The Closer – Bullwhip, Financial Conditions, EIA – 10/9/24
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start by evaluating the ways the US economy is feeling the bullwhip effect (page 1) followed by a checkup on financial conditions (page 2). We then review today’s 10-year note reopening (page 3) before closing with a rundown of the latest petroleum stockpile data (page 4).
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Daily Sector Snapshot — 10/9/24
Chart of the Day – Here Comes the Hurricane
Fixed Income Weekly — 10/9/24
Searching for ways to better understand the fixed income space or looking for actionable ideas in this asset class? Bespoke’s Fixed Income Weekly provides an update on rates and credit each week. We start off with a fresh piece of analysis driven by what’s in the headlines or driving the market in a given week. We then provide charts of how US Treasury futures and rates are trading, before moving on to a summary of recent fixed-income ETF performance, short-term interest rates including money market funds, and a trade idea. We summarize changes and recent developments for a variety of yield curves (UST, bund, Eurodollar, US breakeven inflation, and Bespoke’s Global Yield Curve) before finishing with a review of recent UST yield curve changes, spread changes for major credit products and international bonds, and 1-year return profiles for a cross-section of the fixed income world.
Our Fixed Income Weekly helps investors stay on top of fixed-income markets and gain new perspectives on the developments in interest rates. You can sign up for a Bespoke research trial below to see this week’s report and everything else Bespoke publishes for the next two weeks!
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Bespoke’s Morning Lineup – 10/9/24 – Semi Positive
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“I believe in everything until it’s disproved.” – John Lennon
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
There’s not much economic data on the calendar this morning but a ton of Fedpseak scheduled, so there is the potential for some volatility around these speeches throughout the day. Futures indicate a modest decline at the open but they are off their overnight lows after major overnight volatility in China. The Shanghai CSI 300 fell over 7% as the Chinese government looks like it has under-delivered on stimulus expectations. Last night’s decline was the largest since early on in the Covid crash, and the ASHR ETF that trades in the US is on pace to crash 20% in two trading days! The only other time it fell over 20% in two sessions was in the summer of 2015 when the Chinese government devalued the yuan. If you thought crypto was volatile, it looks like a ‘widows and orphans’ asset class compared to the moves in China over the last few weeks.
In today’s Morning Lineup, we covered the latest sales results for Taiwan Semi (TSM) and much of those sales come from Nvidia (NVDA). NVDA has rallied over 14% in the last week taking its market cap back above $3 trillion and ahead of Microsoft (MSFT). With a market cap of $3.26 trillion, the only company with a larger market cap than NVDA is Apple (AAPL) at $3.43 trillion. The gap between the two companies is now roughly $170 billion, or one Disney (DIS).
NVDA’s stock had a pretty rough summer. After peaking in June, the stock made a series of lower highs with each successive rally attempt. After its late August lower high, though, the ensuing pullback bottomed out at a higher low, and the pullbacks became milder as the stock rallied back above its 50-day moving average. After successfully testing its 50-day moving average last week, the stock has rallied, and yesterday’s 4% rally enabled the stock to make its first ‘higher high’ since June.
NVDA’s technical picture may be improving, but the picture for the semiconductor sector isn’t as strong. While the Philadelphia Semiconductor Index (SOX) has rallied above its 50 and 200-day moving averages (DMA), it has been hung up at resistance all summer. One bright spot for the sector is that the early September sell-off wasn’t as deep as in August. So, while the SOX may not yet be at the point of making higher highs, there has been a higher low. It’s a start!
Unfortunately, the relative strength of the SOX versus the S&P 500 doesn’t look as promising. September’s sell-off was deeper than August’s relative to the S&P 500, and the subsequent bounce back has also been weaker. In last week’s quarterly Pros and Cons report, the recent performance of semis showed up on the negative side of the ledger, and this chart is a big reason why.
The Closer – Treadmill, Sentiment, GDP – 10/8/244
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Looking for deeper insight into markets? In tonight’s Closer sent to Bespoke Institutional clients, we start tonight with a look into US automaker performance and the S&P 500’s rally sans drawdown (page 1). We then review the latest investor sentiment data (page ) in addition to economic sentiment data from our Consumer Pulse report (page 3). We then check in on GDPNow (page 4) before finishing with rundowns of the latest delinquency data (page 5) and the 3-year note auction (page 6).
See today’s full post-market Closer and everything else Bespoke publishes by starting a 14-day trial to Bespoke Institutional today!
Daily Sector Snapshot — 10/8/24
Chart of the Day – Negative Analyst Sentiment Across Sectors
Bespoke Stock Scores — 10/8/24
Insurance Cost Concerns Surging
Within the NFIB’s Small Business Optimism report, the survey also provides a look into what firms are seeing as their biggest challenges each month. In September, inflation once again came in at top of mind with 23% of businesses reporting this as their biggest issue. Quality of labor and taxes were the two next most common concerns and the only others that single-handily accounted for double-digit shares. Of those, quality of labor saw a particularly large 4 percentage point drop last month.
As mentioned above, taxes were the third most common response in September at 14%. That was up slightly from 13% the month prior. Government requirements and red tape also rose a percentage point and combined the two problems made for 23% of responses. As the election closes in, that is actually a relatively small increase in these concerns as other indicators like the Economic Policy Uncertainty Index have surged.
At a combined 23%, government-related concerns on a combined basis equal the share of businesses reporting inflation as the biggest problem. As mentioned previously, inflation responses were lower month over month. Additionally, current levels are much lower than they were at the peak a couple of years ago. That said, current levels also remain very elevated historically, remaining in the upper decile of readings.
Factoring other categories that can be inflationary-adjacent, the picture changes slightly. One interesting area that has seen a surge recently is the cost or availability of insurance. That index is up to 8% of responses versus only 3% three months ago. That is the most elevated reading since the August 2021 spike to low double digits. Although that is the highest reading in a few years, this problem is not yet elevated from a longer-term historical perspective with September’s reading actually matching the historical median. Furthermore, combining a range of expense-related categories (inflation, cost of labor, and cost/availability of insurance) shows that there has been an uptick in cost concerns over the past few months, but things aren’t quite as bad as they were a couple of years ago.
Speaking of cost of labor, the combined share of businesses reporting cost or quality of labor as their biggest problem has continued to trend lower, consistent with a cooling labor market. With September’s reading coming in at 26%, it was the lowest reading since the spring of 2020.
