Feb 24, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“I never look at where a candidate has gone to school. Never!” – Warren Buffett
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
It’s been a tough couple of days for bulls as the S&P 500 pulled back over 2% Thursday and Friday after hitting record highs the day before. Bulls will look to make a stand this morning, but the real tell will be to see how much staying power they have. It’s a quiet day for earnings, but Wednesday will bring about a very important report from Nvidia (NVDA). The economic calendar is also quiet today with the Dallas Fed Manufacturing Business Survey, the only report on the calendar.
The college admissions process has never been more competitive (and it’s harder than ever for the richest Americans to bribe their kids into the top colleges). Still, the quote above from Warren Buffett in this year’s Berkshire Hathaway annual letter should provide comfort to any high school seniors (or their parents) who didn’t get into their first choice. That line is only one of many parts of what has become required reading over the last few decades. Another good one: “Businesses, as well as individuals with desired talents, however, will usually find a way to cope with monetary instability”.
Berkshire’s annual letter also serves as a reminder of what a money-making machine the company has been over the last 60 years. The first chart below shows the annual percentage change in market value of Berkshire Hathaway versus the S&P 500 from 1965 to 2024. As the company has become larger over the years, its margin of outperformance versus the S&P 500 has narrowed as the company has become so large that it’s harder to move the needle on a relative basis. Back in the 1970s and 1980s, though, the size of some of the blue bars dwarfs the red ones.
In Buffett’s first 11 years at the helm of Berkshire, the company ‘only’ outperformed the S&P 500 in six years, but from 1976 to 1983, the company outperformed for an epic eight straight years taking its cumulative percentage of years of outperformance above 70%. Since then, the pace of outperformance has leveled off with time, and through 2024, Buffett has outperformed the S&P 500 in two-thirds of all years.
Outperforming in two-thirds of all years may not sound all that impressive at face value, but like a snowball, it adds up. The chart below shows the cumulative total return of the S&P 500 and Berkshire since 1965. The S&P 500’s cumulative gain during this period is over 39,000%, but it’s barely noticeable compared to Berkshire’s gain of more than 5,000,000%!
Given its size, it has become more difficult for Berkshire to significantly outperform the S&P 500, especially during bull markets. However, given the company’s track record under Buffett’s leadership, most investors are willing to give him the benefit of the doubt. With that in mind, the stock’s modest underperformance versus the S&P 500 over the last year hasn’t caused concern for investors. The last two sessions also serve as a reminder that when the times get tough, Berkshire usually hangs in as it only declined 1% relative to the 2%+ decline for the S&P 500.
Feb 21, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“You will become way less concerned with what other people think of you when you realize how seldom they do.” – David Foster Wallace
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
If you’re looking at futures on the Dow, it’s not looking like a positive start to the last trading day of the week. Futures on that index are down nearly half of a percent on news that the index’s second most heavily weighted component – UnitedHealth Group (UNH) – is down over 10% following a WSJ report that the Department of Justice has launched an investigation into the company for its billing practices related to its Medicare Advantage plans. Outside of the Dow, though, S&P 500 futures are flat, and the Nasdaq is on pace to open 0.35% higher.
Overnight, Asian markets traded higher to close the week with broad-based gains as Japanese CPI rose 0.5% m/m versus an increase of 0.6% in December. In Europe, stocks have also bounced back from yesterday’s decline with the STOXX 600 trading up over 0.5% putting it back into the black for the week. The gains come despite some mixed PMI readings where the Manufacturing index came in higher than expected (but still in contraction territory). At the same time, the Services PMI, which was above 50, missed expectations.
The S&P 500 and Nasdaq were down less than 0.5% yesterday, but there were some big moves in individual stocks as some of the market’s highest flyers in recent weeks/months were taken out to the woodshed. Among the largest US banks and brokers, the percentage declines may not have been as large as some of the other market areas, but relative to their normal price moves, the declines were large. Of the six large US banks shown below, all of them were down at least 1%, with four down over 3%; JPMorgan Chase (JPM) and Morgan Stanley (MS) both fell more than 4%.
The moves may have been painful, but putting them in perspective, most of these stocks have seen large gains in recent months. On a six-month chart, they don’t look especially significant. Besides Bank of America (BAC), they were all either at or right near 52-week highs heading into yesterday’s decline.
Feb 20, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“High expectations are the key to everything.” – Sam Walton
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Walmart (WMT) marked the unofficial end to earnings season this morning by reporting slightly better than expected earnings on inline revenues. The company also lowered guidance for Q1 and the full year. As a result of the lowered guidance, the stock is getting pummeled in the pre-market and is on pace to gap down close to 9%. For many high-growth stocks, a 9% gap down in reaction to earnings may not sound extreme, but WMT has historically been a much less volatile stock. Since 2001, its average one-day move in reaction to earnings has been 2.9%, so if current levels hold through the end of the trading day, today’s move would be more than triple its historical average move.
The table below shows prior earnings reports since 2001 when WMT gapped down by at least 5%. It’s only happened five other times, and it has never gapped down more than 8%, so that would put today’s downside gap on pace to be the most negative gap opening in reaction to earnings since at least 2001. As Sam Walton’s quote above says, high expectations are the key to everything, and when a stock like WMT heads into an earnings report trading for over 37 times earnings and lowers guidance, reactions like this aren’t surprising.
For the broader market this morning, S&P 500 futures indicate a decline of about 0.3% at the open and trade near their lows of the day. Today’s weakness, however, comes just hours after the S&P 500 closed at an all-time high yesterday – its third record closing high of the year. The market doesn’t look like it’s done much since its high in December, but YTD, the S&P 500 has managed a rally of over 4%. We’ve seen some weak housing-related data this week, but today’s economic focus will shift to jobless claims and the Philly Fed at 8:30 and leading indicators at 10 AM. Also on the calendar, we’ll hear from various Fed officials throughout the day, starting with Chicago Fed President Goolsbee just after the opening bell.
Feb 19, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“There are no rules here — we’re trying to accomplish something.” – Thomas Edison
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
Asian stocks had a mixed showing overnight with Japan down fractionally, and China’s Shanghai Composite rising by 0.8%. Economic data in the region, though, was weak with Home Prices in China falling 5.0% y/y in January versus a decline of 5.3% in December. In Japan, Core Machinery Orders fell 1.2% on a m/m basis which was well below the forecast of an increase of 0.4%.
In Europe, stocks are trading down for a change as the STOXX 600 is down by over 0.5%. Contributing to the weakness there are both micro and macro factors. On the micro side, a weaker-than-expected earnings report from Philips, where sales came in weaker than expected and guidance was weak, has that stock trading down over 10%. On the macro side, UK inflation for January came in at 3%, which was above the consensus forecast of 2.8%. Core inflation, meanwhile, surged up to 3.7% from 3.2% in December.
Here, futures are modestly lower ahead of Building Permits and Housing Starts at 8:30 and FOMC Minutes at 2 PM. Treasury yields, crude oil, and gold are all higher on the day, reversing some of the losses from late last week while Bitcoin has bounced back over 2% to get back above $96K.
With a dozen eggs becoming as popular as a Furby circa Christmas 1998 and what seems like half a paycheck going to fund your daily bacon, egg, and cheese habit, egg prices have become a national nightmare. In last week’s CPI report, egg prices rose over 15% in January representing the largest monthly increase since June 2015. The chart of egg prices makes it look more like the Palantir (PLTR) of the CPI report than a boring old breakfast staple.
Egg prices have caused a frenzy online as Google searches have spiked. The chart below shows Google Trends results for eggs going back to 2004. At first glance, it doesn’t look like the spike has been all that extreme. Searches tend to have a seasonal aspect, but there have been many months in the last ten years when the frequency of searches was higher.
Taking seasonality into account, though, searches are easily at extremes. The chart below is the same as the one above, except that we have included red dots for February of each year. Comparing these February readings, searches have been 30% higher this February than any other February in history. The spikes you see in the chart come every year in either March or April coinciding with Easter. If the recent trends in egg prices continue, we can only imagine what the chart above will look like in two months when Easter arrives.
A headline last week from animal health care company Zoetis (ZTS) provides some hope, though. On Friday, the company announced that it had received conditional approval for a bird flu vaccine from the USDA for use in chickens. While the stock of ZTS saw little reaction, the stock of Cal-Maine Foods (CALM), the largest producer of eggs in the US, has been shelled. CALM has been a big winner from the bird flu, more than doubling in the year leading up to last Friday, but it has declined more than 16% in the last two sessions for its largest two-day decline since December 2022.
Markets are forward-looking, so is CALM’s decline the canary in the coalmine signaling that the worst of this wave of bird flu is behind us? Who knows, maybe by the summer, we’ll be able to afford two eggs on our beacon, egg, and cheese, or maybe even an omelet! Seriously, though, since the recent low in egg prices in September 2023, total CPI is up 3.8%. With egg prices up 63% over that same span and having a weighting of 0.172% in the total CPI index, ex eggs prices, total CPI would be up 9 basis points less at 3.72%. So, in terms of a direct impact, egg prices haven’t had a major impact on inflation over the last 16 months. They haven’t helped, though!
Feb 18, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“We all go through a challenge in life because without a challenge there’d be no reason to keep going toward your future.” – Mark Twain
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After a mixed session overnight in Asia, European equities are trading modestly higher this morning, and that follows a gain of over 0.5% for the STOXX 600 on Monday while US markets were closed. Here in the US, equity futures are looking to start the short week positively. The S&P 500 is indicated to open 0.4% higher while Nasdaq 100 futures are looking at gains of just about 0.5%. Yields are also higher as the 10-year is modestly back above 4.5%.
The economic calendar is on the quiet side this morning with the only two reports of note being Empire Manufacturing at 8:30 and the NAHB Homebuilder Sentiment Index at 10 AM. Both reports are forecast to improve from last month’s reading, but they’re also forecast to remain in contraction territory. For the remainder of the week, the calendar is relatively busy with notable reports including Housing Starts and Building Permits on Wednesday, Jobless Claims on Thursday, and the final read on UMich Consumer Sentiment on Friday. That last report will be notable as the preliminary report released earlier this month showed a major skew in inflation expectations between Democrats and Republicans.
After closing out the prior week just south of 4.5% on February 7th, the 10-year US Treasury yield exploded higher with sound and fury in the first three days of last week. It rose as high as 4.66% on Wednesday after the stronger-than-expected January CPI report. Just as it looked like the early January highs were due for a test, though, on Thursday and Friday, yields reversed lower and more than erased the gains from the first three days. By Friday’s close and heading into the three-day weekend, the big moves from earlier in the week had nothing to show for themselves, and the 10-yield finished the week lower than it started below 4.48%. Just when you think the market is going to go one way, it does its best to keep you on your toes (or knock you off them depending on your perspective).
Feb 14, 2025
See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium. CLICK HERE to learn more and start your trial.
“If you’d asked me in 1980 what the big impact of microprocessors would be, I probably would have missed the PC. If you asked me in 1990 what was important, I probably would have missed the Internet.” – Gordon Moore
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After coming up just a couple of points short of a closing record high yesterday, US equity futures are heading into the long weekend on a very modest negative note while the 10-year yield is unchanged. There’s a decent amount of economic data to deal with so the placid tone will likely change between now and the closing bell. Retail Sales were just released, and the January readings came in significantly weaker than expected although December’s report was revised higher. Import and Export Prices were largely inline with forecasts.
Also, the last three Fridays have seen stocks sell off into the weekend as investors look to avoid any potential tape bombs. With a three-day weekend on the horizon after today, if the market manages to avoid a sell-off like it has done the last three Fridays, that would be considered a win!
Gordon Moore co-founded Intel (INTC) in 1968, and in the above quote, he was brutally humble about his fallibility regarding large technological trends. While Intel (INTC) was on the cutting edge of the semiconductor industry for its first few decades, the company has missed a lot of major tech developments and trends over the last decade. The stock has paid handsomely for it. After trading above $60 less than four years ago, INTC recently traded below $20 shedding 70% of its value.
This week, though, INTC has done something not seen since its glory days. In the five trading days ending Thursday, the stock rallied 24.5% which is a level it has only exceeded in three other periods in the last 30 years – January 2000, April 2001, and October 2002.
