June 3, 2023 | Daily JAM, Videos |
How Long Can a Dangerously Narrow Market Run? Certainly not forever. But longer than you might imagine. The Nasdaq 100 and S&P 500 have increasingly diverged. The week before last, the NASDAQ 100 (which includes the largest technology companies), was up 3.15% and the S&P was up only .28%. Over the last three months, the NASDAQ 100 was up 18.88% and the S&P was up 6.14%. For 2023 to date through May 29, the NASDAQ was up 31%, and the S&P was up 10%. NASDAQ tech stocks, like Nvidia (NVDA), are driving the index up and that is pulling the rest of the market with it. The remainder of the market, however, is weighed down by warnings of a tough retail economy, companies reporting negative growth, and inflation problems. At the moment, investors are betting on technology’s big growth to avoid problems from a slowing economy, prolonged high inflation, and the Fed’s rate hikes. The result is a very narrow market, with a small number of specific stocks propping it up. History says, that eventually, the market rally will either expand, with more stocks participating, or it will fail because you can’t sustain an upward trend with fewer and fewer stocks. Narrow markets can run for longer than you might think. But it’s not too early to locate the exits.
April 24, 2023 | Daily JAM, Morning Briefing |
Important observation out of Morningstar on Friday. While the Morningstar U.S. Market Index is up 15.4% from its bear-market low on October 14, the market is only 1.4% higher than it was at the end of November. AND in recent months, the stock market has been moving in tighter and tighter bands. So far in April, the Morningstar U.S. Market Index has only moved up 0.9%. That puts the month on track to show one of the flattest monthly returns since May 2022.
January 30, 2023 | Daily JAM, Morning Briefing |
Here’s what I expect on Wednesday. The Federal Reserve’s Open Market Committee will announce a 25 basis point interest rate increase. In his post-meeting press conference Fed chair Jerome Powell will try to talk the financial markets out of their exuberance by stressing that the Fed doesn’t see a quick end to interest rate increases because at 5% inflation is still running way ahead of the Fed’s 2% target rate. And I expect that investors and traders will ignore Powell’s comments and bid stocks high because a pause in rate increases is just around the corner–maybe as early as March–and financial markets can look for the Fed to begin cutting interest rates in the second half of the year. To which I say, Bushwah! I would sell any post-meeting rally. March increasingly looks like the month where reality will whack the markets on its head.
October 18, 2022 | Daily JAM |
After the close today, October 18, Netflix (NFLX) reported fiscal third-quarter earnings that beat Wall Street projections and added far more subscribers than analysts had expected. After falling 1.73% in the regular session, the stock added 14.02% in after-hours trading.
August 10, 2022 | Daily JAM |
As of 2 p.m. New York time, the Standard & Poor’s 500 is up 2.01% and the Dow Jones Industrial Average is ahead 1.53%. The NASDAQ Composite is higher by 2.71% and the NASDAQ 100 has gained 2.64%. The small-cap Russell 2000 index is higher by 2.77%. And all this on a conclusion that the drop in the July headline CPI inflation reading to an 8.5% annual rate from June’s 9.1% rate is enough to make the Federal Reserve decide to raise interest rates by 50 basis points at its September 22 meeting instead of the 75 basis points move so strongly favored yesterday. To understand the size of this shift in sentiment take a look at the odds in the CME FundWatch Tool. Yesterday, the market–this tool uses prices in the Fed Funds Futures market to calculate the odds of a Federal Reserve move–was pricing in a 68% chance of a 75-basis-point increase. This morning, August 10, after the CPI report, the odds of a 75-basis-point increase had dropped to 37.5%.And the odds of the Federal Reserve deciding on just a 50-basis-point increase had jumped today to 62.5% this morning from 32%.That’s quite a shift. And quite frankly I don’t see enough in the data to support this downgrade of the chances of a 75-basis-point interest rate increase on September 22.
July 2, 2022 | Daily JAM |
I think the next two weeks could bring a test of the bullish argument for stocks to move higher in the near term. I don’t think this is the strongest of arguments but I can see some traders already looking to test it out.
February 1, 2022 | Daily JAM |
Oatly Group (OTLY) was up 6.92% on Monday. Tuesday the shares gained another 2.67%. It’s a good sign when a beaten down stock doesn’t fall on profit taking the next day. For a day, at least, traders behaved as if they see a longer market recovery in prospect. SolarEdge Technology (SEDG) gained 12.33% on Monday and tacked on 1.35% on Tuesday. Teledoc (TDOC) rose 8.96% on Monday and then climbed 3.15% on Tuesday.
April 9, 2021 | Daily JAM, Short Term, You Might Have Missed |
The big question is how much of the huge year over year earnings growth in the first quarter is already priced into stocks. And how much more of a rally can we expect on expectations for even higher year over year earnings growth in the second quarter.
April 7, 2021 | Daily JAM, Dip-O-Meter, Short Term, You Might Have Missed |
This buy on the dip moment is over–this week’s revision of my Dip-O-Meter argues to me. The discounts to the February highs are, in general, getting smaller. And in many cases the size of the bounce that I’m seeing on up days is decreasing too.
February 15, 2021 | Daily JAM, Morning Briefing |
A JPMorgan Chase measure of cross-asset complacency that includes valuations, portfolio positioning, and price momentum is nearing its higher level since the dot-com bubble burst in 2000. Global investors are the least fearful they’ve been in two decades
February 8, 2021 | Daily JAM, Mid Term, You Might Have Missed |
Stocks climbed for a sixth straight day–the longest string of gains for the Standard & Poor’s 500 since August and with the Dow Jones Industrial Average turning in its best start for a February since 1931. The S&P 500 finished the day ahead 0.34% and the Dow gained 0.76% on the session. The NASDAQ Composite was up 0.95% and the NASDAQ 100 added 0.67%. The biggest winner for the day was the small cap Russell 2000, which gained 2.53% on strength in bank stocks and hope for more growth in the general economy. Oh, and the hope for $1,400 checks to individual Americans, hundreds of billions of dollars in state and local aid and enhanced federal unemployment benefits. And continued progress on the Covid-19 vaccination program. All this means, in my opinion, that the currently stretched valuations in this stock market are likely to get even more stretched in the coming days and weeks.
December 5, 2020 | Daily JAM, Friday Trick or Trend |
On Friday American Airlines (AAL) said it it seeing a slowdown in demand because of surging coronavirus cases. (Again.) And that the company now has a weaker outlook on airline bookings heading into the year-end holidays. The news from American Airlines echoes a similar warning the day before from Delta Air Lines (DAL)