Since peaking nearly a year ago, homebuilder sentiment has been in a steady decline, but the past two months have seen a rebound with the October report showing a particularly large jump. The NAHB’s Housing Market Index jumped four points in October to 80 which is the strongest reading since July. That was also a surprise compared to the forecasted one-point decline. While that reading is still well below higher levels of the past year, this month’s reading is back above pre-pandemic record highs.

There were increases in sentiment across all of the various sub-indices.  Everything was higher with present sales increasing by the most.  While it saw the smallest MoM increase of any part of the report, Future Sales are now the most elevated, coming in the top 1% of readings. Geographically, the South and West have higher homebuilder sentiment readings than the Northeast and Midwest, but all four regions saw big jumps in October.

As homebuilder sentiment has improved, so too have homebuilder stocks.  As shown below, the SPDR S&P 500 Homebuilders ETF (XHB) has been rebounding from a near-test of its 200-DMA at the start of the month.  Today, it is seeing an outside day reversal higher to fight to move above its 50-DMA.  If it does manage to close above its 50-day, it would be the first time it has done so in a month.  Even if it crosses that line in the sand, XHB would still only be in the middle of the past several months’ range.

As earnings season ramps up, several XHB stocks are actually reporting in the next few days with many more to come in the following few weeks.  We created a custom portfolio with XHB’s holdings, and below we show a snapshot of those holdings in our Earnings Explorer that are scheduled to report through the end of the month.  Click here to view Bespoke’s premium membership options.

The S&P 500’s market cap has increased by more than $6 trillion this year, leaving the index’s total market cap above $40 trillion.  As shown below, the Technology sector makes up more than a quarter of the index’s market cap at nearly $11 trillion.  The next closest sectors are all right around the $5 trillion mark — Consumer Discretionary, Health Care, Communication Services, and Financials.  There are also four sectors that barely add up to $4 trillion combined: Energy, Real Estate, Materials, and Utilities.  The four largest stocks in the S&P 500 — Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN) — have a combined market cap that is $8.3 trillion, more than two times the size of the four smallest sectors.

While the Technology sector ranks in the middle of the pack in terms of year-to-date performance, on a market cap basis, it has easily increased the most of any sector this year.  As shown below, Tech’s market cap has increased by nearly $1.7 trillion so far in 2021.  The next closest sector is Financials with an increase of $1.1 trillion.  So far this year, every sector has seen an increase in market cap, with the Utilities sector increasing by the smallest amount at roughly $48.5 billion.

Below is a quick snapshot of the 25 largest stocks in the S&P 500 at the moment.  Apple (AAPL) and Microsoft (MSFT) are the two largest and the only members of the “$2 trillion club.”  Alphabet (GOOGL) and Amazon (AMZN) rank 3rd and 4th with market caps of more than $1.7 trillion.  There’s a big drop-off after the “big 4” of AAPL, MSFT, GOOGL, and AMZN.  Facebook (FB) ranks 5th with a market cap of $916 billion, while Tesla (TSLA) has moved up to the #6 spot at $845 billion.  With Facebook declining recently and Tesla rallying, the market cap spread between the two is now at just $71 billion.  Berkshire (BRK/B), NVIDIA (NVDA), Visa (V), and JP Morgan (JPM) round out the top ten.

As you can see, all of the stocks on the top 25 list now have market caps of $250 billion or more.

In terms of the biggest market cap gainers so far this year, there’s Alphabet (GOOGL) and Microsoft (MSFT), and there’s everyone else.  GOOGL has seen the biggest gain in market cap with an increase of $702 billion.  There are only six stocks in the S&P 500 that currently have total market caps of more than that amount!  The $702 billion gain for GOOGL is also larger than the total YTD gains in market cap for seven of the eleven S&P 500 sectors.

As shown, nine stocks in the S&P have seen their market caps increase by more than $100 billion so far in 2021.  Of the 500 stocks in the S&P 500, 411 (more than 80%) of them have total market caps of less than $100 billion.  Click here to learn more about Bespoke’s premium subscription services.

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.

While you’re here, join Bespoke Premium with a 30-day free trial!

California

California moves toward ban on gas lawn mowers and leaf blowers by Phil Willon (LAT)

Gasoline-powered lawn equipment motors are extremely inefficient and produce shocking amounts of pollutants. California is responding by banning their sale (though operating them will still be legal in the state). [Link; soft paywall]

More than half of Bay Area residents plan to leave permanently: poll by Jordan Williams (The Hill)

As the saying goes, talk is cheap, and it’s a lot easier to grouse about where you live than actually leave, but there certainly are a lot of people near the Golden Gate who would rather be somewhere else. [Link]

Logistics

Crews Are Abandoned on Ships in Record Numbers Without Pay, Food or a Way Home by Drew Hinshaw and Joe Parkinson (WSJ)

Dozens of ships are being abandoned with their crews left unpaid and far from home as maintenance, left without resources to make their own way home from the locations their ships have in some cases literally washed up. [Link; paywall]

Amazon Seeks Used Long-Range Cargo Jets Able to Fly From China by Matt Day and Julie Johnsson (Bloomberg)

With passenger flights down sharply and therefore huge amounts of cargo capacity missing from the trans-Pacific trade network, Amazon is buying long haul jets in order to fill the gap and rush high value shipments from Asia to the US. [Link; soft paywall]

Biggest U.S. Retailers Charter Private Cargo Ships to Sail Around Port Delays by Sarah Nassauer (WSJ)

Large stores like Home Depot (HD), Costco (COST), and Walmart (WMT) are chartering their own ships in the hopes they can avoid the chaos in the freight forwarding industry and get goods to US consumers on time for the holidays. [Link; paywall]

Culture

Netflix’s ‘Squid Game’ Is Slammed by Kim Jong Un’s Propagandists as ‘Beastly’ by Dasl Yoon (WSJ)

The most successful Netflix show ever has drawn the ire of North Korean propagandists, who are spinning the show as a realistic depiction of South Korean society (it is not). [Link; paywall]

I Was a Lifelong Vegetarian. I Decided to Taste What I Was Missing by Rajesh Parameswaran (Bon Appetit)

When in Argentina, get a steak. That’s the upshot of this wonderful personal essay about breaking in to beef from the perspective of a lifelong vegetarian. [Link]

Manufacturing

How Morocco transformed itself into a carmaking hub by David Pilling (FT)

An unlikely powerhouse in the global auto manufacturing industry is Morocco, which produces more than twice as many cars as it purchases thanks to an aggressive industrial policy that has supported the development of car making infrastructure and value chains. [Link; soft paywall]

History

Christopher Columbus And The Replacement-Level Historical Figure by Patrick Wyman (Defector)

While Columbus is a culture war focal point in the US these days, the larger context of his role in history puts the lie to the idea that he was either a unique hero or a specific villain, as opposed to a direct product of his time and circumstances. [Link]

Astronomy

Dark matter’s shadowy effect on Earth by Michael R. Rampino (Astronomy)

One possible explanation for what appear to be periodic cataclysms throughout geological history is the influence of Earth’s passage through the central plane of the galaxy, an area that may be rife with dark matter and create increased likelihoods of major impacts or geological disasters. [Link]

Real Estate

Soaring Home Prices Are Roiling Appraisals and Upending Sales by Nicole Freidman (WSJ)

With home prices soaring, appraisers are skeptical, and many new home deals are falling apart as lenders balk at the prices their potential borrowers are agreeing to. [Link; paywall]

Pay To Play

Is Stock Index Membership for Sale? by Kun Li, Xin (Kelly) Liu, and Shang-Jin Wei (NBER)

This novel paper documents a relationship between companies purchasing credit ratings from Standard & Poors and their inclusion in the flagship S&P 500 index. [Link; registration required]

Labor Market

A Year After a Jobs Bust, College Students Find a Boom by Nelson D. Schwartz and Coral Murphy Marcos (NYT)

College seniors are finding lots of interest from employers as companies scramble to fill positions in a hot, high turnover labor market that has shifted the balance towards students who a year ago were staring into the abyss of a COVID recession. [Link]

Read Bespoke’s most actionable market research by joining Bespoke Premium today!  Get started here.

Have a great weekend!

Last month, the New York Fed’s Empire Fed survey saw the index for General Business Conditions come in at the seventh-highest reading on record. With the most recent update this morning, the index showed significant moderation in the pace of activity.  The index plummeted 14.5 points MoM which ranks in the bottom decile of monthly moves and is now in the 77th percentile of readings going back to the start of the survey in 2001.

The big drop in the headline index can be attributed to big drops throughout the report.  New Orders, Shipments, Unfilled Orders, Prices Received, Number of Employees, and Average Workweek were all lower with those declines historically large. With that said, most indices remain at historically strong levels with only the headline number and Shipments not in the top decile of their historical ranges.   Expectations also broadly remain at historically healthy levels.

Demand decelerated as New Orders fell 9.4 points to 24.3 and in turn, Unfilled Orders pulled back 2.4 points to 18.5. As previously mentioned, even though those declines were large, the current levels of these indices continue to sit in the upper 10% of all readings. Shipments are another story though.  That index plummeted 18 points in October and is now only in the 38th percentile of historical readings.

As for why Shipments stand out as a far weaker area of the report, supply chain issues can likely receive the blame and that is backed up with the index for Delivery Times setting yet another record high after three months of increases in a row.

Price pressures remain extremely elevated from a historical context. Prices Paid accelerated this month but remain off the record high from a few months ago. Prices Received, on the other hand, moved lower in October falling off of its record high.

Employment metrics also deteriorated this month with both the indices for Number of Employees and Average Workweek pivoting lower.  With regards to the Number of Employees, New York area firms continue to appear to be exceptionally willing and optimistic on hiring with a very elevated, albeit rolling over, reading in 6-month expectations. Meanwhile, the current conditions index is more muted, but also at the high end of its historical range even after a falling 3.4 points this month.  Average Workweek experienced a larger decline this month, but the index remains at a stronger level respective to its historical range.  Click here to view Bespoke’s premium membership options.