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Chart Advisor: Bond Buyers Worried


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Tuesday, 28th September, 2021

1/ Indexes see selling as lawmakers discuss debt ceiling 

2/ FactSet delivers positive surprise  

3Thor Industries rides wave of orders 

4/ The bottom line

1/ Indexes See Selling as Lawmakers Discuss Debt Ceiling 

U.S. Treasury yields rose for the second day, as investors continue to sell off government debt while waiting for lawmakers to resolve their budget deficit stalemate. Major indexes all moved lower, with Invesco’s tech-heavy Nasdaq 100 ETF (QQQ) falling more than 2%. Congress has yet to come to an agreement to prevent a potential government shutdown or raise an ever-encroaching debt ceiling.  

The technology sector posted a continued contraction as inflation fears persist. Fed Chairman Jerome Powell told the Senate Banking Committee that inflation could last longer than anticipated, citing supply chain issues and ongoing pandemic complications.  

The larger market pullback has sent the Cboe Volatility Index (VIX) higher. Also known as the investor fear gauge, the VIX represents option pricing of the S&P 500 (SPX). As a result, the two have an inverse relationship. The chart below illustrates the recent sharp uptrend for the VIX contrasted against the more subtle downtrend of the SPX. While SPX was on an upward trend the last few months, the VIX remained relatively elevated.    

2/ FactSet Delivers Positive Surprise  

Bucking the trend of the wider markets is FactSet Research Systems (FDS), which rose more than 3% after the company beat both earnings per share (EPS) and revenue expectations in their fiscal fourth-quarter earnings announcement. FDS reported $2.88 EPS and $411.89 million in revenue, exceeding analyst expectations of $2.73 EPS and revenues of $404.92 million. The financial data and software company has risen 15% year-to-date. 

FactSet has recently outperformed its sector, as illustrated in the chart below. The chart compares FDS with State Street’s Financial Sector ETF (XLF). The earnings bump from FDS further places the company in front of XLF, which has gained more than 31% year-to-date. Perhaps without the positive earnings-related price movement, FDS would be more in-line with XLF on the day, as the sector ETF fell more than 1.3% amid a larger market selloff.  

3/ Thor Industries Rides Wave of Orders 

Also outpacing indexes after an earnings beat was Thor Industries (THO), which climbed more than 7% after reporting their fiscal fourth-quarter earnings results. THO reported $4.12 EPS and $3.59 billion in revenues, beating analyst expectations of $2.90 EPS and $3.31 billion in revenue. THO said the demand for RVs remains strong, and that backlogs are at a record high.  

Below is a comparison of the recent performance of THO compared to that of State Street’s Consumer Discretionary sector ETF (XLY). THO has outperformed its sector over the last year, as the company has gained 27% compared to a 24% rise for XLY. However, on a day where most of the market is experiencing a pullback, THO investors expressed confidence in the company, bidding share prices up to an extreme range.  

A spate of recent earnings across the Consumer Discretionary sector have been hampered by supply chain issues, however, THO has managed to buck that trend as the automobile market has remained hot.  

4/ The Bottom Line 

Bond and stock investors alike are nervous about the debt ceiling discussions, but it hasn’t kept investors from looking for stocks to buy. FactSet and Thor Industries both surprised investors after earnings, and buyers showed up despite the market’s overall worries. 

Originally posted on 28th September, 2021

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