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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Smartphones are driving Americans to distraction (The Economist)
After sharp declines from the mid-2000s to the mid-2010s, road deaths have started to rise again with smartphones and the distracted driving they create a prime culprit. [Link; soft paywall]
New Research Confirms That Ride-Hailing Companies Are Causing a Tonne of Traffic Congestion by Bryan Menegus (Gizmodo)
Ostensibly, ride-sharing could reduce the number of cars on the road by improving utilization rates, but the new demand for transportation they create could also be driving an increase in the number of vehicles on the road. New research suggests it’s the latter. [Link]
Tech Tracker: Burger King to deliver to L.A. motorists stuck in traffic by Nancy Luna (Nation’s Restaurant News)
Hungry but stuck in traffic? Burger King initially tested delivery of fast food to drivers stuck in traffic via motorcycle in Mexico City, and is now bringing the service to Los Angelenos. [Link]
The Spectacular Implosion of Dr. Cho’s ‘Nefarious Network’ by Sheridan Prasso and Benjamin Robertson (Bloomberg)
A shadowy network of entities controlled by a Hong Kong doctor has come crashing down, giving rare insight into the hidden world of stock manipulation in the city’s equity markets. [Link; soft paywall]
Boeing MAX: A Tale of Two Crashes by Mariano Zafra, Robert Wall, Elliot Bentley, and Merrill Sherman (WSJ)
A remarkable and beautifully executed visualization of the crashes caused by faulty software included in the Boeing 737-MAX planes which killed hundreds of people. [Link; paywall]
‘Kisse myne arse’: Doctor’s notes reveal bizarre medical cases from 400 years ago by Leslie Katz (CNET)
Doctors’ notes from 17th century England were recently digitized and put online for the review of the public and are full of amusing anecdotes from the various patients. [Link]
Blow up: how half a tonne of cocaine transformed the life of an island by Matthew Bremner (The Guardian)
The story of a drug smuggling operation gone awry and the sudden arrival of a tidal wave of pure cocaine in a small island in the Azores, and how it wreaked havoc on the locals. [Link]
When Mike Bezos came to America by Neal Karlinsky (Amazon)
How the father of Amazon CEO Jeff Bezos ended up in the United States after the Cuban Revolution. [Link]
SAT to Give Students ‘Adversity Score’ to Capture Social and Economic Background by Douglas Belkin (WSJ)
The SAT is a gateway to elite educational institutions in the United States, and its administrator (the College Board) is trying to level its playing field and remove the effects of bias from results. [Link; paywall]
‘I Don’t Want to See Him Fail’: A Firm Takes a Chance on Ex-Inmates by Ruth Simon (WSJ)
A tight labor market is creating opportunity for released inmates, but those opportunities create difficult situations for employers who are invested in both human beings they employee and the businesses they run. [Link; paywall]
The Best Ideas Are the Ones That Make the Least Sense by Rory Sutherland (Entrepreneur)
A catalogue of some of the most ridiculous – but profitable – exercises in marketing that consumers have ever been offered. [Link]
NBA Is the Real Loser After Failing to Send Zion to New York or L.A. by Scott Soshnick (Bloomberg)
Huge media markets in New York and Los Angeles had a shot to land the unique talent of Duke freshman Zion Williamson, but the out-of-the-way New Orleans Pelicans were the ones to land the number one pick. [Link; soft paywall]
Louisiana Unveils Ambitious Plan to Help People Get Out of the Way of Climate Change by Christopher Flavelle and Mira Rojanasakul (Bloomberg)
Southern Louisiana is sinking, forcing the state to plan for a future where the sea gradually forces residents out of its path. [Link; soft paywall]
Multinationals, Offshoring and the Decline of U.S. Manufacturing by Christoph E. Boehm, Aaron Flaaen, and Nitya Pandalai-Nayar (NBER)
A new set of research suggests that multinational firms have been an especially potent force for job losses via offshoring in the US manufacturing sector. [Link]
How the Promise of a $120 Billion Uber I.P.O. Evaporated by Mike Isaac, Michael J. d la Merced, and Andrew Ross Sorkin (NYT)
An inside line on how Uber went from an estimated $120bn worth to a bit more than half of that in public markets post-IPO. [Link; soft paywall]
Uber CEO to employees: Our stock could still be the next Facebook or Amazon by Brian Sozzi (Yahoo!)
After the largest decline in dollar value for any IPO in the US since the 1970s, Uber management sought to shore up internal morale with a letter begging employees to keep the faith. [Link; auto-playing video]
Podcast Growth Is Popping in the U.S., Survey Shows by Jaclyn Peiser (NYT)
Edison Research reported that one in three people in the United States listen to a podcast at least once per month, strong growth versus one in four last year as the audio format gains steam. [Link; soft paywall]
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Have a great weekend!
Stocks started the week poorly but found excuses to rally midweek, just not enough to get all the way up to breakeven since last Friday. Global economic data continued to look mostly soggy, though not across the board. There was a lot of US data this week, but also important releases from China, Japan, and the Eurozone that we discuss in detail. We also take a look at recent earnings in Europe which have exceeded expectations modestly.
One piece of positive economic data we focus on in the week’s report is the ratio of Leading to Coincident indicators published each month by the Conference Board. As shown below, the ratio is rising again after bottoming out in January. While not at a new high, its behavior is looking distinctly different from the typical pre-recession backdrop. Ahead of recessions, the ratio plunges very consistently, a marked difference to the current sideways range. We discuss further in the report.
In this week’s report, we analyze earnings results, global economic data, commodity and foreign exchange price movements, market sentiment, and more to give you the inside track on what’s driving the market at all-time highs. We cover everything you need to know as an investor in this week’s Bespoke Report newsletter. To read the Bespoke 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!
Looking for deeper insight on global markets and economics? In tonight’s Closer sent to Bespoke clients, we recap weekly price action in major asset classes, update economic surprise index data for major economies, chart the weekly Commitment of Traders report from the CFTC, and provide our normal nightly update on ETF performance, volume and price movers, and the Bespoke Market Timing Model. We also take a look at the trend in various developed market FX markets.
The Closer is one of our most popular reports, and you can sign up for a free trial below to see it!
See tonight’s Closer by starting a two-week free trial to Bespoke Institutional now!
Similar to equity price action, the first half of the week was a bit rough but things finished on much more solid ground for economic data. Small business optimism kicked things off on Monday stronger than both expectations and March’s reading, coming in at 103.5. Other Monday releases weren’t as lucky as they broadly came in weaker. Export and import price inflation worsened in April and mortgage delinquencies rose. Fortunately, foreclosures fell 3 basis points down to 0.92%. Empire Manufacturing started Wednesday with a bang coming in at 17.8, more than double estimates of 8.0. But it wasn’t all good as retail figures for the month of April were weaker across the board and Industrial and Manufacturing Production fell 0.5% alongside weaker Capacity Utilization. Things turned much more positive on Thursday, though, as every release beat expectations. Claims were stronger, the Philly Fed crushed estimates, and Housing Starts and Permits both rose while also beating forecasts. On Friday, Michigan Confidence rose to 102.4 versus expectations of staying at 97.2, ending the week on a very high note. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.
Turning to next week, it will be a light data slate with only 14 releases all week. The Chicago Fed releases their National Activity Index Monday morning; the only release that day. Similarly, Existing Home Sales is the sole release Tuesday. Meeting Minutes for the May 1st FOMC meeting will be out Wednesday afternoon. In addition to the standard weekly releases, we will get preliminary Markit PMIs, New Home Sales, and the Kansas City Fed’s Manufacturing Activity Index on Thursday. Preliminary Durable goods for April rounds things off on Friday with weaker data anticipated.
In a post last Friday, we noted that based on our Stock Seasonality tool, the S&P 500 was entering what has historically been its weakest seven-day stretch of the calendar year. That’s right, over the last ten years, the S&P 500 has been down in the one week period from the close on 5/10 through 5/17 by a median of 1.78% with declines eight out of ten times. The image below is from the post last Friday and shows how in the one-week period, our gauge of performance for the S&P 500 was all the way down to zero, meaning it doesn’t get any worse than that! When the market opened on Monday morning it was looking like another mid-May week from hell as the S&P 500 gapped down sharply on trade fears. In a pretty impressive turnaround, though, bulls clawed their way back and the S&P 500 was only down modestly on the week as of Friday afternoon.
So now that we have gotten through ‘hell week’ for the market, what can we expect next week? Below we show the updated gauges for the S&P 500’s historical performance over the next week, month, and three months (from the close on 5/17). While the week of 5/10 through 5/17 has typically been horrible, the week that follows has historically been slightly above average with the S&P 500 posting a median gain of 0.37%, which ranks in the 55th percentile of all 7-day periods throughout the year. Looking further out than a week, returns improve from there. The S&P 500’s median return one month after the close on 5/17 is a gain of 1.84% (71st percentile), and the median three-month return is a gain of 3.86%, which is better than 75% of all other one week periods throughout the calendar year. Now, if you want to find the stocks that have historically performed best during this period of the year, head on over to the Stock Seasonality tool for more info. If you are not currently a Bespoke Premium client, start a two-week free trial today for immediate access.
We’ve just published a B.I.G. Tips report that provides a full summary of the just-completed earnings season along with the newest edition of our Top Triple Plays. This season we identified 22 earnings triple plays that have attractive price charts right now.
What is a triple play? When a stock reports quarterly earnings, it registers a “triple play” when it beats analyst EPS estimates, beats analyst revenue estimates, and raises forward guidance. We coined the term back in the mid-2000s, and you can read more about it at Investopedia.com. We consider triple plays to be the cream of the crop of earnings season, and we’re constantly finding new long-term buy opportunities from this basket of names each quarter. You can track the newest earnings triple plays on a daily basis at our Triple Plays page if you’re a Bespoke Premium or Bespoke Institutional member. To read our newest report and see the triple plays that we think look the best right now, start a two-week free trial to Bespoke Premium!
After a strong slate of economic data on Thursday, today’s data continued the positive trend with a much stronger than expected sentiment report from the University of Michigan where the headline index came in at its highest level since January 2004. While economists were forecasting the index to come in at a level of 97.2, the actual reading was much stronger at 102.4. That beat relative to expectations was the biggest since October 2017. The big driver of this month’s strength was the fact that the expectations component surged 8.6 points to 96.0 from 87.4. Over the last few years, the expectations component of the UMich Sentiment report has tried unsuccessfully to break above 90, but this month it blew right through that level to the highest levels of the current economic cycle.
Not only did the expectations component make new highs relative to the last few years, but it’s also at levels not seen in over 15 years. The fact that this index is making new highs is an encouraging one as it indicates confidence about the future, and with the number of Americans feeling like they are living ‘paycheck to paycheck‘ at multi-year lows, how can you blame them?
The one head-scratcher? It’s a bit counter-intuitive to see consumer sentiment and the probability of rate cuts from the FOMC so high at the same time! Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.
Futures are indicating a lower close for equities to end the week, and a big reason for that decline is the latest earnings report from Deere (DE). In addition to missing EPS forecasts by 11 cents (3.52 vs 3.63), DE also lowered guidance. The company summed up the factors affecting its impact with the statement that, “Ongoing concerns about export market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases.” Trade and weather.
In other earnings news, Nvidia (NVDA) is trading modestly lower after initially seeing a very positive reaction to earnings in after-hours trading on Thursday, while Applied Materials (AMAT) is trading higher after a strong report. Finally, Pinterest (PINS) is down over 17% in the pre-market after reporting a wider than expected loss and lowering guidance in its first earnings report as a public company. Rule #1 for IPOs, for at least your first earnings report as a public company, it’s a good idea to manage street expectations well enough so that you don’t come in weaker.
We’ve just published today’s Morning Lineup featuring all the news and market indicators you need to know ahead of the trading day.
The term ‘stock-picker’s market’ has become a bit of a cliche in stock market conversation, but looking at where sectors are currently trading relative to their trading ranges shows that the term is especially applicable right now. While the S&P 500 is essentially right at its 50-day moving average, sectors are pretty much evenly split between trading above and below that level. At the extremes, Consumer Staples is the only overbought sector while Energy is the lone sector in oversold territory.
Start a two-week free trial to Bespoke Premium to see today’s full Morning Lineup report. You’ll receive it in your inbox each morning an hour before the open to get your trading day started.
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Looking for deeper insight on markets? In tonight’s Closer sent to Bespoke Institutional clients, we show equities ripping out of their short term downtrend as the S&P 500 also took out its 50-DMA. We also provide the performance of similar times this has happened. We also highlight concerns around commodities before turning to economic data, taking a look under the hood at housing starts and permits in addition to Cass Freight volumes. We finish tonight with an update of our Five Fed Manufacturing Composite.
See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!
Our Chart Scanner Tool has become an incredibly popular and useful tool for clients as it gives a user the ability to quickly scan through hundreds of charts in order to find the most attractive (or unattractive) patterns. Included with the tool are a number of pre-defined screens that allow users to see stocks that hit 52-week highs or lows in the previous session or experienced “death” or “golden” crosses.
A Golden Cross occurs when a stock’s upwardly sloping 50-day moving average (DMA) crosses above its 200-DMA, which also has to be rising. Conversely, a Death Cross occurs when a downwardly sloping 50-DMA crosses below the 200-DMA, which also has to be moving lower. Technicians consider Golden Cross formations to be a positive signal, while a Death Cross is considered to be negative. Although it is valuable to look at Golden and Death Cross formations, as we have pointed out in the past, it is not always a reliable pattern and does not always serve as a good buy or sell signal. Today, we wanted to highlight recent examples of each formation and show how they performed going forward
As an example of a Golden Cross, below we highlight Generac Holdings (GNRC) which saw a Golden Cross yesterday. GNRC makes home generators and has seen steady growth as concerns over the reliability of the power grid have increased in recent years. Over the last ten years, GNRC has shown consistently positive returns in the three month period following its four prior golden crosses. As you can see below, the stock’s average three-month return has been a gain of 10.13% (median: 11.38%).
On the negative side, below we highlight the price chart of the iShares MSCI Turkey ETF (TUR) from 2009 to 2019. Turkey has been a country in turmoil in recent years, and prior death crosses in TUR have played out as the formation suggests. In the three prior death crosses for the ETF, the stock has declined over the following three months for an average decline of 11.31% (median: -4.63%).Our Chart Scanner tool is indispensable for any investor who likes to follow charts. To receive access, start a two-week free trial to Bespoke Institutional for full access.