Sethi Associates

Daily Summary – January 29, 2021 I ended y'day with "Still think at some point we're getting that 5-7% pullback but as always calling the timing is the tricky part."  Well, after today's action we're already there with some indices. RUT despite the cont'd rise in names like GME and AMC is now down 5.5% from its high, while others (SPX, NDX, and Naz) are closing in down in the 4-5% range.   To recap how we got here, the day started out red (other than RUT which started up) but not terribly so, and after an immediate downdraft, stocks moved up for the most part for the first hour or so before staring to weaken. With no real catalyst, the selling accelerated around noon to push steeply into the red bottoming out in the 1 o'clock hour.  From there it was sort of like the end of a roller coaster with ups and downs but ending not too far from the lows. By the end RUT fared the least worst with the support of those Reddit stocks down 1.56%. SPZ, Naz, and NDX

US Personal Income Dec: 0.6% (est 0.1%; prev -1.1%) US Personal Spending Dec: -0.2% (est -0.4%; prev -0.4%) Nice gain from personal income above estimates and first in 3 months as gov't benefits ticked back up for the first time in several months.  Real spending (inflation adjusted) was down for the 2nd month in a row at -0.2% as PCE was up 1.3%, a 3-month high. Ex-food and energy PCE was up 1.5% which ties a post-recovery high I believe. Savings rate ticked up to 13.7%  October income was revised down one tenth, November two tenths and November spending was revised down three tenths to -0.7%. The report does a good job breaking down personal income.  Basically everything improved but sole proprietor income (down for 2nd month in a row -4.5%) with employee comp up 0.5% and transfer payments up 2.3%.  The increase in personal income in December primarily reflected increases in government social benefits, compensation, and personal dividend income that were partly offset by a decreas

  Daily Summary – January 28, 2021 So, in pulling in y'day as I often do, couple of things to note. For one, I noted that if we are using last earnings season as an analog, we saw a dramatic three day pullback at the start, but that I wasn't sure we'd see that this go round due to various reasons. And while it's too early to call an all clear, markets did not terrible (RUT down a tenth) to pretty well (Naz, SPX, and NDX up between half and one percent led by the SPX) although all finished well off the highs fading starting around 1.45 pm. Style box reflected this bias to the large caps although mid-caps really performed best and the growth vs value was all over the place.  Secondly, the "speculation" I noted yesterday about the wider impacts stemming from the multitude of short squeezes has become "fact" as documented by numerous reports. While restrictions on short selling were instituted that caused broad pullbacks in those stocks, which I think in

  LEI's continue to recover although the pace cont's to slow up 0.3 percent in December following a 0.7 percent increase in November and a 0.9 percent increase in October.  From CB: “The US LEI’s slowing pace of increase in December suggests that US economic growth continues to moderate in the first quarter of 2021. Improvements in the US LEI were very broad-based among the leading indicators, except for rising initial claims for unemployment insurance and a mixed consumer outlook on business and economic conditions,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “While the resurgence of COVID-19 and weak labor markets remain barriers to growth, The Conference Board expects the economy to expand by at least 2.0 percent (annual rate) in Q1 and then gain momentum throughout the year.”

  - US New Home Sales Change Dec: 842K (est 870K; prev K 829K) - New Home Sales (M/M) Dec: 1.6% (est 3.5%; prev R -12.6%) - US Dec New Home Supply 4.3 Months' Worth At Current Pace Vs Nov 4.2 Months New home sales seasonally adjusted miss estimates but tick up from November's revised levels. Supply ticked up 0.1 months. Median selling price ticked up to $355k from Nov's $344k. Midwest v strong up 31% while NE and S both fell mid-single digit percentages (table below). West up 9%. 

  US Advance Goods Trade Balance (USD) Dec: -82.47B (est -84.0B; prev -84.8B) Us Retail Inventories (M/M) Dec: 1.0% (est 0.6%; prev 0.7%) US Wholesale Inventories (M/M) Dec P: 0.1% (est 0.5%; prev 0.0%) Trade cont's to recover with exports up 4.4% m/m and imports up 1.4% m/m seasonally adjusted. All categories of exports were up with biggest jumps in ag (food, feeds, beverages) up 10.7% (and up 30.7% y/y) and autos up 6.8% m/m (3.2% y/y). Overall exports are down 2.6% y/y. Imports led by industrial supplies (+6.6%) and autos (+6.2%). Both up y/y. Ag and consumer goods both fell (around 3.2%). Overall imports are up 4.7% y/y. Inventories up both retail and wholesale but more for the former.  Retail inv's remain down 5.8% y/y and wholesale -1.8%, so more restocking needed to get to year ago levels. 

 Mostly just collecting data that we already know, but: Q4 GDP  (initial estimate):  +4.0%  annualized vs. +4.1% estimate and +33.4% in Q3. US Personal Consumption: 2.5% (est 3.1%; prev 41.0%) The economic recovery continues at a much slower rate vs. Q3 as new restrictions were imposed when the virus resurged. Exports, nonresidential fixed investment, personal consumption expenditures, residential fixed investment, and private inventory investment rose, while the federal government and state and local governments reduced spending and imports increased. PCE price index  +1.5%  vs. +2.4% consensus and 3.7% in previous quarter. Core PCE prices  +1.4%  vs. +1.5% consensus and 3.4% in previous quarter. GDP comes in a little weak as personal consumption, while positive, comes in light. Overall, the increase in GDP reflected increases in exports, nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, and private inventory investment that were p

 Initial Jobless Claims: -67K to 847K vs. 875K consensus, 914K prior (revised from 900K) for week ending 1/23/21. -Four-week moving average for week ending Jan. 23 was 868K , up 16.25K from the previous week's average of 851.75K. Pandemic claims 427K  down from 447k. -Advance seasonally adjusted insured unemployment rate was 3.4%, a decrease of 0.1 percentage point from the previous week's revised rate. -The advance number of actual initial claims under state programs, unadjusted, totaled 873.96K, an decrease of 101.4K (or 10.4%) from the previous week. -Continuing jobless claims of 4.771M is down from 4.97M and lower than 5.05M consensus. Mostly positive news from the claims report as initial claims as well as new pandemic claims both fall w/w. Because a 3.5% decrease was expected by the seasonals, the actual decrease was even better at a fall of 10.4% to 873K. Continuing claims, one week removed, fell again this week both SA and non-SA. The only two negatives are the overall

 Daily Summary – January 27, 2021 It's always so clear in hindsight, right? The technical divergences, flagging momentum signals, the inconsistent buying volume, the frothy sentiment, the pattern from last quarter (selloff at start of earnings), the Naz and NDX pushing over their channels, etc., etc. A big down day was coming.  It was so obvious. I'm sure we'll hear that a lot. But regardless, we are we are, which is sifting through the wreckage of a tornedo of a day where more than a few stocks got big haircuts while those most shorted stocks cont'd to see big buying.  At day's end it was the larger and growthier stocks that suffered the most with NDX down 2.8%, Naz - 2.61%, SPX -2.57%, and RUT least bad at -1.91%. Interestingly, it didn't start out that way. At the open while all were red, the RUT was by far the worst actually opening slightly lower than where it closed. All the indices climbed just after the open before selling off around 2pm (Fed statement?)

  US Durable Goods Orders Dec P: 0.2% (est 1.0%; prevR 1.2%; prev 1.0%) US Durable Goods Orders Ex Transportation Dec P: 0.7% (est 0.5%; prevR 0.8%; prev 0.4%) US Cap Goods Orders Nondef Ex-Air Dec P: 0.6% (est 0.5%; prevR 1.0%; prev 0.5%) US Cap Goods Ship Nondef Ex-Air Dec P: 0.5% (est 0.6%; prev 0.5%) Dec durable goods new orders come in weaker (headline) for 4th month in a row and below expectations but were able to have their 8th positive month in a row. Excluding transportation, new orders beat estimates up 0.8% m/m with the increase driven by machinery orders up 2.4%. On the other side computers and electronic products saw new orders fall 0.2% and transp new orders were down 1%. Ex-transp and defense orders were up 0.5% m/m. Y/y new orders remain down 7% headline but excluding transp they are down only 0.1% but taking out defense they are down 7.1% y/y. Shipments stronger up 1.4% (0.4% in Nov) m/m and now down 5% y/y, Ex-transp shipments up 0.8% m/m and ex transp and defense up

Daily Summary – January 26, 2021 At the outset, today looked like we might get a reversal of what we've seen for the most part the past few days which is large growth outperformance, as at the open we had the RUT leading and the NDX lagging a bit. But from the get go, RUT sold off and before the morning was through it was in solidly negative territory. While it did make a shot at green it ended up finishing at the lows and right on that bottom channel trendline, down six tenths. SPX did a mini version of that finishing down -0.15%. Naz and NDX also finished lower than where they started but in a tight range finishing basically flat. Interestingly while the style box did have a bit of a preference for large caps, there wasn't a great pattern with mid-cap boxes (core and growth) taking the bottom two spots. Large value did best. Technically not too surprised by the RUT weakness after I mentioned y'day that it seemed to be losing momentum. As noted above it now sits on the bot

  Non-Manufacturing Firm-Level Business Activity Index: -14.3 (prev 5.0) Philadelphia Non-Manufacturing New Orders Index Jan: 0.2 (prev -9.5) Philadelphia Non-Manufacturing Regional Business Activity Index Jan: -17.5 (prev -26.6) Non-Manufacturing Regional Fed Wage And Benefit Cost Index: 16.4 (prev 8.4) Non-Manufacturing Full-Time Employment Index: 3.1 (prev -5.8) Survey responses were collected from January 11 to January 21. Philly Fed services moves back into negative territory for the first time since mid-2020, with a big drop to negative 14.3 on the firm level (from +5 in Dec), although interestingly new orders were up 10 points to +0.2 and full time employment also went into positive territory at +3.1 from -5.8 in December (and part-time/contract increased to -4.8 from -12.5). Prices paid cont'd to move up to above-average levels while prices rec'd fell. Cap ex also increased with physical plant slightly negative and equipment and software/equipment positive (+10.7).  Exp

 Daily Summary – January 25, 2021 I mentioned last Friday that post-JPM earnings last quarter, the markets sold off pretty substantially. As today progressed, it looked like we might follow that pattern this go round, as markets sold off sharply at 10.45 am going from mild gains to solid losses before bottoming just as sharply 20 minutes later and climbing throughout the day into the close. While there were lots of individual movers (anything with heavy short interest was a buying target today it seemed) the general bias to the FAANG type names from last week carried over into today with the NDX (which led last week) leading again today up 0.87%. Naz was up seven tenths, SPX 0.36% and the RUT lagged finishing down a quarter percent. Style box was consistent with small value again the biggest loser and large core the best.  Technically while some channel lines were broken intraday, by the end everyone was back where they started with Naz and NDX above their channels of Nov-last week, RU

  US Chicago Fed National Activity Index Dec: 0.52 (est 0.10; prevR 0.31; prev 0.27) Nice beat from CFNAI. Data is through Jan 21st. Production-related indicators contributed +0.44 to the CFNAI in December, up from +0.13 in November.  Sales, orders, and inventories moved down to +0.05 in December from +0.09 in November. Employment-related indicators +0.13 in December, down slightly from +0.15 in November. Personal consumption and housing category decreased to –0.09 in December from –0.06 in November. On balance, consumption indicators weakened, pushing down the category’s overall contribution in December.

Daily Summary – January 22, 2021 Day 3 of the Biden Era started out with a similar theme to Days 1 and 2 with large caps and growth outperforming but with a more negative tone than the first two days, with all major indices opening solidly in the red. But right at 9.45 am when the better than expected Markit ISM's were released (actually right before hmm) indices turned around and started heading up until a little after 10 am when all the indices pulled back. From there, paths diverged a bit. The small caps, which had steadily traded lower since the inauguration, bottomed well off the lows and moved higher in a seesaw pattern until 2.15 pm when they took off, ramping right up into the close with the RUT finishing up 1.28%. Naz also trended up, although not quite as smoothly to finish modestly green (up one tenth) due to a last minute drop of several tenths (not sure of the catalyst). SPX, and NDX on the other hand retested the lows, and while they at one point got to around breakev

 EIA - Summary of Weekly Petroleum Data for the week ending January 15, 2021  US DoE Crude Oil Inventories (W/W) 15-Jan: +4352K (est -1675K; prev -3248K) - Distillate: +457K (est +1800K; prev +4786K) - Cushing: -4727K (prev -1975K) - Gasoline: -259K (est +2425K; prev +4395K) - Refinery Utilization: +0.50% (est -0.50%; prev +1.30%) - Propane -6200K (prev -9900K) EIA comes in as API did with a big unexpected build in crude but little better than expected on the products front incl another large propane draw as well as a 1.1mb draw from "Other".  Total petroleum inv's (all products plus crude) decreased by 700kb. Crude - Build was a result of a large decrease in exports (-760kbd) which was predicted by more than a few commentators I follow as loadings were pushed off for various technical reasons. If they're accurate, we should see a big increase in exports in 1-3 weeks. Otherwise, production was flat, imports a little lower, refinery throughput a little higher, adjustme

 US Markit Manufacturing PMI Jan P: 59.1 (est 56.5; prev 57.1) - Services PMI: 57.5 (est 53.4; prev 54.8) - Composite PMI: 58.0 (prev 55.3) Markit January flash PMI's come in strong driven by solid increases in output in both surveys. Rates of expansion accelerated from Dec with mfg showing the sharpest upturn in its survey since March 2015 and largest acceleration in output since Aug 2014, while services output increased the most since Sept 2014. Services new orders and employment did moderate as Covid cases ramped up but remained solidly in expansionary territory. Mfg empl ticked up to best level in two years. Export orders and input prices increased solidly in both surveys with the latter increasing the most on record for services and since July 2008 for mfg. Services outlook improved while mfg took a step back (but still strong). Here was the commentary:

 Daily Summary – January 21, 2021 Day 2 of the Biden administration had some of the feel of Day 1, with value and small caps weak and large core and growth outperforming, but the overall tone was much less positive with much of the market declining, led to the downside by reopening stocks on the back of cont'd pessimistic talk from the White House about the near term amidst the backdrop of a European meeting to potentially lock down their continent for a period of time. In terms of indices, the result was NDX and Naz with nice gains of 0.82 and 0.55% respectively, but SPX basically flat, and RUT sold down nine tenths. The style box looked worse with just two green boxes and only one that was solidly in green territory (large core).  Technically this pushed RUT down towards the bottom of its channel. Also RUT RSI got another above to under 70 which is generally a bearish indicator but it's flipped around that a couple of times. SPX remains at the top of its channel while Naz and