Thursday
Oct232014

Jobless Claims Rise From 14 Year Low

Jobless claims rose by 17K in the latest week, but given we were coming off a print last week that was the lowest in more than 14 years, it's hard to get much better.  For the latest week, the level of claims came in at 283K, which was slightly higher than the consensus expectation of 281K.

In spite of this week's increase, the four-week moving average declined by 3K down to 281K.  This is also the lowest level for this indicator in more than 14 years (June 2000).  Given the fact that the size of the US population has increased by over 10% since then makes this number even more impressive.

On a non-seasonally adjusted basis (NSA), jobless claims fell by 18K down to 255.5K.  For the current week of the year, this is the lowest level since at least 2000, and 85K below the historical average of 339.9K for the current week of the year dating back to 2000.

Wednesday
Oct222014

EPS Strong; Revenues Weak

Just over 300 companies (around 15% of all companies) have reported earnings so far this season, giving us enough data to go ahead and take a look at the earnings and revenue beat rates for the quarter.  So far this season, 64.9% of companies have beaten bottom-line consensus analyst earnings estimates, while just 49.3% of companies have beaten top-line revenue estimates.  As shown in the charts below, the earnings beat rate looks strong compared to past quarters during this bull market, while the revenue beat rate looks very weak.

Investors would rather see top-line revenue numbers come in stronger than bottom-line earnings numbers, because revenue numbers are more difficult for companies to work around.  So far this earnings season, the opposite has occurred.

Below is a list of the companies that have seen the biggest price jumps on their earnings report days so far this season.  (For companies that report before the open, we look at that day's change.  For companies that report after the close, we look at the next day's change.)

As shown, Unisys (UIS) currently ranks first with a one-day gain of 22.03% in reaction to its report.  Healthstream (HSTM) ranks second with a gain of 21.75%, followed by Ruby Tuesday (RT) at 15.2%, iRobot (IRBT) at 13.38%, and Six Flags (SIX) at 12.78%.

E2open (EOPN) has been the worst performing stock on earnings this season with a one-day drop of 33.08%.  ARC Group (ARCW) ranks second worst with a decline of 24.35%, and then Netflix (NFLX) ranks third worst at -19.37%.  Netflix has been by far the worst performing S&P 500 stock this earnings season.  As a heavily owned stock, Netflix (NFLX) put a hurting on plenty of investors when it reported on the 15th.  IBM is another notable on the list with its one-day decline of 7.11% on Monday.  Chipotle (CMG) and Biogen (BIIB) are two other notables on the list of earnings losers.

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Tuesday
Oct212014

Asset Class Performance Since the October 15th Short-Term Low

Below is a look at how various asset classes (using tradeable ETFs) have performed since stocks put in a short-term bottom on October 15th.  For each ETF, we also include its performance so far this month and year.

As shown, US equities have surged off the 10/15 lows, while international markets have seen a more subdued gain.  The Nasdaq 100 (QQQ) and midcaps (IJH) have bounced the most, while sectors like Energy (XLE), Materials (XLB) and Health Care (XLV) have outperformed.  Most sectors are still down for the month, while four of ten are down on the year (Cons. Discret., Energy, Industrials, Telecom).  

The rally in stocks has coincided with a drop in Treasuries, but for the month, fixed income ETFs are still up big.  And year-to-date, the 20+ Year Treasury ETF (TLT) is up the second most of any asset class on the list behind just India (INP).  Russia (RSX) is down the most year-to-date with a decline of 27.31%. 

Tuesday
Oct212014

Losers Bounce Back in a Big Way

The average stock in the Russell 1,000 fell 8.64% from September 18th through October 15th.  Since the close on the 15th, the average stock in the index has rallied back 4.95%.  

So which stocks have led the way higher?  Below we have broken up the Russell 1,000 into deciles (10 groups of 100 stocks each) based on performance (%) during the market sell-off from 9/18 to 10/15.  The "Best" decile contains the 100 stocks in the Russell 1,000 that did the best during the sell-off, while the "Worst" decile contains the 100 stocks in the index that did the worst during the sell-off.  For each decile, we highlight the average performance of its stocks since the 10/15 low.

As shown, the stocks that held up best during the sell-off are up an average of just 2.42% since 10/15, while the stocks in the decile of worst performers during the pullback are up an average of 8.30%!  There's a clear pattern in the chart -- the worse the stock did during the sell-off, the better it has done during the bounce.

Below is a list of the 40 stocks in the Russell 1,000 that are up the most since the current rally began on the 15th.  For each stock, we also highlight how it performed during the 9/18 to 10/15 sell-off, as well as its current distance from its 50-day moving average.

Monday
Oct202014

Heavily Shorted Stocks Bounce But Still Underperforming

When trying to get a feel for the market's overall tone, one indicator we track is the performance of the most heavily shorted stocks.  When these stocks rally and/or outperform the market, it is usually a sign that investors are more open to risk.  As a group, throughout most of 2013 and part of this year, the best performing stocks in the market were also the ones with the highest short interest as a percentage of float.  More recently, though, these stocks have been under notable selling pressure, indicating that investors were no longer willing to stomach the risk associated with these names.  In our regular update (Bespoke Premium subscription required) of short interest back on 9/11/14, we noted the weakness in stocks with high levels of short interest: "Just as we have pointed out in the past that the overall equity market typically performs well when the most heavily shorted stocks outperform the market, in the past when we have seen the most heavily shorted stocks underperform the market, it is not a great sign for the overall market."

Ever since the early September update, the performance of the most heavily shorted stocks has only gotten worse and the rest of the market has followed suit.  The chart below compares the performance of the 150 most heavily shorted stocks in the S&P 1500 to the 150 least heavily shorted stocks in the S&P 1500 (as a percentage of float) so far in 2014.  Each basket of stocks is equally weighted and changes with each semi-monthly update on short interest. 

Starting the year off with both indices at 100, the basket of most heavily shorted stocks ("hi-short") is down just about 10% YTD to 90.06.  Meanwhile, the basket of least heavily shorted stocks ("low-short) is up just under 2.5% on the year.  Looking at the chart, it is interesting to see that both baskets saw nearly identical performances up until Spring, which was right around the time the Russell 2000 peaked.  From that point, though, they began to diverge with the hi-shorts underperforming.  The underperformance of the hi-shorts steadily increased throughout the summer, but beginning in late September, the bottom really fell out of the hi-shorts.  At their lows last week, the hi-short basket was down over 14.5% on the year, while the low-shorts were down less than 1.5%.

As the overall market has bounced since Wednesday, we have seen the hi-shorts make up some of their lost ground, which is supportive of the rally, but going forward it is important for investors and traders alike to track how stocks with high short interest perform.  If the hi-shorts continue to outperform, Wednesday's panic sell-off will likely prove to be the low.  However, if we see the market continue to rally and the hi-shorts do not participate, it may be a good idea to take profits on any stocks you picked up in the sell-off.

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Monday
Oct202014

S&P 500 Sector Weightings; Wither Energy

Below is an updated look at sector weightings for the S&P 500.  As shown, Technology remains the largest sector of the market at 19.32% -- pretty much a fifth of the market.  The Financial sector is the second largest with a weighting of 16.41%, followed by Health Care at 13.89%.  Consumer Discretionary ranks fourth at 11.74%, Industrials is in fifth at 10.41%, and Consumer Staples is sixth at 9.80%.  The Energy sector currently has a weighting of 9.42%, which is down significantly this year.  The bottom three sectors make up just 9% of the index, so together they don't add up to Energy's weighting in seventh place.

Below is a look at how sector weightings have changed during the current bull market as well as so far in 2014.  Ironically, the two sectors that have seen their share of the market drop the most in 2014 are Consumer Discretionary and Energy -- two sectors that you wouldn't expect to move inline with each other.  Industrials has also seen its weighting drop this year, down 0.52 percentage points from 10.93% to 10.41%.

The three sectors that have seen their shares increase the most this year are the three largest sectors of the market -- Technology, Financials and Health Care.  So the "rich have gotten richer" in 2014.

During the current bull market, the Financial sector has seen the biggest increase in share gain at 7.83 percentage points.  It had dropped all the way down to 8.58% at the lows of the financial crisis after it was the largest sector of the market at the peak of the 2002-2007 bull cycle.  Consumer Staples and Energy have seen the biggest drop in share during the current bull, both giving up more than 4 percentage points of share.

Below are long-term charts of sector weightings for the S&P 500.  The red line represents the sector's average weighting going back to 1990.  This allows you to see which sectors are currently above or below their long-term averages.  

As shown, both Technology and Financials are back above their long-term averages, with Tech at nearly 4.5% above.  Health Care is also quite a bit above its average, while Consumer Staples and Industrials are well below.  Both Consumer Discretionary and Energy have now dropped below their average weightings after the rough patch they have experienced in 2014.

Monday
Oct202014

Looking for Action? S&P 1500 Most Volatile Stocks

For traders with a short-term time horizon who are looking for big moves over a short period, we have updated our list of the S&P 1500 stocks trading above $10 that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last 50 days).  The stocks are grouped based on whether they have a rising or falling 50-day moving average (DMA).  Stocks highlighted in gray are new to the list this month.

In prior updates on the most volatile stocks, we discussed how the dearth of volatility in the market was really compressing the intraday ranges of the most volatile stocks.  For example, just last month there were only three stocks in the S&P 1500 that had an average intraday range of more than 5%.  In the last month, though, we have seen the number of stocks with average intraday ranges of more than 5% swell to 11, so we are definitely seeing a pickup.  Topping the list this month are shares of Synergy Resources (SYRG), which have an average daily range of 6.3%.  Along with SYRG there are 18 other Energy sector stocks listed below, and all of them have falling 50-day moving averages.  After Energy, the two sectors with the second most number of stocks represented are Health Care and Technology, which both have eight.

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Monday
Oct202014

Investors Not Running Scared

Amid a big uptick in volatility and a sell-off of the likes not seen in a couple of years, you would have thought bullish sentiment would be heading south.  That's not the case, however.  Last Thursday's AAII (American Association of Individual Investors) number was the first sign that the sell-off wasn't impacting sentiment, and our weekend Bespoke Market Poll only confirmed it.  As shown below, bullish sentiment in our poll came in at 61% over the weekend, which was up 7 points week-over-week.  

Clearly investors are treating this sell-off as a buying opportunity.  Throughout this bull market going back to 2009, we have seen sentiment turn very negative on any signs of market weakness.  That's not happening so far this time around, which is worrisome if you're a contrarian. 

Friday
Oct172014

S&P 500 Higher or Lower from Here?

The S&P 500 had a wild week, but which way will it head from here?  Please take part in our weekly 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 Monday before the open.  Thanks for participating, and have a great weekend!

Interested in Bespoke's thoughts on the wild week and what's in store going forward?  Sign up for any of our subscription services and check out our just-published Bespoke Report newsletter.  It's packed with market stats and insights from our team of researchers here, and will help guide you through this crazy market.  Try out a 5-day free trial today, and get 10% off your membership cost by entering "bespokeinvest" in the coupon code section of our Subscribe page today.

Will the S&P 500 be higher or lower than its current level one month from now?
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Friday
Oct172014

Next Week's Key Earnings Reports

Next week earnings season kicks into full gear.  Below is a list of the 50 largest companies set to report next week, with key data included that's pulled from our Interactive Earnings Report Database -- available to Bespoke Institutional members.

For each stock shown below, we include the percentage of the time it has beaten earnings and revenue estimates going back to 2001, and we also include the percentage of the time it has raised guidance.  The "1-Day" column shows the average percentage change that the stock has experienced on its report days.  (For stocks that report in the morning, we look at that day's change.  For stocks that report after the close, we look at the next day's change.)  Finally, the last column farthest to the right highlights the average absolute change the stock has historically experienced on its report days.  This gives you an idea of the volatility the stock typically sees on its report day.  

On Monday, Apple (AAPL) and IBM are the big companies set to report after the close.  Tuesday morning we'll hear from Verizon (VZ), Coca-Cola (KO), United Tech (UTX) and McDonald's (MCD), and then VMware (VMW) and Yahoo! (YHOO) are set to report Tuesday after the close.

Boeing (BA), Biogen (BIIB) and Dow Chemical (DOW) will report Wednesday morning, while AT&T (T) is the only big company set to report Wednesday afternoon.  On Thursday morning, 3M (MMM), Caterpillar (CAT), Celgene (CELG) and General Motors (GM) will report, followed by Microsoft (MSFT) and Amazon.com (AMZN) on Thursday after the close.  Procter & Gamble (PG), UPS, Bristol Myers (BMY), and Ford (F) will round out the week on Friday morning.

Of the big stocks set to report next week, some of the more volatile names include Apple (AAPL), Yahoo! (YHOO), VMware (VMW) and Amazon.com (AMZN).  Apple has historically gained 1.39% on its report days, while stocks like CAT, LLY, GM and MCD have historically averaged declines.

Over at Bespoke Premium, we have a full calendar containing a list of all companies set to report between now and mid-November, with even more earnings-related data included.  The updated calendar was just sent out to Bespoke Premium members a couple of hours ago, so head on over to our Subscribe page to sign up for a 5-day free trial to get instant access.

Friday
Oct172014

Mixed Housing Data

Friday morning's release of Housing Starts and Building Permits for the month of September came in mixed with a slight beat (starts) and a slight miss (permits).  In the case of Housing Starts, economists were expecting a seasonally adjusted annualized rate (SAAR) of 1.008 million, but the actual reading came slightly better at 1.017 mln.  For Building Permits, the actual SAAR reading came in at 1.018 mln, which was slightly below the consensus expectation of 1.03 mln.

The table below breaks down Friday's report by type of units and on a regional basis.  While the headline reports were essentially in line with expectations, as has been the case for months now, the bulk of the strength came in multi-family units as opposed to single-family units.  In the case of Housing Starts, single-family units grew by just 1.1% month/month (m/m), while multi-family units saw an increase of 16.7%. For Building Permits we saw the same trend, with single-family units actually declining by 0.5% m/m and multi-family units rising by 4.8%.  

The charts below provide a great illustration of how multi-family units have been driving the growth in overall Housing Starts and Building Permits since the lows in 2009.  The charts on the left side show levels of Housing Starts (overall, single-family, and multi-family), and the charts on the right show Building Permits.  As you can see in the charts, both Housing Starts and Building Permits for single-family units are still more than a million below their pre-recession peaks, which accounts for practically all of the gap between current and pre-recession levels.  Multi-family units, therefore, are right back near their pre-recession levels.

Ideally, one would like to see more strength in single-family units as those tend to have more of an economic impact, so the divergence between the two is not optimal.  However, because of demographic (smaller size of household and more urbanization) and financial (affordability and tight credit conditions) factors there has been increased demand for multi-family and rental units.

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Thursday
Oct162014

Netflix (NFLX) -- How Much is Cost Really Impacting New Subscribers?

One of the reasons Netflix (NFLX) cited for its slightly weaker-than-expected subscriber growth was its recent $1 increase in the monthly subscription cost for the service.  Over at Bespoke Market Intelligence, we run a quarterly consumer survey on Netflix (NFLX) and other streaming media companies to track the sector, with extra attention paid to Netflix.  We just ran our most recent survey earlier this month, which is available for purchase if you're interested.  It's a must-read piece of research if you have a big position (either long or short) in Netflix.  Visit our "custom studies" page to learn how to purchase.

One of the many questions we ask consumers in our Netflix/streaming media survey is whether they "believe Netflix streaming would be a great deal at $8.99 per month".  Below are the results from both our June and October surveys.  The $1 price increase from $7.99 to $8.99 took place back in May, so the June survey was the first that ran after the price increase.  

As shown, there was no significant difference in opinion from June to October, and a large majority still either agree or strongly agree that $8.99 is a great deal.  Less than 10% disagree or strongly disagree that $8.99 is a great deal.

When we asked current Netflix subscribers about the value they get for their money, a large majority are either satisfied or very satisfied, with 35.9% answering "very satisfied".  Less than 5% of subscribers are either unsatisfied or very unsatisfied with Netflix's value.

Based on our survey analysis, we don't believe the $1 price increase has impacted subscriber growth to a significant degree.  In general, $8.99 is viewed as a great price for the service.

Last week, we published a "Pulse Point" on Netflix for Bespoke Consumer Pulse subscribers.  We are providing a free look at the report below as a way to show you the type of content that's included with a Pulse membership.  These Pulse Points are released throughout the month, in between our monthly Consumer Pulse Report, which makes up the backbone of the Pulse service.  To learn more about Pulse, please visit our website.  You can sign up for the service now for 30% off the life of your membership!  Simply enter "pulsecharter" in the coupon code section of the Pulse subscribe page to receive the discount.  Our next Consumer Pulse Report is due out at the end of October, one week before the early-November nonfarm payrolls release.  

 

 

Thursday
Oct162014

Philly Fed Exceeds Expectations

After a significantly weaker than expected Empire Manufacturing report on Wednesday, today's regional manufacturing report from the Philadelphia Fed showed a modest decline, but still managed to exceed expectations.  While economists were expecting a level of 19.8, the actual reading came in at 20.7, down from last month's level of 22.5. As shown in the chart, this indicator still remains near its highs of the recovery.

In terms of the breadth of this month's report, the results were mixed, but skewed towards the positive side.  Of the nine subcomponents, five increased and four declined.  Interestingly, while Thursday's jobless claims report showed the lowest weekly reading in 14 years, the two employment related components (Number of Employees and Average Workweek) of the report saw the biggest declines.  In the case of Average Workweek, that indicator actually went negative.  One of the side-effects of ObamaCare was that employers would cut back hours of employees in order to avoid having to offer coverage for their employees, and based on this and many of the other employer related indicators we track, this appears to be happening to a degree. 

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Thursday
Oct162014

Homebuilder Confidence Plunges

Sentiment for the home builders took a big dive in October, falling to its lowest level since July.  According to the National Association of Home Builders (NAHB), home builder sentiment dropped from 59 down to 54, compared to expectations of 59.  October's report ended a run of four straight months where the survey came in better than expected.

The table to the right breaks down this month's report by categories and region.  As shown, the internals of the report weren't pretty.  Across all three categories (Present Sales, Future Sales, and Traffic), sentiment declined, with the biggest declines coming in Present Sales and Traffic.  On a regional basis, no area of the country was spared, with declines across the country.  The biggest declines this month came in the Midwest, where sentiment fell from 61 down to 53.  Behind that, sentiment in the West fell by nearly the same amount (61 down to 54).  It's hard to believe that with interest rates this low, sentiment in the home builder industry can drop so low.

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Thursday
Oct162014

Bullish Sentiment Increases

One would think that with all the volatility and weakness we have recently seen in equities, that individual investors would be getting a bit more fearful.  Over the last two weeks, however, the opposite has been the case.  After rising back above its bull market average last week, bullish sentiment as measured by the American Association of Individual Investors (AAII) saw another slight increase this week, rising from 39.88% up to 42.66%, which is the highest weekly reading in six weeks.  Whenever you see the type of market action that we have seen over the last several days, the last thing you want to see is that individual investors are getting more bullish.

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