This morning the BEA released one of the worst GDP numbers in the modern history of the US economy. Total output fell 4.79% at annual rates, worse than the 4.0% decline (again, at annual rates) that economists had forecasted. That’s not as bad as the worst numbers from the financial crisis, but the details under the hood were qualitatively different. Instead of being led down by falling capital expenditures and gradually decelerating consumption, Q1 saw an outright collapse in services and durable goods spending with large but historically less remarkable declines in business spending. Services spending has been the steady Eddie of US growth for the better part of a century now: it’s never contributed more than an 82 bps headwind to total QoQ SAAR growth since World War 2. But in Q1 it was a 5% headwind, almost an order of magnitude more than its worst quarter in the global financial crisis. We outline the sobering numbers in more detail below.  Start a two-week free trial to Bespoke Institutional to access our Chart Scanner, custom screens, and much more.

This morning, we highlighted the recent performance of sector ETFs noting how Health Care has led the way higher rising the furthest above its 50-DMA.  Consumer Discretionary (XLY), Technology (XLK), Materials (XLB), Communication Services (XLC), and Consumer Staples (XLP) each had also risen above their 50-DMAs.  Given their outperformance, as shown in the table below, headed into today these were the sectors closest to their levels on the S&P 500’s last all time high on February 19th.  The Health Care ETF (XLV) actually headed into today less than 2% away from its 2/19 levels and XLP was also under 10% away.

Today, that performance was turned on its head as some of the sectors that have been playing catch up outperformed while those that have been the outperformers recently underperformed. Whereas it has typically been the strongest sector, Health Care (XLV) actually fell the most dropping ~2%.  On the other hand, Energy (XLE) rose over 2.1% and it even finally rose above its 50-DMA.  Other areas of strength today included Financials, Industrials, and Materials which all finished up over 1%.  Recent winners were the losers today while the recent laggards were today’s winners.  Start a two-week free trial to Bespoke Institutional to access our full range or research and interactive tools.

Over the past couple of weeks, as equities have mean reverted, the vast majority of S&P 500 stocks have moved out of oversold territory. In fact, today there are just two stocks that are oversold: Everest (RE) and Southwest Airlines (LUV).  Meanwhile, more and more stocks have gotten extended above their 50-DMAs.  At the moment, there are around 16% of stocks in the S&P 500 that are overbought.  That is certainly not a large amount of the index, but it is the most we have seen in some time now.

Taking a look across the stocks that are currently overbought, very few of them were those that had gotten hit the hardest from the February 19th peak to the March 23rd low.  In fact, of the 100 worst performing S&P 500 stocks in that period, there is only one that is overbought, Truist Financial (TFC), and there are only twelve (including TFC) that have retaken their 50-DMAs. Currently, the median distance from the 50-DMA of those 100 worst performers from 2/19 through 3/23 is 9.31% below their 50-DMA. In other words, the hardest hit stocks during the worst of the sell off have still yet to completely mean revert (more specifically, move back to their 50-day average).

As for the stocks that have mean reverted and are now looking a bit extended (at least 1 standard deviation above their 50-DMAs), most were of the better performing half of the S&P 500.  In the table below, we show the 40 names that were hit the hardest during the sell off from 2/19 through 3/23 out of the 77 S&P 500 stocks that are currently overbought.  While these are the worst hit of the currently overbought stocks, most of these were actually some of the strongest performers of the broader S&P 500 during the sell off though that does not mean they were totally immune from massive declines. For example, 17 of these stocks were in the top 100 best performers during the sell off. On the other hand, only three stocks, Truist Financial (TFC), Hologic (HOLX), and Humana (HUM) were in the bottom performing half of the index during the sell off.  The massive rebounds that these names have staged has led them to their current overbought levels.  Overall, due to the size of the massive declines in February and March, the hardest hit stocks in the S&P 500 have rallied considerably but have not yet reached overbought territory so much as even retaken their 50-DMAs.  That means that many of the least hard hit stocks are the ones that have first reached and are currently sitting in overbought territory. Start a two-week free trial to Bespoke Institutional to access our full range of research and much more.

It hasn’t been talked about much but the Nasdaq 100 (QQQ) remains up on a year-to-date basis with a 2020 gain so far of 1.62%.  Below is a snapshot of QQQ and other major US index ETFs run through our Trend Analyzer tool that’s available to Bespoke Premium and Bespoke Institutional members.  Note that all but two of these index ETFs have now moved back above their 50-day moving averages, which often acts as a key support/resistance level.  The Nasdaq 100 (QQQ) is the farthest above its 50-DMA at +6.81%, followed by the S&P 100 (OEF) and the three main S&P 500 ETFs (IVV, SPY, VOO).  The Total Stock Market ETF (VTI) is 2.8% above its 50-DMA, while the mid-cap ETFs like IWR, IJH, and MDY are all just slightly above their 50-DMAs.  While the Micro-Cap ETF (IWC) is above its 50-DMA, the two main small-cap ETFs (IWM, IJR) are the ones that remain slightly below.  Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.

Below is a snapshot of the main S&P 500 sector ETFs from our Trend Analyzer tool.  While almost all of the broad US index ETFs are back above their 50-DMAs, only six of eleven of the sector ETFs have re-taken them.  The Health Care sector (XLV) is the farthest above its 50-DMA at +9.42%, and Health Care is the only sector that is now trading in overbought territory.  It’s also the only sector that’s up year-to-date, similar to QQQ.  Consumer Discretionary (XLY), Technology (XLK), Materials (XLB), Communication Services (XLC), and Consumer Staples (XLP) are the other five sectors above their 50-DMAs.

On the downside, the Energy sector (XLE) is no longer the farthest below its 50-DMA; that title now belongs to Financials (XLF) which is 3.73% below.  The Industrials sector (XLI) is 2.9% below its 50-DMA, followed by Energy (XLE) at -1.38% and Utilities (XLU) at -0.80%.

While Health Care is up on the year, three sectors — Energy, Industrials, and Financials — are still down more than 20% year-to-date.  Gain access to our Trend Analyzer tool and our daily investment research with a two-week free trial to Bespoke Premium.