Bespoke Stock Scores — 8/3/21
Background Checks Lose Their Spark
FBI background checks for the month of July have been published and showed another sharp decline. For the month of July, background checks totaled 2.883 million which was down 172K from June’s total. That marks the fourth straight monthly decline in which total background checks have dropped by 1.8 million from the record high of 4.692 million in March. In terms of the raw number of checks, the current four-month decline is the largest on record, and on a percentage basis, the 38.6% drop is the largest since early 2014.
On a y/y basis, the surge in background checks brought on by the pandemic and civil unrest last year looks like it has been fully unwound. After nearing a record surge of 79.2% early last year, we’ve now seen two straight months of 20%+ y/y declines. The last time we saw a y/y decline of this magnitude was back in July 2017.
With such large declines in background checks, you wouldn’t think that would be a positive backdrop for gun companies, and judging by the recent performance of the two publicly traded gun companies, you would be partially right. While both stocks up still up YTD, they have pulled back sharply from their recent highs. On July 1st, both stocks traded at 52-week highs, but since then SWBI has dropped over 38% while RGR is down 18%. In the case of SWBI, its peak from late 2020 has so far held up, but for RGR, support from the highs late last year just recently broke. Click here to view Bespoke’s premium membership options.
Bespoke’s Morning Lineup – 8/3/21 – Let’s Try This Again
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.
“A wise man will make more opportunities than he finds.” – Francis Bacon
Futures are currently trading pretty much where they were at this time 24 hours ago. Yesterday, the bulls couldn’t hang on as a new multi-month low in the 10-year yield raised concerns that economic growth was weakening. Rates are modestly higher this morning reversing a small portion of yesterday’s decline. Over in Europe, the STOXX 600 is higher and that follows a relatively weak night over in Asia. There’s not a lot of economic data to contend with today (Factory Orders at 10 AM), but the earnings stream which already picked up after the close yesterday will continue in full force today. For the entire week, nearly 30% of companies in the S&P 500 are scheduled to report. Try staying on top of all those reports!
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including a record drop in Spanish unemployment, the latest US and international COVID trends including our vaccination trackers, and much more.
One question we’re often asked is that with the Delta variant pushing COVID case counts higher, is the market being too complacent of the risks? Rising case counts are an alarm, but looking at how the wave has progressed in other areas of the world provides a blueprint that the Delta wave may be severe in terms of transmissibility, but it hasn’t been long-lasting. Additionally, the market is more concerned with consumer behavior and to this point, it appears as though Delta’s impact has not caused much in the way of a change in consumer behavior.
A case in point is airline passenger throughput from the TSA. Yesterday was the fifth straight day since the pandemic began that US airports processed more than 2 million passengers per day. The last time that happened was in mid-February 2020. Included in that 5-day run was the first Saturday since last March that more than 2 million passengers traveled on a Saturday, leaving Tuesday and Wednesday as the only two days of the week that haven’t topped the 2 million level since the pandemic began.
Bespoke Market Calendar — August 2021
Please click the image below to view our August 2021 market calendar. This calendar includes the S&P 500’s average percentage change and average intraday chart pattern for each trading day during the upcoming month. It also includes market holidays and options expiration dates plus the dates of key economic indicator releases. Start a two-week free trial to one of Bespoke’s three research levels.
Materials Go For Ten
While the S&P 500 finished last week slightly lower, the general theme across each of the eleven sectors was mean reversion. As shown in the snapshot of our Trend Analyzer below, the best performing sectors were those that are coming from oversold territory or below their 50-DMAs: Materials (XLB), Energy (XLE), and Financials (XLF). XLB was the top performer of these with its 2.8% gain resulting in it exiting oversold territory, and Friday’s close saw the sector finish above its 50-DMA for the first time since June 14th. Conversely, some of the sectors that have recently been at more overbought levels like Consumer Discretionary (XLY) and Communication Services (XLC) were the worst-performing sectors. XLY came back within one standard deviation of its 50-DMA on that move.
Over the past few weeks in our Sector Snapshot, we have noted the consistent oversold readings that the Materials sector has seen, but as noted above, the strong run recently has brought it back not only within a standard deviation of its 50-DMA but above its 50-DMA for the first time in a month and a half. Additionally, it hasn’t been just the last five trading days. Friday’s higher close extended the sector’s winning streak to nine days long. As of this morning, the sector is again higher and looking to extend its streak to double digits. If the Materials sector keeps alive its winning streak, it would be the first double-digit winning streak since an 11-day long streak for Consumer Discretionary ending on July 6. As shown in the second chart below, for the Materials sector that would be the first 10-day winning streak since last June and before that, you would need to go back to the end of 2013 for a streak as long. While still uncommon, there is also some historical precedence for other nine-day-long streaks scattered throughout the past few decades.
Looking at those past winning streaks of nine or more days long, the current one has actually seen a relatively modest gain through the first nine days of 5.91%. Similarly, the S&P 500 is up by a below-average amount through the first nine days of those prior streaks. Click here to view Bespoke’s premium membership options.
Chart of the Day – August Intra-Month Seasonality
Bespoke’s Morning Lineup – 8/2/21 – Another Strong Start
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.
“Start every day off with a smile and get it over with.” – W.C. Fields
It’s a new month for investors, and while August has historically been a tough month for bulls, like most months in the last year, futures are indicating a positive start although they’re currently well off of highs from earlier in the session. Over the last 12 months, the S&P 500 has started off the first trading day of the month with a gain ten times. The only exceptions were in January when the S&P 500 kicked off the year with a drop of 1.48% and then in June when it traded down marginally (-0.05%).
The earnings flow so far this morning has been quiet (as it usually is on a Monday morning), but the pace will pick up again this afternoon and throughout the week. On the economic data front, investors will be watching PMI data at 10 AM as well as Construction Spending. In international markets, equities are higher despite mixed to weak PMI manufacturing data. As an example, China’s reading came in weaker than expected and at its lowest reading since February 2020. Despite that weakness, the headline index has been in expansion territory for well over a year now.
COVID data will continue to make headlines in the weeks ahead as the Delta variant accelerates and large cities consider new mask or social distancing mandates. This morning, though, it has been reported that NYC will stop short of requiring masks but strongly encourage their use. Given the national mood, it will take much worse conditions for more draconian measures to be implemented.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, the latest US and international COVID trends including our vaccination trackers, PMI Manufacturing data, and much more.
Stocks are looking to start out the week and month on a positive note, but they closed out July on a down note as the S&P 500 finished down fractionally for the week. Sectors that led the way lower last week were all some of the recent leaders (Consumer Discretionary Communication Services, and Technology). On the upside, investors rotated into Materials, Energy, and Financials which were the only three sectors that were below their 50-day moving averages heading into the week. You never want to see one sector consistently taking up all of the oxygen in the market, so this kind of rotation is exactly the type of action you want to see.
Bespoke Brunch Reads: 8/1/21
Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
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COVID Research
Outbreak of SARS-CoV-2 Infections, Including COVID-19 Vaccine Breakthrough Infections, Associated with Large Public Gatherings — Barnstable County, Massachusetts, July 2021 by Brown et al (CDC)
A detailed investigation of how the Delta variant acts on vaccinated persons; the data suggest that vaccinated people still face a significant risk of contracting the virus and material risk of symptomatic infection with the same viral load as unvaccinated persons, but existing vaccines do an excellent job protecting against both hospitalization and death. [Link]
Comparison of Neutralizing Antibody Titers Elicited by mRNA and Adenoviral Vector Vaccine against SARS-CoV-2 Variants by Tada et al (Bioxriv)
Lab-based experiments show that antibodies from mRNA vaccines are slightly less effective against Delta while adenovirus-vector Johnson & Johnson jabs are much less effective, basically consistent with the findings of the above CDC study. [Link; 30 page PDF]
Athletics
Athletes Greatly Benefit from Participation in Sports at the College and Secondary Level by James J. Heckman & Colleen P. Loughlin (NBER)
This study catalogues average student benefits from participation in college athletics, where participants tend to enjoy higher graduation rates, better jobs after college, and higher earnings. The authors do not compare foregone earnings for high-potential athletes to identify opportunity costs. [Link]
Barstool Sports Taking Over AZ Bowl From CBS to Broadcast Online by Emily Caron (Yahoo!)
Irreverent sports media company Barstool will broadcast a college football bowl game on its platforms next season, part of a broader diversification of the multi-faceted business. [Link]
Tokyo
Time For The End Of The Teen Gymnast by Dvora Meyers (538)
An indictment of the post-1960s practice of launching young people (especially young girls) into extremely high intensity athletics via gymnastics competitions. Note: this article was published the day Simone Biles withdrew from Tokyo, but is not a response to that specific situation. [Link]
Team USA Trails in the Other Tokyo Olympics Medal Table: Vaccinated Athletes by Rachel Bachman and Georgi Kantchev (WSJ)
While delegations from Italy and Spain have been entirely vaccinated, the US looks more like Poland with almost 15% of athletes not inoculated against COVID before arriving in Tokyo. [Link; paywall]
Tokyo 2020: S Korea TV sorry for using pizza to depict Italy (BBC)
A South Korean broadcaster is in hot water for depicting Italy with pizza, Romania with Dracula, and perhaps most depressingly Ukraine with Chernobyl in its introductions to the Tokyo Olympics. [Link]
Food
Slice of Charles and Diana’s 40-year-old wedding cake to be auctioned (BBC)
A slice of wedding cake given to a member of the Queen Mother’s household back in 1981 has been preserved since and will be sold at auction, for reasons that escape us. [Link]
Sun, Sand, and Spaghetti by Mike Diago (Eater)
An investigation of the niche but fascinating question “why do Dominican-Americans bring spaghetti to the beach?”, filled with history on the Dominican diaspora, food culture, and the appeal of noodles in the hot sun. [Link]
Infrastructure
Small Cities Can’t Manage the High Cost of Old Infrastructure by Jake Blumgart (Governing)
Cities with more limited tax bases that want to make changes to infrastructure either due to cost of maintenance or shifts in their populations’ needs are in deep trouble as tax bases erode and costs rise. [Link]
Police Are Telling ShotSpotter to Alter Evidence From Gunshot-Detecting AI by Todd Feathers (Vice)
Audio tools that locate the sound of gunfire via algorithm can be overridden to provide different evidence when it suits prosecutors per recent filings in murder cases from Chicago. [Link]
Banking
Credit Suisse Claws Back Pay as It Faults Staff for Archegos by Marion Halftermeyer (Bloomberg)
Former execs lost $70mm in compensation and 9 were fired as a result of the $5.5bn in losses booked by the bank over the Archegos blow-up earlier this year. [Link; soft paywall]
Investing
America’s Investing Boom Goes Far Beyond Reddit Bros by Talmon Joseph Smith (The Atlantic)
A survey of the broader world of novice investors that extend beyond the most high-profile communities like r/wallstreetbets. [Link; soft paywall]
Economics
Earnings and Income Penalties for Motherhood: Estimates for British Women Using the Individual Synthetic Control Method by Giacomo Vagni and Richard Breen (European Sociological Review)
British mothers see medium and long term earnings reduced by about 45% when they have children, though interestingly on average households that those women are a part of do not suffer from income declines. [Link]
Great Expectations
A Key Gauge of Future Inflation Is Easing by Gwynn Guilford (WSJ)
Consumer surveys and financial markets proxies for future inflation are not showing the same kind of concerns as short-term metrics of realized inflation. [Link; paywall]
Birds
What we know about the mystery bird death crisis on the East Coast by Natasha Daly (NatGeo)
Birders across the eastern US have recorded a massive surge in deaths of fledgling songbirds, with the causes a complete mystery. [Link]
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Have a great weekend!
Daily Sector Snapshot — 7/30/21
The Bespoke Report – 7/30/21
This week’s Bespoke Report newsletter is now available for members.
July 2021 lived up to its seasonal script of being the only summer month that typically sees gains. The S&P 500 (SPY) is ending the month with a solid gain of 2.5%, although it dipped red in the final week of the month as earnings and renewed COVID concerns stalled the rally a bit. While large-caps fell in the last week of July, it was good to see small-caps and mid-caps bounce back with gains after trading poorly for the better part of the month. For most of the past month or so, there’s been a concern among bulls that the rally was thinning, so this bounce back in small-caps and general breadth is a positive sign.
We cover market breadth, technicals, earnings, and sentiment in much more detail in our full Bespoke Report newsletter. To read the report and access everything else Bespoke’s research platform has to offer, start a two-week trial to one of our three membership levels.
