In today’s Morning Lineup, we noted that 100% of S&P 500 Industry Groups are now above their 50-DMAs. But individual stocks have been equally as impressive in regards to their 50-DMAs.  As of yesterday’s close, 96.24% of S&P 500 stocks finished the day above their 50-DMAs.  Including yesterday, there have only been five days since 1990 that has seen as strong if not stronger readings.  All of those occurred in mid-February and early March of 1991. So it has been quite some time since the S&P 500 last had this many stocks trading above their 50-days.

Given the strong reading for the broader index, for the first time since March of 2016, there are four sectors with 100% of their stocks above their 50-DMAs: Communication Services, Energy, Industrials, and Materials.  Consumer Discretionary is also close at 98.41%.  Every other sector has at least 90% of their stocks above except for Utilities. Granted, it is by no means weak or far behind the rest of the pack with a reading of 89.29%.

The charts below from our Daily Sector Snapshot show the percentage of stocks above their 50-DMAs by sector over the last year.  For the sectors with 100% of their stocks currently above their 50-DMAs, it has understandably been a while since the last time they read 100%. For Communication Services, the current string of days with 100% of stocks above their 50-DMAs has been the first since September of 2018. For Energy and Industrials, this has been the first time since February of 2019 and for the Materials sector, the last time that 100% of stocks were above their 50-days was July of last year. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

While the US equity rally has been more “slow and steady” than “big and bold” in the last couple of weeks, credit markets have been flying. In the chart below we show the spreads on CDX HY, the index of high yield credit default swaps used as a reference for junk bond markets. As shown, the back half of May has been a very good period for high yield investors as spreads have run almost 200 bps tighter. They’re now at the tightest levels since the March blow-out in spreads as US equities plunged into the fastest bear market since the Depression. We covered high yield spreads in more detail in last night’s Closer report, which is available to Bespoke Institutional members.  Click here to start a two-week free trial.

Please click the image below to view our June 2020 market calendar.  This calendar includes the S&P 500’s average percentage change and average intraday chart pattern for each trading day during the upcoming month.  It also includes market holidays and options expiration dates plus the dates of key economic indicator releases.  Start a two-week free trial to one of Bespoke’s three research levels.

ISM’s monthly manufacturing report for the month of May was released this morning. For the first time since January, the headline manufacturing number was higher month over month, rising from 41.5 in April to 43.1 in May.  While that 1.6 point increase is an improvement, it’s still indicative of contractionary activity (anything below 50 is contractionary) as has been the case since the March report.  In other words, similar to what we have seen in the regional Fed reports, activity in May was still declining but not at as rapid of a pace as in April.

In addition to the headline index, most of the sub-indices also improved month over month in May albeit they are also still showing contractionary readings.  In fact, every index is still below 50 except for those of Supplier Deliveries and Inventories. Although those two are above 50, it is not necessarily a positive for broader activity as detailed below. Meanwhile, the only two indices that fell deeper into contractionary territory were those of Customer Inventories and Imports.

As we detailed last month, supply chains faced significant disruptions in April due to COVID-19 and that was reflected in the index for supplier deliveries which spiked to 76; its highest level since April of 1974. Higher readings for Supplier Deliveries indicates that delivery times are longer and lower readings indicate shorter delivery times. While May’s survey continues to show long delivery times, it did improve with the index falling 8 points to 68. That was the largest month over month decline for this index since an 8.2 point decline in October of 1981.

Business Inventories was the only other index to come in above 50 in May; reading 50.4.  That means business inventories expanded for the first time in a year (since May of 2019 when the the index was 51.4). ISM attributed that growth in inventories to businesses trying to get ahead of the aforementioned longer lead times in addition to all around weaker demand.

As previously mentioned, demand is understandably weak with New Orders coming in at 31.8.  That means nine of the last ten months have seen a contraction in New Orders with May being a fourth consecutive month.  That is despite the month over month pickup from 27.1 in April. The industries that are reporting growth in New Orders include Textile Mills, Nonmetallic Mineral products, Food, Beverage, and Tobacco, and Paper Products.

As a result of that weakness in demand in addition to issues with suppliers, the reading on Production also remains weak. Similar to New Orders, including this month there have been contractionary readings in eight of the last ten months. May marked a third consecutive month even with the 5.7 point month over month rise.  So again, things are still deteriorating but at a slower rate than in April. Of the previously mentioned industries that reported growth in New Orders, only Food, Beverage, and Tobacco, and Paper Products also reported growth in Production.  Additionally, the industries for Furniture and Wood Products also reported increased production.

Looking at the commentary section of this month’s report, it backs up some of the findings in the data and offers some other insights.  For example, one Transportation Equipment respondent reported that they have experienced “issues with suppliers that are affecting production.”  Interestingly, they also report that measures like social distancing are also having an impact while another respondent from the Machinery industry reported that they are evaluating the necessity of certain oversees operations.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

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 for 3 months for just $95 with our 2020 Annual Outlook special offer.

Restaurants

I’m a Chef in a Seaside Town. I’m Not an Epidemiologist. by Rob Anderson (The Atlantic)

Some insight into the huge challenges faced by entrepreneurs who are trying to balance what their customers demand (and that’s not the same for all customers) with the safety of their staff and values of their communities. [Link; soft paywall]

Le Pain Quotidien’s U.S. Restaurants File for Bankruptcy by Andrew Sucrria (WSJ)

Once ubiquitous in major cities, the American arm of Belgium’s bakery chain has filed for bankruptcy and plans to sell remaining assets for $3mm. [Link; paywall]

COVID Concerns

So Where Did the Virus Come From? by Matt Ridley (WSJ)

Slow pace of mutation in the SARs-CoV-2 virus is good news in terms of vaccine development, but raises uncomfortable questions about where the virus came from and why it isn’t behaving like other viruses; its attributes leave the door open to a human source even if definitive evidence for that scenario is lacking. [Link; paywall]

Is the “science” behind the lockdown any good? by Jemima Kelly (FTAV)

A detailed, nuanced, and thoughtful essay discussing the limitations of science, public health policy, and risk management of the COVID-19 outbreak. [Link; registration required]

Estimating the Effect of State-Level Stay-at-Home Orders by William J. Luther (SSRN)

While lockdowns and stay-at-home orders have been described as unnecessary and the source of economic pain, Google Mobility data shows individuals reduced activity before those policy measures and do little to explain changes in behavior. [Link]

China

Behind the Fall of China’s Luckin Coffee: a Network of Fake Buyers and a Fictitious Employee by Jing Yang (WSJ)

A deep dive into the fraudulent practices at Luckin Coffee which fueled massive growth and eventually the collapse in the stock with delisting pending. [Link; paywall]

Alibaba is looking for 100,000 influencers to help brands sell their goods by Ben Stevens (Charged)

A new subsidiary of the ubiquitous Chinese internet company is hoping to organize and systematize social media influencers into a formal advertising arm. [Link]

Social Studies

Weddings Are Off but Marriage Is On by Suzanne Kapner (WSJ)

It’s still not safe to hold large gatherings, but just because new marriages can’t start with a big party doesn’t mean couples across the country aren’t still tying the knot. [Link; paywall]

Pensacola Blue Wahoos List Stadium on Airbnb to Rent by Jenna West (SI)

The Minnesota Twins’ double-A affiliate Blue Wahoos are offering their stadium for rent on Airbnb as a way to raise revenue without games being played. [Link]

Vaccines

He experienced a severe reaction to Moderna’s Covid-19 vaccine candidate. He’s still a believer by Matthew Herper (STAT News)

A volunteer for the Moderna vaccine trial developed a fever, fainted, and had to be hospitalized after his adverse reaction, but he’s discussing his experience to shed insight into the process of finding the right dose to activate the immune system without risking the health of patients. [Link]

Profiles

The Remaking of Steve Buscemi by Gabriella Paiella (GQ)

A glorious rundown of the life, career, and artistry of beloved Park Slope resident and ubiquitous subject of the silver screen, Steve Buscemi. [Link]

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Have a great weekend!