Monday
Aug182014

"A Second Half Story"

How many times have you heard that phrase in your life?  At the start of every year, when strategists are asked what their view on the market is, the response invariably sounds something like, "We expect near term volatility and potential weakness in the equity market, but see the economy and earnings picking up steam in the second half of the year."  The purpose of a statement like this is often so the person can claim they were right no matter what happened.  If the market goes down, and never rebounds they can say they were right to get you out of the market (and hope that no one remembers they said it would be a strong second half).  If the market goes straight up, instead, they can say something like the market looks six months ahead, so since we were expecting strength in the second half, you should have been buying in the first half to anticipate that pickup.

This year, though, the term a second half story has actually played out, but in a different way than you might think.  The chart below shows the performance of the S&P 500 so far this year.  In the chart, each quarter of the year has been broken down into halves.  So the first half of each quarter is shaded in gray, while the second half of the quarter is not shaded.  For each half of each quarter, we have also labeled the performance of the S&P 500 during each period.  As you can clearly see, the first half of every quarter so far this year has been negative for the S&P 500.  In fact, the three largest peak to trough declines have all originated and ended in the first half of each quarter.  Like the first halves of Q1 and Q2, the first half of Q3 ended with a decline for the S&P 500.  On the bright side, the second half of each quarter has been positive for the S&P 500, with gains of 1.83% and 4.78%, respectively.  With today marking the first trading day of the second half of the third quarter, bulls are hoping this pattern of 2014 continues to hold and that the third quarter is once again a second half story.

 

Friday
Aug152014

S&P 500 Higher or Lower from Here?

The market quietly pushed higher from Monday through Thursday of this week, only to stumble on Friday morning as geo-political tensions out of Ukraine hit risky assets like equities across the globe.  So which way will the market 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!

Looking for more market analysis and stock ideas from Bespoke?  Be sure to sign up for a 5-day free trial to our Bespoke Premium service and check out our just-published weekly Bespoke Report newsletter.  This week's 34-page newsletter covers numerous topics, including the just-concluded earnings season, geo-political worries, weak economic data out of Europe, market technicals, short interest, seasonality, and much more.  The newsletter also contains our updated Bespoke Model Stock Portfolio and Model Dividend Portfolio, so you can see which stocks Bespoke currently likes best.  Sign up for a 5-day free trial today.  Use "summer" in the coupon code section of our Subscribe page to receive a 10% discount on the life of your membership!

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
Aug152014

Stocks Down on Earnings Again

The second-quarter earnings season came to an end yesterday with Wal-Mart's (WMT) report.  Of the more than 2,400 companies that reported since earnings season began on July 8th, the average stock fell 0.70% on the day of its report.  (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 below, the last two quarters have been brutal for stock performance on earnings.  The average one-day decline of 0.70% this quarter was bad, but last quarter was even worse when the average stock fell 0.9% on its report day.  This is the worst two-quarter losing streak going back to at least 2003 using data from our Interactive Earnings Report Database.  Let's see if there's a bounce back next quarter after this brutal two quarter stretch.

Friday
Aug152014

Bespoke Featured In WSJ's 50 Best Twitter Follows List

Many thanks to the Wall Street Journal and Katie Martin of the MoneyBeat blog for naming Bespoke one of the 50 Financial Twitter Feeds You Must Follow!  We love Twitter as a platform for discussion and engagement.  Being mentioned on the same list as Merrill Lynch, Goldman Sachs, Guggenheim, UBS, and PIMCO was an endorsement of our thirty-seven thousand followers as much as it was of us.  Please click here to read the post and see the whole list.  You can follow us on Twitter at @bespokeinvest and access our subscription content at Bespoke Premium.

Thursday
Aug142014

After the Bounce...

Last week at this time, the S&P 500 and nine of ten sectors were oversold, and various internals we track were at their most extreme negative levels in at least a year.  As shown below, stocks have seen a nice bounce across the board off their lows last Thursday, and after today's 43 basis-point rally for the S&P, just one sector remains oversold.  

Last week, we noted in our weekly Sector Snapshot that the market was due for a bounce.  You can read the report here if you're not currently a Bespoke Premium member.  So what's in store for the market now that we're out of oversold territory?  Find out our thoughts in this week's Sector Snapshot, just published after the close today.  Sign up now for a 5-day free trial to Bespoke Premium to view this week's report.

Thursday
Aug142014

Jobless Claims Back Above 300K

After four better than expected reports in the last five weeks, initial jobless claims came in higher than expected this week, rising back above 300K.  While economists were expecting a level of 295K, the actual reading came in at 311K, representing an increase of 21K from last week's revised reading of 290K.  At current levels, initial claims are at their highest level since the end of June.

Although claims rose by 21K this week, the four-week moving average only saw a modest increase of 2K, rising from last week's post-recession low of 293.75K up to 295.75K.  Unless we get a big drop in claims next week, though, this moving average will see a much bigger increase next week as the four-week running total will drop a reading of 279K off of its moving average.

On a non-seasonally adjusted (NSA) basis, initial claims increased by just under 21K to 268.8K.  You may recall that last week's NSA reading was the lowest for that week of the year in decades, but this week the NSA reading was only the lowest since 2007.  Compared to the average reading for the current week dating back to 2000, this week's level was still more than 60K below average.

Thursday
Aug142014

Individual Investors Buy The Dip

After declines in bullish sentiment in four of the five prior weeks, individual investors stepped in this week to buy the dip.  According to the weekly sentiment survey from the American Association of Individual Investors (AAII), bullish sentiment rose from a depressed level of 30.89% up to 39.81%.  That 8.9 percentage point increase is the largest weekly jump in bullish sentiment since February and brings bullish sentiment back above its average of 38.3% for the current bull market.

As bullish sentiment spiked, bearish sentiment plummeted.  After getting above 38% last week, bearish sentiment fell 11.27 percentage points this week to 26.96%.  This was the largest weekly decline in bearish sentiment in nearly a year. 

While the big increase in bullish sentiment and the decline in bearish sentiment could be construed as investors turning a bit complacent, we would note that leading up to this week we really saw a deterioration in sentiment.  Additionally, the S&P 500 is up in three of the last four trading days for a total gain of just under 2%, so a lot of the improvement in sentiment has been brought on by higher stock prices.

Wednesday
Aug132014

Lots of Stocks Going Ex-Dividend

Between now and October 1st, 561 stocks in the Russell 3,000 will go ex-dividend.  Over at Bespoke Premium, we provide a monthly report highlighting a list of these names that includes other key dividend information.  To see this month's report for free, sign up here for a 5-day free trial.

In the S&P 500 alone there are more than 150 stocks going ex-dividend between now and October 1st.  Below is a list of the highest yielding names.  As shown, five S&P 500 stocks going ex between now and 10/1 yield more than 4% -- RAI, MAT, SCG, AEE and PEG.  Coach (COH) actually has the next highest yield on the list at 3.79%.  

Remember, to capture a dividend, you have to own the shares at the close on the last trading day prior to the ex-dividend date.  To view our most recent Bespoke Dividend Report, or to check out our Model Dividend Portfolio, sign up for a 5-day free trial to Bespoke Premium today.  Use "dividend" in the coupon code section of our Subscribe page to receive a 10% discount on the life of your membership!

Wednesday
Aug132014

Dow Trading Range Screen

Last Thursday we noted that the market was oversold everywhere, and historically when those extremes are reached, the market typically bounces a bit.  As shown in our updated "Dow 30 Trading Range Screen" below, most stocks have indeed seen a nice bounce off of oversold levels over the last week.  In the screen, the dot represents where the stock is currently trading, while the tail end represents where it was one week ago.  As you can see, most dots are to the right of the tails, meaning the stocks have moved higher within their trading ranges.  

A lot of stocks remain oversold, though, just much less oversold than they were last week.  Names like American Express (AXP), General Electric (GE), Coca-Cola (KO), 3M (MMM), Merck (MRK), Travelers (TRV), Wal-Mart (WMT) and Exxon Mobil (XOM) were all in the dark green zone last week, meaning they were more than two standard deviations below their 50-day moving averages.  Now they have moved up into the light green zone, which is between one and two standard deviations below the 50-day.  It's nice that these stocks have stabilized a bit, and if you're bullish, they're still trading at levels where they have a long way to go before getting overheated again.  

Tuesday
Aug122014

Most Heavily Shorted Stocks Outperform

Short interest figures for the end of July were released after the close yesterday, and we just sent our regular update of trends in short interest to clients.  One table from the report is shown below and it lists the 25 stocks in the S&P 1500 that have more than one-quarter of their free floating shares sold short.  Of the 25 stocks listed, GameStop (GME) is the only member of the S&P 500.  Of the remaining 24 stocks, seven are mid caps and 17 are small caps.  In terms of sector distribution, Consumer Discretionary and Technology are the most heavily represented with seven stocks each.  Meanwhile, Consumer Staples and Utilities are the only two sectors that are not represented.

For each stock listed, we have also included its performance since the start of August.  Of the 25 names listed, 16 are up so far this month, while just nine are down.  Overall, the average return of the stocks listed is a gain of 0.44% compared to a gain of 0.17% for the S&P 1500.  Additionally, were it not for the 20% declines in ITT Educational (ESI) and Rubicon Technology (RBCN), the average performance would have been more than 3%!  In prior posts on short interest, you may recall that the most heavily shorted stocks were underperforming the overall market by a wide margin, which was the perfect environment for short-sellers.  So far this month, the short-sellers are facing a little bit of give back, but they have still had a great spring and up until now, a good summer.

Start your day with our Morning Lineup, end it with The Closer, and enjoy everything else (including the Short Interest Report) in between -- some of the most insightful and actionable market analysis on the Street.  Sign up for a 5-day free trial to Bespoke Premium today!

Tuesday
Aug122014

JOLTS Report Shows More Labor Market Strength

The Job Openings and Labor Turnover Survey (JOLTS) report was released this morning by the Bureau of Labor Statistics (BLS).  This once obscure labor market panel has become increasingly important as the Yellen Fed looks to evaluate the broad labor market in much more detail in order to assess progress on its dual mandate of full employment and stable prices.  Much like the BLS's Employment Situation Report, the JOLTS report has a broad range of data that goes much deeper than its headline Total Job Openings number.  This month's report, covering the month of June, shows a continued trend of broad labor market strength, led by Total Job Openings but also visible in other underlying data points.

Job Openings continued to surge in the month of June, reaching a level not seen since February of 2001, surpassing the mid-2000s highs in available and unfilled job openings.

The Total Openings Rate, which measures openings after controlling for size of the labor force, is now at the same level as its last peak in the middle of the last decade.  Similar to the un-adjusted total, the Openings Rate has ticked up noticeably over the last few months.

JOLTS also gives us insight into the flow of workers between jobs in addition to highlighting the demand for labor (job openings).  While the Total Quit Rate was unchanged this month at 1.8%, Private Quits moved upwards again, registering a new recovery high of 2.1%.  That being said, quits are well below the previous recovery's levels, which was in the mid-2% range.  A higher quit rate would imply that wage pressure was being exhibited: higher wages would be drawing a larger number of quits, demonstrating "tightness" of supply.  To get a better view of this, we like to look at the Private Quit Rate as opposed to totals; the labor market is usually segmented between largely stable and unionized public sector workers and more dynamic private sector hiring.  Therefore, we view the Private Quit rate as a better indicator of the marginal tightness in labor markets.  Because real wage growth has been modest recently, it's no surprise the Private Quit Rate remains suppressed.

There's more good news for workers in this report.  Layoffs & Discharges have fallen dramatically and keep edging lower.  Below is the Private Layoff & Discharge rate; we use this statistic instead of total for the same reasons that we look at Private Quits instead of Total Quits.

Today's JOLTS showed that businesses have more openings, more employees are quitting, and business is less likely to fire an employee.  In total, these three trends indicate increasing bargaining power of labor and tighter labor markets relative to recent history.  But wages have yet to spike in response to these dynamics.  Until businesses are willing to pay more for the marginal employee, there is a limit to how much quit rates can go up and job openings can come down.  This is bad news for the average American, as they won't see their incomes rise.  What is bad news for the average American, though, is good news for inflation.  Until wages increase, in order to lure labor off the sidelines or out of their current job into one of the open positions that keep piling up, inflation should remain low.

Tuesday
Aug122014

July NFIB Weaker Than Expected

Today's release of the NFIB Small Business Optimism Index came in at a level of 95.7 in July, which was a modest increase from June's level of 95.0 and was slightly weaker than the consensus expectation of 96.0.  While this month's reading was weaker than expected, it was still the second highest reading for the index since the last recession ended in 2009.

While the NFIB Small Business Optimism Index has seen a big rebound from levels it was at a few years ago, it is still depressed from a historical perspective. The chart below shows the historical levels of this index dating back to 2000.  Over that period, the average reading for the index has been 96.0, which is 0.3 points above the current level.  In the current recovery, there has only been one month (May 2014) where the NFIB Small Business Optimism Index has been above its average level since 2000.  Keep in mind too that the current recovery makes up more than one-third of the entire period for which the average is being calculated!  While we have seen improvement in sentiment for small business owners, there is still a ways to go before getting back to more normal levels.

As we do each month, we also wanted to highlight what issues are causing small businesses the biggest 'problems' according to the NFIB.  The table to the right breaks down the range of responses among respondents to this month's survey. With 22% each this month, there was a tie between Taxes and Red Tape.  Outside of those two 'government' problems, the only other issues that received 10% or more of the vote were Poor Sales (13%) and Quality of Labor (10%).  While fewer respondents cited Quality of Labor as a problem, Cost of Labor increased from 4% to 5%.

On a combined basis, 44% of respondents cited the government problems of Taxes and Red Tape as their number one problem.  This was up from 42% last month, but still below the high of 47% we saw in May of 2013.  At current levels, more than three times as many businesses cite government as their number one problem than they do poor sales. 

Monday
Aug112014

Top Performing Stocks Year-to-Date

The average S&P 500 stock is up 5.89% year-to-date, and 65.4% of the index is in the black for the year.  Below is a list of the 40 best performing S&P 500 stocks so far this year.  

As shown, there aren't any 100% gainers in the index through today, and we're going to need to see some big gains over the next three and a half months if the index is going to register any "doubles" this year.  Newfield Exploration (NFX) is currently the biggest winner in 2014 with a gain of 63.82%.  Another Energy company -- Nabors (NBR) -- ranks second with a gain of 58.09%.  Under Armour (UA), Electronic Arts (EA) and Green Mountain (GMCR) round out the top five, all with YTD gains of more than 50%.

Surprisingly, all ten S&P 500 sectors are represented on the list.  The one Utilities name to make it is Pepco Holdings (POM) with a nice gain of 40.46%.  Technology is the most represented with ten names, followed by Energy with seven.  A few of the notable names on the list include Facebook (FB), Southwest (LUV) and Delta (DAL), Chipotle (CMG), Intel (INTC) and First Solar (FSLR).

The list of 2014's biggest losers in the S&P 500 is dominated by consumer stocks.  Coach (COH) ranks dead last in the index with a decline of 35.54%, and Whole Foods (WFM) isn't far behind with a loss of 33.84%.  Four more brick-and-mortar retailers rank third through seventh worst, and maybe surprisingly to some, web-giant Amazon.com (AMZN) ranks eighth worst in the S&P with a year-to-date decline of 20.18%.  As you saw in the table of winners above, not all retailers are having a rough year (Chipotle and Kroger), but clearly the group as a whole has struggled.  Of the 40 worst performing stocks in the S&P this year, 17 are in either the Consumer Discretionary or Consumer Staples sectors.  Investors are definitely looking for back-to-school and the holiday season to help turn things around.  Historically, the holiday season hasn't been a time to hold retailers, but given their performance so far this year, maybe we'll see a divergence from the normal seasonal stock trends.

While no S&P 500 stocks have doubled this year, 19 names in the Russell 3,000 are up more than 100%.  As shown in the table below, RadNet (RDNT) is currently in first place with a year-to-date gain of 316.17%.  Pacific Ethanol (PEIX) ranks second at +281.34%, and Plug Power (PLUG) ranks third at +275.48%.  Intercept Pharma (ICPT) is up the fourth most in the index at +247.36%, but it's actually set to open tomorrow morning in first place after gaining 58% after-hours!  InterMune (ITMN) round out the top five at +203.53%.

The list of winners in the Russell 3,000 is dominated by biotech names, with 14 of the 40 stocks coming from the Health Care sector.  Biotech ran into big trouble back in March and April, and the group as a whole has yet to take out its highs from eariler this year.  That being said, there are still plenty of names in biotech that are having banner years.

If you have time, browse through the charts and fundamentals of these big winners.  You may not find any long opportunities from a list of names that are up so much, but you'll get a good sense of the trends that investors are playing these days.

Monday
Aug112014

Bulls Charge Back

Bulls took back control in our weekend Bespoke Market Poll after a nice finish to the week last Friday.  As shown below, bullish sentiment came in at 63% this week, which was a jump of 17 percentage points from the reading of 46% seen in the prior week.

Friday
Aug082014

The Bespoke Sector Snapshot: Weekly Index Insight From Bespoke

Every Thursday, Bespoke puts out its weekly Sector Snapshot, giving our subscribers a detailed look at how the S&P 500 and each of its ten constituent sectors is trading.  Using propietary analysis, loads of charts, and easily understandable valuations, we give you a complete recap of each sector's trends and outlook.  In yesterday's Sector Snapshot, we said the following:

As you’ll see below and on the following pages, while trading has been painful recently, we have now reached levels that have typically seen buyers step in and bid the market higher. Just 23% of S&P 500 stocks are currently above their 50-days, which is the lowest level we have seen in at least a year. The 10-day advance/decline line, which measures short-term market breadth, is currently at the very bottom end of its range. Whenever we get this oversold on the 10-day A/D line, the market typically stages at least a short-term rally. 

Please click on the thumbnail at right to view the Bespoke Sector Snapshot for this week free of charge.  If you like what you see, give Bespoke Premium a try!  Trials are free for five days.  Make sure to subscribe now to receive this week's Bespoke Report Newsletter in your inbox tonight.