Monday
Nov032014

ISM Manufacturing Report Stronger Than Expected

Economic data for the month kicked off on a positive note today with a better than expected ISM Manufacturing report.  While economists were expecting a headline reading of 56.1, the actual reading came in at 59.0.  This is a level we saw in August and that was the highest level since March 2011.

The table below breaks out this month's report by each of the ISM's subcomponents and compares the current levels to where they were last month and last year.  As shown in the table, all but one of the components were above 50 this month (the threshold for growth), and just two (Prices Paid and Export Orders) declined relative to last month.  Given the decline in commodity prices, the drop in Prices Paid is not surprising.  Likewise, with the strength we have seen in the dollar, the drop in Export Orders is to be expected as well.

Compared to one year ago, October's ISM Manufacturing report was nearly equally as impressive.  Again, of the ten subcomponents seven are higher now than they were then.  Components where we saw the biggest increases were in Customer Inventories, New Orders, and Production, while the biggest decline came in Prices Paid.  Finally, with the October nonfarm payrolls report coming up on Friday, the employment component of the ISM Manufacturing provided some support as it increased to 55.5 from last month's level of 54.6 and last year's level of 54.8.

Monday
Nov032014

Internet Earnings In The Spam Folder

This earnings season, stocks in the Technology sector have seen quite a positive reaction from market to their earnings reports.  Through Friday, stocks in the sector rallied an average of 1.26% in the first full trading session after they reported earnings, which was ahead of the 0.99% average gain for all stocks.   Even as Tech stocks have been doing well, though, stocks in the internet space have had a brutal go of it this earnings season.  

For stocks in the Nasdaq Internet Index that have reported earnings, the average one day change in reaction to earnings has been a decline of 0.49%.  That doesn’t sound terrible until you only look at the 20 of the 41 companies that have reported and have declined on the day following their report: their average decline is 9.9%!  There are some huge names in that undistinguished crowd too: S&P 500 components include Netflix (NFLX), Amazon (AMZN), Facebook (FB), eBay (EBAY), and Google (GOOGL).  Those five stocks declined an average of 7.03% the day after their earnings, even though the S&P 500 has flown higher to a new all-time closing high over the last two weeks.  When it comes to stock performance this earnings season, not all tech is created equal.

Monday
Nov032014

For Truck Sales Decline Again

Truck sales are one of the less traditional indicators we like to follow to gauge overall strength in the US economy, and more specifically the small business sector.  With that premise, this morning's monthly sales figures from Ford weren't exactly positive.  In the month of October, Ford sold 63.4K F-Series trucks which was a fractional decline over the total from last October.  This represents the third straight month where the monthly total was below the total for that month in the prior year.  While this is a negative at the surface, as we have been pointing out over the last few months, some of the slowdown is due to the changeover of plants for the introduction of the new F-150.  As the plants and production of the new F-150 come online, these results should improve.

For the first ten months of the year, Ford's sales of F-Series trucks in 2014 now total 620K, which is also down slightly compared to last year's total of 623K.  Again, while the declines are somewhat expected, it does mark the first year/year decline since 2009.

Monday
Nov032014

Bullish Sentiment Up to 68%

Bullish sentiment in our weekly Bespoke Market Poll came in at 68% this weekend, which ties for the highest reading we've seen since we began our poll at the start of 2012.  Interestingly, as you'll see in the second chart below, November has been a sweet spot for bulls over the last few years.  We've seen spikes into the high 60s each November for the past three years.  

There's lots of bullishness out there heading into the final two months of the year.

Monday
Nov032014

New All-Time Closing Highs

On October 15th, the S&P 500 reversed with incredible violence off of an intraday low at 1820.66.  Since that intraday low, the S&P 500 has ripped higher, gaining 10.85% and only closing lower on three of twelve trading days since.  It's almost impossible to believe, but on Friday the index closed at an all-time closing high of 2,018.05.  S&P 500 stocks aren't alone though: the Dow also closed at a new all time high.  The blue chips hit an all-time intraday high as well, a feat the S&P 500 was a few points below.  As for the Nasdaq, the index hit a multi-year high, but it's still below its lofty levels established during the internet bubble days.  Finally, small caps in the Russell 2000 Index have done well in their move higher from the October 16th intraday lows.  They've also smashed through a downtrend that had been in place since the June highs.  All four major US indices are now back above 50- and 200-day moving averages.  Below we chart each index's performance over the past year.

Interested in index analysis, technical trends, and macro market commentary?  Sign up for a free trial of Bespoke Premium today to access our weekly Bespoke Report newsletter.  The Bespoke Report makes for an easy, comprehensive read, jammed with charts, statistics, and actionable commentary in an easy to read and accessible format.  Sign up now to gain access!

Friday
Oct312014

S&P 500 Higher or Lower From Here?

After a rough start to October, the S&P 500 finished the month at a new all-time closing high.  So which way will the market go 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!  Happy Halloween!

Looking for Bespoke's take on this huge upside rally and what it means for the market going forward?  Become a Bespoke subscriber today and check out our just-published Bespoke Report newsletter.  This week's report is packed with analysis on the economy, earnings and everything else that impacts equities and other asset classes.  Sign up for a 5-day free trial to view this week's report for free!  If you're unsatisfied, you can cancel at anytime.

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

Friday
Oct312014

Health Care Surging on Earnings; Energy Not So Much

As highlighted in our prior post, the average stock that has reported this earnings season has averaged a big gain of 0.99% on its report day.  Below is a look at the average one-day performance on earnings this season broken up by sector.  As shown, the average Health Care stock that has reported has gained a whopping 2.14% on its report day this season.  No wonder the sector has gone parabolic recently!  Telecom, Consumer Discretionary and Technology are the three other sectors that are seeing out-sized gains on their report days.

On the downside, Energy sticks out like a sore thumb.  As if the sector didn't have enough trouble coming into earnings season, investors have continued to unload Energy shares even after they report.  As shown below, Energy is the one sector where stocks are averaging declines on their report days.  When will the bottom be put in?

Friday
Oct312014

Stocks Reacting Very Positively to Earnings

Nearly 1,500 US companies have reported earnings since the third quarter season began in early October.  As shown below, the average stock that has reported this season has gained 0.99% on the day of its report.  (For companies that report in the morning, we use that day's change.  For companies that report after the close, we use the next day's change.)

If the season were to end today, the current average one-day gain of 0.99% would be the best reading for earnings since the first quarter of the current bull market.  Investors are clearly willing to step in and buy stocks on earnings this season.  Something that we hadn't seen during the prior two quarters, when the average stock fell pretty significantly in reaction to its report.

Looking for more earnings season info?  Sign up for a Bespoke Premium membership today!

Friday
Oct312014

S&P 500 Sector Breadth

The recent market rally has left 71% of stocks in the S&P 500 above their 50-day moving averages, and just three sectors have breadth readings below the broad market's reading -- Energy at 14%, Materials at 46.7% and Consumer Discretionary at 65.5%.

Utilities and Consumer Staples -- both defensives -- have the highest breadth readings.  93.3% of Utilities stocks are above their 50-days.  

It's good to see sectors like Financials, Industrials and Tech back to "better-than-market" breadth levels.  Be careful out there in the near-term, though.  It's tough to sustain readings in the high 80s for long periods of time.

Thursday
Oct302014

October Bespoke Consumer Pulse Report Now Published -- See It With a 5-Day Free Trial

Over at Bespoke Market Intelligence, we have just sent out our October Bespoke Consumer Pulse Report to Pulse subscribers.  Bottom line -- this month's report is must-see for investors looking for a full picture of the US economy.  This month's report found key trend shifts in labor markets, housing, consumer sentiment and consumer spending activity.  Sign up for a 5-day free trial to find out which areas of the economy are helping, and which are hurting -- and more importantly -- why.  

If you're unfamiliar with our new Pulse service, each month we survey between 1,500 and 2,000 US consumers, which represents a statistically significant sampling of the US population.  The survey these consumers take consists of 75 questions related to their personal finances, spending habits, and economic and investor sentiment levels.  From our monthly survey, we're able to get a real-time look at the state of the US economy, and we break it into six key sections -- Economic Sentiment, Consumer Activity, Labor Markets, Housing, Investor Sentiment and Personal Finances.  In this month's report, a few of these sections of the economy were flashing very positive, but a few others were flashing very negative.  You'll have to sign up for the Pulse service to find out which are which.  

Oh, did we tell you that the Pulse report also tracks spending activity and sentiment levels for dozens of specific stocks?  Our survey provides subscribers with key reads on companies like Apple (AAPL), Google (GOOGL), Amazon (AMZN), Netflix (NFLX), Twitter (TWTR), LinkedIn (LNKD), Facebook (FB), Zillow (Z), Nordstrom (JWN), Wal-Mart (WMT), Kohl's (KSS), Walgreen's (WAG), CVS, RiteAid (RAD), McDonald's (MCD), Panera (PNRA), Chipotle (CMG), Starbuck's (SBUX) and dozens and dozens more.  If you have a position in any of these names, you'll find our survey very beneficial to your investment thesis.

Why not sign up for a 5-day free trial today to view our October Consumer Pulse Report?  It's free for the first five days, and you can cancel at any time.  And since this is a relatively new subscription offering (launched in August), we're providing you with a 30% discount to the service for the life of your membership!  Simply enter "pulsecharter" in the coupon code section of the Pulse subscribe page to recieve the 30% discount.  

Head on over to the Pulse website to learn more about the Pulse report.  There's even a sample of a past report at the site so you can get an idea of just how impressive it is.  

Ready to give it a try and see our October Pulse Report for free?  Sign up now now!  If you're unhappy after viewing the report, simply give us a call and cancel at any time.  For the first five days, the service is on us.

Thursday
Oct302014

Advance Q3 GDP Beats Expectation

Going in to this morning's Advance (the first of three) GDP report from the Bureau of Economic Analysis, Wall Street economists were expecting a 3.0% quarter-over-quarter, seasonally adjusted annual rate of growth.  The report printed higher than that, registering a 3.5% increase in the third quarter.  While that rate declined versus the second quarter's strong 4.6% growth rate (the third estimate published), it still represents a growth rate at the top of the range for the current expansion.  

Below is our summary table of GDP categories versus their Q2 reading.  We note the contributions to growth for each component, and add some commentary highlighting trends or differences that came as a surprise.  Keep in mind that the figures below represent contributions to growth.  For instance, the 0.74 figure for Q3 Fixed Investment means that category contributed  0.74 percentage points to the total 3.54% rate of growth in the quarter.  Please note that all figures are adjusted for inflation.

Consumption is the most important part of economic growth: it accounts for about 68% of total output.  The fact that it contributed 1.22 percentage points to total growth is not bad, but it's reflective of suppressed wage trends that are preventing consumers from increasing their spending.  That said, the move down from a contribution of 1.75 down to 1.22 percentage points is nothing to be particularly worried about either.  Moving on, investment registered a large decline in its contribution to growth relative to last month's extremely high 2.87 percentage point figure, but is still positive: most of the decline was in inventories, which dropped more than we expected.  Fixed investment added 74 bps of growth, a steady but not explosive growth rate.  

Two areas we would flag as important to consider are Imports and Government.  Imports actually added to growth in Q3.  Because GDP accounting is the sum of Consumption, Investment, Exports, and Government Spending, less Imports and Taxes, a decline in Imports actually registers as a positive.  While this is welcome from a growth perspective, we wouldn't anticipate it to continue for very long given USD currency appreciation in the quarter, and could provide a hit to next month's second estimate of Q3 GDP.  Second, Government added 83 bps to total growth: this is an excellent reading given the longer-term trend of lower government contributions thanks to a major decline in the budget deficit over the past few years.

All told this was a good report, but not a great one.  Several trends like steady Consumption, high Nonresidential Fixed Investment contribution, and moribund Residential Investment remain in place.  We expect revisions to specific categories (Inventories higher, Imports lower) that could net out to relatively little change in the top line figure on the second reading.

Thursday
Oct302014

Sentiment Little Changed

One of the most unusual aspects of the sell-off in equities earlier this month was that individual investors weren't shaken out in terms of sentiment.  At the S&P 500's highs in mid-September, bullish sentiment (according to the American Association of Individual Investors) was 42.24%; not exceedingly bullish, but still above average for the current bull market.  One month later, with the S&P 500 down a quick 7%, not a single bull was shaken out, and bullish sentiment actually increased slightly to 42.66%.  With respects to sell-offs during this bull market, the lack of a decline in bullish sentiment was atypical, and a potential sign of complacency.  

Since that low for the equity market two weeks ago, the S&P 500 has rebounded by more than 6%.  With that, we have seen an increase in bullish sentiment rising from 42.66% to 49.37%.  All of that increase, though, was in the first week of the rally.  Even though the S&P 500 has continued to rally in the last week, bullish sentiment has been unchanged.  So, while the fact that investors weren't shaken out in the sell-off was a potential red flag for complacency, they aren't necessarily flocking to the bullish camp when the market is rising either.

Thursday
Oct302014

Jobless Claims Slightly Higher Than Expected

Jobless claims for the latest week came in slightly ahead of forecasts, but still remain right near their multi-year lows.  While economists were expecting a print of 285K, the actual reading came in at 287K, which was an increase of 3K from last week.  For the sake of perspective, even though claims rose and were higher than expected, there have only been seven other weeks in the last ten years where claims have been lower than they were this week.

Even with this week's increase in jobless claims, the four-week moving average saw a slight decline falling to 281K.   Once again, this is the lowest level for the four-week moving average in more than 14 years.  As we noted last week, on a population adjusted basis it is the lowest reading since 1968.

On a non-seasonally adjusted basis (NSA), initial claims rose 14.1K this week to 270.2K from last week's reading of 256.1K.  For the current week of the year, NSA claims haven't been this low since 2000.  Compared to the average reading for this week of the year, NSA claims were 85K below the average for the current week going back to 2000.

Wednesday
Oct292014

S&P 500 1.72% From a New All-Time High

A few weeks ago, that 10% correction everyone has been looking for was within an arm's length.  After a huge v-shaped bounce back, the S&P 500 is now just 1.72% from making another all-time high.  Below is a look at where the ten S&P 500 sectors stand in relation to their 52-week highs.  As shown, Energy remains the farthest away at 13.96%, followed by Materials and Telecom at just over 7%.  The four big cyclical sectors (Consumer Discretionary, Financials, Industrials, Technology) are all between 2-3% away from 52-week highs, while three sectors (Utilities, Consumer Staples, Health Care) actually made 52-week highs earlier today.

Below is a look at where the ten S&P 500 sectors now stand in relation to their 50-day and 200-day moving averages.  As shown, just two sectors remain below their 50- and 200-days -- Energy and Materials.  The rest of the market has gained back both of these key trend indicators.

Wednesday
Oct292014

Crude Inventories Keep Piling Up

Crude oil inventories increased less than expected last week (2.061 mln vs. 3.650 mln barrels), ending what seems like a litany of larger than expected increases.  In spite of the smaller than expected increase in stockpiles, crude oil inventories keep piling up.  Over the last four weeks, we have seen a total increase in inventories of 23.11 mln barrels.  That is the fifth largest four-week increase since 1983, and the largest four-week increase since February 2009.  As shown in the chart below, it is typical for inventories to increase at this time of year, but the magnitude of the increase this year has been larger than average.  As a result of the uptick, crude oil inventories are back near their highest levels of the year relative to average.

While crude oil inventories saw a smaller than expected build in stockpiles, gasoline inventories saw a larger than expected decline (-1.236 mln vs. 0.9 mln barrels).  In contrast to crude oil inventories, which have been above average all year, gasoline stockpiles have been tracking their typical seasonal pattern in 2014, and they're currently right inline with their historical average.

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