Tuesday
Sep092014

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.

Tuesday
Sep092014

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.

Tuesday
Sep092014

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.

Monday
Sep082014

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.

For more analysis of monetary, geopolitical, and economic events that impact the market every day, make sure to subscribe to Bespoke Premium.  Start the trading day with the Bespoke take on overnight developments sent with The Morning Lineup, and finish the day with a detailed summary in The Closer.  Our weekly Bespoke Report newsletter is a one-stop-shop for updates on the markets, trends, and major developments affecting investors.  The graphic above was detailed in last week's Bespoke Report.  Start your five day free trial today!

Monday
Sep082014

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:

What It Is

Who We Survey

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Who It's For

Monday
Sep082014

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. 

Friday
Sep052014

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?
Higher
Lower
  
Free polls from Pollhost.com

Friday
Sep052014

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.

Friday
Sep052014

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.

Thursday
Sep042014

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.

Thursday
Sep042014

ISM Services Index Cruises to a Nine Year High

If you were looking for signs that the US economy is showing slower momentum, today's ISM Non Manufacturing Index was not for you.  While economists were expecting a decline to 57.7 from July's reading of 58.7, the actual reading came in at 59.6, which was the highest reading since August 2005 (61.3).  As shown in the top chart below, after oscillating within a range of roughly 52 to 58 since early 2010, the Services sector appears to have broken out.

The second chart below shows a composite of the ISM that combines the readings for the Manufacturing and Non Manufacturing sectors weighted by their share of the overall economy.  During the month of August, the combined index rose from 58.3 to 59.1.  This is the highest reading since August 2005, and just 2.2 points below the high for this index going back to 1997.

The table below breaks down the August ISM Non Manufacturing Index by each of its subcomponents.  Although the headline reading for August was stronger than expected, the month over month 'breadth' was skewed negative with four components rising, five declining, and one unchanged.  The most notable gainer in this month's report was Business Activity, which rose to its best level since January 2004.  Employment saw the third largest jump this month, rising to its best level since February 2006.

Thursday
Sep042014

Bullish Sentiment Pulls Back

While bearish sentiment among newsletter writers dropped to its lowest levels since early 1987 this week, individual investors are slightly less optimistic, although they still are relatively positive.  After spiking up above 50% last week, individual investor sentiment pulled back this week.  According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment declined from 51.92% down to 44.67%.  Even after this week's decline, the current level of bullish sentiment remains above its bull market average of 38.4%.

As bullish sentiment declined, bearish sentiment saw an increase, rising from 19.23% up to 23.96%.  Although here we would note that the magnitude of the up move in bearish sentiment (+4.73%) was smaller than the decline in bullish sentiment (-7.25%), indicating that many of the former bulls moved into the neutral camp rather than turning outright bearish.

Thursday
Sep042014

Jobless Claims Slightly Higher Than Expected

After two straight weeks where claims came in lower than expected, claims for the latest week came in slightly higher than expected this week.  While economists were looking for a level of 300K, the actual reading came in slightly higher at 302K.  This marks the third straight week where claims have been within 5K of the consensus forecasts, so economists can at least give themselves a pat on the pack for being so close.

With this week's 4K increase, the four-week moving average saw a slight increase, rising from 298K to 302K.  This is 9K above the post-recession low of 293.75K that we saw at the start of August.  Given that we haven't even seen a single week reading below that level in the last four weeks, don't expect to see a new low in the four-week moving average any time soon.

On a non-seasonally adjusted basis (NSA), jobless claims were practically unchanged falling by just 0.3K, and that comes after a no change in the prior week.  This is the first time in three years that NSA claims have moved up or down less than 1K for two straight weeks.  At this week's level of 248.6K, NSA claims are the lowest they have been for the current week of the year since 2000, and well below the average of 312K going back to then.

Wednesday
Sep032014

Introducing Pulse -- A New Subscription Product from Bespoke

Over the past year, we have mentioned our work at our sister site – Bespoke Market Intelligence – a number of times.  Today, we’re happy to introduce you to a new subscription offering from Bespoke called the Bespoke Consumer Pulse Report.  Subscribe to our Bespoke Consumer Pulse service to stay one step ahead of the most widely followed economic indicators.  With Pulse, we have created a low-cost way for investors to get early reads on consumer trends across the economic spectrum.  

How do we do it?  Each month, we survey thousands of US consumers on a wide range of topics using questions designed by our financial research team.  We then compile and analyze the data and package it into our monthly Consumer Pulse Report, which we release one week before the monthly Nonfarm Payrolls report.  This gives members ample time to position their portfolios leading up to the deluge of economic data released at the start of each month.  The Consumer Pulse report is packed with in-depth market commentary and thought-provoking analytics that give you as good of a read on the broad economy as you’ll find.  Pulse also gives subscribers unique insights into the health of dozens of individual companies that fundamental or technical research can’t provide.  The Pulse report is easy to read and easy to understand — something that many research products are severely lacking these days.

Head on over to our Pulse website to learn more about the product.  There you can read more about what it is, how to use it, and the various membership levels we offer.  You can also see a sample of the monthly Pulse report along with the other offerings included with a Pulse membership.

Become a charter member of Pulse and receive a big discount on your membership cost.  If you're one of the first 100 new subscribers, you can receive 30% off the life of your Pulse membership!  Simply enter "pulsecharter" in the coupon code section of our Subscribe page to receive the discount.

Wednesday
Sep032014

Ford Truck Sales Decline In August

Sales of pickup trucks are often a sign of strength or weakness in the small business and construction sectors as these types of businesses are the most common users of these vehicles.  With that in mind, today's figures from Ford (F) for sales of F-150 pickup trucks were negative at the surface.  For the month of August, Ford sold 68.1K F-Series trucks, which represented a 4.2% decline from last August's total.  On a year to date basis, total sales of F-series trucks were 497K, which is a fractional decline from last year's total of 499K.  Looking at the charts below, the declines that we saw in August were the first y/y declines on both a YTD and monthly basis since 2008.

One caveat to these numbers, however, is the redesign of the F-150, which will go on sale in the fourth quarter.  As a result of the new model, it is believed that many buyers are holding off on purchases until then.  Whether or not that is the case will be clear in the coming months.