Stock Market Today: February 19th - 23rd, 2024

Welcome StonkForums to the trading week of February 19th!

This past week saw the following moves in the S&P:


S&P Sectors End of Week:


Major Indices End of Week:


Major Futures Markets End of Week:


Economic Calendar for the Week Ahead:


What to Watch in the Week Ahead:
(N/A.)

 

Bitcoin & Black Gold Bid As Stagflation Fears Wreck 52-Year-Old Equity Win-Streak
FRIDAY, FEB 16, 2024 - 04:00 PM

The S&P 500 was on course for its 15th positive week of the last 16, but a late-day sell-off spoiled the historic streak which hasn't happened since March 1972.



Here's what that streak would have looked like... but no more!



This occurred in a week that saw hotter-than-expected inflation (CPI and PPI), but weaker-than-expected retail sales, industrial production, and housing activity - which all sounds very stagflation-y.

All of which pushed 'hard' data to its biggest weekly decline since the first week of October...



Source: Bloomberg

But, based on the lagged impact of the dramatic easing of financial conditions last year, we suspect this 'weak' week is a blip and economic 'animal spirits 2.0' continues for another month at least...



Source: Bloomberg

Rate-cut odds fell (hawkishly) this week with even June now only a 60% chance of being the first cut...



Source: Bloomberg

And the market is pricing a 50-50 chance of 3 or 4 rate-cuts for the year, sliding less-dovishly this week...



Source: Bloomberg

While stocks ripped back from the CPI puke on Tuesday, they were unable to build on gains...



And that left Nasdaq the week's biggest loser, Small Caps the biggest winner while the S&P limped lower and The Dow clung to unchanged...



After Tuesday's bloodbathery, the short-squeezers returned with avarice. But, today they seemed to run out of ammo as OpEx wiped away all the long gamma...



Source: Bloomberg

SMCI entered a bear market (down over 25% from its highs today)...



MAG7 stocks ended the week lower, unable to re-gather any momentum from the CPI-spill...



Source: Bloomberg

Treasury yields were higher across the curve this week after hotter than expected CPI, jobless claims, and then PPI...



Source: Bloomberg

But, as the chart above shows, the short-end notably lagged, leaving the yields curve to an ugly bear flattener. The 2s30s curve is back at its most inverted in 2024...



Source: Bloomberg

Mortgage rates surged back up to two month highs...



Source: Bloomberg

The dollar ended the week higher, but barely, after giving back all the CPI spike gains...



Source: Bloomberg

Bitcoin rallied (8%) back above $52,500 this week (its highest since Nov 2021), the fourth straight week of gains for the largest crypto currency...



Source: Bloomberg

On the heels of over $2BN of net inflows into spot bitcoin ETFs this week...



Source: Bloomberg

Notably, bitcoin ETFs have seen almost $5BN of net inflows since inception and during that time, Gold ETFs have seen net outflows of over $2BN...



So it's not a total surprise that gold ended lower on the week, even though it bounced back notably above $2000 (spot) after the CPI clubbing...



Source: Bloomberg

Oil prices rallied for the 4th week of the last 5, with WTI back above $79 and it highest close since the first week of November...



Source: Bloomberg

Meanwhile, this happened to XOM...



Source: Bloomberg

And don't expect gas prices to help CPI anytime soon (or Biden's re-election hopes)...



Source: Bloomberg

Finally, the most important single-stock earnings print in years is imminent. We are of course talking about NVDA. The current skew for the stock's options is pretty balanced between upside and downside, but as the chart below shows, in the last week, upside (calls) have been aggressively bid...



Source: Bloomberg

As Goldman's Brian Garrett noted, with an 11% implied move, the quantum of market cap priced for gain or loss is equivalent to stock number 37 in the SP500 ($200bn+).

Monday is a market holiday, so at least stocks won't actually trade higher that day, but next week promises to be another fun one.

 

Asset Class and Stock Performance Since 10/27/23
Fri, Feb 16, 2024

Below is an updated look at our popular table that highlights the performance of various asset classes using key ETFs (or ETPs) traded on US exchanges. For each asset class, we show its performance since COVID hit on 2/19/20, since the current bull market began on 10/12/22, and since the low last quarter on 10/27/23.

Since October 27th (less than four months ago), the S&P 500 ETF (SPY) is now up 22.8%. That's a big move. The Tech-heavy Nasdaq 100 (QQQ) is up even more at 25.95%, and interestingly, the small-cap Russell 2,000 (IWM) is up nearly the same amount at 25.58%.

At the sector level, we've seen Technology (XLK) and Financials (XLF) gain the most since 10/27/23, while Energy (XLE) is up the least at just over 2.7%.

Outside the US, we've seen China (ASHR) actually fall 2.3% since 10/27, while Israel (EIS) is up 38%. Natural gas (UNG) is by far the worst performer in our table with a drop of 47%.

Looking at fixed income ETFs, the 20+ Year Treasury ETF (TLT) is up 11.3% since 10/27/23, but it's still down 30.37% on a total return basis since COVID hit in February 2020.



Below is a quick six-month chart of SPY so you can see the sharp move higher seen since 10/27:



Within the large-cap Russell 1,000, we've seen 12 stocks gain more than $100 billion in market cap since 10/27/23, including a $794 billion gain for NVIDIA (NVDA).



In terms of percentage gainers, below are the 20 best performing Russell 1,000 stocks since 10/27/23. Coinbase (COIN), Affirm (AFRM), and Coherent (COHR) are the three stocks up more than 100%, while Lyft (LYFT), SentinelOne (S), Karuna (KRTX), Uber (UBER), and Crowdstrike (CRWD) are all up more than 90%.



Not everything is up, though. Below are the 20 worst performing Russell 1,000 names since 10/27/23. SSR Mining (SSRM) has been the worst with a decline of 65.2%, followed by agilon health (AGL) with a drop of 60.2%. New York Community Bancorp (NYCB) is down 46.6%, while AMC Entertainment (AMC) is down a hair less at 46.34%.



The huge rally we've seen in some areas of the market has left a large number of stocks trading above their consensus analyst price target. As of today, nearly 16% of Russell 1,000 stocks were trading above their consensus analyst price target, and below are the ones the farthest above.

Coinbase (COIN) has been the best performing stock in the Russell 1,000 since 10/27, and it's also now the farthest above where analysts think it should be trading. GameStop (GME) ranks second at 36.76% above its average analyst price target.



One last table...

Below is a list of stocks that have done well since 10/27 (up 20%+) but remain well below (20%+) their consensus analyst price target. These are names that have been rallying but analysts think there's more gas in the tank.



Why the Consumer and Households Appear to Be in the Best Shape in Decades


“Not everything that can be counted counts.” -Albert Einstein

As you’ve probably heard many times by now if you follow the headlines, the US consumer is flush with debt and about to go under in a surge of bankruptcies and the end of civilization could be near. I’m joking, of course. We don’t think that’s actually true. But you still see that view plenty, unfortunately. Here’s one recent example.



Why does the consumer matter? Household consumption makes up close to 70% of our economy and if they are strong, safe to say a recession isn’t likely to happen.

Let’s not waste any more time here. The consumer actually appears quite healthy and we need to push back against the constant doom and gloom crowd.

Household Balance Sheets Are the Best They’ve Been in Decades
Yes, we have a lot of debt (liabilities), as we hear about all the time. But what they don’t tell us about is equity (assets) are significantly higher. Have you owned a home or stocks the past five years? Safe to say your overall wealth has increased substantially as a result.

Here’s a great chart from Sonu Varghese, Global Macro Strategist, that breaks down household balance sheets. He looked at assets (housing, stocks, cash, etc.), liabilities (mortgages, car loans, credit cards, student loans, etc.), and net worth, but as a percent of disposable income. Doing this showed that although we hear all the time about how much debt there is, it is right where it was in the late 1990s when looked at as a percent of disposable income (right near 100%). In fact, we might have more overall debt now than any time in history, but it is well off what we saw right before the Great Financial Crisis (GFC) started as a percent of disposable income (137% then versus 100% now). This happened because debt might be up, but disposable incomes are up substantially as well. (Many tend to focus on only the numerator, ignoring the denominator. We call this denominator blindness). Then as you can clearly see below, assets and net worth have increased more over time, suggesting household balance sheets are as good as they’ve been in decades. Again, this isn’t what the nightly news tells us when they talk about the consumer.



What About $17.5 Trillion in Debt?
Recent data from the New York Federal Reserve showed that overall total debt for US households was up to a record $17.5 trillion. How worried should we be? That’s a LOT of debt last I checked.



Overall debt has grown by $988 billion over the past year, consisting of:

• • Mortgage debt: +583B
  • Home equity: +$38B
  • Auto loans: +$83B
  • Credit card: +$204B
  • Student loans: +$27B

The pace slowed to a 1.2% gain in the fourth quarter from a 1.3% jump in the third quarter. But here’s the real interesting take on this – disposable income increased $1.33 trillion! or 6.9% last year, well above any inflation metric you want to use.

It is quite rare to see disposable income grow more than overall debt. Also, since disposable income is used to service debt, households became less leveraged last year.



Incomes Continue to Increase
Jobs are plentiful and wages are still paying more than inflation, which is a nice combo for the consumer. If people were worried about their jobs or their pay was taking a cut, it isn’t unreasonable to think the consumer could be in trouble. Fortunately, we aren’t seeing that currently.

In fact, incomes adjusted for inflation continue to move to new highs. We actually noted this a year ago as a reason not to expect a recession in ’23 and not much has changed.



Oh No, Credit Card Debt Is HIGH!
We hear this one all the time. Credit card debt is at an all-time high, over $1 trillion. Yes, this is a huge number, but again, you need to look at this number compared to other factors.



$1.13 trillion is a lot of credit card debt. But remember from above there is $17.5 trillion in total household debt (and we already put that in context), so credit card debt is only about 6% of overall debt, with mortgages making up most of it at more than $13 trillion.

Let’s think about this another way. People are worth a lot more over the past few decades. In fact, since 2000, net wealth is up more than 250% compared with credit card debt, which is up only 125%. Again, if you are worth more, you might have more debt.



Now back to disposable income. If you have more income coming in, you might have more debt. I know. I have three kids and one just got a car. I have more debt thanks to that auto loan, but fortunately over the years my disposable income has increased to help offset that new monthly payment and big jump in insurance!

Looking at credit card debt as a percent of disposable income shows we are simply back to pre-pandemic levels at around 5.5% versus 7-8% during the GFC.



Another thing we hear is consumers are maxing out their credit cards to keep things going, but looking at the data shows that simply doesn’t appear to be true. Looking at how much consumers use on their credit cards relative to their overall line of credit is called credit utilization. Would you believe this is running at 24%, the pre-pandemic average? Home equity credit utilization, meanwhile, is nowhere near previous levels. This could be another big positive for consumers down the line as they tap into the massive gains from their homes. It simply doesn’t appear that consumers are maxing out their lines of credit.



Payments Are Late or Are They?
One of the better ways to know how much trouble the consumer is really in is if they have stopped paying back debt. The chart below indeed shows we’ve seen a jump in credit cards that are in serious delinquency (90 plus days with no payment), potentially the canary in the coal mine.



But as we mentioned already, credit cards are only about $1 trillion of the overall $17.5 trillion in debt. Not to mention we’ve seen data suggest it is younger people who are getting in trouble with credit cards, not the high-income earners who move the needle on overall consumption.

Looking at all the debt out there shows a much better backdrop, as 96.9% of all payments are on time, compared with 95.3% at the end of 2019 (a solid economy) and 93.3% at the end of 2007 (right before massive trouble). Also note that the most severely derogatory balances are only 1.5% of all total balances. This was running close to 2.8% pre-pandemic and 3% before the GFC.



This data is updated by the New York Fed quarterly and we will continue to monitor it closely, but at this time we simply aren’t seeing any major cracks in the consumer.

Bankruptcies and Foreclosures Are Soaring
Well, no they aren’t is the quick answer. Here’s the truth.

• The number of consumer foreclosures rose from 36,100 to 40,220 in Q4, which was well below the Q4 2019 level of 71,420.

• The number of consumer bankruptcies fell from 115,660 to 113,600 in Q4. It was running at 201,820 in Q4 2019.

Let’s say that again: The number of bankruptcies FELL last quarter. Yes, this can change and change quickly, but until we see this actually start to increase, it is hard for us to say the consumer is doomed. Again, this all tells us how strong household balance sheets really are relative to history (even a fairly solid period like 2019).



Up 7 of Last 12 After Presidents’ Day but Still Weak Long Term

DJIA, S&P 500 and NASDAQ are all up 7 of the last 12 years on the day after the Presidents’ Day market holiday with average changes ranging from -0.19% for DJIA to 0.01% for NASDAQ. Our February 2024 Strategy Calendar for members shows conflicting indications for this Tuesday, February 20, the day after Presidents’ Day. Over the most recent 21 years (2003-2023) the 13th trading of February has been down 61.9% of the time for S&P 500 with average loss of -0.28% earning the day our “Angry Bear” icon.

Yesterday’s post noted the improving trend of market performance ahead of Presidents’ Day weekend. As you can see in the table here the days after has modestly improved the past 12 years but the Wednesday after has not enjoyed the same turnaround and both days still display a fair amount of red. Since 1990, Tuesday after Presidents’ Day has been strongest for the S&P 500 with 18 gains and 16 losses with a median gain of 0.08% but with an average loss of –0.30%. DJIA is 50/50 on the Tuesday after, but NASDAQ is a net loser down 21 of 34 years with an average loss of –0.56% and a median loss of –0.32%.

Wednesday is all red for all three major averages. NASDAQ and S&P 500 have more losses, but DJIA is a loser as well. On the Wednesday after the Presidents’ Day holiday DJIA is down 18 of 34 with an average loss of –0.10% and a median decline of –0.16%. S&P 500 is down 21 of 34, average –0.08%, median –0.11% and NASDAQ is down 19 of 34, average –0.10%, median –0.14%.

Today’s hotter than expected PPI (combined with a similar CPI report earlier this week) is a stark reminder that inflation and higher interest rates could be around longer than the market had hoped.

DJIA Up 11 of Last 13 Days Before Presidents’ Day Weekend

Trading before Presidents’ Day Weekend used to be miserable. However, there has been an improvement over the last 13 years. The longer-term track record of the market’s performance ahead of Presidents’ Day weekend from 1990 through 2010, shows DJIA, S&P 500 and NASDAQ suffered numerous and sizable declines especially on Friday. However, more recently, since 2011, the Friday before Presidents’ Day has been improving (shaded in light grey in table below). DJIA on Friday has the best record over the last 13 years, up eleven times with an average gain of 0.43%. S&P 500 has been nearly as strong, up ten times, but with a slightly softer average gain of 0.32%. NASDAQ trails both in average performance and frequency of gains with eight advances in the last thirteen years.

Sturdy Sentiment
Thu, Feb 15, 2024

With the S&P 500 pulling back in the past week, sentiment has likewise taken a less optimistic tone. This week's AAII sentiment survey showed 42.2% of respondents report as bullish compared to 49% one week ago. Although that is lower, the bullish reading is still well above the historical average of 37.6% and is only at its lowest level since the end of January.



While sentiment currently holds a bullish bias, things are not exactly extreme. For example, back in December more than half of respondents reported as bullish and the current level of bulls only ranks in the 69th percentile of all weeks on record. What is perhaps more impressive is how consistently sentiment has stood at bullish levels. As shown below, over the past four months 87.5% of weeks have seen bullish sentiment come in above 40%. Such consistency of this level of bullishness has not been observed since April and May of 2021. Prior to that, you'd have to go back to January 2015 to find as elevated of a reading.



Meanwhile, bearish sentiment ticked up from 22.6% last week to 26.8% this week. That is the highest reading in a month, but inverse to bullish sentiment, it remains well below the historical average of 31%.



Given there has been consistent readings of bulls above 40%, there is also an impressive streak for bearish sentiment. This week marked the fifteenth consecutive time that bearish sentiment has come in below 30%. That is currently the longest streak since July 2021, and prior to that, there have only been a handful of other streaks that have lasted as long. There was another 15 week long streak that ended in January 2014 but you'd have to travel back another decade to find the next streak of similar length.

A Full Deck for Bitcoin
Wed, Feb 14, 2024

The price of bitcoin took out its early January high and topped $52,000 for the first time since December 2021 today. Bitcoin’s price traded at a short-term peak in early January just as the ETPs tracking the largest cryptocurrency started trading. From that high on January 11th, prices pulled back over 21% in less than two weeks which, even for bitcoin, is a steep decline in such a short period.



As bitcoin pulled back from that early January high, it looked as though its price would follow a similar path to the one it tracked following other approval milestones. In December 2017, after bitcoin futures launched, prices almost immediately peaked and plunged more than 80%. Then again in October 2021, when the bitcoin futures ETF first launched, prices peaked shortly after once again, resulting in what was ultimately another decline of close to 80%.

As we noted a couple of weeks back, the one difference between the launch of the bitcoin ETPs in January and the other two periods was that while bitcoin’s price was at or right near record highs at each of those prior two points, it was still down over 30% from its all-time high. While “investors” may have been enthusiastic ahead of the launch, the level of excitement was not nearly as strong as it was in late 2017 and late 2021. Even after today’s run to multi-year highs, Bitcoin is still more than 25% below its all-time high.



January Inflation Came in Hot, But Let’s Calm Down Here


Ouch! That was my reaction to the hotter-than-expected January Consumer Price Index (CPI) report, though that was mild compared to what happened in markets. The S&P 500 fell 1.4% on Tuesday. Bond prices fell as well, with 2-year and 10-year Treasury yields jumping 0.14%-points to 4.63% and 4.31%, respectively. This was on the back of a big shift in the narrative around Federal Reserve rate cut expectations – the timing of the first cut is now pushed out to June and investors are pricing in about 4 rate cuts in all of 2024, equivalent to 1%-point. A month ago, investors believed the first cut would happen in March and the Fed could cut 6-7 times in 2024. That’s a big shift in a relatively short period of time, and the January CPI data underlined the shift.



Headline CPI rose 0.3% month over month in January, above expectations for a 0.2% increase. Core CPI, excluding volatile food and energy components, rose 0.4%, above expectations for a 0.3% increase. Over the last three months, headline inflation is running at a 2.8% annualized rate and core inflation is at 4.0%, well above the Fed’s target of 2%.

Now for the qualifier, and I have a few.

For one thing, January is a very volatile month for inflation data, more so when inflation is relatively high – this was the case in 2022 and 2023, when we saw relatively large spikes. Even this time around, expectations were all over the place, reflecting the uncertainty. Seasonal adjustments help, but even that doesn’t remove the larger-than-normal start-of-the-year price spikes.

Two, CPI inflation is currently elevated mostly because of shelter (housing) inflation. If you exclude shelter, headline inflation rose just 0.1% in January. It’s running at an annualized pace of 1.1% over the last three months and 2.1% over the last six months. Over the past year, CPI excluding shelter is up just 1.6%.



What’s the Deal with Shelter Inflation?

It would be one thing if official shelter inflation data reflects what’s happening in reality. But it’s not. Ryan and I have been writing about this for close to a year and half now, and talked about it on our Facts vs Feelings podcast as well.

Shelter inflation within CPI is made up of two components:

• Rents of primary residences, which makes up 8% of CPI.
• Owners’ equivalent rent of residences (OER) makes up 27% of CPI. It’s the “implied rent” that homeowners would have to pay if they were renting their homes. It’s as if you, as an owner, are renting the home to yourself as a service. The “rents” in OER are determined using equivalent homes, and so they essentially track rents. It has nothing to do with home prices, or mortgage rates.

Immediately, you can see a problem. 66% of American households own their homes, which means the CPI basket (a quarter of which is made up of OER) misrepresents inflation experienced by most households. Keep in mind that the actual “servicing cost” of a home is mostly the mortgage, and the average effective mortgage rate paid by homeowners is about 3.5%.

In short, the large weight of shelter in CPI is a big problem. The Fed actually focuses on another inflation metric, the personal consumption expenditures index (PCE), of which shelter makes up just 15%, so the problem is not as big on that side. PCE is running well below CPI as a result.

The other issue with official shelter inflation relates to how it’s measured. Private market data usually tracks only new leases, whereas official data considers both new and existing leases. However, most leases are not up every month, and are instead negotiated for longer periods like 1-2 years. This creates a lag between official and actual market data. Another problem is that the Bureau of Labor Statistics (BLS) samples units only once in 6 months, and they smooth price changes over 6 months. So rapid shifts in the rental market can take a long time to show up in official data. The lag can be 12-18 months.

Apartment List’s national rental index has been decelerating since November 2021, and rents have actually been falling on a year-over-year basis for 8 months now. The good news is that official shelter inflation finally started decelerating last summer, but it’s been agonizingly slow.



Then January threw a further wrench into the data. Rents rose 0.3% in January, equivalent to an annualized pace of 4.2% — the slowest since September 2021. But OER surged to an annualized pace of 6.9%, the fastest since April 2023. It’s extremely rare for these two to diverge like this, and by itself the rents data is probably more meaningful. In all likelihood, the OER surge is not the start of an upward trend.



How to Make Sense of It All

The big picture is that disinflation is happening, but shelter inflation is keeping CPI elevated. Outside of shelter, services inflation is still relatively high, albeit, skewed by “start-of-the-year” January effects. However, this is being offset by falling commodity prices, even outside energy. Prices for used cars, apparel, household furnishings, and prescription medicines have been falling recently.

A year ago, headline CPI inflation was up 6.4% year over year. That’s now at 3.1%. We’ve made a lot of progress, without a slowdown in economic growth or an increase in unemployment. Nothing we see in other data suggests we’re at the start of another inflation surge. Ultimately, this report is likely to be just a bump in the strong downward inflation trend that began 18 months ago. By mid-2024, barring major surprises, core inflation, especially the Fed’s preferred metric of core PCE, should be very close to the Fed’s target of 2%.

With respect to policy, we still expect rate cuts in 2024. However, absent a recession, we were never in the camp that we’d see much more than four rate cuts in total. That’s where the market is now. Of course, there’s been a big shift, but here’s a big positive: the S&P 500 is up 4% year to date despite markets getting less optimistic about the rate cut path. Now, there may be some volatility over the next month or two. As Ryan wrote in his latest blog, February and March are historically weak periods for stocks. Stocks also just gained for 14 out of the last 15 weeks, and so a break is due. The January inflation report may have served as a catalyst right on cue. But at the end of the day, the economy is strong, and the stock market has momentum, which means the bull market is likely to continue.

S&P 5,000 Is Here, Now What?


“It has happened before.” Coach Lou Brown on winning streaks in Major League II

Stocks have picked up right where they left off last year, with new highs across the board and the S&P 500 officially closing above 5,000 for the first time. Although on the surface there isn’t much of a difference between 5,000 and 4,999, it’s an important psychological milestone for investors. One year ago, investors were being bombarded by talk of the bear market and an imminent recession. But now we have a healthy economy, well-contained inflation, a Federal Reserve (Fed) set to cut rates, improving productivity, record earnings, and stocks at all-time highs. What a ride it has been, but investors were once again rewarded for sticking to their investment plans.

So, what now? At Carson, we remain overweight equities and expect this bull market to continue. But stocks have truly had a rally for the ages, so a well-deserved break or consolidation could happen at any time. A downturn would be perfectly normal, but higher prices remain likely to follow.

The chart below lists previous major S&P 500 milestones and the returns that followed. The good news is the S&P 500 was higher six months later every time and up a solid 8.0% on average, versus the average six-month return of 4.4%.



A Truly Historic Bull Move
The S&P 500 has finished higher 14 of the last 15 weeks, something it hasn’t done since early 1972. Over those 15 weeks it gained 22%. In its entire history, the S&P 500 has never been higher 14 out of 15 weeks and gained more than 20% over that time. If you’ve been invested these last 15 weeks, congrats, as it is safe to say you’ve been enjoying a historic stretch for the bull market.

After a 20%-or-better rally over 15 weeks, would you believe the market tends to see stronger longer-term returns moving forward? That’s right, this type of strength isn’t typical of the end of a bull market or the middle of a bear market. Instead, it’s more typical of the start to a longer-term bullish move.

We found 14 other times the S&P 500 gained 20% or more in 15 weeks. One year later the index had added another 12.5% on average and was higher 85.7% of the time.



Time for a Break?
We’ve been bullish, but we agree stocks can’t continue on a trajectory like this forever. But remember, a pause to refresh and let the bull catch its breath would be perfectly normal.

First up, February historically isn’t a very strong month and it is later in the month when most of the weakness tends to happen. Additionally, election years tend to be weak this month as well.



Next is our Carson Cycle Composite, which combines multiple different types of years to form one overall composite. Included are things like the average year, the past 20 years, the presidential cycle, the year after a 20% gain, and years with a positive January. Looking at this proprietary composite shows that the next six weeks or so could be ripe for a well deserved break. Take note, our Carson Cycle Composite worked very well last year.



Putting It All Together

The economy remains strong, earnings are expected to hit an all-time high this year, consumers are in great shape, the employment backdrop is solid, inflation is under control, productivity is soaring unlike anything we’ve seen since the mid to late ‘90s, the Fed will likely begin to cut over the coming months, and we don’t have to watch Taylor Swift every single Sunday anymore. Things really are good and should continue to stay that way.

But markets rarely work that way. When things are too good could be just the time for the rug to get pulled out from under it, even if it’s just a pause. We aren’t expecting a major correction here, but be open to a little more weakness than we’ve been spoiled by the past 15 weeks.

I’ll leave you on this note, the S&P 500 is up more than 5% for the year during the month of February. We would classify this as a good start to the year. 28 other years saw this happen, and the final 10 months gained 25 times and the full year 26 times, in both cases with much better than average returns as well. So should we see any well-deserved weakness in the near-term, it could be an opportunity to add before likely higher prices.

February Weak Seasonality & Frothy Market Selloff Sets Up Next Bull Leg

The big round number of S&P 5000 is proving to be resistant. It will likely take a few attempts to break through. February’s notorious seasonal weakness is bound to relieve the market’s obviously overbought condition. Much like January’s selloff as the market came to grips with the reality that it’s not getting a rate cut anytime soon, selling on January’s hotter-than-expected CPI suggests we are due for some further weakness. This is not out of the ordinary for February even into March. February is the weak link of the Best Six Months so expect some pullback.

Contrary to popular belief our outlook for the year remains bullish. This usually mild (and healthy) retreat (around 4% on average by S&P 500) from mid-February to mid-March in election years with a sitting president running for reelection could be a good opportunity to establish new or add to existing positions. Election year seasonal patterns suggest respectable full-year gains.

A CPI Silver Lining
Tue, Feb 13, 2024

We get it. Today's CPI was exactly what the market wasn't looking for. On all accounts, inflation came in higher than expected. That put the nail in the coffin on a March cut and even took the chances of a May cut down to nothing much better than a coinflip. While disappointing, the trend for both headline and core CPI continues to move in the right direction. Headline CPI came in at 3.1% year/year which is only just slightly above its post-COVID low of 3.0% from last June. Core CPI, meanwhile, fell to a new post-COVID low - technically speaking. The reason we say technically is that while the reported reading of Core CPI was 3.9% y/y and unchanged from December, if stretched out to two decimal places, it fell from 3.91% down to 3.87%.



It may not have been much, but January’s decline in Core CPI extended the streak of monthly declines in the core y/y reading to ten months. Going back to 1960, there has only been one other period where core CPI experienced as long of a streak of monthly declines in its y/y reading. Back in 1975, the y/y reading fell from 11.86% down to 6.73% from February through December. That was a much larger magnitude of decline, but the current period started from a much lower base (5.56%). In the entire history of the series, there have only been five other periods when y/y core CPI declined for eight months in a row. As shown in the chart, most of them occurred very early on in an expansion. That makes sense when you think about it as prices shouldn’t be going down as the economy is strengthening. It’s also why the Fed finds itself in such a difficult position caught between trying to keep a lid on inflation while at the same time avoiding an economic slowdown.



Sentiment Slump From the Little Guys
Tue, Feb 13, 2024

The NFIB published its latest Small Business Economic Trends report covering sentiment among small businesses this morning. As discussed in the Morning Lineup, at the headline level the report came in weaker than expected with optimism dropping to 89.9 versus expectations of an increase to 92.3. That leaves sentiment at the lowest level since last May.



Under the hood, that weaker sentiment number was a result of overall bad breadth including a couple of sizeable moves. The single largest move in January was the drop in expected real sales. That index went from a reading of -4 down 12 points to -16. That month-over-month decline is the largest since June 2022 and ranks as the ninth largest in the history of the survey. Actual earnings changes also marked a significant decline falling 5 points month over month. Conversely, two indices rose month over month: inventories and plans to increase inventories.



As previously mentioned, sales metrics were notably weak with sales expectations dropping significantly. Actual sales changes (which is not a component of the optimism index whereas sales expectations are) are still in contraction and in the bottom decile of all periods on record, but the January reading was unchanged month over month. That clashes with actual earnings changes which fell to -30 which is down at the low end of the past several years' range. Ironically, that worsening of earnings comes despite firms reporting an easing in inflation. The higher prices index fell 3 points to 22. That is now out of the top decile of readings and at the lowest level in three years.



Prices are not the only area hitting a new local low. Hiring plans have continued to collapse with back-to-back declines over the past two months. That index is now at the lowest level since May 2020. While that reading marks a deterioration in labor conditions versus earlier in the post-pandemic period, we would note that current levels are still above the historical median. Additionally, actual employment changes came in at zero meaning firms on a net basis neither hired nor fired. Meanwhile, compensation has appeared to have bottomed for the time being. Compensation plans, on the other hand, have peaked, but are still elevated indicating. Finally, we would note that the percentage of respondents reporting openings as hard to fill is down to a three-year low.



Overall, the report was a bit of a mixed bag if not leaning slightly negative. The share of respondents reporting now as a good time to expand reflects this with a reading that is still historically low albeit unchanged at multi-month highs in January. Digging deeper, economic conditions are overwhelmingly the main culprit for this expansion outlook. The political climate is the next largest factor, although we would note that the NFIB survey has historically tended to be sensitive to politics and leans Republicans (historically during Republican administrations the expansion outlook is better than when Democrats are in power). Financials and interest rates also rank highly for those reporting a negative outlook. Granted, at 7% of responses, that is down significantly from 12% only two months ago.





Inflation Concerns Coming Down
Tue, Feb 13, 2024

In an earlier post, we discussed the latest findings per the NFIB's Small Business Economic Trends report. The report also surveys firms on what they consider to be their most pressing issues. In January, there were some minor shifts in these readings. Overall, cost or quality of labor (combined) accounts for the largest share of small business problems at 31% of firms. That is followed by government-related concerns like taxes or red tape. Again combined, those issues account for just under a quarter of responses.



Inflation also ranks highly among small businesses, but this reading has improved markedly since peaking at 37% in July 2022. Counter to the hot CPI print today, there was a 3 percentage point drop in January in the share of businesses saying inflation is their biggest problem. Of course, that remains at a historically elevated level, matching the 2008 peak.



Stealing from the share of businesses reporting inflation as the biggest problem, poor sales ticked up a percentage point. While not a particularly large or concerning increase (current levels still only rank in the bottom 6% of all months on record), it does bring the reading to the most elevated reading since the summer of 2021.



As we noted in the earlier post, of those businesses saying now is not a good time to expand, the share pointing the finger at interest rates as the main reason has fallen dramatically in the past couple of months. That being said, those saying interest rates are their most important problem hasn't budged. 5% of businesses reported this issue to be their biggest, unchanged versus December at the highest level in over a decade.



Bitcoin Reclaiming $50,000
Mon, Feb 12, 2024

Although it has pulled back as of this writing, at its highs today, Bitcoin reclaimed the $50,000 level. That was the first time the world's largest crypto currency has traded above that threshold (on an intraday or closing basis) since December 28, 2021. As shown below, following the record high set in November 2021, Bitcoin cratered 76.5% over the next year. Since its bottom in November 2022, the crypto has managed to rally 214%. A significant portion of those gains have come since last summer with steep increases in the price of Bitcoin from October through December and another sharp push higher in the past few weeks. In fact, as recently as January 25th, it was trading below $40,000. But nearly three weeks and $10,000 later, Bitcoin is looking to join the 5.5% of days in which it has formerly traded above $50,000.

 

Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2024-



S&P sectors for the past week-

 

Here are the current major indices pullback/correction levels from 52WK highs as of week ending 2.16.24-


Here is also the pullback/correction levels from current prices


Here are the current major indices rally levels from 52WK lows as of week ending 2.16.24-

 

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Here are the upcoming IPO's for this week-

 

Stock Market Analysis Video for February 16th, 2024
Video from AlphaTrends Brian Shannon


ShadowTrader Video Weekly 2/18/24
Video from ShadowTrader Peter Reznicek
(VIDEO NOT YET POSTED.)

 

StonkForumers! Come join us on our stock market competitions for this upcoming trading week ahead!-

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StonkForums Weekly Stock Picking Contest & SPX Sentiment Poll (2/19-2/23) <-- click there to cast your weekly market direction vote and stock picks for this coming week ahead!

Daily SPX Sentiment Poll for Tuesday (2/20) <-- click there to cast your daily market direction vote for this coming Tuesday ahead!

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It would be pretty sweet to see some of you join us and participate on these!

I hope you all have a fantastic weekend ahead!

 

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Here are the most anticipated Earnings Releases for this upcoming trading week ahead.

***Check mark next to the stock symbols denotes confirmed earnings release date & time***

Monday 2.19.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES!

(NONE. U.S. MARKETS CLOSED IN OBSERVANCE OF PRESIDENT'S DAY.)

Monday 2.19.24 After Market Close:

Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES!

(NONE. U.S. MARKETS CLOSED IN OBSERVANCE OF PRESIDENT'S DAY.)

Tuesday 2.20.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES!

Tuesday 2.20.24 After Market Close:

Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Wednesday 2.21.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Wednesday 2.21.24 After Market Close:

Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Thursday 2.22.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Thursday 2.22.24 After Market Close:

Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Friday 2.23.24 Before Market Open:

Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES!

(T.B.A.)

Friday 2.23.24 After Market Close:

Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES!

(NONE.)

 

And finally here is the most anticipated earnings calendar for this upcoming trading week ahead-
($NVDA $PANW $SQ $WMT $RIVN $ETSY $HD $CVNA $MELI $VRT $SNPS $MRNA $LCID $SEDG $MPW $O $TDOC $NOVA $NEM $NKLA $WBD $NU $ARDX $BKNG $BROS $ENVX $AXSM $LNG $FVRR $MDT $ADI $CZR $W $APA $FANG $NEO $MRO $SU $MOS $INTU $RUN $WING $WIX $TOL $FNF Note the market is closed on Monday, but $RIG $DOOR $JELD $HSTM & $BSM are still reporting that evening.)


If you guys want to view the full earnings post please see this thread here-

• Most Anticipated Earnings Releases for the week beginning February 19th, 2024 <-- click there to view!

 

(REMINDER: U.S. MARKETS ARE CLOSED ON MONDAY, FEBRUARY 19TH, 2024 IN OBSERVANCE OF PRESIDENT'S DAY.)

 

Top of the morning StonkForumers! Happy Tuesday to all of you and welcome to the new trading week and a frrrrrrrrrrrresh start. Here is a quick check on those futures as we are under an hour into the US cash market open.

GLTA on this Tuesday, February the 20th, 2024!

 

Morning Lineup - 2/20/24
Tue, Feb 20, 2024

US equity futures are trading slightly lower this morning, while Treasury yields are mostly flat from where they closed last Friday. Walmart (WMT) beat estimates and is trading up a little more than 2%, while Home Depot (HD) beat as well but is trading down about 2%.

While Walmart (WMT) has historically marked the unofficial end of earnings season each quarter, the fact that NVIDIA (NVDA) reports tomorrow means we should probably push that back a day.

NVIDIA (NVDA) has a lot to live up to when it comes to earnings. The stock is up 50% YTD already and now has a market cap of $1.8 trillion. As shown below, the stock has reported an earnings triple play on its Q4 earnings report for four years in a row and seven out of the last eight years coming into its Q4 2023 report tomorrow. Will anything less than another strong triple play be enough to satisfy investors?

 

Here is a final look at today's market and futures maps, as well as how each sector performed individually at the close on Tuesday, February 20th, 2024.