Daily Sector Snapshot — 10/25/24
Not All Crypto is Created Equal
In the crypto space, Bitcoin and Ethereum are considered two of the most credible with market caps of $1.3 trillion and $300 billion, respectively. While there is a tendency for many investors/speculators to lump the two together as highly correlated to each other, that has been far from the case over the last several months. Until mid-summer, Bitcoin and Ethereum followed similar paths, but since then, the paths of the two have diverged. The chart below shows the YTD performance of both cryptos and as recently as July 15th, both were up an identical 50% YTD. Since then, though, Ethereum has given up most of its YTD gains while Bitcoin has added modestly to its rally.
Given the divergence between the two, the ratio of bitcoin to Ethereum has widened to just under 27 which is a level not seen in more than three years. As shown in the chart below, this is still half of where the ratio was in early 2021 (it was even higher than that in 2000), but in the short term, Bitcoin has become the “Mag 1” of the crypto space.
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Bespoke’s Morning Lineup – 10/25/24 – In the Bag
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“Wanting alone doesn’t get anything done.” – Bobby Knight
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S&P 500 futures are indicated about 0.30% higher, but it’s going to take a gain of more than 1% for the market to extend its six-week streak to seven. It’s an especially painful morning for shares of Capri Holding (CPRI) where shares are down close to 50% after a judge blocked the proposed merger with Coach parent Tapestry (TPR), siding with the FTC’s argument that it would reduce competition in the ‘accessible luxury-handbag category’. Talk about a vital sector of the US economy!
Speaking of the US economy, Durable Goods Orders declined 0.8% while August’s report was also revised down to 0.8%. Ex Transportation, September’s report came in at 0.4% versus expectations for a decline of 0.1%. Last month’s report was also revised up to 0.6% from 0.5%.
In Europe, it’s been a mostly negative morning for stocks as major markets over there look on pace to finish the week off with gains of just over 1%. Various measures of business sentiment came in mixed relative to expectations, but PPI in Spain cratered 5.2% y/y compared to a decline of 1.3% in August.
In yesterday’s email, we noted the consistent strength in shares of T-Mobile during the trading day as the stock has closed higher than it opened on 24 of the last 25 trading days. We’ve seen a similar level of persistent buying for the US Dollar Index over the last four weeks.
On 10/17, the index had a streak of 14 straight trading days where it closed higher than it opened. Dating back to 1990, that was the longest streak on record. The next longest streak was 13 trading days ending in August 1997 just ahead of the Asian currency crisis.
Through yesterday, the Dollar Index had closed higher than it opened on 18 of the prior 20 trading days which was tied with the August 1997 period for the most in a 20 trading day period since at least 1990.
Despite the consistent strength in the Dollar Index, its performance over the last 20 trading days, while impressive, hasn’t been anywhere near a record. As shown in the chart below, there have been several periods since 1990 when the index rallied more than the current 3.7% over four weeks with the most recent occurrence just over two years ago near the lows of the bear market in September 2022.
When it comes to the dollar’s impact on the stock market, over the last 20 trading days, the S&P 500 has rallied just over 1.25%. Leading the way higher, Financials have rallied 4.3% which makes sense given the sector has a high level of domestic exposure. The next two best-performing sectors, however, Technology and Energy, both have high levels of international exposure, so all else equal, a strong dollar would be negative for those sectors.
At the other end of the spectrum, Health Care is another sector with a high share of domestic exposure, but it is still the worst-performing sector over the last four weeks. Materials and Consumer Staples, however, both have high levels of international exposure, so their weakness as the dollar has rallied makes sense.
The Closer – Semi Manufacturing, New Homes, State Claims – 10/24/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we begin with a look at US semi production (page 1) followed by an earnings update (page 2). We then review new home sales data (page 3) followed by a review of today’s historic tailing 5-year TIPS auction (page 4). We then provide an updated look at jobless claims data and how recent hurricanes impacted them (page 5).
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S&P 500 Sector Weightings Report – October 2024
Chart of the Day – Durable Goods Destruction
Half a Year of Bulls
The S&P 500’s modest turn lower in the past several days has coincided with a meaningful downturn in investor sentiment. According to the weekly sentiment survey run by the American Association of Individual Investors (AAII), only 37.7% of respondents reported as bullish this week compared to 45.5% last week and over 50% one month ago. At current levels, bullish sentiment is now at the lowest level in six months.
As could be expected, the drop in bullish sentiment has resulted in an uptick in bearish sentiment. Bears accounted for 29.9% of responses this week. That is up 9.3 percentage points in the past two weeks off of the recent low of 20.6%. While that is a decent sized increase, it only leaves the reading at the highest level in a little over a month.
Put together, there are still more investors reporting as bullish than bearish with the former outnumbering the latter by 7.8 percentage points.
As shown below, it has now been 26 consecutive weeks in which bulls have outnumbered bears. That is a historically long stretch of bullish sentiment. This current streak has now surpassed two 24-week long runs ending in July 2021 and April 2024 for the longest streak since 2015. Prior to that, there have only been seven other times in which sentiment has been net bullish for more than half a year.
The AAII survey is not the only gauge that continues to show bullish sentiment. When combined with the Investors Intelligence survey and NAAIM Exposure index into our Sentiment Composite, these three surveys all indicate investors remain firmly bullish with levels around 0.54 standard deviations above the historical average.
Not only has the AAII bull-bear spread been positive for half a year, but so too has our Sentiment Composite. For this index, there have only been three other streaks in which it has been positive for as long as the present. The first of these was a 33 week long run ending in mid-2015. The next longest and most recent prior streak lasted just under a year (50 weeks) coming to a close in September 2021. Then there was the record streak of 72 weeks in a row ending in March of 2018.
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Bespoke’s Weekly Sector Snapshot — 10/24/24
Bespoke’s Morning Lineup – 10/24/24 – Looking For a Rebound
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“If you want to increase your success rate, double your failure rate”. – Thomas Watson, IBM CEO 1914 – 1956
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It’s a mixed morning for US equities as Dow futures trade slightly lower, the S&P 500 is up 0.5%, and the Nasdaq looks like it will open up nearly 1%. Jobless claims were just released and initial claims came in about 15K lower than expected at 227K while continuing claims were modestly higher. European stocks are also higher this morning as rates reverse some of the gains of recent days. There’s been a ton of earnings news since the close yesterday, and we go through the most high-profile ones in today’s report.
Yesterday, the S&P 500 opened modestly lower but then drifted lower throughout most of the trading day before a modest rally into the close which kept the damage contained to a decline of less than 1%. The weakness throughout the trading day was counter to the trend we have seen in recent weeks where the S&P 500 tended to trade higher throughout the trading day. As recently as last week, the S&P 500, measured by SPY, had traded higher from the open to close on 17 of the prior 25 trading days. The fact that the market has been rallying throughout the trading day signals healthy underlying demand.
While last week’s reading of 17 is not a historical extreme, it was tied for the highest frequency of days that SPY traded higher from the open to close in a 25-trading day period this year. In 2023, there were multiple periods when the 25-day rolling toll reached as high as 19 or 20. The best this reading has been able to get in 2024, though, has been 17.
Regarding individual stocks, T-Mobile (TMUS) reported after the close last night, and if you’re looking for an extreme example of stocks consistently rallying from the open to close, we can’t think of a better one. Heading into last night’s earnings report, shares of TMUS traded higher from the open to close on 24 of the last 25 trading days. Talk about a stock that investors can’t enough of!
Looking back over the stock’s history, the current rate of days where TMUS traded higher from the open to close over the last 25 trading days is easily the highest ever. Before the last five weeks, it never got above 21.
We can’t think of another example when a stock traded higher from the open to close with such consistency, and if we look back at the history of Apple (AAPL) and Nvidia (NVDA), the two largest and most successful companies in the US market, neither one ever experienced a run where the stock traded higher from the open to close on more than 21 out of 25 trading days.
The Closer – Europe Earnings, Long Term Returns, Affordability – 10/23/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we lead off with a rundown of tonight’s earnings including reports from Tesla (TSLA) and IBM (IBM) to name a couple (page 1). We then review our latest update of the Beige Book (page 2) followed by a dive into the latest home sales and affordability data (pages 3 and 4). Next, we review today’s 20-year bond reopening (page 5) and close out with a look at the latest EIA data (page 6).
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