The fifth and final regional Fed index for November came out of the Lone Star State today. The index was expected to show expansionary, but decelerating activity in the month of November. The results were just that as the headline number fell from 19.8 in October down to 12 which was a bit weaker than the expected decline to 14.3. Although a slower rate of growth, activity has continued to expand and the index still at some of the highest levels of the past two years.

Similar to the other manufacturing reports from the other districts released this month, under the hood things were pretty mixed.  All but one index (Finished Good Inventories) has continued to be consistent with further growth, but more than half of those indices declined this month, That means activity has generally continued to expand, but at a slower pace than last month. For some components like New Orders and Production, the deceleration was significant while employment metrics held up better.

In November, New Orders continued to grow as the index remained positive at 7.2. While that is still indicative of overall growth in new orders, it also marks a significant deceleration from October when the reading was 19.9.  Given this, the index for New Orders Growth Rate likewise fell to 9.7 from 14.3.

The indices for Capacity Utilization and Production saw even more dramatic declines.  The month over month declines for both indices were in the respective bottom 2.5% of all monthly changes. With Capacity Utilization at 6.9 and Production at 7.2, this month’s readings were still indicative of the district’s firms increasing output for six months in a row.

Even though production overall has continued to pick up, inventories continue to decline at a rapid pace.  The index for Finished Good Inventories fell sharply this month, dropping from -1.9 to -14.7.  Outside of August’s low of -17.3, that is the lowest level since January of 2010.

As inventories drawdown at one of the most rapid paces of the past decade, lead times have risen.  The index for Delivery Time bounced back in November after a decline in October.  At 12.2, the index is now at the highest level since the summer of 2018. That is also nearly in the top 5% of all readings in the survey’s history. Click here to view Bespoke’s premium membership options for our best research available.

We’ve become conditioned over the last couple of years to look to the mega-cap stocks of Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOGL), and Facebook (FB) to not only top the list of largest stocks, but also the best performers.  The month of November has been a different story, though.  Through Friday, the S&P 500 was up an impressive 11.3% on the month, but the equal-weight index (which weights each stock the same) was up a much more impressive 15.4%. Going back to 1990, this November’s performance of the S&P 500 Equal-Weight Index ranks as the second-best of the last thirty years only trailing the 18.6% gain in April 2009.

In addition to being one of the best months for the S&P 500 Equal Weight Index in terms of absolute performance, this month is also on pace to be one of the best months for the index relative to the market-cap weighted index as well.  At the current level of 4.13 percentage points (chart below), this November will be the best performance for the Equal Weight Index relative to the Market Cap Weighted index since April 2009.  Besides April 2009, which was just after the lows of the Financial Crisis, the only other months where the performance gap was wider were in five months spanning April 1999 through May 2003.

In terms of top-performing S&P 500 stocks this month, there have been a lot of winners.  In the entire index, only 40 stocks are down month to date, and only nine of those are down more than 5%.  The table below lists the 27 stocks in the S&P 500 that have rallied more than 40% so far this month.  The top six stocks listed, as well as a number of others, come from the Energy sectors.  Besides beaten-down stocks from the Energy sector, most of the stocks listed come from other sectors, like cruises, air travel, and lodging that have been battered by the pandemic. Five stocks you won’t find on the list, though, are the FAAMG stocks mentioned above.  While all five stocks are in the black for the month, none of them are even up 10%.  Slackers.

One last observation is that even after gaining at least 40% in November, 25 of the 27 stocks listed below are all still down YTD, and most of them by a lot.  The only two stocks that are now positive YTD are Albermarle (ALB) and DISH Network (DISH).  Even after taking into account this month’s gains, the average YTD change of the 27 stocks listed is a decline of 32.1%.  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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Regulation

Coinbase Will Suspend All Margin Trading Tomorrow, Citing CFTC Guidance by Nikhilesh De (Coindesk)

Thanks to new CFTC guidance that limits the ability of exchanges to liquidate crypto holdings on margin calls, one of the largest exchanges is shutting down margin trading. [Link]

Illegal Tampering by Diesel Pickup Owners Is Worsening Pollution, E.P.A. Says by Coral Davenport (NYT)

Off-the-shelf devices marketed as improving performance in pick-up trucks have been creating massive amounts of pollution by altering settings on truck engines to bring them out of compliance with EPA regulations. [Link; soft paywall]

COVID Changes

People are working longer hours during the pandemic (The Economist)

Evidence is mounting that all the time saved by working from home instead of commuting during the pandemic has been eaten up by more time working. [Link]

The extra mile: how Covid-19 transformed exercise by Laura Noonan (FT)

People seeking any possible escape from the drudgery of the pandemic – and being locked into repetitive routines – have led to a revolution in the way they engage in fitness. [Link; paywall]

Innovation

Microsoft’s Creepy New ‘Productivity Score’ Gamifies Workplace Surveillance by Alyse Stanley (Gizmodo)

Microsoft has built a dense suite of surveillance and reporting tools into newer versions of its ubiquitous workplace software, prompting concerns that the company will be directing how workplaces evolve in addition to attacking employees’ privacy. [Link]

From Culinary Dud To Stud: How Dutch Plant Breeders Built Our Brussels Sprouts Boom by Dan Charles (NPR)

It’s not just your imagination: brussels sprouts used to be much worse. Selective breeding efforts in the 1990s led to the modern delectable crunch of greenery. [Link]

Citations

CDC director cites this website to back in-school learning. Its designer calls that ‘bananas’ by Maggie Fox (CNN)

An unofficial tracker for COVID infections in schools is being cited by policymakers. The only problem? It creator has backpedaled sharply, suggesting that the data is not meant for the sort of analysis it is being used for. [Link]

Development

Pushed by Pandemic, Amazon Goes on a Hiring Spree Without Equal by Karen Weise (NYT)

Amazon has added almost half a million workers in less than a year, roughly 50% of the company’s total global workforce. [Link; soft paywall]

10 new skyscrapers about to transform the Toronto skyline by Tanya Mok (blogTO)

Don’t look now, but Canada’s largest city is getting a lot taller. A series of extremely high buildings are starting to take shape, and will fundamentally alter the huge city’s skyline. [Link]

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Have a great weekend!

For most of the past year, one significant trend on a sector by sector basis has been the outperformance of sectors like Technology and Consumer Discretionary.  The relative strength lines of these sectors have consistently shown outperformance versus the rest of the S&P 500 as a whole, but since August, other sectors have begun to take the wheel.  As we noted in today’s Sector Snapshot, just about every sector has had a banner month in November with some of the biggest month to date rallies of the past 30 years, but some sectors have seen much larger returns than others.  One of the best examples of this has been Energy which has risen over 35% in November. Similarly, Financials has risen an astounding 19.5% this month compared to more modest but still significant rallies of around 10% from Tech and Consumer Discretionary.  Given those large degrees of outperformance, the relative strength lines of Energy and Financials have taken a sharp turn higher in recent weeks.  Similarly, they have seen a turnaround in their weightings in the S&P 500 as shown in the charts below.

Over the past three months, the Financial sector has gained a full percentage point weighting while the Technology sector has lost 1.36 percentage points with a decline in weighting in three straight months.  For Financials, that is the largest gain in weighting in a three month span since January 2017. For Tech, outside of the reshuffling in 2018 that saw a large share of its weight change into Communication Services, the last time the sector lost this much or more in weighting in three months was November of 2008.  Prior to this recent string of losing weight over the past three months, Tech had seen weight gain in every month from October of last year through August. Even though the weight loss has been significant, it has only put a dent in the increased share of the entirety of the past year as the sector’s weight is only back down to where it was in May.

Similarly, looking at the other sectors, while Financials have added a full percentage point in share over the past few months, that follows nine months of declines running from last December through August.  That brings the sector’s weighting back above 10% in the S&P 500, but that is only at the highest level since March.  Similarly, Materials and Industrials have also seen their weights rise for three and four months in a row, respectively. As for Energy, the 0.44 percentage point gain in November is set to snap six straight months of declines; the longest such streak since at least 1990.  As with Financials, that turn around this month has only put a dent in the longer term trend of weight loss as Energy’s weighting is now only back to its highest level since July. Opposite of Energy, Consumer Discretionary is on pace to lose weight for the first time since March.  Click here to view Bespoke’s premium membership options for our best research available.