There was a lot to like in this morning’s jobless claims release.  For starters, claims beat expectations falling to 779K rather than the forecasted decline to only 830K.  Additionally, last week’s number was revised down by 35K to 812K compared to the original 847K number.  This week, claims fell for a third week in a row with the 33K decline bringing the total drop to 148K over the past three weeks since the high of 927K. While there is still plenty of room for further improvement given claims remain well above the pre-pandemic record high of 695K, at 779K claims are now at the lowest level since the last week of November’s level of 716K which was also the second-lowest reading of the pandemic behind November 6th’s 711K print.

On a non-seasonally adjusted basis, claims have also dropped sequentially for three weeks in a row.  Unadjusted claims have now fallen by nearly 300K since the high of 1.113 million in the second week of the year.  Now at 816.2K, non-adjusted claims are at the lowest level since the last week of November. As we have noted the past couple of weeks, falling claims are normal for this time of year with last week (the fourth week of the year) and the previous week (the third of the year) historically having seen claims lower week over week 90.74% and 100%, respectively, of the time all years since 1967.  Turning to the current week of the year, there is not as consistent of a trend as the past couple of weeks, but historically claims have moved lower more often than not.

Even including PUA claims, total initial jobless claims dropped this week.  Alongside the 23.535K decline in regular state claims, PUA claims fell by 54.68K. In total, this week saw 1.165 million claims between the two programs, down from 1.243 last week marking a continued return towards the low of just above 1 million at the end of October.

As for continuing claims which are lagged an additional week to initial claims, the declines keep coming.  Continuing claims totaled 4.592 million this week, down 193K from the prior week’s upwardly revised reading. Like initial jobless claims, that was better than the expected reading of 4.7 million and also set a new low for the pandemic.

Including all programs adds another week’s lag but for the week of January 15th, total claims across all programs declined to 17.87 million from the prior week’s spike higher to 18.359. Most programs contributed to that decline with the biggest contribution coming from the Pandemic Emergency Unemployment Compensation (PEUC) program which saw claims fall by 289.91K. Outside of the first week of the year when this program fell by over 1 million (likely due to benefits expiration at the end of 2020 and other discrepancies as a result of the timing of the spending bill) that 289.91K decline was the largest week over week drop on record. Despite that decline, a 197K uptick in the Extended Benefits program made for a new high in the extension programs’ share of total claims. Click here to view Bespoke’s premium membership options for our best research available.

As the S&P 500 (SPY) bounces back from last week’s declines, global equities are broadly doing the same. Glancing across the rest of the countries tracked in our Global Macro Dashboard, most countries have similarly risen over the past week with only Hong Kong (EWH), Mexico (EWW), Singapore (EWS), Switzerland (EWL), and the United Kingdom (EWU) lower over the past five days.  For the US, the rally over the past few days has left SPY within 1% of its 52-week/all-time high.

Like the US, there are several other country stock market ETFs that are also a few percentage points away from a new high, but only one, India (INDA), has reached a new 52 week high. China (MCHI) and Sweden (EWD), like SPY, are also within 1% of their highs. China is also the most overbought country ETF trading nearly 2 standard deviations above its 50-DMA.  While none are nearly as overbought as China, there are seven other countries that are also overbought including the US.  On the other hand, Brazil (EWZ), Mexico (EWW), and the UK (EWU) are all over 10% below their 52 week highs.  Granted, only EWW is currently oversold alongside Malaysia (EWM) and Spain (EWP), though EWM and EWP are close to no longer being oversold.  Click here to view Bespoke’s premium membership options for our best research available.

A couple of weeks ago in our Equity Market Pros and Cons report, we highlighted the chart below showing the S&P 500 over the past year and the various “acts” of sector rotation in those periods. Overall, the fact that various sectors have been participating at different stages of the rally has been a good sign for breadth. In the most recent act, the leaders have been sectors like Energy, Financials, and Tech which are the three top-performing sectors.  On the other hand, Real Estate, Utilities, and Consumer Staples have been some of the worst-performing sectors.

But looking at the relative strength charts of the eleven sectors versus the S&P 500 over the past year, there have been some reversals recently, meaning some of the trends that have been in place over the past few months are turning a corner.  For example, the relative strength lines of Energy and Financials—the two best performing sectors since November—have generally been in uptrends during the current “act” meaning they have outperformed the broader S&P 500. But in the past couple of weeks, the relative strength lines of both Energy and Financials have broken those uptrends. The Industrials sector has seen the same play out while the Materials sector is sitting right at the bottom of its multi-month uptrend.

On the other hand, Technology—which has been the third best performing sector—has seen its relative strength line make a break higher alongside Communication Services.  While a less recent development, Consumer Discretionary has also seen its relative strength line resume its uptrend. Perhaps more interestingly, some defensive sectors like Real Estate and to a lesser degree Utilities have been the laggards of the current act, but have seen their relative strength lines turn higher recently.  For the former, this recent uptick has broken the past year’s downtrend. Granted, the same trends are still very much in place for the other two defensives: Consumer Staples and Health Care.  Click here to view Bespoke’s premium membership options for our best research available.

Our Earnings Explorer tool allows users to track every single earnings report throughout earnings season to find individual stock opportunities or identify broader macro trends through our summary analysis.  The tool contains data on more than 155,000 individual quarterly earnings reports from stocks dating back to 2002!  There are countless ways for a user to filter and analyze the data to find what they’re looking for.  It’s a must-try product that you can access with a two-week free trial to Bespoke Institutional.

Using our Earnings Explorer, we found that 417 companies had reported earnings since the current reporting period began on January 11th.  As shown in the snapshot from the tool below, 84% of these companies beat bottom-line analyst EPS estimates, while 77% beat top-line sales estimates.  In terms of guidance, 14% of companies have raised forward guidance while just 2% have lowered guidance.

What has been notable about this earnings season is the price action that stocks are seeing after they report their quarterly numbers.  On average, stocks that have reported have gained 0.41% at their first open of trading after their earnings release.  This means stocks are initially reacting positively to the earnings news.  From the open to the close of trading after the initial gap higher, though, stocks that have reported have averaged a decline of 1.67%.  Combining the opening gap and the open to close move, the average full one-day change for stocks reporting earnings stands at -1.28% this season.  That’s a pretty bad number that’s indicative of a “sell the news” reaction.

The snapshot below also shows the stocks that have reacted the most positively to their earnings reports so far this season.  Pot-stock company Aphria (APHA) has seen the best reaction of any company to report so far with a one-day gain of 21.1%.  As it stands now, Netflix (NFLX) has seen the second-best reaction to earnings with its one-day gain of 16.85% on January 20th (it reported after the close on 1/19).

There have been ten stocks that have dropped more than 10% on their earnings reaction days this season, and we list them below.  The three biggest losers have been software company Agilysis (AGYS), Pitney Bowes (PBI), and Harley Davidson (HOG).  To use our Earnings Explorer tool and access everything else Bespoke’s research platform has to offer, start a two-week trial to Bespoke Institutional today.