Thursday
Aug142008

Percentage of Stocks Above 50-Day Moving Averages

Currently, 60% of S&P 500 companies are trading above their 50-day moving averages.  This number has peaked out just above 80% twice in the past year, so hopefully it can make it up there again before the index sees a pullback.  Health Care tops the list of sectors with 92% of stocks trading above their 50-days.  Consumer Discretionary and Consumer Staples rank second and third at 79% and 78%, while Energy is at just 3%.

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Finlindu50day

Inftenrs50day

Condcons50day

Hlthmatr50day

Utiltels50day

      

Thursday
Aug142008

Dollar Up Ten Days in a Row

Since our post on the Dollar breakout last week, the currency has continued its trek higher.  It is currently trading well into overbought territory, however, and is also up ten days in a row for just the fifth time since we have daily pricing going back to 1971.  The last ten-day winning streak for the currency was all the way back in May 1990.  The currency has gone up eleven days in a row just twice, and it has never been up twelve days in a row.  While we expect the uptrend to continue for the Dollar, it can't go up every day.

Dollar814

Dollarwinning_2 

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Thursday
Aug142008

Cost of Rising Commodities Falls

Last week, we highlighted that the rising prices of commodities during 2008 was costing the average American an extra $1.77 per day this year, which was down sharply from the $4.77 we saw in early July when oil and most grains were peaking.  In the chart below we calculated the '08 price change of the major food and energy commodities in the CRB index (Corn, Soy, Wheat, Cattle, Hogs, Oil and Natural Gas) and multiplied the changes by the annual per capita consumption of each item.  While this method may oversimplify the actual costs, it provides a good idea of how changes in commodity prices have impacted consumers' wallets.  As shown, this week we have seen the daily increase in food and energy prices in '08 decline to $1.37, which is now at a four-month low.  A decline from $4.77 to $1.37 per day in a little more than a month is huge for consumers.

Commodity_cost

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Thursday
Aug142008

Russell 1,000 Stocks with the Highest Short Interest as a Percentage of Float

July month-end short interest figures were released earlier this week, and below we highlight stocks in the Russell 1,000 with the highest short interest as a percentage of float.  As shown, more than 50% of both Big Lots' (BIG) and Sears Holdings' (SHLD) equity float is sold short.  While SHLD is down 10% year to date, BIG is up significantly at 110%.  The 25 most heavily shorted stocks in the index all have more than 20% of their float sold short.  Other names on the list worth noting are Wynn Resorts, Las Vegas Sands, General Motors and KB Homes.  For more short interest analysis, subscribe to Bespoke Premium today.

Russellshort

Thursday
Aug142008

US vs Europe

Stocks in the US are outperforming those in Europe by a wide margin this year.  As shown below, the S&P 500 is down 11.89% year to date, while the Dow Jones Euro STOXX 50 is down 23.74%.  For a bit of perspective on this relationship going back further, in the bottom chart we provide the ratio of the S&P 500 to the Euro STOXX 50 since the European index was created at the end of 1991.  When the line is declining, European stocks are outperforming the US, and vice versa for a rising line.  As shown in the chart, the US outperformance in '08 is the first time it has happened since the period from '00 to '03.

Eurous

Eurous1 

Thursday
Aug142008

Changes in P/E Ratios During the Current Bear Market

Since the S&P 500 peaked on October 9th, the index is down 17.85%.  As shown, Financials are down the most at 43%, followed by Telecom (-27.5%), and Consumer Discretionary (-20.15%).  The other seven sectors are actually outperforming the index as a whole, and the Consumer Staples sector is actually up 1.64%.  During bear markets, P/E ratios typically contract as prices fall faster than earnings.  During this bear market, the S&P's P/E ratio has risen from 19.62 to 25.67.  This P/E expansion can be attributed to the 3 worst performing sectors.  Financial and Telecom P/Es have both gone negative, and Consumer Discretionary is pretty much negative at 1,402.  On the other hand, five sectors have seen P/E contraction.  Technology has seen the biggest P/E decline, going from 28.19 on 10/9/07 to 21 at current prices.  Utilities, Industrials, Health Care and Energy are the other sectors that have seen P/Es contract.  This is definitely a concentrated bear market, where a couple sectors have caused all the problems.

Sectorperf100908

Pechange

 

Wednesday
Aug132008

Dividend Stocks Finally Showing Life

At the July lows, the Dow Jones Dividend index was down 35% since the market peaked last October.  Compared to a decline of 22% for the S&P 500, dividend stocks (which have a lot of financials) underperformed mightily.  Since the July lows, however, it has been dividend stocks that have helped bring the index back.  As shown below, the Dow Jones Dividend index is now down just 23% since 10/9/07, while the S&P 500 is down 17%.  Since July 15th, the dividend index is up 18%, while the S&P is up 6.4%.

Dividendstocks

Wednesday
Aug132008

Financial Sector and The SEC Short Selling Rule

Given that the weak performance of the Financial sector over the last two days has coincided with the expiration of the SEC's crackdown on naked short selling, there are some who think the timing of the two events is more than a coincidence.  However, a look at the daily changes of the Financial sector over the last four weeks shows that the declines of the last two days have not been out of the norm.  The sector saw similar one-day declines in late July as well as early August. 

We would argue that the rally in the Financial sector had more to do with the 20% declines in oil and commodities as well as the 7% rise in the dollar than the SEC's half-hearted attempt to crack down on naked shorting.  Furthermore, the weakness we have seen over the last two days is more likely related to negative news flow such as numbers cuts at Goldman, write-downs at JP Morgan, a credit downgrade at Morgan Stanley, etc.. than it is to the expiration of the SEC's rule on shorting.  Why the SEC put in place a temporary crackdown only to let it expire with no longer term plan in place is a question for another time.

Financial_sector

Wednesday
Aug132008

Fox Business News Appearance August 13th

Snap1_2Paul Hickey will be on Fox Business Channel at 1:30 PM ET on August 13th to discuss the impact of the new baby boom on stocks.

Wednesday
Aug132008

Historical S&P 500 Earnings Beat Rates

Since Q4 '06, the percentage of companies in the S&P 500 beating EPS forecasts had been on the decline.  This quarter, however, we've seen the earnings "beat" rate pick back up again.  As shown in the chart below, the trend for companies "beating" estimates has sloped upward since we have data going back to 1993 (via Bloomberg).  What this says about companies and the analysts that covers this is a different topic for a different time.

If you look back at the bear market from 2000 to 2002, you'll see that "beat" rates declined throughout the bear, but actually started ticking higher before the market made its bottom in October 2002.  Hopefully the same scenario is playing out now.

Historicalbeatrate

Wednesday
Aug132008

Second Quarter Earnings Analysis by Sector

Below we highlight the percentage of S&P 500 companies that beat earnings estimates in the second quarter by sector.  With 435 out of 500 companies already having reported, the final numbers shouldn't change too much from here.  As shown, Telecom and Industrials have beaten estimates at a very high rate (just under 89%).  Health Care, Consumer Staples, Technology and Materials are the other sectors doing better than the S&P 500 as a whole, while Consumer Discretionary, Energy, Utilities and Financials have done worse than the S&P 500. 

Epsbeatrates

We also provide a chart of the percentage of companies reporting earnings that were stronger than they were in Q2 '07.  Again, the Industrial sector has had a strong showing, with 88.7% of companies in the sector showing year-over-year earnings growth.  Health Care ranks a close second, followed by Energy, Telecom and Technology.  The S&P 500 as a whole has seen 63% of companies report stronger YoY growth.  Consumer Discretionary and Financials are once again the weak links, with less than 50% of companies in each reporting stronger growth.

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Epsgrowth813

Tuesday
Aug122008

Today's Declines Were All Financials

Aside from Financials, today's losses weren't so bad.  Unfortunately, you can't ex out sectors.  The Financial sector contributed to two-thirds of today's 1.21% decline in the S&P 500.  As shown below, the next biggest sector impacting the index on the downside was Consumer Discretionary at 10.6%.

Sectorchange

Below we highlight the recent performance of key ETFs.  These cover the majority of asset classes and give readers a quick look at what's been moving higher and what's been moving lower.  The red and green arrows show that US equities have been doing much better than foreign equity markets lately. 

Over the last month, SPY is up 5.40%, and India (INP) is the only foreign ETF that is doing better.  Within US equities, smallcap has been doing the best, as highlighted by the performance of IJR, IWM, IJT and IJS.  And dividend ETFs have also made quite a comeback.  Since last month, DVY is up a whopping 16%. 

Where equities have gained, commodities and foreign currencies have lost.  UNG (Natural Gas) is down 30% over the last month, followed by SLV (Silver), USO (Oil) and DBC.  And the British Pound (FXB), Euro (FXE) and Yen (FXY) are all down more than 3%, which is a big move for currencies.

Etf812 

Tuesday
Aug122008

Gold Down Eight Days in a Row

For the eighth day in a row, gold finished the day down.  Since 1975, this is the sixth time that the commodity has had an eight-day losing streak.  Just as eight hasn't been a lucky number for Chinese investors, eight-day losing streaks for gold haven't a turnaround point either.  Looking at the five prior eight-day declines, gold has finished the ninth day with a gain three out of five times, but the average return has been a decline of 0.2%.  Looking out over the next week, gold has finished lower three out of five times for an average decline of 0.8%.

8_day_losing_streaks_2 

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Tuesday
Aug122008

Tech Sector Seasonal Patterns

With nearly a six percent gain over the last week and a half, Technology has been one of the market's best performing sectors recently.  Based on its seasonal trading patterns, strength in tech stocks may continue.  As shown below, over the last five years, the sector has averaged its low for the second half in early August.  While the sector usually rallies towards the end of the year, if we expand our focus to the last ten years, the end of year rally typically doesn't arrive until October.  While fundamentals will always trump seasonality, at least it's nice to know that these trends are supportive of the market.

Tech_sector_seasonal_patterns

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Tuesday
Aug122008

Bespoke's Paul Hickey on CNBC Street Signs Today at 2:15 PM ET

Street_signs_4Bespoke's Paul Hickey will appear on CNBC's Street Signs today at 2:15 PM ET to discuss the impact of the SEC's naked short selling crackdown on levels of short interest.