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“Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.” – Mark Zuckerberg

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

After three days of gains, a fourth doesn’t look likely today. The largest drag this morning is Meta Platforms (META) which is down over 15% after the company announced that Q2 revenues would be at the low end of prior forecasts and that expenses would rise more than expected. META isn’t in the Dow, so it’s not to blame for the 300+ point decline in those futures, but a 4% decline in shares of Caterpillar (CAT) and a 9% drop in shares of IBM are making their presence felt.

Besides the slew of earnings reports last night and this morning, we also have a lot of economic data to contend with. At 8:30, Q1 GDP, Personal Consumption, Core PCE, Wholesale Inventories, and Jobless Claims were all released. While jobless claims were better than expected, GDP came in weaker than expected (1.6% vs 2.5% estimate) but inflation readings were higher than expected, and that was followed by another leg lower in the futures. At 10 AM, the latest update on Pending Home Sales will be released followed by the 11 AM report on manufacturing from the KC Fed.

When it comes to breaking things, one thing Mark Zuckerberg has broken more than a few times is his company’s stock price. Based on where the stock is trading today, the market cap of META is on pace to decline by more than $100 billion for the third time in 2018 and the second time since the start of 2022. While all but a small number of companies in the world could only dream of reaching a market cap of $100 billion, META loses that much money in market cap about once every other year! That’s not to say that shareholders are upset with these declines- at least they shouldn’t be. Shareholders are feeling a bit bruised this morning, but from the start of 2018 through yesterday’s close, META’s stock is up 180% which is just about double the gain in the S&P 500. That margin of outperformance is narrower this morning, but there’s still a wide gap.

The chart below shows the one-day change in market cap in reaction to META earnings reports since the start of 2018. As mentioned above, today’s decline will be the third time that the company lost $100 billion in market cap in a single day. That includes the largest ever one-day decline for any US stock ($232 billion) in February 2022 (according to Investopedia). Besides the big one-day declines, META also owns the bragging rights to the second-largest ever single-day increase in market cap (according to Bloomberg) when it saw its market cap increase by $197 billion this past February. The only company ever to see a larger one-day increase in market cap was Nvidia (NVDA) when it added $277 billion also in February.

In pre-market trading, shares of META are around $423 per share which is down sharply from its recent highs, and also right in the middle of its gap from February.  To fill that gap, META would have to trade down an additional 3%.

Given its enormous market cap, META’s decline is contributing to a decline of nearly 1% in the Nasdaq 100 this morning. That would only take the ETF back to a level it was trading at on Monday, and the next level of support doesn’t come into play until about $412, or about 2.5% below current levels. With stocks like Alphabet (GOOGL) and Microsoft (MSFT) due to report earnings after the close today, we should find out soon if those support levels will come into play.

Continue reading today’s Morning Lineup.

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“Any product that needs a manual to work is broken.” – Elon Musk

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Equities are looking to make it three in a row, but skeptics aren’t holding their breath just yet.  Driving the gains this morning is Tesla (TSLA), which is up more than 11% in reaction to what pundits have called a “terrible” report. The report was so terrible that this morning’s gap higher at the open will be the largest since October 2019.  Whether that’s a reflection of what the pundits know or just how oversold the stock was heading into the report, we’ll leave it for you to decide. The economic calendar is quiet this morning with Durable Goods at 8:30 being the only report. Tomorrow will be a lot busier, though, so enjoy the calm while it lasts.  The pace of earnings has been busy and will only get busier after the close when we’ll hear from Chipotle (CMG), Ford (F), IBM, Meta (META), and ServiceNow (NOW) to name a few.

A two-day rally of 2% may not sound that impressive based on how the market traded from November to March but compared to what we have seen so far in Q2, we aren’t turning our noses up on it.  While the S&P 500 has rallied over 2% so far this week, on an equal-weighted basis, it’s up just 1.70%.  Below we summarize the performance of individual stocks by sector.  Not surprisingly, Technology stocks have experienced the most upside with an average gain of 2.50%, and right behind, stocks in the Health Care and Consumer Discretionary sector have seen average gains of over 2%.  The only other sectors that have experienced better than average returns are Industrials (1.97%) and Real Estate (1.95%).  To the downside, Materials is the only sector where the average stock is lower (-0.58%), but every other sector has averaged gains of at least 1%.

Continue reading today’s Morning Lineup.

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“You speak an infinite deal of nothing.”– William Shakespeare

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

If you missed yesterday’s segment on CNBC’s Overtime, check it out here.

Some of the positive tone from yesterday’s gain has followed through to this morning as equity futures are modestly higher and gold and oil both continue to give up ground.  Yields are higher, so we couldn’t quite get the trifecta, but two out of three isn’t bad. Earnings reports have finally taken the spotlight, and this morning’s results have been positive with encouraging reports from General Motors (GM) and UPS. After the close, we’ll hear from Tesla (TSLA), Texas Instruments, and Visa (V). On the economic calendar, today’s reports include S&P PMIs for the Manufacturing and Services sector, New Home Sales, and the Richmond Fed reports.

A lot of the noise coming from the market is ultimately meaningless, but investors crave to find a cause for every effect.  Analysts have blamed everything from the tax deadline to geopolitics, higher rates, or an overbought market.  The fact that gold and the dollar – two of the biggest haven assets – both rallied throughout much of the decline suggests that geo-political concerns could have been a large factor. If, as gold’s price suggests, these anxieties are easing, it could bode well for future market performance.

Whatever the cause, 5% pullbacks in the stock market are incredibly ordinary. Since WWII, there have been 230 different periods where the S&P 500 declined 5% or more on a closing basis without a gain of 5% in between. That works out to once every four months, and besides the one we’re dealing with now (so far), every one of them has been followed by a new high. Some new highs took longer than others to achieve, but eventually, the market got there.

Yesterday was an interesting day for the market. The S&P 500 opened higher, quickly sold off in the morning, gave up nearly all its early gains, and then rallied into early afternoon only to drift lower into the close.  For a nervous investor watching every tick, the emotional swings probably went something like the comments in the chart below.

We have no idea whether Friday’s close was the low point of this month’s decline, but what we can tell you is that yesterday’s intraday pattern is very common and the type of action you often see as the market is coming out of a low point in the decline. Going back over the last 30 years, we looked at the intraday performance of the S&P 500 tracking ETF (SPY) on the first trading day after the closing low of each of the 106-prior 5%+ S&P 500 declines.  On a median basis, SPY has gapped up 0.58% at the open, but at some point, the market tended to dip and shake out the weak hands. At the intraday low, SPY’s median decline was 0.18% versus the prior day’s close, but it tended to finish the day with a median gain of 1.75%.  Even though that first trading day after a closing low was positive, the median decline at the close from the intraday high was 0.36%. In other words, roller coaster patterns like Monday’s intraday chart frequently follow a market low.

Continue reading today’s Morning Lineup.

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“The people who were trying to make this world worse are not taking the day off. Why should I?” – Bob Marley

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Can we finally get an up day today? Equity futures are higher this morning, but as the last week has shown, that means nothing. There’s not much of a catalyst for the rally this morning, besides the market reaching short-term oversold levels. The only economic report on the calendar is the Chicago Fed National Activity Index, and even though this week’s earnings calendar is jammed-packed, today is relatively quiet with Verizon (VZ) and Truist (TFC) being the only major reports so far. After the close, things will also be relatively quiet, but we will get reports from SAP (SAP), Nucor (NUE), Cleveland-Cliffs (CLF), and Ameriprise Financial (AMP).

The S&P 500 had its worst week in over a year (-3.05%), so you would think that pretty much everything was down on the week. That wasn’t the case, though. In the S&P 500, there were actually 179 stocks that finished higher on the week (35.8% of the index), and four of the eleven sector ETFs finished the week higher. Utilities (XLU) and Consumer Staples (XLP) were both up over 1%, Financials (XLF) were up nearly 1%, and Health Care (XLV) was marginally higher. Granted, these aren’t the leadership sectors that market rallies are made of, so you know it’s a tense environment whenever you see defensive sectors leading, but it does show that investors aren’t just exiting equities en masse.

On the downside, the big drag was Technology. With a drop of over 6%, the sector had its worst week since early November 2022 just as the sector was bottoming. Behind Technology, Consumer Discretionary (XLY) and Real Estate (XLRE) were both crushed with declines of over 3.5%.

Technology is the biggest sector in the market, and its chart has started to show signs of breaking down. After last Monday’s break below the 50-DMA, the sector hasn’t been able to come up for air since, and it’s now trading closer to its 200-DMA than its 50-DMA.  One potential silver lining is the fact that last Friday’s decline came to a close right at levels that coincide with the high before the late December peak that was followed by a brief but sharp pullback of nearly 5%.  For comparison, the current decline in the sector has been nearly twice that at roughly 9%.

Continue reading today’s Morning Lineup.

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