius
It’s a mixed picture for equity futures this morning after Thursday’s drubbing. There’s been no economic data so far, but at 10 AM we’ll get flash readings on April Manufacturing and Services activity from Markit. Investors will be looking for signs of how serious or likely the Democrats will be to pass Biden’s plans to raise capital gains tax rates for the highest earners, but with some Democrats even voicing concerns, this plan may not be the slam dunk that the market feared yesterday.
Read today’s Morning Lineup for a recap of all the major market news and events including the biggest overnight events, some key earnings reports, economic data from around the world, as well as the latest US and international COVID trends including our vaccination trackers, and much more.
Economic data has generally been strong around the world lately, but don’t tell that to the 10-Year US Treasury. Yesterday, the yield on the 10-year US treasury closed below its 50-DMA for the first time since last August.
Records Across the Board Out of Kansas City
There has been no shortage of strong readings on the manufacturing sector of late and this morning’s release of the Kansas City Manufacturing index was yet another point of this. The index was already at a record high in March but it gained another 5 points this month. Expectations pulled back slightly but remain right around some of the highest levels in the history of the survey.
With overall growth accelerating at a record pace, half of the individual categories of the report also set new records. Even for those that did not set a new record, almost all of the April readings were at least in the top few percentiles of all readings. As shown below, every index is now showing expansionary readings after the index for Finished Good Inventories rose to 8 from -10 last month. Additionally, there were only two indices that were lower month over month: New Orders and Supplier Delivery Times. In spite of those declines, both of those indices are coming off of record or close to record highs. In other words, even after declining they remain historically elevated.
New Orders continue to grow at a historically strong rate albeit decelerated from March as that index fell 9 points to 29. Given the further growth in orders, backlogs are continuing to rise at an increasingly rapid pace. That index gained another 3 points to reach a new high of 35. This month marks the third in a row that the index for unfilled orders came in at a record high. To meet this demand, firms appear to have massively ramped up production as the index topped 40 after gaining 17 points month over month. Although production is rapidly accelerating, shipments are lagging a bit. That index is also at a strong level of 32 but it only rose 5 points.
One likely reason for a more throttled reading on shipments is supply chain issues. As shown below, Delivery Times still remain extremely elevated. Even after pulling back in April, the index is well above anything observed prior to the past several months. Highlighted comments also make mention of these issues. For example, one comment states that “It is very difficult to handle the increased business with supply chain issues across all materials and finding anyone who wants to work” while another mentioned the company is, “facing significant supply chain problems due to COVID-19 issues, tariff issues, and the weather problems in Texas earlier this year”. On the bright side, expectations for Delivery Times plummeted in April as the index collapsed by 14 points. That is in the bottom percentile of all monthly moves.
Commentary also frequently mentioned increases in prices and the data backs up that anecdotal evidence. Both indices for Prices Paid and Prices Received rose to record highs this month. The same can be said for expectations of prices paid. The commentary gave a bit more color to this with mentions of inputs like steel contributing to those increases. Labor shortages were another area blamed for rising prices.
On the topic of labor, the indices for Number of Employees and Average Workweek are both at new highs. Expectations also remain extremely optimistic with the former at the highest level to date and the latter just off the prior high of 32 from June 2018. Again circling back to the commentary section, one firm noted that “Entry-level pay will need to be increased. This will create pressure on all other positions” and another stated that they “cannot get people to apply. We pay upwards of $20 or more per hour with full benefits”. In other words, even with employment metrics rising at a record rate, there is still plenty of demand on the part of employers. Click here to view Bespoke’s premium membership options for our best research available.
Bespoke’s Weekly Sector Snapshot — 4/22/21
The Bespoke 50 Top Growth Stocks — 4/22/21
Every Thursday, Bespoke publishes its “Bespoke 50” list of top growth stocks in the Russell 3,000. Our “Bespoke 50” list is made up of the 50 stocks that fit a proprietary growth screen that we created a number of years ago. Since inception in early 2012, the “Bespoke 50” is up 469.1% excluding dividends, commissions, or fees. Over the same period, the Russell 3,000’s total return has been +266.2%. Always remember, though, that past performance is no guarantee of future returns. (Please read below for more info.) To view our “Bespoke 50” list of top growth stocks, please start a two-week trial to either Bespoke Premium or Bespoke Institutional.
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, fees, or dividends are not included in the performance calculation. 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.