SUNDAY, JULY 29, 2012 AT 02:34PM
Roughly 1,000 companies have reported second quarter earnings so far this season, and while the earnings beat rate has been average relative to prior quarters, guidance has been negative to say the least. As shown below, the current spread between the percentage of companies raising guidance minus the percentage of companies lowering guidance is -6.38 percentage points. If earnings season were to end today, this would be the most negative guidance spread since Q4 2008 when it was nearly -14 percentage points.
We've now had four straight quarters where more companies have lowered guidance than raised. This streak has come after we went nine quarters with a positive spread. The only other period over the last 10+ years where the spread was negative for this many consecutive earnings seasons was from Q2 '02 to Q2 '03 (5 quarters in a row).
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FRIDAY, JULY 27, 2012 AT 05:37PM
After a very rough start to the week, the S&P 500 had its first back-to-back gains of more than 1.5% since last August. With the index at a new summer high, where does it go from here? Please take part in our weekly market poll below which asks whether the S&P 500 will be higher or lower from its current level one month from now. We'll report back with the results on Monday before the open. Thanks for participating and have a great weekend! If you're looking for more reading from Bespoke, become a Bespoke subscriber today and check our our Week in Review newsletter.
FRIDAY, JULY 27, 2012 AT 03:32PM
Nearly 1,000 companies have now reported their Q2 earnings and revenue numbers. At the moment, 60.6% of the companies that have reported have beaten earnings per share estimates, while 47.9% have beaten top-line revenue estimates. At 60.6%, the current EPS beat rate for this season is right inline with the average beat rate that we have seen since the start of 2011. At 47.9%, the revenue beat rate is much lower than the average of 60% that we've seen start of 2011.
Below is a chart that shows how the overall earnings and revenue beat rates have changed as earnings season has progressed. As shown, the earnings beat rate started out very low, but it ticked up above 60% on July 19th and has remained above 60% since then. The revenue beat rate was down near 41% early on, but it has been ticking higher this week. On Monday, the revenue beat rate for all companies that had reported was 43.9%, but through today, the beat rate has ticked up near 48%.
We're just now halfway through the second quarter reporting period, and another 1,000+ companies still have to report. If the revenue beat rate can continue to tick higher and get into the 50s, it will look much better than it did early on.
FRIDAY, JULY 27, 2012 AT 12:21PM
Bespoke Premium Plus members have the ability to run their portfolios through a number of screens that we provide. One of these screens is our trading range screen, which allows clients to view where a large number of stocks are trading from an overbought/oversold perspective on one simple page. Below we have run the screen on the 30 stocks that make up the Dow Jones Industrial Average. For each stock, the light and dark green shading represents oversold territory, while the light and dark red shading represents overbought territory. The Neutral line represents the 50-day moving average. The dot for each stock shows where it is currently trading, while the tail shows where it was one week ago.
This screen allows users to quickly identify which stocks in their portfolio have upside or downside momentum, and which ones may be getting overheated or deeply oversold. For the Dow, 16 of the 30 members are now in overbought territory, although just two (KO and WMT) are in extreme overbought territory. Just three Dow stocks are oversold -- AA, CSCO and HPQ. Of these three, CSCO still has downside momentum, while AA has seen a pickup lately and may have more upside. Of the stocks in Neutral territory, American Express (AXP), Caterpillar (CAT) and IBM currently have the most upside momentum, while McDonald's (MCD), Pfizer (PFE) and United Tech (UTX) have downside momentum.
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FRIDAY, JULY 27, 2012 AT 12:07PM
The rally over the past two days has pushed the S&P 500 solidly back above its 50-day moving average. As far as the stocks that make up the index go, 67% of them are currently above their 50-days. While this is a solid reading, it needs to get up into the 80s before getting overheated, so there's still upside room to run.
All ten sectors now have at least 50% of their stocks trading above their 50-days. Utilities and Energy are the only two sectors with readings above 90%, while Materials has the lowest breadth reading at 50%. Financials is back up to 68%, while Industrials is just behind at 67%. The Technology sector has seen a nice pickup in breadth this week. Two weeks ago, Tech had a reading in the 20s, which was by far the worst of any sector. After this week's gains, 62% of Tech stocks are now above their 50-days, and this is with Apple not even participating.
FRIDAY, JULY 27, 2012 AT 11:34AM
We've now crossed the apex of earnings season, and the number of reports we get each week through mid-August will now drift lower. But there are still quite a few big name companies left to report Q2 numbers. Below is a list of the 40 largest stocks that are set to report earnings next week. For each stock, we highlight its report date and time, its EPS estimate, its historical earnings beat rate (from our Interactive Earnings Report Database), and its average one-day change on its past reports.
Monday is a slow day, but on Tuesday we'll hear from big European financials Deutsche Bank (DB) and UBS. We'll also hear from Pfizer (PFE) and BP on Tuesday. Time Warner (TWX) and MasterCard (MA) will be the most watched on Wednesday, while General Motors (GM), Kraft (KFT), CBS and AIG will be followed closely on Thursday. Procter & Gamble (PG) will round out the week with its report on Friday morning.
Of the key companies set to report next week, MasterCard (MA) has the highest earnings beat rate at 95.8%. MasterCard (MA) has also averaged the biggest gain on its report day of the stocks listed at +4.35%. General Motors (GM) has averaged the biggest decline on its past report days at -2.72%.
THURSDAY, JULY 26, 2012 AT 02:41PM
In spite of the fact that the S&P 500 is down more than 1% in the last week, individual investors turned more optimistic, or perhaps less pessimistic, in the latest week. After dropping to a multi-year low of 22% last week, the percentage of bullish investors in the American Association of Individual Investors (AAII) weekly sentiment poll rose to 28.1%. Although this is an increase, we would note that going back to 2009, the average weekly bullish reading has been 38.0%, so investors still remain stuck in hibernation.
THURSDAY, JULY 26, 2012 AT 02:02PM
More than 750 companies have now reported earnings this season, and the average stock has gained 0.10% on its report day. But there are always big winners and losers during earnings season, and we highlight them below.
As shown, Mellanox (MLNX) has seen the biggest one-day gain of all stocks that have reported at 41.46%. MetroPCS (PCS) ranks second with its gain of 35.19%. Five other stocks have seen one-day gains of more than 25%: TEX, LL, SCSS, PPHM and RVBD. Other notables on the list of big winners include WDC, S, CROX, IRBT and PHM.
Supervalu (SVU) has been the biggest loser on earnings with a one-day decline of 49.15%. Zynga (ZNGA) ranks second at -38.95%. Both EDU and QSII have lost more than 30% on their report days as well. NFLX, CMG, NVR and AMD are a few other big name stocks that made the list of earnings season losers.
THURSDAY, JULY 26, 2012 AT 12:26PM
The charts below show the relative strength of the ten S&P 500 sectors as well as the Dow Jones Transports relative to the S&P 500 over the last year. When the line is rising it indicates that the sector is outperforming the S&P 500, while a falling line indicates underperformance. We have also shaded each sector in red or green to indicate whether the sector has outperformed (green) or underperformed (red) the S&P 500 over the last year.
As shown in the chart, six sectors have outperformed the S&P 500 over the last year. For much of the last year, the Consumer Discretionary sector was leading the market with steady outperformance. Over the last two months, however, the sector has run into headwinds and has seen its relative strength weaken considerably. Sectors that are still seeing positive momentum in their relative strength include Consumer Staples, Health Care, Telecom Services, and Utilities. Given the fact that all of these sectors are defensive in nature shows that investors are in no mood to take risk.
On the other side of the spectrum, sectors that have underperformed the S&P 500 over the last year are mostly cyclical in nature (Energy, Financials, Industrials, Materials, and Transports), once again illustrating the risk averse nature of investors. One potential bright spot in the group of underperforming sectors is Energy. As shown in its chart, while the sector is still underperforming by a wide margin, we have seen some steady improvement in the sector's performance beginning shortly after the Consumer Discretionary sector peaked.
THURSDAY, JULY 26, 2012 AT 10:53AM
Since going public just over seven months ago at a price of $10 per share, shares of Zynga (ZNGA) have lost nearly 70% of their value, including today's decline of 40% following a disastrous earnings report. As if Wall Street didn't have enough of an image problem, stories like this only add fuel to the fire. Looking at the firms who underwrote the ZNGA offering shows a who's who of the most high profile firms on the street, including Morgan Stanley, Bank of America/Merrill Lynch (BAML), Barclays, Goldman Sachs, and JP Morgan. When the so-called most respected companies on Wall Street underwrite garbage like ZNGA, can you fault individual investors for becoming disillusioned with the stock market? In the eyes of investors, these firms are no different from a sleazy used car salesperson, or a guy on the street selling fake handbags or Rolex watches.
Now, we realize that the IPO process is a two-way street. The firms underwriting the stocks wouldn't be selling the deals if there weren't eager buyers. In this respect, investors who bought the stocks are just as much if not more at fault than the underwriters selling to them. Additionally, the underwriters are also trying to get the best possible price for their clients. What makes the whole deal with ZNGA so bad in the eyes of individual investors, though, is that of the five lead underwriters of the stock, BAML was the only firm who didn't initiate coverage of the company with a Buy or Overweight rating. Furthermore, even after declines of 50% from the stock's IPO price, three of those firms still had the stock at an overweight rating today.
THURSDAY, JULY 26, 2012 AT 08:58AM
Initial jobless claims rose considerably less than expected today as economists continue to struggle with seasonal adjustments. While economists were looking for first time claims to come in at 380K, actual claims rose by only 353K. This marks the fourth straight week where the weekly change in claims topped 10K which is actually the longest streak of weekly moves in excess of 10K since April 2011. Continue reading.
WEDNESDAY, JULY 25, 2012 AT 03:49PM
With the opening ceremony of the London Olympics starting this Friday, we went back and calculated the performance of the Dow Jones Industrial Average (Dow) during each Summer Olympic Games since 1900. We also found the performance of the market for host countries during the Summer Olympics since 1984.
As shown, the Dow has averaged a gain of 4% from the opening ceremony to the closing ceremony over 26 Summer Olympics since 1900 (3 of the 29 were cancelled due to world wars). The median return has been smaller at +0.81%, and the index has been positive 68% of the time. From 1980 through 1996 (5 Summer Olympic Games), the Dow gained during every Summer Olympics, but since 2000 (3 Olympics), the index has fallen twice and gained once. During the 2008 Beijing Olympics, the Dow fell 0.91%, which actually wasn't that bad since we were in the middle of a financial collapse.
The stock markets of host countries have done well during the Games as well. Since 1984, host countries have averaged a gain of 1.54% (median 1.72%) from opening ceremony to closing ceremony, with positive returns 5 out of 7 times (71.4%). The Beijing Games were not kind to Chinese stocks, however. During the 2008 Games, China's Shanghai Composite fell 7.69%. If you remember, there was extreme optimism for China heading into the 2008 Games, as the country was set to display its extravagant growth. Unfortunately, investors sold the news, and it ended up being a terrible time for Chinese markets. With Europe in the depths of despair heading into the 2012 Olympics, London doesn't have to worry about displaying any extravagance. Instead, they've got to worry about digging out of a deep recession.
Finally, we also looked at the performance of Nike (NKE) during the Summer Olympics since 1984. As shown, Nike has gained during six of seven Olympic Games, with the only decline coming during the 2008 Games. NKE's average gain from opening ceremony to closing ceremony has been strong at +7.07%.
WEDNESDAY, JULY 25, 2012 AT 02:55PM
If the DJIA manages to close up more than 100 points today, it will mark the fourth straight day that the index saw a one-day move of +/- 100 points. If you were wondering when the last time the DJIA had four straight 100 point days, it was not that long ago. As shown in the table, the DJIA had several streaks of four or more 100 point days in a row last year, most recently in November 2011.
Historically speaking, four 100 point moves in a row is far from a record. In fact, there have been 43 other prior periods where the index moved 100 points or more for at least four days in a row. Just last October, the DJIA saw nine straight days in a row where the index moved 100 or more points each day. The record for the longest string of 100 point days was ten which occurred twice in 2008 (October and November). Today's gain following three straight days of 100 point declines is actually not terribly uncommon. As we noted in a report for clients yesterday, the index has tended to rally on day four following three straight 100 point declines.
WEDNESDAY, JULY 25, 2012 AT 10:40AM
After two straight weeks of declines, crude oil inventories showed an unexpected increase in the latest week, rising by 2.717 million barrels (consensus was for a decline of 1 million barrels). As shown in the chart below, this week's rise was even more noteworthy given the fact that we are currently in the time of year when inventories are in a seasonal decline.
As it stands now, US crude oil inventories remain well above average. In fact, the only other year where inventories were higher at this time of year was during the summer of 1990.
TUESDAY, JULY 24, 2012 AT 03:43PM
While percentage moves are preferred over point moves in terms of historical market analysis, 100+ point moves on the Dow do have a psychological impact on investors. The Dow Jones Industrial Average is set to decline more than 100 points for three consecutive trading days going back to last Friday. This would be just the 23rd time this has happened in the Dow’s history, with the first coming back in October 1997.
Below we highlight how the Dow has performed on day four following these big three-day declines as well as how it has done over the next week and month. As shown below, on average, the Dow has...