Chart of the Day: Bond Bid All About Balance
Bespoke’s Morning Lineup – 3/25/21 – Hideout in Defensives
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“Experience is a good school. But the fees are high.” – Heinrich Heine
It’s not looking like a particularly positive day for risk assets extending what has already been a painful week. Equity futures were higher earlier but have given up all of their gains are now firmly in the red. Bitcoin prices have also been on the decline falling by more than 7%. Oil prices are lower and the 10-year yield is unchanged. There’s a lot of economic data and Fed-speak on the calendar today, so be on the lookout for headlines related to these events.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events from the US and around the world, including a discussion of recent confidence surveys from major global economies, the latest US and international COVID trends including our series of charts tracking vaccinations, and much more.
It’s been a rough week in the equity market as all of the major US indices are down by a minimum of 1.5% over the last five trading days. Indices holding up the best have been the Dow and S&P 100, which is comprised of the 100 largest stocks in the market. At the other end of the spectrum, small-cap stocks have been hit hard. The Russell 2000 is down over 8%, and the Micro-Cap Index is down nearly 11%.
Within individual sectors, there hasn’t been much shelter either. Energy has been the leading sector YTD with a gain of over 30%, but it has also declined more than 4% in the last 5-trading days. Along with Energy, Consumer Discretionary and Communication Services haven’t been nearly as strong YTD, but that hasn’t made them immune to weakness as both sectors are down over 3%. The only areas of strength in the last five trading days have been the defensive sectors like Utilities and Consumer Staples which have both managed to rally more than 1%.
Daily Sector Snapshot — 3/24/21
B.I.G. Tips – Analysts Increasingly Bullish
Chart of the Day – A First for the Russell 2000
Bespoke’s Morning Lineup – 3/24/21 – Nasdaq Leads Again as Yields Remain Stable
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.
“It’s not whether you’re right or wrong that’s important, it’s how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros
Nasdaq futures are leading the way higher this morning as yields stabilize. Crude oil is also rebounding and bitcoin is on the rise as we head into the final week of the quarter.
Be sure to check out today’s Morning Lineup for updates on the latest market news and events from the US and around the world, including a discussion of Intel’s announcement last night, an update on the latest Markit flash PMI readings for the month of March, equity performance in Asian benchmark indices, the latest US and international COVID trends including our series of charts tracking vaccinations, and much more.
Tuesday was a brutal day for the Russell 2000 as it fell more than 3.5% for its worst day in nearly a month. With that decline, the small-cap benchmark also closed below its 50-day moving average for the first time since the end of October.
At 96 trading days, the Russell 2000’s streak of closes above its 50-day moving average was the second streak of more than 90 trading days in the last year and also the longest streak in a decade (March 2011). As shown in the chart below, while streaks of 90 or more trading days have been relatively uncommon in the last decade, prior to that there were numerous streaks lasting much longer than 100 trading days.
Daily Sector Snapshot — 3/23/21
Bespoke Stock Scores — 3/23/21
Shipments Drive the Richmond Fed Higher
The Richmond Fed’s Manufacturing Activity Index rose to 17 in March after readings of 14 over the prior two months which had been the weakest readings since last July. At 17, this month’s reading was the strongest since December pointing not only to further growth but also an acceleration in the region’s manufacturing activity.
Across sub-indices, almost everything continues to show expansionary readings although there are a few exceptions for things like inventories and availability of skills; neither of which are necessarily bad signs for activity. As for the month-over-month changes, things were perhaps a bit more mixed with five of the eighteen categories lower and another two unchanged. Expectations also generally improved across categories though the actual levels of most of these indices are generally at the lower end of their historic range. In all, the report showed orders continue to grow with inventories being drawn upon at a record pace. Prices (including wages given labor market tightness) are also increasing at a historic rate.
The main driver of the uptick in the headline number (which is a composite of Shipments, New Orders, and Employment) was the increase in Shipments which offset the unchanged readings in the other two components. That index gained 10 points to 22 in March. That was both the biggest one-month gain and the highest level for this index since October and leaves it in the top decile of readings throughout the index’s history. Although Shipments were higher, New Orders remain off their highs from a few months ago going unchanged in March. With Shipments on the rise and new demand steady, the Backlog of Orders decelerated as the index fell 7 points. But even with that decline, the current reading still stands in the top 10% of readings. One surprising point about the uptick in Shipments was that it also coincided with a historically high reading in Vendor Lead Times. Higher readings in this index indicate that it takes longer for products from suppliers to reach their destination. In other words, supplier delays have not yet appeared to slow down manufacturers getting products out the door.
While supplier delays aren’t slowing things down yet, inventories are being drawn upon at a record rate. Both indices for final good and input inventories fell to record lows in March.
Meanwhile, prices for both inputs and receivables continue to accelerate. Prices Paid rose at a 6.15% annualized pace. That is the third-highest reading on record behind October 2018 and June 2008. Expectations for Prices Paid are at the highest point in over a decade and the seventh-highest level on record. Prices Received are rising at a slower clip, 3.52% annualized, but this too is around one of the highest levels in recent years.
As for another input, Wages, there was a six-point decline in the current conditions index in March. Even though that is in the bottom 10% of monthly moves, the index is still at a historically strong level. As the report also continues to show a lack of skilled workers, expectations for Wages were much higher. That index rose to 57 which is the highest level since May 2019. Prior to that, you would need to go back to March and February of 2000 to find as high of a reading. Click here to view Bespoke’s premium membership options for our best research available.
