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.

In the final weeks of January and carrying through to today, the US dollar has been in rally mode.  The Bloomberg Dollar index is now up 1.82% off the January 6th low having reclaimed its 50-DMA in the process.  With a higher low now in place, over the past couple of months the dollar has appeared to have formed an inverse head and shoulders pattern which is typically viewed as a bullish set-up.  As shown in the second chart below, this recent rally is also leading the dollar to test the downtrend line that has been in place since its high on March 23rd of last year.

In periods of dollar strength, companies with a higher share of revenues generated domestically stand to benefit while companies with heavy international revenue exposure are hurt.  In the past year, we have generally seen that play out. From the 2020 high for the dollar on March 23rd through the recent low early last month, Russell 1,000 stocks with heavy international exposure (those in our International Revenues database who generate less than half their revenues domestically) outperformed with an average gain on 109.44%. By comparison, stocks with 90% of more of their revenues generated domestically rose 97.11% in the same time frame.  Since the dollar low on January 6th, that has reversed.  Whereas the basket of internationals is flat since early January, domestics are up 1.56% on average.

For a bit more granularity, we broke the Russell 1,000 into deciles based on international revenues.  The tenth decile is made up of those stocks with the entirety of their revenues generated at home while the first decile is comprised of stocks with the highest share of international revenues.  Again, from the dollar’s high to low, internationals outperformed while the tenth and seventh deciles were the two worst performing.

As for the past few weeks, the only deciles to have declined have been deciles 2 and 3. While not in the red, the first decile of stocks with the highest share of international revenues have been laggards as well. On the other hand, stocks with higher shares of domestic revenues have generally done better.  Click here to view Bespoke’s premium membership options for our best research available.