Major media stocks caught up in the Archego margin call have found some respite today as Discovery (DISCA) and ViacomCBS (VIAC) both trade higher.  Elsewhere in the Media and Entertainment industry, E.W. Scripps (SSP) came in at the top of our Stock Scores this week. Our Stock Scores ranks members of the S&P 1500 on their attractiveness based on a range of Fundamental, Technical, and Sentiment indicators. For access to our weekly Stock Scores screen, sign up here for access. SSP—which has a portfolio of local and national media outlets like TV stations and newspapers—came in this week with a perfect Technical score alongside high Fundamental and Sentiment scores.

At its multi-year highs earlier this month, E.W. Scripps (SSP) had broken out to multi-year highs before its sharp pullback in the second half of March which has brought the stock down around 20% from its closing high on March 12th. While that decline coincides with the big losses in VIAC and DISCA that resulted from prime brokers, who held positions equal to more than 5% of each company’s float, selling positions as hedge fund clients failed to meet margin calls on swap positions, in the case of SSP none of those same brokers like Credit Suisse or Morgan Stanley possess any significant stake.  Additionally, the technical damage has not been quite as severe for SSP.  Whereas the losses for VIAC or DISCA resulted in the stocks crashing through their 50-DMAs, SSP’s uptrend remains intact as it has so far managed to find support at its 50-DMA in the past week.  SSP didn’t rally nearly as much as DISCA or VIAC, they haven’t dropped nearly as much either.

Not only is the technical picture positive, but an attractive valuation relative to its peers also played into EW Scripps’ high Stock Score this week.  SSP showed much stronger revenue growth YoY, up 37.45% in 2020, when compared to the average for other stocks in the Media and Entertainment Industry. On top of that stronger revenue growth, SSP trades at a discount to the average stock in its industry on a forward P/E, P/S, and EV/EBITDA basis. Those are also more attractive valuations than VIAC and DISCA in spite of both of those stocks having seen their prices nearly cut in half recently.  Respective of its own history, current valuations for SSP are also at the low end of the past decade’s range. Click here to view Bespoke’s premium membership options for our best research available.

On Friday, we noted massive share price declines for a handful of US media names and Chinese education technology stocks.  Further details of the saga were released over the weekend and into this week which we reviewed in greater detail in yesterday’s Morning Lineup.  Included in that news were announcements that two of the prime brokers for Archegos Capital Management — Credit Suisse (CS) and Nomura Holdings (NMR) — could incur significant losses as a result of the liquidation event.  As a result, the two stocks were down double-digit percentage points yesterday with further losses today.

Some US firms have also been reported as involved as prime brokers in the ordeal including Morgan Stanley (MS) and Goldman Sachs (GS). In spite of their involvement, credit default swap (CDS) spreads have risen recently but are not necessarily at worrying levels for the time being.  As shown in the charts below, the only major US investment banks’ CDS spread that has reached a new six-month high has been Morgan Stanley (MS).  Across these four banks, CDS spreads range from Bank of America’s (BAC) low of 52.49 bps to Goldman Sachs’ (GS) high of 63.9 bps.

From an even longer time horizon, the recent tick higher in CDS is hardly even noticeable, especially relative to where they stood exactly one year ago.  Back then, other than GS, each of these CDS spreads peaked above 200 bps.  Again, although they have begun trending slightly higher, current levels across these four names are all below the five-year average.

By far the biggest move in CDS has been for the bank that appears to be the most affected: Credit Suisse.  As shown in the first chart below, CDS for Credit Suisse have spiked to new six-month highs.  Even still, CDS are only trading just above 70 basis points, which is significantly lower than the reading in the mid-100s seen during the COVID Crash last year.  Click here to view Bespoke’s premium membership options for our best research available.

The reporting period for the Dallas Fed’s Manufacturing Outlook Survey for the month of February had some overlap with the region’s winter storms, but the extent of the damages were likely not fully captured. Fast forward a month to the March report and the region appears to have seen a strong bounce back.  This morning’s release saw a huge beat relative to expectations just like other regions’ manufacturing surveys for the month of March.  The Dallas Fed’s reading on the region’s manufacturing sector was actually expected to decline to 16.5 from last month’s reading of 17.2; the second-highest level of the index since the start of the pandemic. Instead of falling, the index surged to a new high post-pandemic high of 28.9. That is the best level since August 2018. Prior to 2018, the only other times that there has been as strong of readings was in the first few years of the index’s history.

The General Business Activity index was far from the only one to come in with an impressive reading. Across the 16 indices, 13 are in the top decile of readings with three of those at record highs.  Expectations came in more mixed with most indices still positive but at less impressive levels historically while just over half fell month over month in March. Overall, the report showed that general conditions continue to improve with higher growth in orders, ramping up of production and employment, and higher prices. Granted, given the survey asks respondents to report on the change in activity from the prior month (i.e. when the winter storms had dampened activity), some of these strong readings could be a result of base effects.

New orders have consistently grown over the past several months, but since the fall, that pace of improvement had generally plateaued. But with activity bouncing back after the storms, the indices for New Orders and Order Growth Rate both ripped higher in March. New Orders topped a reading of 30 for the first time since June 2018 this month while Order Growth Rate reached the highest level since May of that same year.  Thanks to that growth in new orders plus an inability to fulfill existing orders last month, the index for Unfilled Orders has experienced a more unprecedented spike higher. The 12.1 point rise month over month was in the top 5% of all monthly moves leaving the index at the second-highest level on record behind September 2005 when it was 10 points higher. Given that massive backlog, Shipments also have ramped up as the index rose 17 points to 33.1.

An even more impressive increase to gauge the effort being put in to meet that demand came from the indices for Production and Capacity Utilization.  Both indices surged to new all-time highs.

Even though the region’s manufacturers have increased production significantly, supply chains are showing signs of stress.  The index for Delivery Times soared by the highest amount in a single month on record to a new all-time high of 31.2, surpassing the previous record from September 2005 by almost 10 points.

In addition to longer lead times, price growth is accelerating for both Prices Paid and Received.  Prices Paid rose to 66 this month which is the sixth-highest level on record and a level that has not been seen since July 2008. The index for Prices Received is actually at a slightly higher end of its range (98th percentile versus 97.5th percentile for Prices Paid), but it too is at the highest level since 2008.

Finishing with a look at employment, although there was not a big pickup in the reading on firms increasing hiring, they appear to be making do with existing workers and are increasing incentives. The indices for Hours Worked and Wages & Benefits both saw increases in the top 5% of all months. In addition, Capital Expenditures also saw a big uptick in March. Click here to view Bespoke’s premium membership options for our best research available.

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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Policymaker Profiles

The Years of Work Behind Washington’s Best-Liked Man by Claudia Sahm (NYT)

An oral history of how a strait-laced Republican and former Wall Street executive has helped push the world’s most important central bank in a genuinely populist direction. [Link; soft paywall]

The Born Prophecy by Richard B. Schmitt (ABA Journal)

In the late-1990s, the nascent derivatives markets were starting to boom, and CFTC Chair Brooksley Born tried to set up prudential regulation. Her efforts were quashed by Clinton administration Treasury Secretary Bob Rubin, his top deputy Larry Summers, and Fed Chair Allan Greenspan. [Link]

Odd Marketing

Post Consumer Brands to repay shoppers for black-market Grape-Nuts purchases by Noah Manskar (NYP)

Consumers desperate for their fibrous favorite were willing to pay as much as $100 per box earlier this year, prompting parent company Post to offer to reimburse the biggest fans for their overpriced purchases. [Link; auto-playing video]

Read the Pentagon’s 20-Page Report on Its Own Meme by Matthew Gault (Vice)

An unimpressive effort to skewer Russian hackers spent three weeks filtering through an approval process at the Pentagon before winding up on the US Cyber Command’s Twitter feed. [Link]

Capex

A Van Fight Is Brewing by David Welch (Bloomberg)

Commercial vans typically travel less than 100 miles per day, so electric conversion of fleets that reduce operating costs thanks to fewer moving parts and fuel costs are compelling for operators…and that’s before considering big tax incentives. [Link; soft paywall]

Intel is spending $20 billion to build two new chip plants in Arizona by Kif Leswing (CNBC)

After losing huge ground to foreign competitors, Intel has decided to shift its strategy towards a more US-centric approach. The result is billions of capex on two Arizona factories. [Link]

Weird News

How Many Slaps Does it Take to Cook a Chicken? This YouTuber Built a Slapping Rig to Find Out by Alyse Stanley (Gizmodo)

Energy is fungible, so imparting kinetic force on a chicken should at least hypothetically be enough to raise its temperature to the point it is “cooked”. As it turns out, it’s not just a hypothetical possibility. [Link]

How to Kill a Zombie Fire by Matt Simon (Wired)

Peat fires can continue to burn long after they appear to be put out, and warming temperatures are making them more common. Luckily, new techniques are proving more effective in fighting these fires. [Link; soft paywall]

Gaming

RollerCoaster Tycoon: the best-optimised game of all time? by Matt Hrodey (PCGames)

Thanks to an expertise in a more fundamental language than the ones typically used to code graphics packages, RollerCoaster Tycoon’s original developer was able to pull off miraculous performance. [Link]

Infrastructure Week

Biden Team Prepares $3 Trillion in New Spending for the Economy by Jim Tankersley (NYT)

A two-part effort to revitalize physical infrastructure via investments in roads, bridges, telecommunications, housing, rail lines, ports, and green energy and human lives via job training, free community college, universal pre-kindergarten, subsidized childcare, and national paid leave is being floated by the Biden Administration. [Link; soft paywall]

Pandemic Spending

Pets and Pet Spending During the Pandemic: A Money Report by Paul Reynolds (Money)

Spending more time at home means spending more time with furry friends, leading to increases in value and affection of pets. Pandemic-enforced changes in behavior and increasing loneliness led to more purchases of pets, which were more commonly picked up from shelters or rescues than other sources. [Link]

Recast as ‘Stimmies,’ Federal Relief Checks Drive a Stock Buying Spree by Matt Phillips (NYT)

With $1400 economic impact payments rolling out the door, a legion of individual investors is looking to put their money to work in the stock market. [Link; soft paywall]

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Have a great weekend!