Daily Chartbook #208

Welcome back to Daily Chartbook: the day’s best charts & insights, curated.

1. Mortgage demand. "The contract rate on a 30-year fixed mortgage increased 22 basis points to 6.91% in the week ended May 26...The index for home purchases fell to the lowest level since early March."

2. Rent prices. "Rents nationally increase by 0.5% month-over-month; prices up 0.9% year-over-year."

3. CRE loans. "Banks are losing their appetite. The ratio of money lent out, compared with property value, dropped to a 30-year low in commercial mortgages this spring."

4. China recovery slows. "China’s economic recovery weakened in May...Manufacturing activity contracted at a worse pace than in April, while services expansion eased."

5. DM PMIs. "Manufacturing PMIs have been fairly weak recently on both absolute and relative bases."

6. Public debt. "Outstanding debt held by the public stood at $23.9 trillion as of the end of 2022. That’s 97% of gross domestic product, using the measure most popular among economists — roughly triple what it was 20 years earlier, and forecast to keep climbing."

7. Margins vs. inflation. "A newly published study by economists at Georgetown and NYU found no correlation between changes in profit margins and industry-level inflation."

8. JOLTs. Job openings increased to 10.103 million (9.4M expected) while the quits rate ticked down to 2.4%. "They're telling different stories: Openings suggest the labor market is cooling but still *very* hot. Quits suggest the labor market is strong but beginning to look more normal."

9. Chicago PMI. The index dropped to 40.4 (vs. 47.3 expected) from 48.6 for the 9th straight month of contraction (longest streak since GFC). "New orders, production, and inventories all fell at faster pace (all contracting); supplier deliveries and prices paid rose at slower pace (both expanding) … employment slipped into contraction."

10. Dallas Fed services. "Texas/Dallas Fed Services declined -2.9 to -17.3.  Input and selling prices declined.  Employment also weakened."

11. Redbook. Redbook retail sales increased 1.2% YoY in May.

12. Recessionary indicators. "The Citi Economic Surprise index and Copper have fallen since March, suggesting a rising level of economic weakness."

13. Oil prices. "After failing to break through the 200-DMA in April, crude oil has now extended its streak of closes below the 200-DMA to 190 trading days.  Fifth longest on record."

14. Bond shorts vs. gold. "Hedge funds have placed a record aggregate short bet across long-dated Treasury futures, a set-up that could spell a rush to bullion if the extreme positioning is unwound."

15. Private client flows. "BofA’s private clients have been selling stocks."

16. Investor flows. "Flows into equity ETFs starting to strengthen again, but for month of May, large-cap equities made up <5% of inflows ... bond ETFs didn't lose popularity last week, with aggregate bond funds taking in $2 billion last week."

17. Investor Intelligence. "Investors Intelligence bears 23.3%. Lowest since January 2021."

18. Money market vs. equity flows. "The gap between money markets and equity flows [is] starting to become as wide as it was post the COVID equity low. Equity markets are very strong following 12 months."

19. Tech longs. "Leveraged funds and asset managers are very net long Nasdaq 100 futures."

20. SPX vs. NDX positioning. "The extreme narrowness of the latest leg of the equity rally, in our view, further leaves the risk/reward for broader equity markets skewed to the downside, evident from the divergence in speculative positioning of SPX and NDX futures."

21. Hedge fund positioning (I). "Hedge funds are long equities again and should consequently be less of a tailwind for equities."

22. Hedge fund positioning (II). "They also carry a near-record short position in SPX futures as a partial hedge to their long cash equity."

23. Computer long positioning. "The combined equities long by ‘computers’ has been playing momentum, increasing the equities long. We are still not at extreme long levels, but the ‘delta’ of the buy has been rather strong lately."

24. Cheap small-caps. "Small-caps are relatively inexpensive compared to large-caps."

25. FANG valuation. "Forward P/E for largest and most popular growth stocks has surged to 33.7, bringing year/year % change to nearly 63%, surpassing peak reached in September 2020."

26. Sector correlation. "1-month correlation between sectors has fallen to multi-year lows."

27. Bellwether stocks. "Here is a look at my custom bellwether stock index... Price is stuck below August highs, with the average stock trend strength composite fading."

28. Operating margins. "S&P 500 operating earnings bottomed in Q4 2022."

29. Seasonality. "Historically, June tends to be a positive month for the S&P 500 in the third year of the US presidential cycle."

30. Post-narrow breadth. And finally, “market gains have historically been prevalent once stellar runs by the five largest stocks have ended, with the S&P 500 rising 6.7% on average in the subsequent six months.”

Thanks for reading!