Apple (AAPL) Back Above the $600 Billion Mark; Two Tech Stocks Creep Up on Exxon Mobil

Below is an updated look at the rankings for the largest public companies in the US.  After moving back above the $100/share level today, Apple (AAPL) is back over the $600 billion mark as well.  This puts it nearly $180 billion larger than Exxon Mobil (XOM), the next largest company in the US.  The difference in market cap between Apple and Exxon is equivalent to the size of AT&T, the 19th largest company in the country!  

Exxon is still valued at more than $400 billion, but it's getting close to losing its number 2 status to two Tech behemoths.  As shown below, Google (GOOGL) is now valued at $397 billion, just $15 billion less than XOM.  And don't sleep on Microsoft (MSFT) either.  MSFT has surged in 2014, adding $74 billion in market cap to put it at $386.4 billion.  

Berkshire Hathaway (BRK/B) rounds out the top five with a market cap of $339.5 billion.  No other companies are worth more than $300 billion, but Johnson & Johnson (JNJ) is close at $296 bln.  

Along with Microsoft (MSFT), other companies that have added significantly to their market caps this year include Facebook (FB) -- up $62 billion, Verizon (VZ) -- up $60 billion, Gilead Sciences (GILD) -- up $47.5 billion, and Intel (INTC) -- up $44 billion.  Some of the big losers along with XOM include General Electric (GE) -- down $22.7 billion, and (AMZN) -- down $29 billion.  Coming into the year, was the 16th largest company in the US, but declines in the stock have left it outside the top 25.


Average Stock Declines From 52-Week Highs

The S&P 500 may have closed at an all-time high just three days ago, but some may be surprised by the fact that the average stock in the S&P 500 is down 7.5% from its own 52-week high.  While that may sound startling at first, keep in mind that the index is made up of 500 stocks, and while most stocks typically move in the same direction, different areas of the market fall in and out of favor at different times, even as the overall trend is higher.

The table at right breaks down the average percentage that stocks are trading from their 52-week highs by size.  While large cap stocks in the S&P 500 are down 7.5%, mid and small cap stocks are having an even rougher go of things.  In the S&P 400 Mid Cap index, the average stock is down 11.1%, while the average small cap stock in the S&P 600 is down 17.3%.  For this area of the market, the average stock isn't far from bear market territory!  Overall, the average stock in the S&P 1500 is down 12.4%.

Looking at average declines by sector also shows a varied picture.  For the entire S&P 1500 (large, mid, and small cap), Utilities (-6.6%) and Financials (-8.6%) are the only sectors where the average stock is not down more than 10% from its 52-week high.  We mentioned that certain areas of the market tend to fall in and out of favor, and one sector that has definitely fallen out of favor is Energy.  Stocks in the Energy sector are currently down an average of 19.7% from their 52-week highs.  The only other sector that is even close is Telecom Services (-17.3%), but with only 15 stocks in the sector (compared to 96 in the Energy sector) it has little overall impact on the market.  With both small caps and Energy stocks trading the furthest below their 52-week highs, you can imagine that small cap stocks in the Energy sector would be underperforming, and that would be an understatement as stocks that fit this criteria are down just under 30% (29.4%) from their 52-week highs.  Bull market?  Not if you're overweight Energy.


Long Term Economic Growth

While it's not always the best indicator of what's going to happen in the future, it can be helpful to look at what long-term trends in growth tell us about how the global economy has developed over time.  Using a data set put together by the Maddison Project, we are able to see some interesting trends over the long arc of economic history and across countries.  The chart below shows the per capita GDP for a variety of countries over time, experessed in 1990 dollars.

Towards the end of the 19th century, the political power of the British empire started to decline, and with it the advantages for British subjects in the UK and Australia; these two started as the two most productive nations but had to play defense over the intervening period as other nations' growth rates caught up.  Central American countries have also had an interesting path.  While Venezuela started at a very low level of GDP, it was able to move up the ranks to number two in this sample by the late 1950s.  But since then, political decisions have hampered growth, and the nation now trails significantly.  Argentina was also a very productive society in the 1910s; unscathed by World War I, Argentines were the 4th most productive in the above sample by the time the Roaring Twenties kicked off.  But the Great Depression destroyed Argentina's open economy, and political issues in the 1970s again trashed growth.  Overall, the most glaring country on this chart is the United States, which has been able to grow from a relatively high base in 1870 to a drastically more productive economy than its peers.  Most of that outperformance accrued around World War II, but it's continued throughout the last 70 years.

Overall, prosperity today is relatively dependent on where prosperity sat in 1870.  The chart below compares 1870 and 2010 per capita GDP (again, constant 1990 dollars) for an even broader set of countries than the first chart.  While the US has grown faster than its initial starting point would suggest (as have Nordic countries and Canada), many of today's emerging markets have underperformed versus their starting base, as has New Zealand and to an extent the UK.

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25% of Bespoke Readers Plan to Buy the Apple Watch

Yesterday afternoon after the unveiling of the new Apple Watch, we asked readers whether they plan to purchase one or not within the next year.  As shown below, 25% of respondents answered "Yes", which seems like a pretty high number considering that the question was asked to all consumers, not just iPhone owners (the Apple Watch needs to be used alongside an iPhone).  It looks like Apple will have a pretty large baseline number of Watch buyers when the product is released early next year given that a quarter of our respondents plan to buy one.


Will You Buy the Apple Watch?

Apple unveiled its first new product since the iPad today with the Apple Watch.  Have a look at the product to get an idea of the various models and what it does.  (With text message pop-ups on the Watch, maybe parents will finally be able to get the phones off the table at dinner!)

The Apple Watch isn't set for release until early 2015, but we want to know if you plan to buy one or not.  Please let us know in our poll below.  We'll report back with the results shortly.  Thanks for participating!

Will you purchase the new Apple Watch within the next year?
Not Sure
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New iPhone Unveils and Apple (AAPL) Stock

After trading up as much as 4% earlier, shares of Apple (AAPL) have dipped into negative territory following the conclusion of its unveiling of the iPhone 6 and new Apple Watch.  AAPL's decline seems to be following the typical script it has followed in prior product launches, where the stock tends to sell off following the unveiling of new models of the iPhone. 

The table below summarizes the performance of AAPL, the S&P 500 Technology sector, and the S&P 500 following the unveiling of new versions of the iPhone.  For each time period, we color coded the returns from worst (red) to best (green).  For the most part, the further you get away from AAPL, the better your returns.  Over the following day, week, and month, the average return of AAPL trails the average return of the S&P 500 Technology sector, which itself underperforms the S&P 500.  The only time frame where AAPL does not have the worst return of the group is three months out, when AAPL's average return outperforms the average return of the S&P 500 Technology sector by 51 bps (2.61% vs. 2.10%).  Even still, the S&P 500's average return (+4.45%) still outperforms both.


Little Change In JOLTS

Today's Job Openings and Labor Market Turnover Survey (JOLTS), released monthly by the Bureau of Labor Statistics, showed little progress in key indicators of labor market demand since last month.  While we didn't see a noticeable deterioration for the July statistics versus June, there wasn't much to get excited about either.  Fed Chair Janet Yellen has pointed to indicators within the JOLTS report as key signals in the Federal Open Markets Committee (FOMC) assessment of labor market tightness.  The FOMC continues to stress that labor market tightness - especially indicators like long-term unemployment, the labor force participation rate, wage growth, and a variety of JOLTS statistics - is the last remaining condition for a hike in rates.  Today's report did not show any significant progress towards a best estimate of that condition.

The headline "Job Openings" number fell by a minute amount month-over-month, below Wall Street economists' expectations for a slight increase to 4.7 million.

The quit rate for private employees was unchanged versus June's report; this suggests there was no incremental improvement in terms of demand for labor that could entice current employees from quitting their jobs.  While the quit rate did not fall sequentially, it did fall versus June's print of 2.1%, which was revised down to 2.0% itself.  Excluding a "blip" move down to a 1.9% quit rate in January, the private quits have been stuck at 2.0% since August of last year; hardly a dramatic improvement.

Joining the private quit rate data in mildly disappointing territory was a tick up in the private layoffs rate from 1.3% to 1.4%.  While this data is within the sideways trend in place since December, and is still very depressed relative to recession highs, it's no reason to get incrementally more excited about the labor market.

One positive indicator we saw in the report was another tick up in the private openings rate; due to rounding, this didn't change the total openings rate, illustrating that it was a very small improvement.  The government openings rate was also unchanged month-over-month.  Excluding Census-driven distortions from 2010, the private, government and total openings rates are at highs matching the previous economic expansion; demand for labor is therefore healthy, even if that didn't lead to an increase in turnover this month.

The bottom line on today's JOLTS report: steady as she goes...the labor market continues to improve but whether it is doing so fast enough to appease the Fed's doves for a rate hike next year is still unclear.


NFIB Small Business Optimism Exceeds Forecasts

This morning's release of the NFIB's Small Business Optimism Index for August showed a modest increase from July (96.1 from 95.7) and just barely exceeded the consensus forecast of 96.0.  What makes August's reading notable is that for just the second time since the last recession, the headline index rose above its average monthly reading since 2000 (96.03).  Given that, there is still a lot of room on the upside for this index before we can say small businesses are overly optimistic.

In each month's NFIB survey, small businesses are asked what issue is their single most important problem.  The table to the right shows the breakdown of this month's responses and compares them to the last month.  Topping the list all by itself this month is Taxes.  At a level of 24%, nearly one in four small business owners cite taxes as their biggest problem, which is up from 22% last month.  After Taxes, Government Red Tape is the next biggest problem for small business owners as 19% cited this as their number one problem, which was down from 22% in July.

On the inflation front, it was encouraging to see that just 4% of small business owners cited Cost of Labor as their biggest problem, which was down from 5% last month.  With so few small business owners seeing wage pressures, it will be hard for inflation levels to tick higher.  With respect to inflation overall, just 4% cited this issue as their biggest problem which was unchanged from July.

As we do each month, the chart below compares the percentage of small business owners who cite government issues as their biggest problem (Taxes and Red Tape) with the percentage citing Poor Sales.  In this month's report, the spread between the two came in at 30 percentage points.  Going back to 2007, this is only the fifth time that the spread has been 30 or more.


How It Works: The ECB QE Program

Last Thursday, the ECB announced a new program of quantitative easing through commitments to buy asset backed securities (ABS) and covered bonds.  The central bank also announced further rate cuts, which caught most of the market by surprise.  These programs, in addition to the first round of rate cuts and expanded Long Term Refinancing Operations (LTROs) announced in June, are designed to get money flowing through the Eurozone economy faster and expand access to credit.  The markets loved the measures as they were announced: European equities had a monster day, while the EUR declined by over 1.5% versus the USD.  

When combined with LTROs, the long-term lending to Eurozone banks backed by collateral posted to the ECB due to start in the next few weeks, the ECB is hoping to kick-start lending from the financial sector to the rest of the European economy by providing an end market for European loan production.  This is a much more direct approach than the Fed’s multiple rounds of QE in the US.  The ECB is trying to turn banks into pass-through conduits for loans by giving them an end market for covered bond and ABS sales.  Whether this will open up the credit taps or not is unclear, but it’s desperately needed: Household Credit has been shrinking since 2008, and since 2012 for corporate debt.

Below is a flow chart of how the ECB’s new programs for funding (LTROs, announced in June) and asset purchases (ABS/covered bond purchase programs, announced Thursday) are intended to work.  Whether this program will be effective is anyone’s guess for now.  Much will depend on how much the ECB is willing to buy.  ABS will probably be more stimulative than covered bonds.  This is because buying ABS takes loans off of the balance sheets of banks, while covered bonds stay on-balance sheet, limiting how much purchases can stimulate new lending given the low capital levels of Euro area banks.  The covered bond market is quite large, while the ABS market is more modest.  In our view, ABS purchases will be the most effective if they can incentivize banks to make new loans for packing into ABS, then sell them to the ECB.  Much like QE in the United States, which has had uncertain, but probably positive, effects on the economy, there is a big question over whether this will work.

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Run Your Own Custom Consumer Surveys with Bespoke Market Intelligence

Along with our new Pulse subscription offering over at Bespoke Intel, another big part of our business model at Bespoke Market Intelligence (BMI) is working with asset managers, private equity firms and even corporations to run custom surveys on consumers and businesses.  

Bespoke Market Intelligence works with clients to design, implement, and deploy custom research studies targeting products, companies, industries, sectors, geographies, and the macro economy using survey analysis.  Until you survey a statistically significant sampling of groups or individuals, you simply don’t have a complete understanding of the companies or sectors that you’re invested in.  We take our clients’ visions and design surveys that we strategically deploy to thousands of consumers and businesses.  We have the resources to target very specific audiences or broad categories, both domestically and internationally.  We use our expertise and knowledge of surveying techniques to uncover the information that’s most important to a client’s investment thesis, and it’s fully compliant as well.  Our client base includes hedge funds, investment advisors, private equity firms and corporations, for which we commission studies on a singular or co-commissioned basis.

Learn more about BMI's institutional offerings at the following links:

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Back to Bearish

After four weeks of more bulls than bears, sentiment flipped in our Bespoke Market Poll this weekend.  As shown below, bearish sentiment came in at 51% versus 49% for bullish sentiment.  It looks like last Friday's positive action couldn't make up for the three days of declines the market put in from Tuesday through Thursday. 


S&P 500 Higher or Lower from Here?

After three straight days of declines to start this holiday shortened work week, the S&P 500 finished Friday higher and at a new all-time closing high.  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 Monday before the open.  Thanks for participating and have a great weekend!

We have just put the finishing touches on our weekly Bespoke Report newsletter over at Bespoke Premium.  To view the newsletter, be sure to sign up for a 5-day free trial to Bespoke Premium using our "end of summer" 10% off special!  

We also had a big week here at Bespoke with the launch of our new Consumer Pulse subscription service.  Learn more about the new offering at our sister site -- Bespoke Market Intelligence.  If you'd like to sign up, we're offering a deep discount on the service for Bespoke readers.  Click here to learn more.

Will the S&P 500 be higher or lower than its current level one month from now?
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Country Trading Range Screen

Below is a nice, quick snapshot of where the 30 largest country ETFs are currently trading within their normal ranges.  For each ETF, the dot represents where it's currently trading, while the tail end represents where it was trading one week ago.  When the dot is to the right of the tail, the ETF has moved higher over the last week.  When the dot is to the left of the tail, the ETF has moved lower over the last week.  The black vertical "N" line represents each ETF's 50-day moving average.  If the dot is to the right of the "N" line, the ETF is above its 50-day.  If the dot is to the left of the "N" line, the ETF is below its 50-day.  The red shading represents overbought territory, while the green line represents oversold territory.

As you can see in the screen, the bulk of countries are currently trading above their 50-days, which means they're in short-term uptrend patterns.  The bulk have also moved higher over the last week.  Plenty of countries are overbought right now, with India (PIN), Phillipines (EPHE), Mexico (EWW) and Vietnam (VNM) at the most extreme levels.  Just two countries are currently trading in oversold territory -- Japan (EWJ) and Sweden (EWD).  Japan looks better than Sweden, though, as it appears to have turned a corner by trading higher within its range over the last week.  Sweden was neutral a week ago but has trended into oversold territory.

We also include the year-to-date change for each country ETF.  Through this afternoon, the India ETF (PIN) was up the most year-to-date with a gain of 30.02%.  Only a handful of countries are down on the year, and most of them are in Europe.  Russia (RSX) is down the most at -12.5%, while Germany (EWG), France (EWQ) and the UK (EWU) are in the red as well.


S&P 500 Sector Trading Range Charts

Below we provide our trading range charts for the S&P 500 and its ten sectors.  For each chart, the light blue shading represents the sector's "normal" trading range, which we calculate as one standard deviation above and below the 50-day moving average (white line in each chart).  The red shading represents between one and two standard deviations above the 50-day, and moves into or above this zone are considered "overbought."  The green shading represents between one and two standard deviations below the 50-day, and moves into or below this zone are considered "oversold."  

As shown below, the S&P 500 traded down into oversold territory in early August, but it bounced right when it dipped to the bottom of the green zone.  It was straight up after the index crossed back above its 50-day, but we have seen the index struggle to continue higher over the last two weeks after it moved into overbought territory.  For now, the index is holding above newly formed support that developed from the prior highs made in July.  We'd like to see the moving averages continue to catch up to the S&P's price, which allows overbought levels to work themselves off through time instead of seeing a price pullback.

Seven of ten S&P 500 sectors are currently trading in overbought territory.  Financials, Health Care and Consumer Discretionary are the most extended above their trading ranges.  Both Materials and Consumer Staples look pretty interesting here, as they're moving in nice uptrends but not too extended to the upside.  The sectors that have lagged recently are Industrials and Energy.  Industrials had gotten extremely oversold in mid-August, but it has been able to re-take and hold its 50-day so far this month.  Still, the sector is trending sideways instead of upwards here, and it will need to see an upside breakout to new highs before the chart starts looking good again.  

Energy has traded horribly since peaking in July, and it is currently oversold even as the rest of the market is overbought.  The first thing bulls on the sector will be looking for is a move back above the 50-day.  Until that happens, the short-term trend for Energy will remain down.


Bull Market Crosses the 2,000 Day Mark

The bull market that began on March 9th, 2009 recently crossed the 2,000-day mark.  Throughout the S&P 500's history going back to 1928, only three other bull markets have lasted longer.  For reference, below is a chart showing the length (calendar days) of bull and bear markets for the S&P 500 as they have occurred from 1928 through today.  Over at Bespoke Premium, we just published a more in-depth look at historical bull and bear markets and how the current bull fits in.  To view the report, sign up for a 5-day free trial today.  Be sure to use "endofsummer" in the coupon code section of our Subscribe page to receive a 10% discount on the life of your membership!  We think you'll be happy with the service, but if you're not, you can cancel at no charge during your 5-day trial period.