Interest Rate Spikes Sans The $1.9T Stimulus Package Produced A Broad Market Pullback This Week

The markets simply closed lower again this week continue to correct substantially across the board.  The Nasdaq is now down over 7% from its recent lofty all-time high of 14,175.12. So not quite a 10% correction, but pretty close. What seemed ‘Squishy” to me in last week’s ‘weekly’ seemed without foundation this week, especially in growth names, as a rotation of sorts continued. Interestingly, this lack of solid ground seemed to be in contrast to the soaring reopening hopes and a number of somewhat positive trending macroeconomic reports that surfaced along with COVID-19 vaccine distribution advancement. However, we had a ‘fly in the ointment’, which came in the form of interest rates, specifically the 10-year and long term interest rates which spiked. The spike sent a cold chill throughout the markets and with the $1.9 trillion stimulus package still hung up with politicians on Capitol Hill there appeared to be no net in sight. Even Fed Chair Jerome Powell’s attempt to calm all by emphatically restating this week that the economy is no where near the 2% target inflation rate, the employment situation still needs assistance, & the Fed was prepared to continue bringing its full set of tools to support the economy for the foreseeable future, only helped for a minute and then the markets proceeded to fall again. So, at the end of the week, outside of the energy sector which rose 4.3% as oil prices jumped to close at $61.45/bbl up ~+4%, all other sectors ended soundly in the red and thus the struggle to find solid profitable ground was difficult. The indices closed down as follows: S&P 500 closed at 3,811.15 (-2.4%, wk/wk) (+1.5% YTD), the Dow ended at 30,932.37 (-1.8% wk/wk) (+1.1 YTD), & the Nasdaq Composite closed at 13,192.34 (-4.9%, wk/wk ) (+2.4% YTD) while the Russell 2000 closed at 2,201.05 (-2.9%, wk/wk) (+11.5% YTD). 

In my estimation, the best thing about a week in the markets like this one is that it has possibly reveled some true value and it is over.  Also, apparently at the time that I wrote this late Friday afternoon, the politicians were actually making louder and promising noises that the $1.9T stimulus package may possibly be approved this weekend. It could get fun again next week folks if that is the case. Onward and Upward!

THE WEEK’s “MACRO”

The macroeconomic schedule also produced a number of reports as follows this week that showed improvement in many cases. On Monday, the Conference Board’s Leading Economic Index report confirmed a rise by .5% month/month in January. On Tuesday, the Conference Board’s Consumer Confidence Index report which confirmed a rise to 91.3 in February. The FHFA Housing Price Index report confirmed a rise by 1.1% in February. The S&P Case-Shiller Home Price Index report confirmed an rose by 10.1% in December. On Wednesday, the new home sales report confirmed a 4.3% month/month rise to a seasonally adjusted annual rate of 923k in January & on a year/year it is now up 19.3%. The weekly MBA Mortgage Applications Index fell 11.4%. On Thursday, the initial claims report for the week ending February 20 which showed a drop of 111k to 730k while continuing claims for the week ending February 13 dropped by 101k to 4.419M. The Durable Goods Orders report for January moved up 3.4% month/month. The second estimate for Q4 GDP was revised upward slightly to 4.1%. The GDP Price Deflator was moved up to 2.1%. The Pending home sales report confirmed a drop by 2.8% month/month in January. On Friday, the Personal income report  jumped 10% month/month in January while personal spending rose 2.4% month/month. The PCE Price Index and Core PCE Price Index, moved up equally .3%. The final reading for the February University of Michigan Index of Consumer Sentiment was revised upward to 76.8. The Chicago PMI for February fell to 59.5. The Advance report for International Trade in Goods for January showed a deficit of $83.7B. The Advance report for Retail Inventories for January dropped .6%. The Advance report for Wholesale Inventories for January rose 1.3%.

Next week, we will receive the January leading indicator index report, the durable goods orders report, & the personal income and spending reports.

TECH HIGHLIGHTS

NVIDIA Corporation (NVDA) achieved a new all-time high of $614.90 recently prior to closing at $548.58 on Friday. NVDA has risen greatly during the ongoing “global chip shortage” as their chips power the future of self-driving cars and cloud gaming. This week, NVDA reported record revenue for the fourth quarter ended January 31, 2021, of $5.00 billion, up 61 percent from $3.11 billion a year earlier, and up 6 percent from $4.73 billion in the previous quarter. The company’s Gaming and Data Center platforms achieved record revenue for the quarter and year.

Peter Thiel co-founded software/data analytics firm Palantir Technologies (PLTR) closed at $22.90/share, -.25% Friday & down again from the $29/share close last week. This week, PLTR announced a multi-million dollar expansion of its relationship with 3M. 3M has chosen to expand its use of Palantir’s Foundry platform to support its digital transformation, assisting in the build out of a dynamic supply chain that enables the global manufacturer to respond nimbly to changes in demand across tens of thousands of products. According to Barron’s Palantir Technologies Chief Operating Officer Shyam Sankar disclosed in a filing with the Securities and Exchange Commission that he sold 757,510 shares between Feb. 19 and Feb. 23, at prices ranging from $24.59 to $29 a share. Proceeds were about $21.5 million. With the sales, Sankar now owns 2,879,793 shares in the data analytics company, not counting 1.07 million shares held in two trusts he controls, according to the filing. The disclosure followed filings earlier this week covering 2.7 million shares sold by three other Palantir executives.

Leading EV car maker Tesla (TSLA) closed at $675.50, -.99% Friday & down again from $816.12 that it closes tow weeks ago. Tesla’s CEO Elon Musk was reported to have confirmed in an email that the electric vehicle maker’s Fremont car production facility line is up after it was experiencing some parts supply issues. 

Foxconn Technology Group is set develop an EV with Fisker Inc. (FSR) ($28.50, +32.07%), part of the manufacturer’s efforts to boost its automotive capabilities. The car will be built by Foxconn, targeted at multiple markets including North America, Europe, China and India, and sold under the Fisker brand, according to a joint statement from the companies Wednesday. Production is proposed to start in Q4/2023.

Gamestop (GME) ($101.74, -6.43%) once again conducted its crazy volatility act trading millions of shares rising and falling substantially while being suspended in other points throughout the week while only reporting the CFO had resigned. Once again, whoever is making money trading this one from the Reddit/Robinhood, etc. crowd,  I would just like to say “good luck” and “good on you” and I will be watching and learning from this entertaining phenomena. 

The ever so popular FAANG’s ended down across the board as follows: Apple (AAPL) shares closed at $121.26 down last Friday’s close of $129.87, Amazon (AMZN) closed at $3,092.93 down from last Friday’s close of $3,249.9, Alphabet (GOOG) closed at $2,036.86 down from last Friday’s close of $2,101.14, Facebook (FB) closed at $257.62 down from last Friday’s close of $261.56 & Netflix (NFLX) closed at $540.22 down from last Friday’s close of $556.52/share. Facebook’s agreement to pay $650M to settle a class-action litigation alleging it violated users’ privacy via its photo-tagging feature has reportedly been approved by a federal judge. Facebook users who submitted claims in the case will receive at least $345 each. 

ACROSS THE DOW 30

The Home Depot (HD) announced Q4 and fiscal 2020 results this week as Q4 sales stood at $32.3 billion, an increase of $6.5 billion, or 25.1 percent from the fourth quarter of the previous year.

Johnson & Johnson’s (JNJ) ($158.46, -2.64%) announced that the FDA has endorsed their single-shot coronavirus vaccine for emergency use. It was reported to less effective than Pfizer’s and Moderna’s as it checked in at 66% overall.

Pharmaceutical giant Merck (MRK) closed at $72.62/share, -2.68% Friday and down again from last Friday’s close of $74.31/share. 

Reportedly, the Board of the Coca-Cola Company (KO) ($48.99, -2.35%) announced the company’s 59th consecutive annual dividend increase by 2.4 percent from 41 cents to 42 cents per common share, payable on April 1 to shareholders of record on March 15.

Shares of Disney (DIS) closed at $189.04/share, -1.02% on Friday, but above last Friday’s at $183.65/share. Recently, Disney reported earnings for its first fiscal quarter ended January 2, 2021. Diluted earnings per share (EPS) from continuing operations for the quarter decreased 98% to $0.02 from $1.17 in the prior-year quarter. “We believe the strategic actions we’re taking to transform our Company will fuel our growth and enhance shareholder value, as demonstrated by the incredible strides we’ve made in our DTC business, reaching more than 146 million total paid subscriptions across our streaming services at the end of the quarter,” said Bob Chapek, Chief Executive Officer,

Shares of Nike (NKE) closed at $134.78/share down ~$8 from last Friday’s close at $142.02/share. Nike will pay a quarterly cash dividend of $.275 per share to all outstanding common stock shareholders of Class A & Class B as of March 1, 2021. The dividend is to be paid on April 1, 2021.

Walmart (WMT) closed at $129.92/share down from last Friday’s close of $138.34/share. Walmart recently reported improved Q4 revenue driven by strong e-commerce growth that increased during the COVID-19 pandemic. However, there was an increase in costs due to a pay hike for its frontline workers.

Shares of Deere (DE) closed at $349.12, +.31% Friday & up again from last Friday’s closing price of $330/share. Recently, Deere lifted its earnings guidance above analyst estimates with elevated crop prices and an improving farm farm economy supporting their outlook. Caterpillar (CAT) closed at $215.88/share, -2.68% but up again from last Friday’s close of $209.91/share. Caterpillar recently beat Q4 estimates and see a housing boom leading the 2021 sales recovery.

Boeing (BA) closed $212.01, -2.05% on Friday & down from last Friday’s close of $217.47/share. This week, South Korea’s transport ministry ordered the grounding of all local airlines’ Boeing (BA) 777s with PW4000 engines, also the ministry has banned all foreign aircraft with PW4000 engines from operating in South Korea airspace from this week.

Reportedly, Salesforce.com Inc. (CRM) reported its Q4 earnings this week, exceeding analysts’ estimates. The enterprise-software company reported adjusted earnings of $1.04 per share versus 75 cents per share as expected by analysts. Revenue stood at $5.82 billion versus $5.68 billion expected

BIOTECH

iShares Nasdaq Biotechnology ETF (IBB) closed at $156.93 down ~10 points from last week’s close of $166.31. The NYSE ARCA Biotech Index (^BTK) closed at 5,744.01 down ~300 points from last week’s close of 6,041.82. 

Please join me next week as I am hosting the Tribe Public’s Next CEO Webinar Presentation and Q&A Event, which will be held Wednesday, March 3 (8:30 am PT/ 11:30 am ET). Our events are approximately 30 minutes in duration. David A. Dodd, Chairman, President, CEO & Mark W. Reynolds, CFO of GeoVax Labs (NASDAQ: GOVX) will deliver a presentation titled “Advancing A Unique Broad-based Vaccine Approach To Fighting COVID-19, Ebola & Beyond!” They will be also be available for a 5-10 minute Q&A session at the end of the presentation. GeoVax Labs, Inc. is a clinical-stage biotechnology company developing human vaccines against infectious diseases and cancer using a novel patented Modified Vaccinia Ankara-Virus Like Particle (MVA-VLP) based vaccine platform. On this platform, MVA, a large virus capable of carrying several vaccine antigens, expresses proteins that assemble into VLP immunogens within (in vivo) the person receiving the vaccine. The production of VLPs in the person being vaccinated can mimic virus production in a natural infection, stimulating both the humoral and cellular arms of the immune system to recognize, prevent, and control the target infection. The MVA-VLP derived vaccines can elicit durable immune responses in the host similar to a live-attenuated virus, while providing the safety characteristics of a replication-defective vector. GeoVax’s current development programs are focused on preventive vaccines against COVID-19, HIV, Zika Virus, hemorrhagic fever viruses (Ebola, Sudan, Marburg, and Lassa), and malaria, as well as therapeutic vaccines against multiple cancers. Register fro FREE now at GeoVax.TribePublic.com.

Shares of Chinook Therapeutics (KDNY), a clinical-stage biotechnology company developing precision medicines for kidney diseases, quietly closed at $16.54 edging up from the $14.84 2 weeks ago.

FINANCIALS

Around the sector, Goldman Sachs (GS) closed trading at $319.48/share, -2.35% Friday but up from last Friday’s close of $315.62/share, American Express (AXP) closed at $135.26/share, -1.33% on Friday but up ~$3 from the $131.71/share close last Friday, Visa (V) closed trading at $212.39/share, -.64% Friday but up from the $204.73/share close last Friday & shares of Morgan Stanley (MS) closed at $76.87/share, -1.99% Friday but slightly up from last Friday’s close of $76/share. JPMorgan Chase (JPM) closed at $147.17, -2.65% Friday & down from the $148.02/share close last Friday & Citigroup (C) $65.88/share basically inline with the close of $65.78/share last week. PayPal Holdings (PYPL) closed at $259.85/share cooling off again from last Friday’s close of $286.92/share after recently beating Q4 expectations and Square (SQ) closed at $230.03 down $46/share from last week’s close of $276.57/share after it posted its results for Q4 and full year of 2020 on the Financials section of its Investor Relations website at investors.squareup.com. Q4 revenue and gross payment volume came in below expectations. Square also confirmed that it purchased $170M of bitcoin to add to its expanding position brining its total position to ~ 5% of Square’s cash & cash equivalents.

GOLD & SILVER MARKETS

Gold prices closed at $1738 down again from the $1,786/oz. close last week. This Friday silver prices closed at $26.75/oz. down from the $27.77/oz. close last Friday.

Barrick Gold Corp. (GOLD) closed trading at $18.67 down again from last Friday’s close of $19.78/share after recently reporting an earnings beat. 

North American silver and gold producer Hecla Mining Company (HL) ended the week at $6.53/share up from last Friday’s close of $6.09/share. Hecla recently announced Q4 and full year 2020 financial and operating results. Phillips S. Baker, Jr., President and CEO of Hecla stated, “The COVID pandemic provided significant challenges to Hecla and the mining industry; however, due to our people and the jurisdictions we operate in, Hecla exceeded the high end of our pre-COVID silver guidance by 1.4 million ounces. We saw modest disruptions in Quebec and Mexico; however, these did not materially impact our business. During the year we refinanced our long-term debt now due in 2028, and through solid free cash flow generation, added cash to the balance sheet, reduced our net debt, and increased dividends. As we look to 2021, we see three significant value drivers. First, with Lucky Friday running at full production, positive results from the work at Casa Berardi, and the continued consistency of Greens Creek, we expect to grow silver production and generate significant free cash flow. Silver production from our United States silver mines is expected to go from 8 million ounces in 2018 to almost 15 million ounces by 2023, further increasing Hecla’s position as the most significant US silver producer. Second, we start the year with the 3rd highest reserves in our history despite disruptions to our planned exploration and definition drilling programs due to COVID‑19, and we expect reserve growth in 2021 from a normal drilling program. Finally, Hecla’s 2021 exploration program is following up on high-grade intercepts that have the potential to expand existing or develop new high-quality deposits in some of the world’s best mining jurisdictions. Examples of this are Midas’ Green Racer Sinter target where we have made a multi-ounce gold discovery in a never before drilled target and at San Sebastian’s El Bronco vein where we are seeing high-grade over significant widths.”

Recently, Phillips S. Baker, Jr., President, and CEO of Hecla Mining Company (NYSE: HL), discussed “The Silver Squeeze” while addressing questions from the Tribe Public where he offered valuable insights on silver prices throughout history and the recent volatility that helped move silver related stocks & silver prices. Please view the event video here now. 

MONEY UPDATE

The U.S. Dollar Index strengthened to end the week at 90.92 up from 90.37 last Friday. 

OIL

Oil prices ended at $61.45/bbl up ~4% from the $59.15/bbl close last week. 

TRADING NEXT WEEK 

We are back to 5-trading sessions again next week. 

Thanks again for your attention this week. Please continue to share your thoughts, questions, & ideas as we move forward. 

In the meantime, please enjoy the balance of the weekly newsletter’s videos, quotes, updates. 

Investing & Inspiration

1. “We don’t have an analytical advantage, we just look in the right place.” – Seth Klarman
2. “Men, it has been well said, think in herds. It will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” – Charles Mackay
3. “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – George Soros
4. “In investing, what is comfortable is rarely profitable.” — Robert Arnott
5. “Don’t look for the needle in the haystack. Just buy the haystack!” — John Bogle
6. “No Price is too low for a bear or too high for a bull.” — Anonymous
7. “Investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future.” — Anonymous
8. “Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
9. “Wise spending is part of wise investing. And it’s never too late to start.” –Rhonda Katz
10. “If there is one common theme to the vast range of the world’s financial crises, it is that excessive debt accumulation, whether by the government, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom.” — Carmen Reinhart
11. “It amazes me how people are often more willing to act based on little or no data than to use data that is a challenge to assemble.” ― Robert Shiller
12. “A bull market is like sex. It feels best just before it ends.” — Barton Biggs
13. “The investor’s chief problem — even his worst enemy — is likely to be himself.” — Benjamin Graham
14. “No profession requires more hard work, intelligence, patience, and mental discipline than successful speculation.” – Robert Rhea
15. “The most contrarian thing of all is not to oppose the crowd but to think for yourself.” — Peter Thiel
16. “Money is like a sixth sense – and you can’t make use of the other five without it.” – William Somerset Maugham
17. “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.” — Albert Einstein
18. “The stock market is a device for transferring money from the impatient to the patient.” – Warren Buffett
19. “Thousands of experts study overbought indicators, head-and-shoulder patterns, put-call ratios, the Fed’s policy on money supply…and they can’t predict markets with any useful consistency, any more than the gizzard squeezers could tell the Roman emperors when the Huns would attack.” – Peter Lynch
20. “Investing puts money to work. The only reason to save money is to invest it.” – Grant Cardone
21. “Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn
22. “You cannot save time for your future use however you can invest time for your future.” – John F. Heerdink, Jr. 
23. “We always live in an uncertain world. What is certain is that the United States will go forward over time.” – Warren Buffett
24. “Never test the depth of the river with both of your feet.” – Warren Buffet
25. “Know what you own, and know why you own it.” – Peter Lynch
26. “Liquidity is only there when you don’t need it.” -Old Proverb
27. “There is no such thing as no risk. There’s only this choice of what to risk, and when to risk it.” – Nick Murray
28. “If you want to be a millionaire, start with a billion dollars and launch a new airline.” – Richard Branson
29. “Fear incites human action far more urgently than does the impressive weight of historical evidence.” – Jeremy Siegel
30. “In investing, what is comfortable is rarely profitable.” – Robert Arnott
31. “Spend each day trying to be a little wiser than you were when you woke up.” – Charlie Munger
32. “The entrance strategy is actually more important than the exit strategy.” – Edward Lampert
33. “The rivers don’t drink their own water; Trees don’t eat their own fruits. The sun does not shine for itself, And flowers do not spread their fragrance For themselves. Living for others is a rule of nature” – PopeFrancis
34. “It is impossible to produce superior performance unless you do something different from the majority.” – John Templeton
35. “Inaction and patience are almost always the wisest options for investors in the stock market.” – Guy Spier
36. “Remember that the stock market is a manic depressive.”  – Warren Buffett
37. “An investment in knowledge pays the best interest.” – Benjamin Franklin
38. “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
39. “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
40. “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
41. “If all the economists were laid end to end, they’d never reach a conclusion.
    -George Bernard Shaw
42. “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
43. “In the short run, the market is a voting machine. But in the long run, it is a weighing machine.” – Ben Graham
44. “In investing, what is comfortable is rarely profitable.” -Robert Arnott
45. “The fundamental law of investing is the uncertainty of the future.” -Peter Bernstein
46. “How many millionaires do you know who have become wealthy by investing in savings accounts?” -Robert G Allen
47. “Greed is all right, by the way. I think greed is healthy. You can be greedy and still feel good about yourself.”-Ivan Boesky
48. “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
49. “The policy of being too cautious is the greatest risk of all.” -Jawaharlal Nehru
50. “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
51. “Blaming speculators as a response to financial crisis goes back at least to the Greeks. It’s almost always the wrong response.” -Larry Summers