Tuesday
Aug052008

Stock Performance Since Earnings

We recently calculated the performance of all US stocks since the open following their most recent earnings reports.  This takes out the initial reaction to earnings reports in after-hours and pre-market trading and highlights how investors have treated shares post earnings.  As shown below, stocks in the Energy sector have averaged a decline of 6.73% since they've reported earnings, which is by far the worst of the ten major sectors.  Financials and Consumer Discretionary have performed the best since reporting earnings.  So even after their initial reaction to earnings reports, investors have remained bullish on the two sectors that have seen the biggest declines in earnings growth this quarter.  Clearly investors are focusing on what they expect to happen going forward and not was has already been reported.

Sectorsinceopen

Below we highlight the individual stocks that have seen the biggest gains and losses after their initial reaction to earnings.  CAL, WB, USB, CDI and IMCL have been the best, while ELN, TRS and GAP have been the worst.

Upmosteps

Downmosteps

 

Tuesday
Aug052008

An Equal Opportunity Rally

With a gain just shy of 3%, today's rally was an equal opportunity advance, as all ten S&P 500 sectors rose by at least 1%.  Since the onset of the credit crisis in February 2007 (when HSBC was one of the first to disclose losses from bad real estate loans), today's advance is the tenth occurrence where every sector gained more than 1%.  Below we highlight each occurrence along with the S&P 500's performance during the following day and week.  On the following day, the S&P 500 has declined five out of nine times, but over the next week the returns are more positive, with an average gain of 0.79% and up six out of nine weeks.

Ten_sectors_up_2   

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Tuesday
Aug052008

Consumer Discretionary Worse Than Financials

With second quarter earnings season about 3/4 over, it's interesting to note that declines in the Consumer Discretionary sector are now worse than the declines in Financials.  As shown below, year-over-year earnings growth for the Consumer Discretionary sector is currently at -86.7% for the second quarter, compared to -81.7% for Financials.  Thank you GM and Ford!  These are the only two sectors seeing negative growth, but they are big enough to put the entire S&P 500 at -20.2%.  Technology has seen the strongest YoY growth at 19.5%, followed by Energy, Health Care and Consumer Staples.

Yoyepsgrowth

At the start of earnings season, estimates for the Consumer Discretionary sector were for YoY declines of -19.9%.  For the entire S&P 500, actual earnings declines are currently double the expectations on 6/27.  On a positive note, all other sectors except for Energy have actually seen stronger than expected earnings growth this quarter. 

Yoyepsgrowth1_2

   

Tuesday
Aug052008

Baltic Dry Index Down 17 Days in a Row

The Baltic Dry Index has now declined for 17 straight days and hasn't had an up day since early July.  Since its peak in the Spring, the index is now down more than 30%.  Given that the index measures tanker shipping rates, falling prices are considered a sign of global economic weakness, while rising rates are considered signs of strength. 

In the present situation, however, the interpretation is a bit more tricky given the actions by the Chinese government to shut down factories ahead of the Olympics.  Some expect these rates, as well as the prices of other commodities, to pick up once the Olympics pass and factories begin to open back up.  While it sounds like a plausible explanation, is the market really that shortsighted that it hadn't already priced in a two-week event that has been on the radar for seven years now?

Baltic_dry_0805

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Tuesday
Aug052008

Recent Fed Days

Below we highlight the performance of the S&P 500 on the day of and week following Fed days since they stopped hiking rates back in August 2006.  As shown, the average performance of the S&P 500 on rate decision days has been 0.47% since 8/06, with positive returns 10 out of 17 days.  However, the index has averaged a decline of 0.45% in the week following Fed days.  On the last Fed day on June 25th, the market was up 58 bps on the day, but down 4.57% over the next week.

Fedfunds804_2

Tuesday
Aug052008

Oil Approaching Bear Market Territory

With another drop of nearly $3 this morning, oil is now down 18.3% from its closing high on July 3rd.  In order to hit the 20% threshold for a bear market, oil needs to break $116.23.  While consumers will take any relief they can get, even if it breaks $116, oil would still be up 21.1% year to date and 61.3% over the last year.

Oil_080508

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Monday
Aug042008

Struggling ETFs

An article in this weekend's Wall Street Journal about ETFs with dwindling market caps caught our attention.  More and more ETFs seem to be trading hardly any volume these days, and many have already liquidated or announced plans to liquidate in the future.  As Wall Street usually does with everything, it seems to have gone overboard with ETFs, creating too many too fast.  Eventually only the biggest and strongest will survive.

We looked at more than 700 US ETFs and ETNs to see which ones are struggling the most with low market caps and volume.  The average market cap of all ETFs we looked at was about $816 million, but 131 (about 18%) have market caps lower than $10 million.  The market cap of the largest ETF, SPY, is also greater than the sum of the market caps of the smallest 596 (84%) ETFs.  Talk about income inequality!  The article notes that anything less than $50 million "probably loses money for the firm that sponsors it."  With that in mind, the ones below are probably in the biggest trouble.  As shown, the Healthshares ETFs make up the majority of the list of ETFs with the lowest market caps.  Some of these average less than 100 shares a day (HHT, HRW).  We also filtered the list to get rid of the Healthshares ones.  The ETFs in the second table below have the lowest average 30-day volume with market caps less than $5 million (ex-Healthshares).  As shown, SSK, GCE, MZN and WSI top the list, with average volumes of less than 600 shares a day.

Just because an ETF specializes in a strategy that seems attractive doesn't make it a good investment.  In additions to fees, it's important to take volume and liquidity into account for ETFs just as it is for all asset classes.  It's never good to get stuck holding something because the spreads are so wide or the bids just aren't there at all, and with a lot of ETFs trading less than 1,000 shares a day, it's easy to run into this problem if you're not careful.

Etfsmallest

Etfsmallest1

Monday
Aug042008

Investor Presidential Survey

Last week we asked Bespoke readers for their thoughts on the Intrade contracts for a McCain or Obama Presidency.  McCain's contract was trading at 38.7, while Obama's contract was trading at 59.8.  We wanted to know which one readers thought was a better buy at those prices.  As shown, McCain at 38.7 beat Obama at 59.8 by 8 points (54% vs 46%).

Obamamccain_3

While those in finance are generally thought to be more conservative, high-profile figures on Wall Street have supported the Democrat this year by a wide margin over Republicans (see Gasparino's take in the NY Post today).  While polls of all Americans have Obama tied to slightly ahead of McCain, we want to know who investors are rooting for.  Please take part in the poll below to let us know who you support for President.  We'll conduct the poll every week until the election.


Who would you vote for if the US Presidential election were held today?
McCain
Obama
Other
Neither
  
Free polls from Pollhost.com

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Monday
Aug042008

Oil Headlines

This morning investors were greeted with news that Iran was once again acting defiant, Nigerian militants had kidnapped French sailors, and a tropical storm was churning in the gulf.  You would think that all this news would be enough to move oil at least $5, and you would be right.  Except that the $5 move hasn't been up, but down!  With oil breaking below $120, the commodity is inching closer and closer to the official bear market threshold at $116.32.

Headlines_080408

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Monday
Aug042008

Global Stock Markets

Ghana's stock exchange has been the best performing of the 84 countries listed below year to date (local currency).  Ghana is followed by Lebanon, Qatar, Oman, Kuwait, Tunisia and Costa Rica on the upside.  Morocco, UAE, Ecuador, Venezuela, Slovakia, Jamaica and Bahrain make up the rest of the 14 countries that are positive so far this year. 

With just 14 countries in the black this year, 83% are in the red.  Vietnam leads the declines at -52.6%, but China isn't too far behind with a decline of 47.89%.  On the eve of the Olympics in Beijing, China's poor stock market performance has not been talked about much in recent months.  China is followed by the Ukraine, Bulgaria, Ireland, Romania and Greece.  The unweighted average decline for the 84 countries below is -15.04% year to date.  At -14.69%, the S&P 500 is doing just slightly better than the average this year.

Globalstockperf

Monday
Aug042008

Best and Worst Performing Stocks Seven Months Into 2008

We're now well into the back half of 2008, and below we highlight the stocks that have managed to buck the market downtrend this year and see big gains.  Twenty-six stocks in the Russell 3,000 are up more than 100% this year, with Finish Line (FINL) leading the gains at 348%.  FINL is followed by James River Coal (JRCC) at 246%, Idenix Pharma (IDIX) at 217%, and Alpha Natural Resources (ANR) at 210%.  JRCC had been the top performer, but it has come in significantly since we posted on it in June. 

Bestytd

Sixty-five percent of the stocks in the Russell 3,000 are down year to date, but the ones below are down the most.  RH Donnelley (RHD) leads the way at -96%, followed by GHS, IAR, DSL, LNG and CROX.  As the year comes to a close, the questions for these companies will not be how much they're down, but if they're still around. 

Worstytd

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Friday
Aug012008

This Week's B.I.G. Tips Reports

Below we provide the titles of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money.

This week's B.I.G. Tips reports: Week in Review (our widely followed weekly newsletter on the markets), Earnings Estimate Revisions (stocks with the biggest increases and decreases in analyst estimates), Stock Ratings (a look at the most and least loved stocks from the major financial websites), July Headlines (key events impacting the market this month and this year), 1% Days Becoming the Norm (analysis of prior periods where their was a high frequency of 1% days), Global Bank and Broker CDS Index (a look at the default risk of banks and brokers), First and Last Day of the Month (historical analysis of market performance on the first and last day of the month), The New Baby Boom (stocks poised to benefit from the new baby boom), Housing Futures See Upside (analysis of most recent Case Shiller figures), Up Days in Bear Markets (How does the market perform following big days during bear markets?), Capital Raised in the Financial Sector (performance of financial firms which have raised capital), Bear Market Valuations (historical analysis of market valuations during bear markets), August Seasonality (How does the market typically perform during the month of August?)

Friday
Aug012008

Guess The Dow With Bespoke's Prediction Poll

Where do you think the Dow Jones Industrial Average will close on August 8th?  Please enter your prediction by taking part in the poll below.  Predictions must be in by this Sunday at midnight.  The person with the closest answer will receive one free month of the $40/month Bespoke Premium service.  Thanks for participating!









Where will the DJIA close on Friday, August 8th?
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Friday
Aug012008

General Motors (GM) $15 Billion Q2 Loss

Besides this morning's July Employment report, the other main headline of the day is the $15.5 billion loss from General Motors (GM).  To put this in perspective, with a market cap of $6.3 billion, this loss represents about 2.5 times the net worth of the company!  Not only is this number bad for GM, but it will also cause Q2 earnings for the S&P 500 to take a big hit as well.

Friday
Aug012008

Second Worst Month For Commodities Ever!

Commodity investors were probably just as happy to see July end as equity investors were to see the end of June.  During the month, the CRB Commodities Index recorded a decline of 10.0%, which is the worst monthly decline since March 1980 (10.5%) and the second worst decline ever!  Below we highlight a long term chart of the CRB commodity index since 1960, with each of the red dots indicating the only two monthly declines of 10% or more.

Crb_commodities_index

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