Friday
Jan232015

EPS So-So, Sales Strong; Largest Companies Reporting Next Week

Since earnings season began on January 12th, 179 companies have reported their quarterly numbers.  That's a small number, but we're still able to get an early read on the percentage of companies that are beating consensus earnings and revenue estimates.  As shown below, the earnings beat rate (bottom line) this season currently stands at 60%, while the revenue beat rate (top line) stands at 60.1%.  As you can see in the chart, compared to prior quarters over the past few years, the current earnings beat rate is somewhat mediocre, but the revenue beat rate is relatively strong.  Investors like to see strong top line numbers because they're less easy for companies to fudge, so it's a positive sign that revenues have held up well so far this season.

As mentioned above, just 179 companies have reported so far this season.  Next week alone more than 450 companies are set to report, so by next Friday, we'll really have a lot of data to get a good measure of this quarter's results.

Below is a list of the largest companies set to report their quarterly numbers next week.  For each stock, we include its expected report date and time (AM or PM), its current consensus earnings estimate, and it historical earnings, revenue and guidance beat rates.  We also include its average one-day change on its past report dates going back to 2001 using our Interactive Earnings Report Database that's available to Bespoke Institutional subscribers.  Also, if you're simply looking for an earnings calendar that lists all of the companies set to report between now and the end of February, we provide one with our Bespoke Premium service.

Next week, we'll get big Technology sector reports from Microsoft (MSFT) on Monday, Apple (AAPL) on Tuesday, Facebook (FB) on Wednesday, and Alibaba (BABA), Google (GOOGL) and Amazon (AMZN) on Thursday.  We'll also hear from UTX, 3M (MMM), Caterpillar (CAT), Amgen (AMGN), Boeing (BA), Biogen (BIIB), Visa (V), MasterCard (MA) and Chevron (CVX).  Needless to say, it's a big week for earnings.

Thursday
Jan222015

Back in Uptrend Mode

Markets have decided to head higher over the past few days after struggling for the past couple of weeks.  Since trading down to two standard deviations below its 50-day moving average (bottom of green zone in chart below) earlier this month, the S&P 500 has moved back above its 50-day moving average.  The market's long-term uptrend remains intact.

As shown below, last week at this time, the S&P 500 and five of ten sectors were in oversold territory.  As of this afternoon, the S&P 500 is neutral and three of ten sectors are overbought.  Additionally, the S&P 500 and seven of ten sectors are back above their 50-day moving averages.

Below is a look at sector breadth levels using the percentage of stocks in each sector that are above their 50-day moving averages.  As shown, 57.8% of S&P 500 stocks are currently above their 50-days.  Six of ten sectors have readings better than this, with Utilities and Consumer Staples (two defensive sectors) leading the way with readings in the 80s.  Health Care ranks third at 79.2%, and then we see a big drop down to 58.6% for the Materials sector.  Industrials, Technology and Consumer Discretionary have readings right around market levels, while Financials, Telecom and Energy have readings to the downside.  Energy still has the worst breadth reading with just 16.3% of stocks above their 50-days.

Subscribe to Bespoke Premium to view our weekly Sector Snapshot report, with in-depth sector analysis and commentary.

Thursday
Jan222015

Bespoke CNBC Appearance (1/22/15)

Bespoke's Paul Hickey appeared on CNBC's Fast Money yesterday to dicuss last week's report from Bespoke on the implications of the yield on the S&P 500 relative to the yield on the 10-year US Treasury. To view the clip, please click on the image below. To gain access to the report, and everything else Bespoke has to offer, sign up for a free Bespoke subscription trial today.

Thursday
Jan222015

Countdown To Liftoff: Fed Funds Futures Ignore ECB

Despite the ECB unveiling a huge 1.08 trillion EUR (60 billion EUR per month for 18 months) bond buying program today, Fed Fund futures are mostly unchanged, predicting an interest rate hike from the Federal Reserve next November.  Based on the assumption that the hike will take place at a meeting with a press conference, this suggests a hike takes place either in September or December, with December being more likely.

Thursday
Jan222015

Crude Oil Inventories See Monster Increase

While this week's inventory report was delayed by a day due to Monday's holiday, the number crunchers at the Department of Energy may have needed an extra day just to count it all.  While traders were expecting inventories to increase by 2.7 million barrels, the actual increase was nearly four times that at 10.071 million barrels.  That is just a huge number for one week and is the largest weekly increase since March 2001, and the 16th largest weekly increase since 1983.  For the current week of the year, US crude oil inventories are higher than any year since at least 1983.  The next closest year was 2013, when total crude oil inventories were 363.1 million barrels, or 9% below the current level of 397.9 million barrels.

Thursday
Jan222015

Jobless Claims Disappoint Again

Jobless claims for the latest week came in higher than expected once again, coming in at a level of 307K versus estimates of 300K.  This marks the third straight week that jobless claims have been above 300K, which hasn't happened since last July.  While Consumer Confidence may be hitting multi-year highs, jobless claims have been slowly creeping higher.

With three straight weekly readings above 300K, the four-week moving average of jobless claims is also back above 300K.  The last time we saw the four-week moving average higher than it is now was just after Labor Day.

While the seasonally adjusted readings for claims were weaker than expected, non-seasonally adjusted (NSA) claims continue to hold up well.  In this week's report, NSA claims dropped 149K from 530K down to 381K.  For the current week of the year, this is the lowest reading since 2007 and more than 100K below the average of 491K for the current week since 2000.

Thursday
Jan222015

Market Takes its Toll on Bullish Sentiment

It seems that all of the weakness and volatility in equities so far this year is finally taking its toll on the sentiment of individual investors.  According to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment dropped from 46.11% down to 37.1%.  That 9 percentage point drop took bullish sentiment down to its lowest level since 10/2 and back below the bull market average of 38.8%.

While bulls are starting to scatter, the bears are slowly coming out of their caves.  In this week's survey, bearish sentiment rose by 9.6 percentage points to 30.8% from 21.25%.  This was the highest reading since last October's equity market lows, and was the largest one week increase since January 2014.  From a contrarian perspective, it is nice to see a little nervousness on the part of investors instead of complacency.

Wednesday
Jan212015

Phillip Morris (PM) vs. Altria Group (MO) Continues to Track the Dollar

Here at Bespoke, we've been harping on the dollar's impact on stock performance since we launched back in 2007.  In fact, the very first report that we published when we launched Bespoke covered this topic.  Simply put, US companies that generate a large portion of their revenues outside of the US do better in a "falling dollar" environment, while US companies that generate a large portion of their revenues domestically do better in a "rising dollar" environment.  

Annual members of our Bespoke Premium service and all members of our Bespoke Institutional service have access to our International Revenues Database.  This database provides users with a breakdown of domestic versus international revenues for all companies in the Russell 1,000 and S&P 500.  If you expect the Dollar to remain strong, you would look for "domestic" stocks in the database.  If you expect the Dollar to retreat from multi-year highs, you would look for "international" stocks in the database.

The best example we can use to highlight how this trend plays out is to compare the performance of Altria Group (MO) and Philip Morris International (PM).  Back in 2008, Altria Group (the old Philip Morris) broke its domestic and international operations into two different entities.  The two new companies now trade as Altria Group (MO) and Philip Morris International (PM).  All of Altria's (MO) revenues are generated domestically here in the US, while all of Philip Morris International's revenues are generated outside of the US.

Take a look at the performance of Altria Group (MO) and Philip Morris International (PM) since the start of 2013 in the chart below.  The performance disparity is glaring.  Altria Group -- the domestic unit -- is up 71.4%, while Philip Morris Int'l -- the international unit -- is flat as a pancake (up 0.1%).

Now look at the way the US Dollar index has traded alongside the two over the same time period.  Since the US Dollar began its huge run higher in 2014, MO (domestic) has skyrocketed, while PM has flat-lined.

The performance disparity between MO and PM has caused PM's dividend yield to move nearly 100 basis points higher than the dividend yield of MO.  Right now, PM is yielding 4.8%, while MO has a yield of 3.86%.  As shown in the chart below, MO's yield was higher than PM's up until just recently, when MO began rising sharply in price.  

Below is a chart that shows the spread between the yield of PM and the yield of MO (PM's yield minus MO's yield).  We have overlaid the US Dollar index onto the chart so you can compare the movements once again.  As shown, the spread actually pre-empted the move higher in the Dollar by about six months.  As long as the Dollar is heading higher, the "domestics" from our International Revenues Database should continue to outperform the "internationals".  If you start to see the "internationals" like PM start to outperform, it's probably a sign that the uphill climb for the Dollar is running out of steam.

Interested in accessing the Bespoke International Revenues Database?  Become an annual Bespoke Premium or Bespoke Institutional member today!

Wednesday
Jan212015

Gas Prices Nearing $2 Per Gallon

Gas prices have picked up in 2015 right where they left off in 2014, and so far this year the national average price of a gallon of gas has declined every day.  That makes it a total of 118 days where prices at the pump have declined.  According to AAA, the last day where the national average price of a gallon of gas increased was in late September of last year, and currently the price stands at $2.05.  Over this stretch, prices have declined 39%.  While this streak is longer than the losing streak we saw in 2008, the magnitude of the decline has not been nearly as steep.  In that decline, the average price of a gallon of gas fell 57%.

Wednesday
Jan212015

Bespoke's ECB Preview

Tomorrow, ECB President Mario Draghi is expected to unleash a round of sovereign bond purchases totalling 50 billion EUR per month through 2016.  Regardless of whether the ECB QE program that sent risk markets higher today is actually implemented, Bespoke Premium subscribers know there's a longer game underway.  Below, we show the implied volatility spreads (one month minus three month, six month, and twelve month) for the EURUSD currency pair.  The dramatically higher implied volatilities for the short-term imply expectations of a large move in the currency tomorrow following ECB. 

The above chart is taken from our report sent to Premium and Institutional subscribers earlier today highlighting opportunities around the ECB decision, along with a full review of the economic picture in Europe.  Regardless of how the ECB comes down tomorrow, Bespoke offers ways to play it, with trade ideas to help capture several themes we've identified.  Subscribers can find the full report here.  If you're interested in accessing but don't currently subscribe, you can do so by signing up for a free trial over at Bespoke Premium.

Tuesday
Jan202015

Dollar Index Still Flying

Below is a one-year chart of the US Dollar Index, highlighting the near-parabolic move it has experienced since it lifted off in mid-2014.  The Dollar Index has been trading in "overbought" territory (greater than one standard deviation above its 50-DMA) for a couple of months now, and it hasn't even come close to touching its 50-day moving average since it last broke above it last July.  At the moment, the Dollar is more than two standard deviations above its 50-day.  It has had some run.

Take a look at the long-term chart of the Dollar Index.  It looks a lot different than the upward trending chart above. The 30.46% move the Dollar has experienced during its current run doesn't look nearly as impressive when taken from this perspective.  One thing that Dollar bulls have to like, though, is its recent breakout above the top of its multi-decade downtrend channel.  This trend break occurred when the index moved above 87 (it's currently at 93), which traders will now look to as a key support level.  

The Dollar's average level since 1967 based on daily closing prices stands at 97.17.  The Index needs to rally 4.3% from here to reach that average, and it needs to rally 7.5% to top the triple-digit mark once again for the first time since April 11th, 2003.  

Tuesday
Jan202015

Bespoke Market Poll: Still Bullish

Since the start of the year, we've seen investors remain bullish even in a rough market.  Up until recently, investors would head for the hills any time the market ran into trouble, but that hasn't been the case so far this year.  Contrarians would argue that this is not good news for the market.

This weekend, our Bespoke Market Poll results showed a continuation of the "bullish in the face of market weakness" trend.  While bullish sentiment ticked down one point, it still remains well above the 50% threshold.  We still haven't seen a bullish reading below 50% since the end of September 2014.

Tuesday
Jan202015

Countdown To Liftoff Mostly Unchanged

Bespoke's "Countdown To Liftoff" indicator was introduced last week, and it provides our current estimate for the length of time until the Fed hikes rates.  After getting close to 11 months following last week's poor economic data, it has started to drift back down under 10.  The decline we saw over the weekend may in part be related to yesterday's WSJ article that suggested the Fed remains on course to hike rates this year despite falling yields on long-term treasuries.

For an explaination of Bespoke's Countdown To Liftoff, please see our previous post.

Tuesday
Jan202015

NAHB Home Builder Sentiment Declines

Home builder sentiment in the month of January saw a modest decline in January falling to 57 from December's upwardly revised level of 58.  With economists collectively looking for a reading of 58 in the headline index, today's report was slightly weaker than expected.  The table to the right lists the breakdown of this month's report by category and region.  As shown, there was widespread (although not huge) weakness in this month's report.  While Present Sales was flat, Future Sales and Traffic were both down (see charts below).

On a regional basis, sentiment weakened everywhere but in the Midwest, where we saw the sentiment index rebound back up to 60.  Out west, though, sentiment dropped by nine points from last month's post-recession high of 74.  Even though the declines in this month's headline reading were minimal, it turned what was an already weak market for the sector even weaker.

Friday
Jan162015

S&P 500 Higher or Lower from Here?

The S&P 500 saw a nice move higher on Friday, but the index closed lower on the week.  So which way will the market head from here?  Please take part in our Bespoke Market Poll below by letting us know whether you think the S&P 500 will be higher or lower one month from now.  We'll report back with the results on Tuesday before the open.  Thanks for participating, and have a great weekend!

Will the S&P 500 be higher or lower than its current level one month from now?
Higher
Lower
  
Free polls from Pollhost.com

Wondering what to make of this market over the long weekend?  Sign up for a 5-day free trial to our Bespoke Premium service and view our just-published Bespoke Report newsletter.  It's 42 pages packed with data and analysis that Bespoke readers have come to love.  If you follow the markets, our weekly report is a "can't miss".