Russell 2000 Leads All Markets Rebounding Into Memorial Day Weekend 2020

Happy Memorial Day Weekend! I hope all of you are out BBQ’ing, practicing safe social distancing, and enjoying your family time as we continue to fight the coronavirus pandemic. Please remember that Memorial Day is a federal holiday in the United States for honoring and mourning the military personnel who had died while serving in the United States Armed Forces. The holiday is now observed on the last Monday of May, having been observed on May 30 from 1868 to 1970. Please take the time to remember and those that have served and their families that live because of their sacrifice.

This week was eventful as we managed to pass through the 5 million level hitting 5,168,433 confirmed worldwide cases of COVID-19 with 1.985M cases that have recovered and more than 335k worldwide deaths. In the US, we now have 1,626,066 confirmed cases with 311,442 that have recovered & now 95,906 reported deaths. At the same time, the reopening processes in the US are now proceeding across all of the 50 states. Some more than others of course as there hasn’t been a coordinated effort across the states to date and it appears that there will not be any surfacing anytime soon. We also are receiving stimulus measures that are being pushed forward through the legislature and more, is on the way as many of us have collected their economic impact payment checks from the UST by now. Hopefully, these moves will speed up an economic recovery.

On the macroeconomic side of the coin, a number of negative economic reports continued to come in reflecting the damage of the shutdown as reopening measures are just beginning to take effect. Here’s a summary of this week’s economic reports: On Monday, we received the NAHB Housing Market Index Report for May, which confirmed a rise of 37 up from 30 the month before. On Tuesday, we received the Housing starts report which confirmed a precipitous drop of 30.2% month/month in April to a seasonally adjusted annual rate of 891k while building permits dropped significantly by 20.8% month/month to a seasonally adjusted annual rate of 1.074M. Housing permits for single-family dwellings dropped a whopping 24.3% month/month to 669k. On Wednesday, we received the weekly MBA Mortgage Applications Index which confirmed a drop of 2.6%. On Thursday, we received the Initial claims for the week ending May 16 confirmed a drop by 249k to 2.438M but the nine-week total is now up to a whopping 38.636M. Continuing claims for the week ending May 9 also moved significantly higher by 2.525M to 25.073M a record high. The Existing home sales report showed a double-digit drop as fell 17.8% month/month in April to a seasonally adjusted annual rate of 4.33M leaving your local real estate brokers feeling a bit empty. Lastly, the Conference Board’s Leading Economic Index dropped by 4.4% month/month in April. The Philadelphia Fed Index for May moved higher to -43.1. On Friday there were no significant reports.

Despite the somewhat sobering messages that economic reports provided again this week & the increasing tensions surrounding the US-China trade war, the markets charged forward rebounding on the shoulders of reopening hopes/beliefs that our collective economies will successfully come back strongly over the next few months and that a vaccine for COVID-19 may be in the cards from the likes of Moderna (MRNA), Sanofi (SNY) or Novavvax (NVAX) to name a few companies that are hard at work on the issue. The markets are now up an amazing 27.3% since March 23 of this year.

This week the Russell 2000, which was down ~35% this year as it was the index that was hit the hardest, closed at 1,355.53 representing a weekly sizable increase of 7.8% and is now only down 18.7% YTD. The Nasdaq Composite closed at 9,324.59 on Friday, representing a weekly 3.4% upward move & is now up 3.9% YTD. The Dow ended the week at 24,465.16 representing a weekly increase of 3.3% and is down 14.3% YTD. The S&P 500 closed at 2,955.45 and is now knocking on the 3k door again as it realized a 3.2% weekly gain and is now back in the single digits down 8.5% YTD. 

The energy sector gained 6.1% this week as oil prices closed at $33.25/bbl & up significantly (13.2%) since last week’s close of $29.38/bbl. Chevron (CVX) moved up this week to close at $90.28/share ($89.16, last wk) and Exxon (XOM) moved up closing at $44.60/share ($42, last wk.) The industrials sector was up +7.2% while the real estate sector moved up +5.6% this week as b0th ended the week as leaders across the 11 sectors this week.

The FAANG’s ended up for the most part week over week with Facebook looking particularly strong but Netflix cooling off its recently hot COVID-19 driven ways.  Facebook (FB) closed at $234.91/share, +1.52% Friday, ($210.88/share a week ago), Amazon (AMZN) closed at $2,436.88/share, -40% Friday, ($2,409.78/share a week ago and is up approx. 40% since mid-march), Apple, Inc. (AAPL) closed at $318.89/share, +.64% Friday, ($307.71/share a week ago), Netflix (NFLX) closed at $429.32/share, -1.59% Friday, ($454.19/share a week ago) & Alphabet (GOOG) closed at $1,410.42/share, +.54% Friday, ($1,373.19/share a week ago.)

Gold prices moved slightly lower this week closing at $1,740/0z. down from $1,748/oz & silver prices shot up to $17.68/oz from $16.99/oz last Friday. North American silver and gold producer Hecla Mining Company (HL) ended the week at $3.35/share significantly up from last Friday’s close of $2.99/share.

The U.S. Dollar Index weakened to end the week at 99.77 up from 100.38 last week.  The 2-yr Treasury yield closed at .17% up 2 basis points from the .15% mark last Friday, the 10-yr yield closed at .66% up equally while the 30-yr yield ended at 1.374% up from 1.33%.  

NEXT WEEK

The U.S. financial markets will be closed May 25 for Memorial Day so enjoy the 3-day weekend.

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

• The durable goods orders report on Thursday
• The consumer sentiment on Friday

STOCKS IN VIEW

• Shares of Atossa Therapeutics (ATOS) closed at $2.31/share on Friday (up from $1.90/share last Friday) after reaching a high of $2.68 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, this week they announced the successful results from in vitro testing of AT-H201, Atossa’s proprietary COVID-19 drug candidate. The preliminary study results show that AT-H201 inhibits SARS-CoV-2 infectivity of VERO cells in a laboratory culture, which are the standard cell types being used to study the infectivity of the coronavirus. SARS-CoV-2, sometimes called the coronavirus, is the COVID-19 infectious agent. This is the first submicromolar inhibitor of SARS-CoV-2 identified to date in published literature, meaning that a relatively small amount of the drug is necessary to result in an anti-viral effect. The testing was conducted on behalf of Atossa by a leading academic research institute. Atossa plans to publish a manuscript of these test results. Successful in vitro tests do not guarantee similar results from in vivo studies, including in human clinical trials. Additional safety and efficacy studies must be successfully completed and regulatory approvals must be obtained before AT-H201 may be commercialized. AT-H201 is reportedly designed to act as a “chemical vaccine” by binding to the surface of the coronavirus and inhibiting the ability of the virus to enter a cell (“viral infectivity”). Significant findings from the testing include: AT-H201 components inhibited SARS-CoV-2 from infecting VERO cells in a laboratory culture & This is the first submicromolar inhibitor of SARS-CoV-2 identified to date in published literature, meaning that a relatively small amount of the drug is necessary to result in an anti-viral effect. Testing was also performed on Gilead Sciences’ (GILD) remdesivir, an anti-viral medication being studied by others for use in COVID-19 patients, and the generic anti-malaria drug hydroxychloroquine, which is also being studied by others in COVID-19 patients. In these laboratory tests, the components of AT-H201 were found to be at least four-times more potent than remdesivir and at least twenty times more potent than hydroxychloroquine. Potency was measured by microscopic examination of the cytopathic effect caused by SARS-CoV-2 in VERO cells. Learn More. Also, please review Maxim’s Friday 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. 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, INVO announced that it will effect a 1-for-20 reverse stock split. The Company’s common stock will begin 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.”

• Shares of Moderna (MRNA) closed at $69/share up 2.91% on Friday as it moved up another ~2.5 points since last Friday when it closed at $66.69/share. MRNA recently received FDA approval to proceed to a Phase 2 trial with its potential COVID-19 vaccine candidate.

• Shares of Fate Therapeutics (FATE) closed at $35.23/share up 5.04% on Friday ending at an all-time new high. 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.

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

Here’s a summary of this week’s economic reports: On Monday, we received the NAHB Housing Market Index Report for May, which confirmed a rise of 37 up from 30 the month before. On Tuesday, we received the Housing starts report which confirmed a precipitous drop of 30.2% month/month in April to a seasonally adjusted annual rate of 891k while building permits dropped significantly by 20.8% month/month to a seasonally adjusted annual rate of 1.074M. Housing permits for single-family dwellings dropped a whopping 24.3% month/month to 669k. On Wednesday, we received the weekly MBA Mortgage Applications Index which confirmed a drop of 2.6%. On Thursday, we received the Initial claims for the week ending May 16 confirmed a drop by 249k to 2.438M but the nine-week total is now up to a whopping 38.636M. Continuing claims for the week ending May 9 also moved significantly higher by 2.525M to 25.073M a record high. The Existing home sales report showed a double-digit drop as fell 17.8% month/month in April to a seasonally adjusted annual rate of 4.33M leaving your local real estate brokers feeling a bit empty. Lastly, the Conference Board’s Leading Economic Index dropped by 4.4% month/month in April. The Philadelphia Fed Index for May moved higher to -43.1. On Friday there were no significant reports.

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