The Markets Eked Out A Positive Win This Week Despite Second Wave Worries!

Published Jun 20, 2020
Current Coverage
Market News

By John F. Heerdink, Jr.

Overall the markets produced marginal gains this week as reported rise COVID-19 cases & the threat or fear of a “second wave” was all over the world wide web. It indeed proved to be a cloud that weighed on the spirits of investors while trimming returns towards the week’s end as hopes of a swift reopening seem to dampen a bit more for a wider portion of us. Florida, Arizona, Texas, and California reported increased cases of the coronavirus while increased safety measures were ordered into place including requirements to and the enforcement of wearing masks in public. Apple (AAPL) also did its best to spook investors as they also recognized the rising case rates and moved forward with announcing the closing of a few stores in four states. Worldwide cases are now past 8.5M while +454k deaths have been realized. In the U.S. we are almost at 2.2M reported cases and now +118K deaths have been reported.

On a somewhat of a positive note, our good ole pals, The Federal Reserve Board, added further stimulus to the market and the market responded positively early this week. Specifically, the Fed announced updates to the Secondary Market Corporate Credit Facility (SMCCF), which will begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers. As detailed in a revised term sheet and updated FAQs, the SMCCF will purchase corporate bonds to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds. This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility’s current purchases of exchange-traded funds. The Primary Market and Secondary Market Corporate Credit Facilities were established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act. The White House might also be working on a $1T infrastructure plan than could also boost spirits and economic activity.

The macroeconomic schedule also brought forth the following reports this week that showed positive signs that the reopening was moving forward successfully. On Monday, we received the Empire State Manufacturing Survey for June which moved up to -0.2 after hitting record lows in April and May. On Tuesday, we received the retail sales report for May in the U.S. which jumped a stout 17.7% month/month and when you exclude autos sales, retail sales moved up 12.4% month/month. The total industrial production report confirmed a move higher by 1.4% month/month in May while the capacity utilization rate bumped up and came in at 64.8%. The NAHB Housing Market Index report for June confirmed a move higher to 58 up from 37 in May. The Business Inventories report confirmed a move lower by 1.3% in April. On Wednesday, we received the Total housing starts report confirmed a rise by 4.3% month/month in May to a seasonally adjusted annual rate of 974k units is currently down 23.2% year/year. The Total building permits report revealed a rise of 14.4% month/month to a seasonally adjusted annual rate of 1.22M while single-unit permits also rose across all regions of the US. We also saw that the weekly MBA Mortgage Applications Index listed 8%. On Thursday, the initial jobless claims report for the week ending June 13 came in above expectations at 1.508M, but lower than 1.566M which was realized in the week before, while continuing jobless claims for the week ending June 6 dropped by 62k to 20.544M. The Conference Board’s Leading Economic Index (LEI) report rose by 2.8% in May the first increase since January 2020. The Philadelphia Fed Index for June also rose to 27.5. On Friday, we received the current account balance for Q1, which trimmed to $104.2B= from $109.8B in Q4/2019.

MARKET RESULTS & MARKET LEADERS

Leading all sectors this week the health care sector was up 3.1%, the information technology sector was up 2.8%, the consumer staples sector was up 2.4%, and the consumer discretionary sector was up 2.3%. The utilities sector was off 2.4% & the energy sector was off 1.0% as provided a drag on market performance.

The Dow ended the week at 25871.46 representing a weekly lift of 1% and is now down 9.3% YTD. The Russell 2000 closed at 1418.63 representing a weekly increase of 2.2% and is now down 15% YTD. The S&P 500 closed at 3097.74 climbing 1.9% and is now down 4.1% YTD. The Nasdaq Composite closed at 9946.12 on Friday representing a weekly 3.7% downward move & is now up 10.8% YTD.

From the financials sector, which somewhat traded water this week, we saw shares of Goldman Sachs (GS) closed trading at $201.63/share slightly down from the $201.78/share last Friday, American Express (AXP) closed at $100.94/share down from the $101.68/share last Friday, Visa (V) closed trading at $192.20/share down from the $192.26/share last Friday & shares of Morgan Stanley (MS) closed at $46.93/share up from last Friday’s close of $46.28/share.

The information technology sector had a strong week rising 2.8% while the FAANG’s ended nicely up overall this week as follows: Facebook (FB) closed at $238.79/share, +1.21% Friday, ($228.58/share a week ago), Amazon (AMZN) closed at $2,675.01/share, +.79% Friday, ($2,584.02/share a week ago and is up approx. 43% since mid-march), Apple, Inc. (AAPL) closed at $349.72/share, +.86% Friday, ($338.80/share a week ago), Netflix (NFLX) closed at $453.72/share, +.86% Friday, ($418.07/share a week ago) & Alphabet (GOOG) closed at $1,431.72/share, -.30% Friday, ($1,431.18/share a week ago.)

COMMODITY MOVES

Gold prices closed at $1751/oz. up from $1,683/0z. last Friday & silver prices closed at $17.86/oz. up from $17.59/oz. last week. North American silver and gold producer Hecla Mining Company (HL) ended the week at $2.85 down from last Friday’s close of $3.10/share. First Majestic Silver (AG) closed at $8.63/share lower than the $9.26/share close last Friday.

Oil prices rose 9.7% to end at 39.74/bb and nearly back to $40/bbl. Remember when it was below $20/bbl not too long ago this year and it was a “screaming buy?” Energy giant Chevron (CVX) moved lower this week to close at $90.63/share ($92.39, last wk) and Exxon (XOM) moved down closing at $45.98/share ($47.17, last wk.)

MONEY UPDATE

The U.S. Dollar Index weakened again to end the week at 97.67 up from 97.11 last week.

The 2-yr Treasury yield closed at .19% up 1 basis point from the .18% mark last Friday, the 10-yr yield closed at .70% the same as last week while the 30-yr yield ended at 1.462% up slightly from 1.458% last Friday.

NEXT WEEK

We are looking forward to another full week of summer trading filled significant macroeconomic reports and with the following stocks in view.

MACROECONOMIC DATA

The existing home sales report on Monday

The preliminary Purchasing Managers’ Index report for June on Tuesday

The personal income and spending report on Friday

STOCKS IN VIEW

Shares of Atossa Therapeutics (ATOS) closed at $3.18/share on Friday up 4.26% and then proceed to rise to $4.22/share in the after-hours trading. As interest continues to swell around their breast cancer treatment programs and their COVID-19 drug candidates the trading volatility to the upside this year up from $.76/share. Atossa announced recently 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. CEO of Atossa, Dr. Steven Quay, MD, Ph.D., author, and physician-scientist, announced the availability of his 158-page book, “Your COVID-19 Survival Manual: A Physician’s Guide to Keep You and Your Family Healthy During the Pandemic and Beyond,” in paperback and eBook format on his website, www.DrQuay.com, beginning Monday, June 8, 2020. Proceeds from the book will go to military veterans performing COVID-19 relief work in their communities.

Shares of INVO Biosciences (INVO, INVOD) closed at $3.55/share up 5.73% today after hitting $3.70 intraday trading. INVO has made a number of moves to build out its organization while focusing its efforts to increase access to its INVOcell procedure globally. On May 26, the company reversed its 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 until January 22 when it reverts back to INVO. Learn more about INVO by reading my interview: A Vista Partners Interview With Steve Shum CEO of INVO Bioscience Regarding Increasing Access To Care For Fertility Treatment.

Shares of Fate Therapeutics (FATE) closed at $28.21/share last Friday and this Friday closed higher at $31.72. Its recent 52-week high is $37.24 and its 52-week low of $12.59. On June 11th, FATE announced that it closed an underwritten public offering of 7,108,796 shares of its common stock, which included 927,324 shares that were issued pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $28.31 per share. Aggregate gross proceeds from this offering, including exercise of the option, were approximately $201.3 million, prior to deducting underwriting discounts and commissions and estimated offering expenses. 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?… Recently, 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 Neubase Therapeutics (NBSE) closed trading last Friday at $8.44/share and proceeded to hit a new all-time new high of $11.78/share this week prior to closing at $10.88 on Friday. We are following Neubase Therapeutics (NBSE) for a number of reasons including its development of a modular antisense peptide nucleic acid (PNA) platform with the capability to address rare genetic diseases caused by mutant proteins with a single, cohesive approach. NBSE is listed on the reconstitution list for the Russell 3000 index now as you can view here. Here are a couple of dates to consider regarding the process:

June 26 – Russell Reconstitution is final after the close of the US equity markets.

June 29 – equity markets open with the newly reconstituted Russell US Indexes.

Shares of Stereotaxis, Inc. (STXS) closed at $5.47/share up 5.39%. The 52-week range is $1.70 – $5.82/share. The global leader in innovative robotic technologies for the treatment of cardiac arrhythmias continues to gain traction leading in their webcast symposium on June 20th where they will have a live broadcast of their bi-directional TeleRobotic procedures with physicians navigating catheters from hospitals more than 1700 km apart.

Shares of Aduro (ADRO) closed at $2.38/share up 7.69% today. On June 2nd, Aduro Biotech, Inc.(ADRO) and Chinook Therapeutics, Inc., a privately-held clinical-stage biotechnology company focused on the discovery, development, and commercialization of precision medicines for kidney diseases, today announced that the companies have entered into a definitive merger agreement pursuant to which Aduro will acquire all of the outstanding capital stock of Chinook in exchange for shares of Aduro common stock representing approximately 50 percent of Aduro’s outstanding common stock immediately following completion of the transaction. The combined company is expected to have approximately $200 million in cash, cash equivalents, and marketable securities at closing, including $25 million in additional financing committed by Chinook’s existing investors. Following closing, which is expected to occur in the second half of 2020, Aduro will be renamed Chinook Therapeutics, Inc., and is expected to trade on the Nasdaq Global Market under the ticker symbol “KDNY”.

Thanks again for your attention this week. Please continue to share your thoughts, questions, & ideas as we move froward. I hope that you have a wonderful weekend and please 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

The macroeconomic schedule also brought forth the following reports this week that showed signs of reopening measures that were having a positive effect in its early going. On Monday, we received the Empire State Manufacturing Survey for June which moved up to -0.2 after hitting record lows in April and May. On Tuesday, we received the retail sales report for May in the U.S. which jumped a stout 17.7% month/month and when you exclude autos sales, retail sales moved up 12.4% month/month. The total industrial production report confirmed a move higher by 1.4% month/month in May while the capacity utilization rate bumped up and came in at 64.8%. The NAHB Housing Market Index report for June confirmed a move higher to 58 up from 37 in May. The Business Inventories report confirmed a move lower by 1.3% in April. On Wednesday, we received the Total housing starts report confirmed a rise by 4.3% month/month in May to a seasonally adjusted annual rate of 974k units is currently down 23.2% year/year. The Total building permits report revealed a rise of 14.4% month/month to a seasonally adjusted annual rate of 1.22M while single-unit permits also rose across all regions of the US. We also saw that the weekly MBA Mortgage Applications Index listed 8%. On Thursday, the initial jobless claims report for the week ending June 13 came in above expectations at 1.508M, but lower than 1.566M which was realized in the week before, while continuing jobless claims for the week ending June 6 dropped by 62k to 20.544M. The Conference Board’s Leading Economic Index (LEI) report rose by 2.8% in May the first increase since January 2020. The Philadelphia Fed Index for June also rose to 27.5. On Friday, we received the current account balance for Q1, which trimmed to $104.2B= from $109.8B in Q42019.

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