US equities: bonus season under threat

Two weeks ago, FT Alphaville noted that below the surface of a roaring US stock market, something was amiss.

Despite near record highs in the indices, a larger and larger cohort of stocks in the Russell 3000 — which constitutes some 96 per cent of the entire market — were hitting new 52-week lows with a few large-cap names holding the market above water.

A fortnight later, little has changed. While the S&P 500 has only shed 2.7 per cent since, the number of shares hitting new lows keeps hitting new highs, and the number hitting new highs keeps hitting fresh lows:

In fact, on Thursday, the number of companies hitting new 52-week highs was just 13. The lowest number since September 2020.

The macro environment hasn’t helped. What with Grandmaster Jay revealing that he’s planning to taper faster than expected, and the emergence of a new variant of Covid. But even then, it seems traders are getting jittery at even the slightest whiff of bad news.

Take digital signature business DocuSign. After the bell Thursday, the Covid-winner reported earnings: beating estimates on both revenues and earnings per share. All good then? Well, not exactly. The company revealed that its billings of $565m — revenue which is contracted but yet to be recognised — were short of its own guidance of $585m to $597m. And, in chief executive Dan Springer’s words, “after six quarters of accelerated growth, we saw customers return to more normalised buying patterns [following Covid].” In pre-market, the stock is down 32 per cent. Wiping some $15bn off its market capitalisation. Ooof.

Of course, it should be pointed out that when you’re a high growth software business trading at an enterprise value to forward sales multiple of 22, there’s very little margin for error if you miss estimates.

Yet, you can’t help but feel that with the year-end rapidly approaching, and the threat of the holiday season’s low volumes creeping into focus, that some fund managers might want to start locking in gains to guarantee that performance-based bonus comes in as planned. Otherwise Father Christmas, with his sack of carry, might not deliver this year.

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US equities: tick, tick, tick — FT Alphaville

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