lt's not often that a largecap stock like American Express gaps down as much as it is in the pre-market this morning. Yesterday after the close, the company announced a fourth-quarter writedown of $275 million to cover customer defaults. The stock is currently trading down 6.62%, which would be the biggest down gap since 9/17/01. Below we highlight all AXP opens of -5% or more since 1990, along with how the stock performed from the open to the close.
We regularly track a variety of sentiment and confidence indicators to get read on what other investors are thinking. Whenever sentiment goes too far to one extreme, it is time to look for a move in the opposite direction. With that being said, a look at the current state of various sentiment measures shows that investors, and the public overall, are looking at the glass as less than half empty. Below we highlight some of the more widely quoted sentiment and confidence measures. As the chart illustrates, with the exception of the Investor's Intelligence Bullish Sentiment, all of the indicators we track are at or very close to their lows of the last year.
While sentiment is currently negative versus its short-term range, we also noticed that bullish sentiment among individual investors is in a much longer term downtrend. Below we highlight the historical range of the AAII weekly survey which shows the percentage of bullish investors. While the indicator generally trended higher from 1988 through 2002, since then the trend has clearly been down.
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We recently broke the S&P 500 into deciles (50 stocks in each decile) based on a stock's institutional ownership. When then calculated the average year to date performance of each decile. As shown in the chart below, the decile of stocks with the highest institutional ownership is by far down the most. The two deciles of stocks with the least amount of institutional ownership are holding up the best year to date. Clearly, institutions are unwinding positions. This is probably due to a combination of increased bearishness, investor redemptions, and a decrease in the amount of leverage allowed.
We have just updated our earnings calendar to show earnings reports from 1/10-1/25.
In order to help you stay on top of earnings season, Bespoke has created an in-depth calendar that highlights over 2,000 US stocks due to report in the next month and a half. The calendar is more advanced than typical earnings calendars because it includes detailed information about each stock's historical reports. We looked at each company's quarterly reports going back to the end of 2001 and calculated the percentage of the time the company has beaten or missed EPS and revenue estimates as well as guided higher (we only provide beat rates for companies that we have at least 8 historical report dates for). In addition, we also provide the average one-day price change following earnings reports to highlight how the stock typically trades on earnings. The average absolute one-day price change is included as well to highlight the stock's volatility in reaction to earnings.
Bespoke will continuously update its earnings calendar to show the next two weeks worth of earnings reports. However, if you sign up for our www.BespokePremium.com service, you will receive a more in-depth interactive file of the entire earnings season calendar that is sortable by stock and all other categories.
To access the basic Bespoke Earnings Calendar, click the button below or at the top right of this page. For the premium interactive calendar, subscribe at www.BespokePremium.com.
As shown in the chart of China's Shanghai Composite, the index recently held its long-term uptrend, made a double bottom, and broke its short-term downtrend.
While Chinese equity markets have held up well and are up for the year, many Chinese ADRs trading on US exchanges have been hit hard. As shown, CSUN is down 26%, GRRF is down 19.5%, CNTF is down 19% and TSL is down 18.6%. Currently, 72% of the Chinese ADRs that we track are down for the year. Have these ADRs been unjustly punished because they are trading on US exchanges?
Below we highlight the trading range charts of the S&P 500 and its ten major sectors. When the price trades below the green zone, it has reached extreme oversold territory and vice versa for the red zone. As shown, the S&P 500 is trading well below the green zone, but it also broke below the August and November lows, signifying a shift from a range bound market to a downward trending market.
Some sectors look like death while some look great. Financials and Consumer Discretionary continue their downtrends, but they are trading at the bottom of their downward channels, and a bounce to the top of their channels should come soon. Unfortunately, Industrials and Technology recently broke key support levels, but they remain very oversold as well. On the positive side, Energy, Consumer Staples and Utilities look great.
Since Alcoa's (AA) quarterly report kicks off earnings season, we figured we would highlight it as an example of our Bespoke Interactive Earnings Report Database. Below is a snapshot of the "Stock Query" lookup in the Earnings Database. Entering the ticker AA brings up all of Alcoa's historical reports going back to 2001. It highlights how the stock did versus earnings and revenue estimates, forward guidance, and the stock price reaction on the first trading day following the report. It also summarizes the typical earnings report for the stock and the average performance when it gaps up or down on earnings or beats or misses estimates. Our database can run this query on over 2,500 stocks.
Currently, Alcoa is up about 60 cents in pre-market trading. Historically, when the stock has gapped up on earnings, it has averaged a decline of 1.42% from the open to the close.
Want to know how stocks in your portfolio typically react to earnings? Please email email@example.com or call 914-315-1248 to inquire about the Bespoke Earnings Report Database.
With earnings estimates for companies getting cut sharply over the past month, we set out to find the few that have actually seen increases in earnings expectations. Below we highlight stocks from the Bespoke Earnings Calendar that are reporting between now and February 7th that analysts have raised estimates on over the past month. As shown, STT has seen its earnings per share estimates rise 27 cents to $1.31 over the past 4 weeks. With so much negativity out there, a premium will be put on the few bright spots out there this earnings season.
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As we write this, the markets are gyrating faster than the gravitron. But with the S&P 500 in a clear downtrend and recession fears now worrying main street, the probability of a bear market is increasing by the day. For us to reach a bear market, however, take the way you've felt over the past month and double the pain. The S&P 500 is currently trading 11.58% below the highs made on 10/9/07 (exactly 5 years from the day the market bottomed on 10/9/02). To reach bear market status, it needs to fall another 9.5% to 1,252.12. The index is currently trading at extreme oversold levels, and we expect a short-term rally. However, it is probably wise to play the downtrend (sell at the top of the downward channel and buy at the bottom) until it is broken.
Many of us have had those moments where after a crazy night, we wake up the next morning saying, "What was I thinking? Did anyone see me doing that?" If you have had one of those moments, you can certainly sympathize with the actions of strategic investors. Below we highlight some of the recent high profile strategic investments in the financial sector, and how those investments have fared since they were consummated. In August, Bank of America (BAC) invested $2 billion in CFC when the stock was at $18. Today, CFC traded under $5!
On a more serious note, however, the performance of these investments highlights some important points. First, these investors are regarded as some of the best in the world. If they are having a hard time making money in this environment, it shows how treacherous a market we are dealing with.
The second point regards the Fed. While the Fed worries about rising prices in food and energy (of which it has little control), two of the biggest and most important sectors of the economy, financials and housing (of which it has more control), are in deflationary spirals. Financials, which made up 22% of the S&P 500 at the start of 2007, now make up less than 17% of the index.
From the Bespoke Interactive Earnings Report Database, we filtered stocks with at least 20 quarters worth of earnings report data to find the ones that have beaten or missed earnings per share estimates the most often. These are key data points for stock owners to know, because they affect the sentiment and price reaction of stocks on their earnings report days.
While it is fundamentally positive for a company to consistently beat earnings estimates, it also creates high expectations for future earnings reports. If a stock has beaten estimates 100% of the time over the past 5 years, an earnings miss will most likely impact the stock more on the downside than a stock that beats only 50% of the time. Conversely, if a stock is known to miss estimates quite a bit, an earnings beat will most likely impact the stock more on the upside than one that beats estimates all of the time.
As shown below, 7 stocks in our database have beaten estimates 100% of the time since 2001 -- COH, UNH, SYMC, TRMB, COLM, LLL and YUM. Stocks that have missed the most include CFC, CCI, OSTK, AA, CAT, WFC and CVX. Expectations for these companies aren't very high.
The NYSE updates its short interest numbers twice a month, and below we highlight the most up-to-date list of stocks with the highest short interest as a percentage of equity float. As shown, the list is filled with homebuilders, mortgage companies and financials. BZH leads the list at 83%, followed by HOV (76%), NFI (75%), FED (69%) and SPF (67%). With the exception of NFI, every stock on the list is down this year, and in most cases, down significantly. When the market finally to decides to have a rally, expect these names to get a nice bounce. But don't get greedy -- if you're able to register some gains, be ready to exit quickly.
Below we highlight the year to date returns of the major indices for a number of countries. As shown, US indices are leading the declines, with the Nasdaq already down 8%. BRIC countries (Brazil, Russia, India, China) are holding up relatively well, as Russia, India and China are actually in the black for the year.
Looking at various asset classes, US equities and real estate are leading the declines. The Dow Jones Real Estate index is down 10% and the S&P 500 is down 5.3%. Volatility is leading the way, up 13%, followed by Gold (+5.9%), the 10-Year (+1.93%) and Oil (+1.04%).
On a sector basis, Technology stocks are down the most at -9.96%. Tech is followed by Financials, Consumer Discretionary and Industrials. The two sectors up on the year are Utilities and Health Care. If one were to draw up the likely performance of sectors and assets leading up to or during a recession, it probably couldn't get more similar than what is actually happening now. But like Obama's 95% odds of winning the New Hampshire primaries on Intrade yesterday, markets can get it wrong.
The Nasdaq is now down 14.64% from highs made on 10/31/07. For it to fall into a bear market, it needs to drop another 153 points from its current level of 2,440 to 2,287. Looking at our trusty desk calendar, based on the 162 point decline the index has had over the last 3 days, we could be there by Friday!
Yesterday, we highlighted that even though the Nasdaq was down 7 days in a row, it didn't mean we were due for gains on day 8. Now that the index is down 8 days in a row, however, the chances for gains tomorrow are better. Historically, the index has averaged a gain of 9 bps (median of 0.40%) on day 9 after declining for 8 consecutive days. And it has gone up on day 9 each of the last 8 times this has happened for an average gain of 72 bps. Hopefully the carnage can at least be stalled for one day!
Below we highlight the year over year quarterly earnings growth estimates for the S&P 500 and its 10 sectors from Q4 '07 through Q3 '08. While the S&P 500 is expected to see a 4th quarter decline in earnings of 8%, it's important to note that the only sector expected to see a 4th quarter decline is Financials. This holds true for the first 3 quarters of 2008 as well. Utilities, Energy, Technology and Telecom are all expected to have earnings growth of 15% or more in the fourth quarter. Even though many sectors are expected to see double-digit gains this earnings season, the negativity towards Financial earnings has caused overall sentiment to become bearish as well. We believe this excess negativity could be bullish for markets over the coming weeks if sectors ex-Financials can report inline or slightly better than expected.