Claims Tick Up Again

Initial Jobless Claims ticked up again this week after last week’s reading came down off of a recent high from the week prior.  Since late last year, jobless claims have been fairly volatile with the seasonally adjusted number swinging from its lowest levels since the 60s all the way up to the aforementioned high which broke a historically long streak of strong readings.  This week’s reading of 239K was a 4K increase from last week’s revised reading of 235K.  While the reading is not a new high, it is at the upper end of the range that we have seen in the last year.  Despite the uptick, this week’s data has maintained the streak of 206 weeks below 300K.  While still healthy, several weeks of these spikes could be a sign of some cooling in what has been a historically hot labor market.

The four-week moving average—a less volatile measure of this indicator—confirms this.  Over the past few months, claims by this measure bottomed out and have been consistently working their way upwards. This week’s 231.75K was the highest since the middle of January of last year.  Looking to next week, assuming the indicator does not once again fall to the bottom of the range it has been in, the low of 200K from mid-January will roll off of the average likely leading to a further increase.  While the horrible Retail Sales report for December is getting most of the attention, the uptick in the four-week moving average is more of a concern.

Unfortunately, the non-seasonally adjusted number does not provide much optimism either.  Claims by this measure came in at 242.3K, which for the current week of the year is the highest since 2017’s print.  As claims often have, this week is still well below the average for the current week of the year since 2000.  That average is 368.84K, placing this week’s data over 100K below the average.

Trend Analyzer – 2/14/19 – Double Digits All Around

After another push higher yesterday, major US index ETFs are all now firmly overbought.  Small and mid-caps are still the most overbought by a small margin as they continue to be the best performers with each one up over 1.5% over the past week while their peers have seen far more modest gains.  Turning to the YTD performance, things are a bit more cheery.  Currently, a majority of US index ETFs have now edged out double-digit gains on a year to date basis, and the ones that aren’t (DIA, IVV, OEF, and VOO) are very close to doing so.  Despite the rally since Christmas, each of these indices are still in long term downtrends and the timing is poor.  If the gains to start 2019 continue for a few more weeks, however, we’ll start to see these downtrends flip to sideways trends or even new uptrends.

Morning Lineup – Weak Economic Data

Futures had been drifting higher this morning, but a ton of economic data was just released and it wasn’t good.  PPI missed on the headline but was stronger than expected at the core.  Retail Sales for December were much weaker than expected, and Jobless Claims also came in considerably higher than expected.  Jobless Claims have now been steadily drifting higher with the four-week moving average reaching its highest level in over a year and leading to the question, have we seen the low in jobless claims?  Read all about overnight events around the world and this morning’s news in today’s Morning Lineup.

Bespoke Morning Lineup – 2/14/19

With all the strength we have seen in equities so far this year, it’s pretty amazing that there has been practically no movement in the long-end of the Treasury curve, as the 10-year yield remains below 2.7% this morning.  With little changes in long-term rates, the yield curve (the spread between the yield on the 10-year and 3-month US Treasuries) remains below 30 basis points and is actually flatter now than it was at the end of December.  As we have repeatedly mentioned in the past, though, flat yield curves aren’t necessarily a bad thing for US equity prices or a negative signal for the economy.  It isn’t until the curve inverts (and then starts to re-steepen) that you have to start raising your guard.

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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The Closer — Overbought Again, Federal Finances, CPI Solid — 2/13/19

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, as equities have continued to move higher, taking out the 200-DMA, we take a look at the various ways the S&P 500 is flashing overbought signals. Next, we recap today’s release of the December budget statement from the US Treasury. We finish with an update on CPI which showed a pick up in inflation in this morning’s release.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

Fixed Income Weekly – 2/13/19

Searching for ways to better understand the fixed income space or looking for actionable ideals in this asset class?  Bespoke’s Fixed Income Weekly provides an update on rates and credit every Wednesday.  We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week.  We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed income ETF performance, short-term interest rates including money market funds, and a trade idea.  We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1 year return profiles for a cross section of the fixed income world.

In this week’s report we discuss the recent decision by Santander to not call its CoCo bond.

Sample

Our Fixed Income Weekly helps investors stay on top of fixed income markets and gain new perspective on the developments in interest rates.  You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes free for the next two weeks!

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Update: Guidance Spread Can’t Find a Bottom

We continuously monitor a number of earnings-related indicators that up until recently were only available to us internally.  We have now made them available to Bespoke clients via our Interactive Tools section.  Bespoke Premium and Bespoke Institutional subscribers can visit our Earnings Explorer at any time to see up-to-date readings of these key indicators.  Start a two-week free trial to either membership level to access our Earnings Explorer now.

The first snapshot below is an updated look at the rolling 3-month beat rate for both EPS and revenues.  These readings show the percentage of companies that have beaten consensus EPS or revenue estimates over a rolling 3-month basis.  As shown, the earnings beat rate has been drifting lower recently after peaking in mid-2018.  Even after the declines, though, the current reading is still more than 4 points above the historical average.  The revenue beat rate peaked at the same time as the earnings beat rate in mid-2018, but it has fallen a lot more since then and is now just above its long-term average.  Top-line revenue numbers are much harder for companies to “manufacture” than bottom-line EPS, so we put more stock in the revenue beat rate than the EPS beat rate.

Our guidance spread measures the difference between the percentage of companies raising guidance and lowering guidance on a rolling 3-month basis.  As shown in the chart below, the guidance spread reading currently stands at -6.59, which means a lot more companies have lowered guidance than raised guidance over the last three months.  Similar to EPS and revenue beat rates, our guidance spread reading peaked in mid-2018 at a very high level of 10+.  At its peak, companies were as bullish on the future as they had been in nearly a decade going back to the early days of the post-Financial Crisis bull market.  Now the picture looks much different as companies can’t seem to lower guidance quickly enough.  We’ll be watching closely to see when this reading is ready to stop falling and begin to turn higher again.  As you can see in the chart, there is definitely an ebb and flow to it as companies collectively get either too optimistic or pessimistic.

As beat rates and guidance readings weakened in the 2nd half of 2018, we didn’t see a corresponding drop in the price reactions of stocks reporting earnings.  The chart below measures the median one-day price change that stocks reporting earnings are experiencing on a rolling 3-month basis.  This reading tells you how positively or negatively stocks are reacting to earnings reports.

As shown, earlier this earnings season, stock price reactions hit their highest level of the last five years.  We’ve seen a drop, over the last few weeks, however, which is something to keep an eye on as the broad market continues to chug along in 2019.

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Best and Worst Performing Stocks on Earnings

The Q4 2018 earnings reporting period is quickly approaching its end point with Wal-Mart’s (WMT) report scheduled for next Tuesday.  So far this season, the average stock that has reported has gained 0.61% on its earnings reaction day (the first trading day following its after-hours or pre-market release).

Below is a look at the stocks that have posted the strongest upside one-day returns in reaction to their earnings reports this season.  At the top of the list is cloud customer service software company eGain (EGAN), which nearly doubled (+47.7%) back on February 8th after it beat both EPS and revenue estimates.  EGAN shareholders certainly went home happy that night since you don’t see one-day gains of 50% very often!

Coty (COTY) — which was mentioned positively by Bill Miller at the start of the month — ranks second on the list with a one-day gain of 32.15% after it reported before the open on February 8th.  And toy-maker Mattel (MAT) has posted the 3rd strongest gain on earnings at +23.22%.

Other notables on the list of big winners this earnings season include semiconductor company Advanced Micro (AMD), flower-delivery company 1-800-FLOWERS (FLWS), shoe-maker Skechers (SKX), and Mueller Industries (MLI) — not to be confused with THAT Mueller.

Looking at S&P 500 stocks specifically, Coty (COTY), Mattel (MAT), Hanesbrands (HBI), Advanced Micro (AMD) and Xilinx (XLNX) ranks as the top five, while other companies on the list you’re certainly familiar with include General Electric (GE), Estee Lauder (EL), Chipotle (CMG), Facebook (FB), Goldman Sachs (GS), IBM, and Bank of America (BAC).

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While there’s a long list of earnings season winners, there have also been plenty of big losers.  Below we show the 40 worst performing stocks in reaction to their earnings reports this season.  Whereas eGain (EGAN) gained nearly 50% in reaction to earnings, wireless security camera maker Arlo Technologies (ARLO) fell nearly 50% following its report on February 5th.  Other notables on the list of losers include Tupperware (TUP), The Container Store (TCS), QuinStreet (QNST), Stanley Black & Decker (SWK), Take Two Interactive (TTWO), and Electronic Arts (EA).  Ironically, EA fell 13% following earnings back on February 5th, but it has exploded higher to recover all of its earnings losses and then some after its new Fortnite competitor — Apex — registered 10 million users in its first 72 hours.

Bespoke’s Global Macro Dashboard — 2/13/19

Bespoke’s Global Macro Dashboard is a high-level summary of 22 major economies from around the world.  For each country, we provide charts of local equity market prices, relative performance versus global equities, price to earnings ratios, dividend yields, economic growth, unemployment, retail sales and industrial production growth, inflation, money supply, spot FX performance versus the dollar, policy rate, and ten year local government bond yield interest rates.  The report is intended as a tool for both reference and idea generation.  It’s clients’ first stop for basic background info on how a given economy is performing, and what issues are driving the narrative for that economy.  The dashboard helps you get up to speed on and keep track of the basics for the most important economies around the world, informing starting points for further research and risk management.  It’s published weekly every Wednesday at the Bespoke Institutional membership level.

You can access our Global Macro Dashboard by starting a 14-day free trial to Bespoke Institutional now!

Morning Lineup – Optimism on Trade and a Truce in DC

Lawmakers in DC have reportedly come to an agreement on keeping the government open, and the President has agreed to go along with it.  Can you believe it?? Elsewhere overnight, there is some optimism on US-China trade talks, while economic data in Europe continues to stink up the joint. Read all about overnight events and this morning’s news in today’s Morning Lineup.

Bespoke Morning Lineup – 2/13/19

Yesterday was a pretty momentous day for the stock market.  Not only did the S&P 500 close back above its 200-DMA (barely), but the percentage of stocks hitting new highs also reached its highest point since December 3rd, before the big whoosh lower.  With the rally, though, the percentage of stocks that are short-term overbought has reached its highest level since January 26th of last year.  That by no means suggests we are due for a repeat of what happened following that last reading, but does indicate that short-term technicals are getting a bit stretched and that the market may need to pause and catch its breath.

 

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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The Closer — 200 Day Reclaimed, Job Openings Insane, Consumer Credit Explained — 2/12/19

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Looking for deeper insight on markets?  In tonight’s Closer sent to Bespoke Institutional clients, as the S&P 500 finally closed above its 200-DMA, we show the returns following similar periods where the index spent several weeks below its average.  In addition to returns, we look at how breadth has held up in those same periods as today was the highest percentage of net new highs since early December. Next, we provide an updated look at December’s JOLTS report from the BLS which continues to show a very strong labor market.  After that, we turn our attention to the NY Fed’s quarterly release of consumer credit data which showed continued growth in debt to record levels. We delve in depth into this credit data to get a read on the health of consumer credit.

See today’s post-market Closer and everything else Bespoke publishes by starting a 14-day free trial to Bespoke Institutional today!

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