The Bigs & Financials Lead Positive Charge During Holiday-Shortened Trading Week

I hope that you all had a wonderful week and that the social distancing, washing hands, and mask-wearing measures that we are all practicing will continue to pay off and keep us safe from COVID-19. However, this week we still saw some growth, albeit at a slower pace, but we have not won the war. The world has now realized 5,867,727 confirmed worldwide cases of COVID-19 (up from 5,168,433 last wk) with 2.462M cases that have recovered and more than 362k worldwide deaths. In the US, we now have 1,770,247 confirmed cases (up from 1,626,066 last wk) with 380,961 that have recovered & now 103,580 reported deaths. 

At the same time, the reopening process in the US is continuing to proceed in all of the 50 states, and some of my friends in Texas and elsewhere are reporting that they are “nearly back to normal,” but in my hometown of San Francisco, we seem to be still taking steps backward as we now have a “30-foot mask rule” that is imposing further restrictions on our daily lives, so we will remain working remotely & basically shutdown in The CIty for now. We are also seeing further stimulus measures take hold in the US as a 5th round seems to be in the cards for us in June, while many of us have already collected their economic impact payment checks from the UST. Hopefully, all of these moves that the government and our people are taking and dealing with will speed up our economic recovery, and a vaccine and effective treatments will be found soon by researchers soon as efforts continue to ramp up. Please stay strong and continue staying safe in the meantime.

MACRO FRONT

On the macroeconomic side of the coin, a number of negative economic reports continued to come in reflecting the damage of the shutdown,  but we are seeing some advances as reopening measures take effect. Here’s a summary of this week’s economic reports: On Monday, it was Memorial Day so now reports surfaced. On Tuesday, we received the following reports: The New home sales report confirmed an increase by .6% month/month on lower selling prices to a seasonally adjusted annual rate of 623k and on a year/year basis new home sales are now down 6.2%. The Conference Board’s Consumer Confidence Index came in at 86.6 for May and increasing from April as reopening measures tick forward. The FHFA Housing Price Index for May confirmed a rise by .1%. The S&P Case-Shiller Home Price Index jumped 3.9% year/year in March. On Wednesday, we received the weekly MBA Mortgage Applications Index that confirmed a rise by 2.7%. On Thursday we receive the Initial claims for the week ending May 23 confirming a drop by 323k to 2.123M while continuing claims for the week ending May 16 dropped by 3.86M to 21.052M.  The New orders for durable goods report confirmed a drop of 17.2% month/month in April. The second estimate for Q1 GDP revealed a downward move to -5% while the GDP Price Deflator was revised slightly upwards to 1.4%. The Pending Home Sales report confirmed a whopping 21.8% decrease in April. On Friday, we received the Personal income report in April which jumped 10.5% with the additional stimulus hitting, however sadly personal spending dropped by 13.6% while the real PCE decreased 13.2%. The University of Michigan’s Index of Consumer Sentiment fell to 72.3 with the final reading for May but up from April’s 71.8. The Chicago PMI for May decreased to 32.3. The advance goods trade deficit came in at $69.7B in April as advance retail inventories decreased 1.1% in April. Advance wholesale inventories rose .4% in April. According to Morningstar Direct the U.S. GDP is now forecasted to decrease by 40% annualized in Q2.

TRADE WAR

The US-China trade war also haunted us throughout the week and again at the end of the week as a White House press conference was orchestrated to discuss the situation for Friday adding a bit of fear, mystery, and choppiness in the markets. But in a surprising but consistent fashion, President Trump stopped short of speaking about adding more tariffs and/or withdrawing from the Phase One trade deal.  However, even this potentially negative cloud did not shake investors’ attitudes and/or stop a broad advance across all indices during this Memorial Day holiday-shortened trading week.

BIGS & FINANCIALS

This week the “bigs” were the leaders as the Dow ended the week at 25,383.11 representing a weekly increase of 3.8% and is now down 11.1% YTD. The S&P 500 closed at 3044.31 grabbing its own 3% weekly gain and is now down 5.8% YTD but up 32% since from the March 23rd low. The Nasdaq Composite closed at 9489.87 on Friday, representing a weekly 1.8% upward move & is now up 5.8% YTD. The Russell 2000, which was down ~35% this year as it was the index that was hit the hardest, closed at 1394.04 representing a weekly increase of 2.8%and is now only down 16.4% YTD.

The financials sector was up 6.6% leading all sectors but in addition, the industrials sector was up +6%, the utilities sector was up 5.7%, and the real estate sector was up +5.8%. These four sectors led all sectors in performance this week. From the financials and the Dow 30, we saw shares of Goldman Sachs (GS) closed trading at $196.49/share up from the $179.93/share last Friday. American Express (AXP) closed at $95.07/share up from the $89.33/share last Friday. Visa (V) closed trading at $195.24/share up from the $190.86/share last Friday. Shares of Morgan Stanley (MS) closed at $44.20/share up from last Friday’s close of $40.13/share.

The FAANG’s ended mixed this week.  Facebook (FB) closed at $225.09/share, -.16% Friday, ($234.91/share a week ago), Amazon (AMZN) closed at $2,442.37/share, +1.72% Friday, ($2,436.88/share a week ago and is up approx. 40% since mid-march), Apple, Inc. (AAPL) closed at $317.94/share, -.1% Friday, ($318.89/share a week ago), Netflix (NFLX) closed at $419.73/share, +1.52% Friday, ($429.32/share a week ago) & Alphabet (GOOG) closed at $1,428.92/share, +.86% Friday, ($1,410.42/share a week ago.)

COMMODITIES MOVE

Oil prices closed at $35.33/bbl & up 6.3% again this week seeing a nice jump from last week’s close of $33.25/bbl. Chevron (CVX) moved up this week to close at $91.70/share ($90.28, last wk) and Exxon (XOM) moved up closing at $45.47/share ($44.60, last wk.) 

Gold prices moved slightly lower this week closing at $1,730/0z. down from $1,740/oz & silver prices shot up to $18.02/oz from $17.68/oz last Friday and overall is continuing to exhibit bullish behavior. North American silver and gold producer Hecla Mining Company (HL) ended the week at $3.32/share slightly down from last Friday’s close of $3.35/share. First Majestic Silver (AG) closed at $10.01/share up 7.52%.

MONEY UPDATE

The U.S. Dollar Index weakened again to end the week at 98.31 down from 99.77 last week.  The 2-yr Treasury yield closed at .15% down 2 basis points from the .17% mark last Friday, the 10-yr yield closed at .65% ticking down from .66% last week while the 30-yr yield ended at 1.413% up from 1.374%.  

NEXT WEEK

The U.S. financial markets will be back to a normal 5-day trading week.

We are also due to receive the following significant economic data reports next week:

• The ISM manufacturing Purchasing Managers’ Index (PMI) on Monday
• The services PMI on Wednesday
• The May jobs report on Friday

STOCKS IN VIEW

• Shares of Atossa Therapeutics (ATOS) closed at $2.38/share on Friday (up from $2.31/share last Friday) after reaching a high of $2.55 during the week as interest continues to swell around their breast cancer treatment programs and their COVID-19 drug candidate. Atossa Therapeutics, Inc. (Nasdaq: ATOS), a clinical-stage biopharmaceutical company seeking to discover and develop innovative medicines in areas of significant unmet medical need with a current focus on breast cancer and COVID-19, announced that it has begun the development of a second COVID-19 program using its proprietary drug candidate AT-301, to be administered by nasal spray as is teaming with nasal spray specialist firm Summit Biosciences. AT-301 is Atossa’s proprietary formula intended for nasal administration in patients immediately following a diagnosis of COVID-19 but who have not yet exhibited symptoms severe enough to require hospitalization. Atossa confirmed that it is intended for at-home use to proactively reduce symptoms of COVID-19 and to slow the infection rate so that a person’s immune system can more effectively fight SARS-CoV-2 (coronavirus). Atossa also intends to conduct testing to determine whether AT-301 can be used as a prophylaxis to prevent or mitigate SARS-CoV-2, with the goal that it could become a “bridge to the vaccine” and be useful in the next phase of the coronavirus pandemic. Shares of ATOS closed $2.27/share after spiking to an intraday high of $2.55/share on 1.54M shares of trading volume. Learn More. Also, please review Maxim’s update titled “Less may be More for an Antiviral – Positive In Vitro Data for AT-H201 Against COVID-19” and their BUY RATING/$4 Target Price here. The 52-week high is $3.25/share. 

• INVO Biosciences (INVO) has made a number of moves to build out its organization while focusing its efforts to increase access to its INVOcell procedure globally. This week the company reversed their outstanding share count 1-20 and now has ~7.8M shares with 15% in the hands of insiders.  The shares are trading under the symbol INVOD for 20 days from May 26 and closed trading at $2.19 up 1.86% today. INVO Bioscience’s INVOcell® is a patented medical device used in infertility treatment and is considered an Assisted Reproductive Technology (ART). ART includes all fertility treatments in which both eggs and embryos are handled outside of the body. On Friday last week, INVO effected a 1-for-20 reverse stock split. The Company’s common stock began trading on a split-adjusted basis on Tuesday, May 26, 2020, under the symbol “INVOD.” After 20 trading days, the symbol will revert back to “INVO.” The new CUSIP number for the Company’s common stock following the reverse stock split is 44984F 203. It will be exciting to see how this company moves forward and how the stock performs with less 8 million shares issued outstanding post the reverse and the company now showing up on low float lists. Steve Shum, Chief Executive Officer of INVO Bioscience, stated, “As we continue to improve our commercialization activities and expand the awareness of our FDA-cleared INVOcell device both domestically and abroad, we also set the objective to improve the capitalization structure of the company in order to enhance our public company visibility and attract a larger audience of investors. Today’s announcement is an important step in that process.”  INVOD shares closed trading at $2.19 up 1.86% today. 

• Shares of Moderna (MRNA) closed at $61.50/share up 10.73% on Friday after announcing that their latest study of its potential COVID-19 vaccine had begun. 

• Shares of Fate Therapeutics (FATE) closed at $32.43/share up .65% on Friday. Fate Therapeutics, Inc. (FATE), a clinical-stage biopharmaceutical company dedicated to the development of programmed cellular immunotherapies for cancer and immune disorders. Are you still invested in Fate after meeting them via this newsletter and attending meetings over the last couple of years when it was in the $3-4 range?… This week Fate announced that the U.S. Food and Drug Administration (FDA) has cleared the Company’s Investigational New Drug (IND) application for FT538, the first CRISPR-edited, iPSC-derived cell therapy. FT538 is an off-the-shelf natural killer (NK) cell cancer immunotherapy that is derived from a clonal master induced pluripotent stem cell (iPSC) line engineered with three functional components to enhance innate immunity: a novel high-affinity, non-cleavable CD16 (hnCD16) Fc receptor; an IL-15/IL-15 receptor fusion (IL-15RF); and the elimination of CD38 expression. The Company plans to initiate a clinical investigation of three once-weekly doses of FT538 as monotherapy in acute myeloid leukemia (AML) and in combination with daratumumab, a CD38-directed monoclonal antibody therapy, for the treatment of multiple myeloma.

• Shares of cybersecurity firm Zscaler, Inc. (ZS) flew up 29.41% on Friday closing at $98.09/share near a record high that was achieved as well as it beat fiscal Q3 earnings estimates.  The work-from-home environment continues to drive earnings and revenue jumped to $110.5M from $79.1M in the same period a year ago.

Thanks again for your attention this week. Please also enjoy the weekend and the balance of the weekly newsletter’s videos, quotes, updates, and keep up the great work in helping our nation and world recover from the coronavirus epidemic.

Economic Reports

On the macroeconomic side of the coin, a number of negative economic reports continued to come in reflecting the damage of the shutdown,  but we are seeing some advances as reopening measures take effect. Here’s a summary of this week’s economic reports: On Monday, it was Memorial Day so now reports surfaced. On Tuesday, we received the following reports: The New home sales report confirmed an increase by .6% month/month on lower selling prices to a seasonally adjusted annual rate of 623k and on a year/year basis new home sales are now down 6.2%. The Conference Board’s Consumer Confidence Index came in at 86.6 for May and increasing from April as reopening measures tick forward. The FHFA Housing Price Index for May confirmed a rise by .1%. The S&P Case-Shiller Home Price Index jumped 3.9% year/year in March. On Wednesday, we received the weekly MBA Mortgage Applications Index that confirmed a rise by 2.7%. On Thursday we receive the Initial claims for the week ending May 23 confirming a drop by 323k to 2.123M while continuing claims for the week ending May 16 dropped by 3.86M to 21.052M.  The New orders for durable goods report confirmed a drop of 17.2% month/month in April. The second estimate for Q1 GDP revealed a downward move to -5% while the GDP Price Deflator was revised slightly upwards to 1.4%. The Pending Home Sales report confirmed a whopping 21.8% decrease in April. On Friday, we received the Personal income report in April which jumped 10.5% with the additional stimulus hitting, however sadly personal spending dropped by 13.6% while the real PCE decreased 13.2%. The University of Michigan’s Index of Consumer Sentiment fell to 72.3 with the final reading for May but up from April’s 71.8. The Chicago PMI for May decreased to 32.3. The advance goods trade deficit came in at $69.7B in April as advance retail inventories decreased 1.1% in April. Advance wholesale inventories rose .4% in April. 

Investing & Inspiration

“An investment in knowledge pays the best interest.” – Benjamin Franklin.

“I believe the returns on investment in the poor are just as exciting as successes achieved in the business arena, and they are even more meaningful!” -Bill Gates

“Every portfolio benefits from bonds; they provide a cushion when the stock market hits a rough patch. But avoiding stocks completely could mean your investment won’t grow any faster than the rate of inflation.” – Suze Orman

“The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital… the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.” – John F. Kennedy

“If all the economists were laid end to end, they’d never reach a conclusion.
-George Bernard Shaw

“The riskiest thing we can do is just maintain the status quo. I get up at 4:30 in the morning, seven days a week, no matter where I am in the world. I think it is important for people who are given leadership roles to assume that role immediately. What I’ve really learned over time is that optimism is a very, very important part of leadership.” – Bob Iger, Former Ceo of Disney

“In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham

“In investing, what is comfortable is rarely profitable.” -Robert Arnott

“The fundamental law of investing is the uncertainty of the future.” -Peter Bernstein

“How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen

“Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky

“Michael Marcus taught me one other thing that is absolutely critical: You have to be willing to make mistakes regularly; there is nothing wrong with it. Michael taught me about making your best judgment, being wrong, making your next best judgment, being wrong, making your third best judgment, and then doubling your money.” -Bruce Kovner

“The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru

“I talk about macro themes a lot because they are fun to talk about, but it is the risk management that is the most important thing. The risk control is all bottom-up. I structured the business right from the get-go so that we would have lots of diversification.” -Michael Platt

“Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers

Tomorrow

We are due to receive the following significant economic data next week:

• The earnings season continues this week with about one-third of the companies in the S&P 500 reporting Q1 results
• The Q1 GDP estimate and the Federal Reserve rate announcement on Wednesday
• The manufacturing Purchasing Managers’ Index (PMI) on Friday