Monday
Jul072008

Hopes for a Second Half Recovery Fading

As we highlighted earlier, analysts are expecting second quarter earnings to show an 11.2% year over year decline.  While consensus estimates throughout the first half of the year were calling for a second half recovery, these numbers as well as trends in recent analyst revisions show that hopes for a rebound in the second half of the year appear to be fading.  In our weekly look at analyst EPS revisions for the stocks in the S&P 1500, we found that over the last month, analysts have raised EPS forecasts for 375 companies, but lowered forecasts for 608 companies.  As shown in the chart below, this net differential of -233 (-15.5%) is the weakest reading we have seen since the end of April.

Net_earnings_revisions_070708_2

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Monday
Jul072008

Second Quarter Earnings Expectations

With earnings season starting this week, below we highlight the current estimated second quarter earnings growth for the S&P 500 and its ten sectors.  As shown, Financials and Consumer Discretionary are once again expected to drag down the index as a whole.  Financials are expected to see earnings decline by 60.1% versus the second quarter of 2007, while Consumer Discretionary earnings are expected to drop 23.5%.  The index as a whole is expected to see earnings decline by 11.2% versus Q2 '07. 

But all is not expected to be bad.  In fact, seven of the ten sectors are still expected to see earnings growth in Q2 '08 versus Q2 '07, with Energy at the top of the list at 25.4%.  Technology trails Energy at 13.1% growth, followed by Consumer Staples (8.5%), Health Care (4.9%) and Industrials (3.3%).

Epsgrowth

For those interested in specific stocks, below we highlight ones in the S&P 500 that have seen the biggest increases and decreases in earnings estimates for the current quarter over the last month.  As shown, TEG has seen its earnings estimates increase by nearly 37 cents.  COP and CVX trail TEG at $0.30, and other names on the upside list include XOM, AIG, EOG, EK, X and GS.

The list of stocks with the biggest decreases in earnings estimates is littered with Financials, including MER, C, LM and LEH.

Epsgrowth4wk

Epsgrowth4wk1

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Sunday
Jul062008

Bespoke in Barron's

BarronsbearFor those interested, one of Bespoke's recent Premium reports was featured in the Barron's cover story this weekend by Randall Forsyth.  Please click the link below to view the article.

The Bear's Back (Barron's subscription)

The Bear's Back (on MarketWatch)

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Thursday
Jul032008

Bespoke's July 4th Prediction Poll

The winner of last week's Bespoke Prediction Poll guessed that the Dow would close the week at 11,285.5 -- just 0.02% percent from today's actual close of 11,288.54.  Congratulations on the prediction and winning one free month of the Bespoke Premium service!  Please enter your prediction for where the Dow Jones Industrial Average will close next Friday.  The index is currently trading at 11,288.54.  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, July 11th?
E-mail Address: *

* Required

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Thursday
Jul032008

Bespoke Readers on the Market, Oil, Housing and the Election

On Tuesday we asked Bespoke readers for their thoughts on the market, oil, real estate and the election in the second half of 2008.  Based on the results, it looks like the consensus is looking for higher stock prices, lower oil prices, lower real estate prices, and Barack Obama as the next President.  Contrarians would take these results as a hint to continue selling stocks and go long oil, however, we consider Bespoke readers the "smart" money!

Spxhigherlowermid

Oilhigherlowermid

Homepricesmid

Obamamccainmid_2

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Thursday
Jul032008

At Least We Won't Have a Late Afternoon Sell Off

Looking at the bright side, given the early close today, at least we won't have a late afternoon sell off in the Dow.  Although with the market staying open until 1PM, there's still a chance for a brief afternoon decline.  If you are reading this in the US, have a Happy Fourth of July.  Otherwise, enjoy the weekend.

Dow_intraday_0703

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Thursday
Jul032008

Central Bank Rates: US vs Euro

With today's 25 basis point increase in the ECB's benchmark interest rate, the spread between central bank rates in the US and the Euro region is now at its widest level since the ECB's inception in 1998.  While some will argue that the ECB is being too hawkish in the face of a weaker economy, given that their sole mandate is on price stability, the strength or weakness of the economy is of little concern to them.

Fed_funds_spread_vs_ecb_3   

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Wednesday
Jul022008

Bin Laden Comment From '01

The Drudge Report today pointed us to this article from the New York Times back in October 2001.  The key quote from the article is below:

''If bin Laden takes over and becomes king of Saudi Arabia, he'd turn off the tap,'' said Roger Diwan, a managing director of the Petroleum Finance Company, a consulting firm in Washington. ''He said at one point that he wants oil to be $144 a barrel'' -- about six times what it sells for now.

With oil now trading at $144, bin Laden looks to have gotten his wish.  Pretty incredible.

Wednesday
Jul022008

It's Still All About Oil

Earlier in the week we highlighted a chart of the intraday performance of oil and the S&P 500 last week, which showed how each up (or down) move in oil was met with an opposite move in the S&P 500.  Looking at the relationship between oil and the S&P 500 this week shows that it's still all about oil.

Oil_vs_sp_500

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Wednesday
Jul022008

Coal and Steel Stocks Take A Hit

Coal and mining companies have been some of the top performing stocks this year, but since the start of July (1 and a half trading days), many of these names have gotten hit with declines of 10% or more.  As shown below, Massey Energy (MEE), which was the top performing S&P 500 stock at the end of the second quarter, is down 14.05% in July.  James River Coal (JRCC), which was the top performing Russell 3,000 stock at the end of June, is down 13.43% in the last two days.  This big selloff in the top performing names indicates that money managers and other institutional investors were most likely holding onto these names for window dressing purposes through the end of the quarter, only to take profits in them at the first chance they had.  Investors that have been waiting to get into these names on a pullback might want to take a look at them now.

Coalmining_2

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Wednesday
Jul022008

Bespoke's Sector Snapshot

Below we highlight our trading range charts of the S&P 500 and its ten sectors.  Moves into or below the green shading represents an oversold reading (red=overbought). 

The S&P 500 is walking on thin ice right now, barely holding support levels made from the March lows.  If it breaks support, the index will resume the long-term downtrend that has been in place since 2007.  Unfortunately, Financials, Industrials, Consumer Discretionary, Consumer Staples and Health Care haven't been able to hold their March lows.  It's going to take a lot of work on the upside to get these sectors out of their downtrends.  While Technology, Materials and Telecom haven't broken their March lows, they are in extreme oversold territory.  Utilities and Energy are the only sectors holding onto uptrends.

Sectorte

Finlindu

Inftenrs

Condcons

Hlthmatr

Utiltels   

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Wednesday
Jul022008

Global Financial Performance

As of yesterday, just 11.6% of the stocks in the Bloomberg World Financial index were up in 2008.  At least some are up!  Below we highlight the best and worst performing stocks in the index year to date.  As shown, a Chilean financial firm is up the most at 225%, followed by Climate Exchange in Britain at 92%.  There are multiple financial firms in the Middle East on the list of winners as well.  Surprisingly, the US does have some representation on the positive list.  Oritani Financial out of New Jersey and Dime Community Bank of New York are both up about 30% on the year, while Capitol Federal (out of Kansas) is up 23.8%.

Worldfinancialsup

There's much more pain on the downside than there is joy on the upside for Financials.  While just 11% of global financials are up on the year, 16.6% are down more than 50% on the year.  Below we highlight the ones down the most.  As shown, the US has a lot more representation on this list than the one above.

Worldfinancialsdown 

Wednesday
Jul022008

Groundhog Day in Japan

Last month, we highlighted the streak of 25 straight down days in Vietnam's benchmark stock index (it is now running an eight day streak of positive returns).  Currently, Japan is working on its own streak of days with negative returns.  Over the last ten trading days, the Nikkei 225 has finished the session down every single time for a total loss of 8.1%.  Since 1970, this is the index's third streak of ten negative days.  In each of the prior two periods, the Nikkei managed to have an up day both times, and it was also positive over the next week.

Nikkei_10_day_losing_streaks_2

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Tuesday
Jul012008

Lampert's Bet on CIT Group and Housing

Yesterday's Wall Street Journal had an article highlighting that Eddie Lampert has recently placed bets on a housing recovery.  Some of the housing-related names that Mr. Lampert's hedge fund (ESL Investments) held at the end of the first quarter included CIT Group, PHH Corp, Centex and KB Home.  While these are housing-related names, none of them made up more than 1% of the portfolio at the end of the first quarter (this doesn't include HD because he's held that one for awhile).  As shown below, SHLD makes up 58% of the fund, followed by Autozone (22%) and Autonation (AN).  While it is indeed a bet on housing, it's not yet a very big one.

Eslinvestments613_2

   

Tuesday
Jul012008

Average Stock Distance From 52-Week Highs

Average_distance_0701While investors wait for the S&P 500 to hit the official 20% threshold for a bear market, once it does, it will only be telling us what the average stock has been telling us for some time.  As shown to the right, the average stock in the S&P 500 is currently down over 25% from its 52-week high, while the average stock in the S&P 1500 is down closer to 30%.

On a sector by sector basis, Consumer Discretionary stocks are the furthest from their 52-week highs with an average decline of 36.3% (the half off sale is looking like it's right around the corner), followed by Telecom Services and Financials.  Don't be misled by the fact that Financials are only the third worst though.  Since this was the first sector to feel the credit crunch, many of these names started their descent over a year ago, so their 52-week highs are lower than their highs from 2007.  As far as sectors that are holding up the best, Energy stocks unsurprisingly top the list with an average decline of only 15.9%, followed by the 16.7% decline in the Utilities sector.

Average_distance_0701_sector