January 15, 2021
Market Recap Week Ending January 15th
Monday – Dow (89) to 31,008 Nasdaq (165) to 13,036 and the S&P (25) to 3,799. Profit taking, high valuations, Covid-19, continuing fallout from the failed coup and a historical 2nd impeachment of Donald Trump all weighed heavily on the market today. Seven of the eleven S&P sectors traded lower today. Winners included Energy, Healthcare and Financials. The losers were led by Consumer Discretionary, Communication Services and Real Estate. Eli Lilly (LLY) boosted the healthcare sector as it announced positive Phase III trial data on their Alzheimer’s drug…Big tech took it on the chin today, the sector traded down 0.94% with Apple (AAPL) down 2.32% and Amazon (AMZN) down 2.15%…The 10-year Treasury yield continued its rally higher, closing at 1.13%…The House submitted a singular article of impeachment to the House rules committee today. It will be reviewed and forwarded for an up or down vote to the entire House membership on Wednesday. Previously, Senate Majority Leader McConnell has said that it would not be possible to begin the impeachment trial prior to 12:01pm on January 20th, but keen Senate rules observers have noted that a clause exists whereby both the Majority Leader and Minority Leader could agree to convene the Senate without unanimous consent of its members in times of duress. It is unknown whether Senate Minority Leader Schumer will attempt to take advantage of that exception to put McConnell on the record….
Tuesday – Dow +60 to 31,068 Nasdaq +36 to 13,072 and the S&P +2 to 3,801. Markets eked out small gains held back by Big Tech which was down 0.43%. Only six of the eleven S&P sectors traded up today. Energy led the way, up 3.5% along with the price of crude which rose 1.7% to $53.14/bbl. Other cyclicals traded up as well, with Industrials (XLI) up 1% and the Banks (KBE) up 1.5%. The yield on the 10-year Treasury soared to 1.187% before falling back to 1.13%. Tech has been under pressure recently because of the rally in the 10-year yield. As many of these firms have been growing via debt issuance, rising yields, i.e. interest rates, makes business more expensive to finance in this manner and thus the recent pressure on the sector…The House will vote on an unprecedented second impeachment tomorrow and so far, 3 GOP House members have indicated they will vote to impeach the President, including Liz Cheney, the #3 GOP leader in the House, and daughter of former Vice President Dick Cheney. Reports are out this evening that House Minority Leader Kevin McCarthy is asking his GOP colleagues if he should demand the President’s resignation and further has warned his caucus not to criticize other GOP members who do vote for impeachment as they could be placing those House members’ lives in danger. Lastly, and in a shocking development, Senate Leader Mitch McConnell, has reportedly told associates that he believes the President did commit impeachable offenses and ispleasedthat the Democrats are pursuing impeachment. This could provide Senate GOP members sufficient cover to vote to convict the President. We shall see.
Wednesday – Dow (8) to 31,060 Nasdaq +56 to 13,128 and the S&P +8 to 3,809. Big tech rallied, pushing the Nasdaq higher while the Dow and the S&P hovered near even for the day. Some of the cautiousness could be ascribed to the fact that the President was impeached for a historic second time in his term (there have only been four impeachments in the history of the republic and this President owns half of them) as well as bad news regarding Johnson and Johnson’s (JNJ) production of its Covid 19 vaccine (apparently all the vaccine manufactures have produced their vaccine while it was/is still in trials so that they can ship immediately upon approval by the FDA). However, in better news, JNJ also announced that their single shot vaccine is nearing the end of its Phase III trial and that they would be applying for EMA from the FDA late this month or early February…After it was reported that activist hedge fund Third Point had taken a position in Intel (INTC)in late December, the company has made a change, with Bob Swan out as CEO, replaced by Pat Gelsinger. INTC traded up 7% on the news…The 10-year Treasury yield finally took a break from its ascent and settled in at 1.10% from 1.12%….
Thursday – Dow (69) to 30,991 Nasdaq (16) to 13,112 and the S&P (14) to 3,795. Jobless claims surged to 965,000 new claimants vs expectations of 795,000 and last week’s number of 784,000. This was the greatest number of claims since August 27th.The majority of claims came from Illinois, California, New York, Florida, and Texas. Markets, while trading down slightly, did not react more violently perhaps because it makes more likely the passage of President Elect Joe Biden’s new $1 trillion + stimulus plan, just announced today.Biden’s plan calls for additional $1400 direct payments to Americans, additional federal unemployment payments of $400 week and moratoriums on evictions and foreclosures both of which (payments and moratoriums) would be extended through September, additional money for state and local governments, money for Covid testing and vaccination testing, and raising the federal minimum wage to $15/hr. Another bill, focused on climate change and infrastructure, is expected to be introduced next month.On the news of the stimulus plan, 10-year Treasury yields continued their march higher and settled in at 1.15%. Seven of eleven S&P sectors traded lower, led by technology, down 0.95%. Energy was the big winner up 3%.
Friday – Dow (177) to 30,814 Nasdaq (114) to 12,998 and the S&P (27) to 3,768. If you have never heard the market adage “buy the rumor, sell the news,” today was the definition of the cliche. The market had already priced in President-Elect Biden’s stimulus plan and as such sold the news after the plan was announced yesterday afternoon. Retail sales may have had a say as well, as December’s number was down 0.7% vs November, the third consecutive monthly drop. This along with yesterday’s huge jump in unemployment claims bodes ill for the economy going forward. The last of the bad news was the shocking admission by the Trump administration that despite the announcement from outgoing HHS Secretary Azar that the government would release the federal stockpile of Covid-19 vaccines that were being held back, the stockpile in question never existed…Seven of the eleven S&P sectors traded in the red, led by Energy, down a whopping 4%. JPMorgan Chase (JPM) reported a huge quarter, beating earnings estimates by nearly 50% and beating revenues by 5% on stong investment banking and trading numbers. The revenue beat was due entirely to the release of credit reserves back into earnings. The market was unimpressed and JPM traded down 1.79% as did Citigroup (C down 6.6%) and Wells Fargo (WFC down 7.8%) who both missed their earnings estimates. Exxon Mobil (XOM) fell 4.8% after the SEC announced an investigation responding to an employee’s whistleblower complaint.
The week in review…Dow (283)or (0.09%) Nasdaq (203) or (1.5%) and the S&P (177) or (4.6%). The week was dominated by political news that I won’t bother repeating again in this paragraph. Economic news continues to deteriorate, and bank earning were underwhelming to say the least. Earnings will continue next week with Bank of America (BAC), Goldman Sachs (GS), Proctor & Gamble (PG), IBM (IBM), Netflix (NFLX), Charles Schwab (SCHW) and Intel (INTC) among the headliners. Markets are closed on Monday in observance of Martin Luther King Jr. Day. I am watching inauguration day as I am sure the rest of you are. The one thing that worries me a bit is that the National Guard presence continues to rise from 15,000, to 20,000, to today’s announcement that there will be 25,000 armed troops in the capital city. Is this out of an abundance of caution or based on actionable intelligence?
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Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities…AAPL, Bitcoin (physical), Chainlink (physical), Ethereum (physical), GBTC, LAZR, and VLDR.