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.

Tuesday
Oct282014

Confidence Inequality

This morning's Consumer Confidence for the month of October came in significantly ahead of forecasts, coming in at a level of 94.5 on the headline reading compared to expectations of 87.0.  This month's reading represented a 5.5 point jump from a revised September reading of 89.0 (originally reported at 86.0).  This month's 7.5 point upside surprise represents the biggest beat relative to expectations since February 2013, and the 14th largest upside surprise since 2000.  At a current level of 94.5, Consumer Confidence remains above its broken downtrend from the 2000 highs, and slightly above the historical average of 93.3 going back to 1967. The last time Consumer Confidence was this high was in October 2007.  Sharp-eyed readers will recall that October 2007 also marked the peak of the last bull market, but before we go running for the hills, back then Consumer Confidence was already on a downtrend rather than an uptrend as it is now.

While overall Consumer Confidence is back above its historical average, depending on your income the rebound in confidence has been extremely uneven.  The chart below compares Consumer Confidence for US consumers based on income with the red line showing confidence for consumers with annual incomes greater than $50K and the blue line showing confidence levels for consumers with incomes between $35K and $50K.  While the two have historically tracked each other relatively closely, in the current recovery the confidence gap has been steadily widening.  We have highlighted this trend numerous times over the years, but as the recovery has progressed, the gap has only widened.

The final chart shows the spread in confidence levels using a six-month rolling average to smooth out month to month moves.  At a current average spread of 30.8, the gap is now less than a half-point below its all-time record high of 31.17 reached in June.  One would expect that as we get deeper and deeper into the economic recovery, the rising tide would start to lift all boats, but for lower income Americans, the pickup in confidence has been under pressure.  Anyone reading the papers in the last several months has read about the widening gap between the rich and poor, and these numbers show how it has impacted confidence.

Monday
Oct272014

Most Heavily Shorted Stocks Still Underperforming

Short interest figures for the middle of October were released after the close on Friday, and earlier today we sent out our regular Short Interest update to clients highlighting the major trends in the data.  The table below is from the report and it lists the 29 stocks in the S&P 1500 that have the highest short interest as a percentage of float as well as their performance so far this month.  

As has been the case for the last several weeks now, stocks with the highest short interest as a percentage of float have been underperforming the overall market by a wide margin.  While the S&P 1500 was only down fractionally (-0.26%) on the month through Friday, the average return of the stocks listed below is a decline of 5.17% (median: -3.20%).  Additionally, of the 29 stocks listed, only 11 are up this month, while 18 are down, and for the most part down big.  Of the 18 stocks that are down on the month, half of them are down more than 10%, with two, both from the Energy sector, down by more than 30% (Swift Energy: SFY and Penn Virgina: PVA).  The way things are going for stocks with high levels of short interest, short-sellers are entering the last two months of 2014 on a positive note.

Monday
Oct272014

Bulls in Charge

Bullish sentiment in our weekly Bespoke Market Poll came in at 60% over the weekend, down one point from last week's reading of 61%, but still elevated compared to an average reading of 51% since we began running the poll at the start of 2012.  After four consecutive sub-50% readings during the month of September, sentiment has been above 50% for four straight weeks in October.  Given the volatility and sharp declines we have seen this month, it's surprising (and worrisome) to see such optimism from investors.

Friday
Oct242014

S&P 500 Higher or Lower from Here?

The market bounced this week and bounced hard, with stocks soaring off of last week's lows.  Does the bounce continue or are we headed lower next week?  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!

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
Oct242014

Nasdaq Back Above Its 50-Day Moving Average

The Nasdaq Composite regained a major technical level today as the index closed at 4483.715, almost 4 points above its 50-day moving average, which currently sits at 4479.89.  In the space of about a week, we've seen the Nazz move from well below its 200-DMA to above its 50-DMA, a move that has been incredibly violent, even relative to previous v-shaped bounces shown in the chart below.

Sign up for a Bespoke Premium subscription today to check out our just published Bespoke Report newsletter, which contains our thoughts on last week's sell-off and this week's bounce back.  It's can't miss weekend reading!

Friday
Oct242014

Key Earnings Reports Next Week

Below is a table of major earnings reports next week.  During earnings season, each edition of The Bespoke Report includes analysis of how earnings are progressing and what to look forward to in the coming week.  Sign up for a five-day free trial now to get this week's Bespoke Report in your inbox tonight!

Next week we see big reports in Health Care (MRK, PFE, HCA, ABBV, GILD, AGN), Tech (TWTR, FB), Energy (APC, MCK, PSX, COP, XOM, CVX, FCX), and Financials (V, MA, MET).  Earnings season is currently coming in fairly strong for EPS but revenues have lagged estimates thus far, despite growing over 5% year-over-year.  We've seen relatively few Energy names report so far, so next week will be interesting given the chaos in the sector since oil began to sell off in earnest at the end of the summer.

Have a great weekend!

Friday
Oct242014

Biotech Laps the Internet

The Nasdaq Biotech and Internet groups were the two market leaders in 2013, and they both experienced massive corrections from February through April of this year.  Below is a check-up on the performance of the two groups.  As shown, both groups bottomed around the same time earlier this year, but Biotech has run circles around the Internet group over the last couple of months.  Today's sharp breakout higher for Biotech is in stark contrast to the weakness seen in the Internet group lately. 

Since the start of 2013, Biotech is up 110.4%, while the Internet group is up 59.5%.  Biotech has essentially lapped the Internet group at this point.  Let's see where these two groups head over the final two months of the year.

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