COVID-19, Negative Macroeconomic Reports, Unemployment Trends, & Trade Wars Pull Markets Down This Week

This week, we saw the number of worldwide coronavirus cases grow to more than 4,483,864 from 3.9 million while the number of worldwide deaths jumped to 303,825 from 272k. The good news is that 1,609,475 cases have now recovered. In the US, we now have over 1,460,159 cases up from 1.3M cases last Friday and 77,727 (up from 64,867 last week) US citizens have now past away due to COVID-19 with 182,305 cases that have recovered. Even with the worldwide spread of COVID-19 still advancing, we continue to grow our collective understanding and we are now at a point where we are finding more tolerable ways to live with it while we search for vaccines and treatments. As we are collectively continuing to plan or attempt to reopen our local economies, some more than others, hopefully, we will be successful in moving increased amounts goods, services & businesses back online, therefore, reversing the currently negative unemployment trends more quickly than expected and safely so that we do not unnecessarily overburden the healthcare system and an increased risk of deaths but we have a long way to go.

On Wednesday, we heard Fed Chair Jerome Powell’s less than rosy remarks. He essentially warned us about lasting economic damage while reminding us that approx. 40% of the households earning less than $40k/year lost their jobs in March. He also let it be known that more stimulus will likely be needed to counter the current coronavirus-induced contraction, but then he stopped short of endorsing negative interest rates in order to do so. On Thursday, stimulus measures were again being pushed forward and a 4th consecutive coronavirus relief effort seems likely and is likely needed as the reopening will needs help. The Labor Department’s latest report on initial unemployment claims also confirmed 2.981M Americans filed for first-time unemployment benefits last week, which now totals 36.5M since the week ended March 20, 2020.

On the macroeconomic side of the coin, a number of negative economic reports continued to come in reflecting the damage of the shutdown, and reopening measures are just beginning. Here’s a summary of this week’s economic reports: Here’s a summary of this week’s economic reports: On Monday, we did not receive any significant economic data. On Tuesday, we received the following reports: the Consumer Price Index report showed a decrease of -.8% month/month in April, while core CPI decreased -.4%, the Treasury Budget report for April confirmed a deficit of $737.85B vs. a surplus of $160.3B during the same period a year ago., & the NFIB Small Business Optimism Index report for April decreased to 90.9. On Wednesday, we received the Producer Price Index for final demand report showed a decrease of 1.3% month/month in April & the weekly MBA Mortgage Applications Index report which confirmed a rise of .3%. On Thursday, the Labor Department’s latest report on initial unemployment claims confirmed 2.981M Americans filed for first-time unemployment benefits last week, which now totals 36.5M since the week ended March 20, 2020, while the Import prices report which confirmed a drop of 2.6% in April while export prices decreased 3.3% in April. On Friday, the total retail sales report confirmed a decreased 16.4% month/month in April while retail sales, excluding autos, decreased 17.2% month/month. The industrial production report confirmed a decrease of 11.2% month/month in April. The capacity utilization rate report confirmed a drop to 64.9%. On a year/year basis, industrial production was down 15%. The University of Michigan’s Index of Consumer Sentiment increased to 73.7 in the preliminary reading for May. The Empire State Manufacturing Survey for May came in at -48.5. March job openings dropped to 6.191M. Business inventories dropped .2% in March. Inflation reading recently showed a significant decline in core inflation dropping from 2.1% to 1.4%. The federal deficit is now projected to grow to $3.7T in 2020 while the total debt is projected to rise to 107% of GDP.

Adding to somewhat sobering messages, the markets had to digest negative and uncertain stories relating to the increased tensions surrounding the US-China trade war as it ramps up again. The FBI stated that China-related cyber actors had targeted U.S. companies conducting COVID-19-related research and the White House in turn blocked semiconductor shipments to Huawei Technologies. 

As a result, risk investments were back off and the markets were down week over week across the board.  The Nasdaq Composite closed at 9o14.56 on Friday, representing a weekly 1.2% downward move but remains up .5% YTD. The Dow ended the week at 23,685.42 representing a weekly decrease of 2.7% and is now down -17% YTD. The S&P 500 closed at 2863.70 for a weekly loss of 2.3% and is now down -11.4% YTD. The Russell 2000 closed at 1,256.99 representing a weekly 5.5% decrease and is now down a -24.6% YTD. 

The energy sector dropped -7.6% this week leading all sectors on the downside however oil prices closed at $29.38/bbl & up significantly since last week’s close of $24.71/bbl which seems to be a conflicting result. Chevron (CVX) moved down this week to close at $89.16/share ($89.47, last wk) and Exxon (XOM) moved down closing at $42/share ($46.18, last wk.) The real estate, industrials, & financials sectors respectively dropped -7.3%, -5.9%, & -5.7%.

The FAANG’s ended overall down week over week and as follows: Facebook (FB) closed at $210.88/share, +1.92% Friday, ($212.35/share a week ago), Amazon (AMZN) closed at $2,409.78/share, +.88% Friday, ($2,379.61/share a week ago and is up approx. 40% since mid-march), Apple, Inc. (AAPL) closed at $307.71/share, +2.38% Friday, ($310.13/share a week ago), Netflix (NFLX) closed at $454.19/share, +2.77% Friday, ($435.55/share a week ago) & Alphabet (GOOG) closed at $1,373.19/share, +1.15% Friday, ($1,388.37/share a week ago.)

Gold prices moved higher this week closing at $1,748/0z. up from $1,709/oz & silver prices shot up to $16.99/oz from $15.65/oz last Friday. North American silver and gold producer Hecla Mining Company (HL) ended the week at $2.99/share up +13.26% on Friday. On Friday Hecla announced its upcoming Annual Meeting of Shareholders will be exclusively held in a virtual meeting format at 10:00 a.m. PDT on Thursday, May 21, 2020. The virtual meeting format was chosen in order to protect the well-being of Hecla’s shareholders, service providers, and employees. All information pertaining to the Annual Meeting of Shareholders can be found on Hecla’s website at http://ir.hecla-mining.com/CustomPage/Index?KeyGenPage=309292. “We will be holding a virtual annual meeting and will have a presentation on our response to COVID-19, key investment considerations, and a deep dive into the silver and gold markets. I’m excited to announce an investor event directly afterward with the goal of enabling investors of all sizes the chance to book a call with members of senior management for information on one of four topics: operations, finance, ESG, and a call with me. If investors want to book a call, on a first-come-first-served basis, they should follow the links below in this news release. We are excited to offer the investing community these opportunities to speak with our senior management,” said Phillips S. Baker, Jr., President, and CEO. The virtual meeting platform is found at www.virtualshareholdermeeting.com/HL2020. Shareholders can login using their 16-digit control number found on each individual’s proxy card or, without a control number, can login as a guest. To login to the meeting and ask questions, shareholders will need their 16-digit control number. There are two ways for shareholders to submit a question. If shareholders want to ask a question before the meeting, then beginning at 8:30 a.m. PDT on May 19, 2020, and until 11:59 p.m. PDT on May 20, 2020, they may log into www.proxyvote.comand enter your 16-digit control number. Once past the login screen, click on “Question for Management,” type in the question, and click “Submit.” Alternatively, they can submit their question during the meeting by logging into the virtual meeting platform at www.virtualshareholdermeeting.com/HL2020, typing the question into the “Ask a Question” field, and clicking “Submit.” Learn more.

The U.S. Dollar Index strengthened to end the week at 100.38 up from 98.78 last week.  US Treasury yields ended mixed week over week with further liquidity/stimulus measures being weaved into the market by the Fed. The 2-yr Treasury yield closed at the same mark at .15%, the 10-yr yield closed at .64%, & the 30-yr yield ended at 1.33% down from 1.384%.  

NEXT WEEK

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

• The housing starts on Tuesday
• The Fed meeting minutes on Wednesday
• The May preliminary PMIs on Thursday

STOCKS IN VIEW

• Shares of Sorrento Therapeutics, Inc. (Nasdaq: SRNE) jumped 158.02% today closing at $6.76/share on 500,040,392 shares of trading volume and now sports at $1.418B market cap. The move came as Sorrento announced today that its anti-SARS-CoV-2 antibody, STI-1499, demonstrated 100% inhibition of SARS-CoV-2 virus infection in an in vitro virus infection experiment at a very low antibody concentration. Sorrento aims to generate an antibody cocktail product that would act as a “protective shield” against SARS-CoV-2 coronavirus infection and remain effective even if virus mutations render a single antibody therapy less effective over time. Learn more.

• Atossa Therapeutics’ (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 their Q1 2020 Financial Results and confirmed the following progress: (1) Launched a new drug development program called COVID-19 HOPE to test AT-H201, a novel combination of two drugs that have been previously approved by the FDA for other diseases. The goal of the COVID-19 HOPE program is to develop a therapy to improve lung function and reduce the amount of time that COVID-19 patients are on ventilators. Atossa has applied to the FDA for approval to commence a clinical study in this setting, (2) Announced that Atossa has contracted with NYC Health + Hospitals/Metropolitan in New York City to conduct the COVID-19 HOPE study of AT-H201,(3) Announced positive interim results from Atossa’s Phase 2 study of oral Endoxifen to treat breast cancer in the “window of opportunity” between the diagnosis of breast cancer and surgery. A statistically significant (p = 0.031) reduction of about 74% in tumor cell proliferation was achieved over an average of 22 days of dosing. Proliferation was measured by Ki-67, a recognized standard measurement of breast cancer cell proliferation. Other recent progress with this program includes contracting with Avance Clinical to open a second site for the study in Geelong, Victoria, Australia, with the goal of increasing the rate of enrollment; applying to the Institutional Review Board for approval to open the second site; and, manufacturing sufficient Endoxifen necessary for all patients expected to enroll in this study, (4) Announced that recent input from the FDA on Atossa’s oral Endoxifen program will inform Atossa’s clinical trial strategy and study design both in the U.S. and in Stockholm, Sweden, where Atossa is planning a Phase 2 study to reduce MBD. Atossa plans to commence the MBD study in Stockholm after receiving approval by the European Medical Product Authority (MPA) and the re-opening of mammography clinics in Stockholm following the COVID-19 closures. Review Maxim’s BUY RATING & $4/share Target Price here. The 52-week high is $3.25/share. This week ATOS closed at $1.70/share on Friday ($1.64 last Friday) after reaching a high of $1.90 during the week.

• Shares of INVO Biosciences (INVO) ticked up on Friday closing up +3.37%. INVO has made a number of moves to build out its organization while focusing its efforts to increase access to its INVOcell procedure globally. INVO’s lead product, the 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.

• Shares of Moderna (MRNA) closed at $66.69.share up 3.30% on Friday as it jumped 7 points since last Friday when it closed at $59.25/share. MRNA recently received FDA approval to proceed to a Phase 2 trial with its potential COVID-19 vaccine candidate.

• Shares of DraftKings (DKNG) closed at $29.23/share up 15.5% on Friday after the sports betting firm beat EPS estimates and provided positive guidance.

Please enjoy the weekend at home with the family, appreciate what you have, stay flexible in the markets to strike when the opportunity appears attractive, and plan and dream of what life may bring all of us in we can move forward safely through this reopening period together. 

Please also enjoy 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

Here’s a summary of this week’s economic reports: On Monday, we did not receive any significant economic data. On Tuesday, we received the following reports: the Consumer Price Index report showed a decrease of -.8% month/month in April, while core CPI decreased -.4%, the Treasury Budget report for April confirmed a deficit of $737.85B vs. a surplus of $160.3B during the same period a year ago., & the NFIB Small Business Optimism Index report for April decreased to 90.9. On Wednesday, we received the Producer Price Index for final demand report showed a decrease of 1.3% month/month in April & the weekly MBA Mortgage Applications Index report which confirmed a rise of .3%. On Thursday, the Labor Department’s latest report on initial unemployment claims confirmed 2.981M Americans filed for first-time unemployment benefits last week, which now totals 36.5M since the week ended March 20, 2020, while the Import prices report which confirmed a drop of 2.6% in April while export prices decreased 3.3% in April. On Friday, the total retail sales report confirmed a decreased 16.4% month/month in April while retail sales, excluding autos, decreased 17.2% month/month. The industrial production report confirmed a decrease of 11.2% month/month in April. The capacity utilization rate report confirmed a drop to 64.9%. On a year/year basis, industrial production was down 15%. The University of Michigan’s Index of Consumer Sentiment increased to 73.7 in the preliminary reading for May. The Empire State Manufacturing Survey for May came in at -48.5. March job openings dropped to 6.191M. Business inventories dropped .2% in March.

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