Daily Sector Snapshot — 10/12/20
Big Banks Reporting This Week
The third quarter earnings season begins this week with the first of the big banks set to report tomorrow morning. One feature of our Earnings Explorer tool is an interactive earnings calendar with detailed information on stocks set to report earnings in the days, weeks, and months ahead. Below is a snapshot of the calendar showing expected earnings reports through Wednesday morning. Notably, Citigroup (C) and JP Morgan (JPM) will report tomorrow morning, while Bank of America (BAC), Goldman Sachs (GS), and Wells Fargo (WFC) will report on Wednesday morning.
You can dig deeper into individual stocks with our Earnings Explorer tool to see their historical earnings reports and how investors reacted. Below we show aggregate earnings snapshots for both Citigroup (C) and JP Morgan (JPM), which report tomorrow ahead of the open.
Notably, the Q3 earnings release for Citigroup has seen the stock average a one-day gain of 0.87% in reaction to the news. That’s a better share price response than any other quarter. Following its historical Q4 earnings releases, for example, Citi shares have been very weak with an average one-day decline of 2.39%.
While Q3 earnings have been okay for Citigroup in terms of share price reaction, it has been the worst quarter of the year for JP Morgan (JPM) historically. Over the last 19 years, JPM has averaged a one-day decline of 0.73% on its Q3 earnings reaction day with positive returns just 26% of the time.
Bank of America (BAC) has the worst numbers of the five big banks reporting this week when it comes to share price reactions to earnings. As shown below, the stock has averaged a decline of 1.03% on its 76 earnings reaction days since 2001 with positive returns just 42% of the time. Goldman Sachs (GS) has also struggled on earnings historically with its share price rising in reaction to the news just 39% of the time. Goldman’s Q3 report, however, has been a bit more bullish with the stock averaging a one-day gain of 0.44% in reaction to past third quarter earnings releases. Finally, Wells Fargo (WFC) is also set to release Q3 earnings on Wednesday, and the stock has only gained in reaction to past Q3 releases 32% of the time. Try out our Earnings Explorer tool for free with a two-week trial to Bespoke Institutional.
Chart of the Day: AAPL Performance After iPhone Reveals
“Meet the Nasdaq”
Tim Russert used to sign off from each week’s episode of Meet the Press with the tagline, “If it’s Sunday, it’s Meet the Press.” Borrowing from that phrase, the Nasdaq’s tagline might as well be “If it’s Monday, it’s Meet the Nasdaq.” With a gain of over 3% today, the Nasdaq is doing what it always does on Mondays – rally! The chart below shows the year-to-date performance of the Nasdaq so far in 2020 as well as its performance if you only owned the index on Mondays. Year to date, the Nasdaq is up an impressive 32.7%, putting it on pace for the first back-to-back annual gain of over 30% since 1998 and 1999. Even crazier, though, is the fact that the Nasdaq is up over 20% year-to-date on Mondays alone! The weekday that most people love to hate has been responsible for more than 60% of this year’s Nasdaq gain.
In the table below we summarize the performance of the Nasdaq by weekday so far in 2020. Monday’s average daily gain of 0.57% with gains more than 75% of the time is both the best average daily return and the most consistent to the upside. Tuesdays and Wednesdays haven’t been particularly bad for the Nasdaq either. Both days have seen an average one-day gain of 0.30% or more, and Wednesday has been positive three-quarters of the time. While the first three trading days of the week have been strong, Thursday and Friday have been days to forget. Although both days have also experienced positive returns more than half of the time, the average one-day change for both is negative resulting in declines on a cumulative. Thursday has been the weakest with a cumulative decline of 11.53% while Friday’s cumulative decline has been more modest at just 3.46%. TGIM. Click here to view Bespoke’s premium membership options for our best research available.
Economic Data and Earnings In Earnest
Although a very busy news week made up for it, last week was uneventful on both the earnings and economic data front. In terms of earnings, only eight companies reported, and for economic data, as shown below, there weren’t even a dozen releases.
This week is another story. On the economic data front, there are more than two dozen releases crammed into Tuesday through Friday (there are no scheduled releases for today due to the Columbus Day holiday). Small business optimism will be the first release of the week early Tuesday morning. CPI will be out later in the day with PPI following up on Wednesday morning. Tuesday will also see manufacturing readings from the Philly and New York Fed, and we’ll get the usual Thursday weekly releases like jobless claims and Bloomberg Consumer Comfort. Friday closes out the week with retail sales, industrial production, University of Michigan sentiment, and TIC flows all on the docket.
Not only is economic data ramping up but so too are earnings. Whereas last week only saw 8 earnings reports, this week there are over ten times that number as earnings season kicks off with some of the big banks like Citi (C) and JPMorgan Chase (JPM) reporting. As shown in the snapshot from our Earnings Explorer below, the following three weeks will only see the number of companies reporting accelerate with peak earnings season in the first week of November. Click here to view Bespoke’s premium membership options for our best research available.
Air Passenger Traffic Achieves Upward Lift
With COVID case counts on the rise throughout the country, you would think that Americans would be a bit more concerned about getting on airplanes. Rather than hunker down, though, Americans have been increasingly spreading their wings. The latest passenger throughout numbers released by TSA showed that on Sunday 984,234 passengers went through security checkpoints at US airports. That was the highest single-day reading since March 16th. This weekend’s air passenger traffic also helped to push the 7-day average of traffic to new post-COVID highs. After rising and then falling back down after the Labor Day holiday, air passenger traffic has ‘surged’ in recent days to push the current 7-day average up to 819,384 passengers per day.
Air travel has been on the rise, but the term surge may be too strong. When we compare air passenger traffic levels to where they were a year ago, we’re still down over 65% on a 7-day average basis. Even yesterday’s strong passenger numbers were still down over 61% from their same levels last year. In other words, there’s still a lot of room for improvement! The chart below compares the y/y change in passenger throughput to the performance of the Airline ETF (JETS) since the start of the pandemic. Not surprisingly, there has been a pretty strong correlation between the two as increases in passenger traffic have been accompanied by rallies in the airlines and vice versa. Click here to view Bespoke’s premium membership options for our best research available.
Bespoke’s Morning Lineup – 10/12/20 – “Soft” Open
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.
“Do more of what works and less of what doesn’t.” – Steve Clark
Due to the Columbus Day holiday, it’s a quiet start to the week in terms of data related to earnings and the economy, but equities are poised for a very strong start anyways as tech stocks lead the rest of the market higher. More specifically, it’s the software sector that’s driving the rally this morning, and one catalyst for the gains is the $3.2 billion takeover of Segment by software darling Twilio (TWLO). While stocks of the acquiring company usually take a hit when a merger is announced, this morning TWLO is trading more than 5% higher to record highs, and that comes after already tripling this year!
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, market performance in the US and Europe, manufacturing in Japan, trends related to the COVID-19 outbreak, and much more.
On the topic of software, just last week the group looked to be starting to break out of a consolidation phase after underperforming the broader market since early September. Today’s rally should further the move out of congestion, but the group still enters the week trading down close to 5% from its prior high.
Bespoke
Bespoke Brunch Reads: 10/11/20
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.
While you’re here, join Bespoke Premium with a 30-day free trial!
Treatments
Eli Lilly says its monoclonal antibody cocktail is effective in treating Covid-19 by Matthew Herper (Stat News)
Internal numbers from Eli Lilly this week showed that its monoclonal antibody treatment reduced viral load over the 11 days after treatment, with 0.9% of recipients visiting the ER versus 5.8% for the placebo. This is extremely welcome news, and especially when combined with our next link’s news. [Link]
Remdesivir for the Treatment of Covid-19 — Final Report by John H. Beigel, Kay M. Tomashek, Lori E. Dodd, Ph.D., Aneesh K. Mehta, Barry S. Zingman, Andre C. Kalil, Elizabeth Hohmann, Helen Y. Chu, Annie Luetkemeyer, Susan Kline, Diego Lopez de Castilla, Robert W. Finberg, et al.
The second piece of good treatment news this week was this New England Journal of Medicine study which showed impressive positive effects from remdesivir. Recipients had a median recovery time of 10 days versus 15 days for placebo, with mortality of 6.7% versus 11.9% for placebo after 15 days. [Link]
Investing
Vatican used charity funds to bet on Hertz credit derivatives by Miles Johnson and Robert Smith (FT)
While the story is sensationalized (including the frankly hilarious observation that the Pope isn’t believed to have known anything about the investment) the details report a relatively generic credit exposure which paid out in full. [Link; paywall]
Fidelity Reviewed Which Investors Did Best And What They Found Was Hilarious by Myles Udland (Business Insider)
A throwback to 2014, but a good one: Fidelity data showed that customers which performed best were those who had forgotten that they had an account with the broker. [Link]
Quis custodiet ipsos cynicis?
AIER Hosts Top Epidemiologists, Authors of the Great Barrington Declaration by AIER
An argument that the most deaths of any year in American history should have unleashed more fatalities in order to satisfy arcane cost-benefit calculations. [Link]
Schools Aren’t Super-Spreaders by Emily Oster (The Atlantic)
Similarly to the Great Barrington Declaration, this analysis relies on an economist to argue that strategies designed to manage the epidemic which may create inconvenience are actually ineffective. [Link]
Using Google Trends to Predict U.S. Elections (Superhighway 98)
This analysis argues raw Google search counts are a perfect predictor of Presidential election outcomes; notably, it does not account for the fact that those searches are relatively ineffective at predicting popular vote outcomes. [Link]
Fiscal Policy
Fed Tenure Boosts Lael Brainard as Potential Biden Treasury Pick by Nick Timiraos (WSJ)
If Google search results are wrong and the President isn’t re-elected, a likely pick for Treasury will be Governor Brainard, who has been working diligently at the Federal Reserve on a range of priorities that might endear her to Democrats. [Link; paywall]
Travel
Half a Billion Trips Show China’s Economy Moving Past Covid (Bloomberg)
With almost zero COVID presence in the country of its origin, the Golden Week holiday unleashed almost half a billion domestic travelers to move around China. [Link; soft paywall, auto-playing video]
Aviation Outsider Builds Supersonic Jet for Transatlantic Flight by Ashlee Vance (Bloomberg)
A small aviation enthusiast has managed to build a supersonic jet prototype that has a realistic shot at becoming a commercial option for overseas flights around the world. [Link; soft paywall, auto-playing video]
Cruise ship dismantling booms in Turkey after pandemic scuttles sector by Bulent Usta (Reuters)
Ship-breakers in Turkey are stripping large numbers of cruise vessels into scrap and components that are sold on for recycled purposes in a range of industries. [Link]
Remote Work
Microsoft is letting more employees work from home permanently by Tom Warren (The Verge)
Even after it re-opens US offices, Microsoft employees will be permitted to work from home at least half the time, and managers will be able to approve full remote work. [Link]
Economic Research
A B.C. research project gave homeless people $7,500 each — the results were ‘beautifully surprising’ by Bridgette Watson (CBC)
A study in Vancouver tried giving houseless people cash with no strings. Recipients reduced spending on drugs, alcohol and cigarettes by 39%, managed to save an average of $1,000 12 months later, spend fewer days homeless, and moved into stable housing two months faster than the control group. [Link]
Old Stories
“Bruges fishermen can continue fishing in British waters after Brexit thanks to 1666 Charter” by Michaël Torfs (VRT)
A charter granted by English King Charles II dating back to 1666 is being used as precedent as the EU and UK square off over fishing rights. [Link]
How Mosquitoes Changed Everything by Brooke Jarvis (The NYer)
The long and deadly history of a pest that is typically an annoyance for modern Americans but historically felled empires and killed millions. [Link; soft paywall]
K-Shaped Recoveries
High-end retailers, posh eateries rebounding after COVID setback by Steve Cuozzo (NYP)
Despite the author’s efforts to paint the grimmest possible picture of pandemic New York, high-end retailers that don’t rely on middle class consumers are showing green shoots….for those who can afford it. [Link]
Terrorism
Plans to kidnap Whitmer, overthrow government spoiled, officials say by Robert Snell and Melissa Nann Burke (The Detroit News)
A heavily armed gang surveilled and planned to kidnap Michigan Governor Gretchen Whitmer this summer, according to communications included in a federal indictment this week. [Link]
Proprietary Data
A Corporate Sleuth Claims Squarepoint Capital Took Her Content. The Hedge Fund Is Threatening Action. What Actually Happened? by Richard Teitelbaum (Institutional Investor)
Widely-used financial research service Footnoted stopped operating, and the owner claims it was in large part out of concern that her data and algorithms had been stolen by a hedge fund masquerading as a customer. [Link]
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Have a great weekend!
The Bespoke Report – Go Big or Go Home
The market may abhor uncertainty, but even with an abundance of it, US equities had their best week in months. The health of the President, the progression of COVID, the ultimate outcome of the election, and the status of another round of stimulus are just a few of the issues facing investors right now, but this week the market was able to grin and bear it and push higher.
That wasn’t necessarily the case on Tuesday, though. What was looking like a good day for equities abruptly headed south after the President put the kibosh on hope for a stimulus deal when he tweeted that he had instructed “representatives to stop negotiating until after the election when, immediately after I win.” With that, the S&P 500 erased a 0.5% intraday gain and finished the day down over 1%. While the reversal was scary to watch, as we noted in our Morning Lineup on Wednesday, “while it’s often tempting to read into these types of late-day sell-offs as an early ‘tell’ for further market weakness, the summary results don’t bear that out.” By the close on Wednesday, the S&P 500 had erased all of Tuesday’s losses, only adding to those gains on Thursday and Friday.
Part of the reason for the recovery in equity prices was the fact that President Trump backtracked on his comments from Tuesday, and by Friday was tweeting and telling Rush Limbaugh that he wanted to “Go Big” with an even larger stimulus bill than the Democrats were proposing!
Where these stimulus talks end up is anyone’s guess, and we’re not sure anything even gets done, but there’s also a lot more to cover in the markets this week. We just published our weekly Bespoke Report newsletter, which covers all of the major events of the week, including the economy, sentiment, the Covid outbreak, key group performance, and the upcoming earnings season. To read the report and access everything else Bespoke’s research platform has to offer, start a two-week free trial to one of our three membership levels. You won’t be disappointed!
