Sethi Associates

 Daily Summary – July 29, 2021 - The Rotation Continues Please excuse any typos. The back and forth between value and growth of late flipped back to value's favor, but most stocks pushed higher today, led again by small caps.  RUT was up seven tenths, SPX four, while Naz and NDX were up around a tenth.    Style box tilted towards value but core actually outperformed.  Small and mid-caps over large. And while value/growth was on a basically one-way trip to the downside from the start of June until last week, one of our favorites, Charlie McElligott was out today with a note saying that as we move past August and its low liquidity into September and October, value may retrace some of this slide.  In “an environment where yields could again begin to [move] higher as supply picks back up and QE tapering is announced” over the next several months, traders may look to pivot back into growth he said.  He found support for his view in what he thought was a "ha...

Q2 GDP (initial estimate): +6.5% vs. +8.0% consensus and +6.4% in Q1. Core PCE prices: +6.1% vs. +5.9% consensus and 2.5% prior. PCE price index: +6.4% vs. 3.8% prior (revised). Note: remember that all of the numbers are annualized so it reflects the change from the previous quarter but then annualizes it (so they're basically 4x what the q/q change was). 2Q21 GDP came in at 6.5% (annualized) well below expectations of an 8.4% (and the range of estimates from 70+ economists was 6-11.2%).  "The increase in real GDP in the second quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, exports, and state and local government spending that were partly offset by decreases in private inventory investment, residential fixed investment, and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased."   Looking at the components individually (full table at the end): PCE (spending) increased at...

US Pending Home Sales (M/M) Jun: -1.9% (est 0.3%; prev 8.0%) US Pending Home Sales NSA (Y/Y) Jun: -3.3% (est -3.3%; prev 13.9%) June pending home sales (which are contract signings not actual transactions so a little more forward looking) deviated from June new home sales with a decrease m/m (but after a big increase last month). They remain though at pre-pandemic highs post-GFC. As this is contract signings, this will later filter through to existing home sales in July and August.  All regions saw m/m increases.  Here is some commentary from the report which now has very little mentions of supply and much more emphasis on prices which is sort of a flip from reports earlier this year. WASHINGTON (July 29, 2021) – Pending home sales declined marginally in June after recording a notable gain in May, the National Association of Realtors® reported. Contract activity was split in the four major U.S. regions from both a year-over-year and month-over-month perspective. The Northeast ...

  Initial Jobless Claims week ending Jul 24: -24K to 400K vs. 390K consensus, 424K prior (revised from 416K).  Non-SA 344.6K , an increase of 66,591 (or 16.2%) from the previous week.. PUI claims -15K to 95 K . Four-week moving average was 394.5K , up 8K from the previous week's average of 386.5K. Continuing jobless claims seasonally adjusted (one week delayed) of 3.269M higher than 3.262M prior and higher with 3.196M consensus.  Non-SA fell by 28k to 3.247M . Total receiving benefits in all programs (two weeks delayed) was   13.156 M , +582K. Headline (seasonally adjusted) jobless claims ticked back down after last week's big rise (which was revised even higher) coming in right at 400k above estimates for 390k.  But as seasonality was expecting a decrease, taking out adjustments, the net number was a healthy -66k to 345k around the lowest levels we've seen post-pandemic.   The 4-week moving average of initial claims remains near post-pandemic lows....

 As we approach the open... - 7/29/21  Apologize for any typos. As we approach the open of US equity trade in NY, most stocks trade with a positive bias again this morning, with small caps leading again but large growth continuing to struggle after some disappointing guidance from Facebook and Paypal (following yesterday's sell the news reaction to great earnings from Apple, Microsoft, and Alphabet).  We get Amazon tonight.  RUT indicated up around nine tenths, SPX up around two tenths, NDX down one tenth. Remember our summer caveat: One thing to keep in mind is after July 4th until around Labor Day, there is significantly less liquidity in the markets due to vacations, etc., so we can get more whippy action and "overshoots" in all markets. In U.S. corporate news: Facebook (FB 359.89, -13.39): -3.6% after saying it expects 2H21 yr/yr revenue growth rate to decelerate modestly on a two-year basis. The company beat top and bottom-line estimates. PayPal (PYPL 285.10, -1...

Daily Summary – July 28, 2021 - No Fed Surprises  Please excuse any typos. While the post-pandemic pattern noted in the tweet above is a sell-off into the close on Fed days, the SPX actually staged a more pre-pandemic pattern of bottoming around the meeting (today it was right at 2 when the statement was released), recovering from modest losses to end flat.  The Naz and NDX looked more like the blue line, finishing up seven and four tenths, respectively, while the RUT didn't even dip, just sort of flatlined for a couple of hours as it moved up throughout the day to finish up 1.5%.   Style box a mirror image of yesterday with small over large and growth over value today, with most of the box finishing at least mildly green.  Large core was brought down by Apple which also weighed on the tech sector. And if it's felt like small cap growth hasn't done as well as large cap growth over the past month, that's because it hasn't.  In fact, the divergence is near re...