As counties and states come out of pandemic-inspired economic restrictions and other madness and the general economy begins to mend, stocks may be involved in a little buy the rumor, sell the news kind of action. Wall Street made hay throughout the COVID crisis, and now the sharpies may be taking profits before what promises to be an uneven recovery period.
Two months into 2021, the major indices have come off their recent highs and are close to flat for the year. The Dow is up just one percent, the NASDAQ has put on a gain of just over two percent, while the S&P is in between those two. The big winner is the NYSE Composite, comprised, in the main, of small caps, up 3.34% on the year.
For investors with short attention spans or investment horizons, the period between February and May could prove to be unsettling. March and April are often months in which rallies die or bull markets turn to bears. There's not a lot of reason for concern presently, though the $1.9 trillion stimulus bill passed by the House on Friday is likely to undergo some revisions in the Senate and passage is not, at this time, guaranteed. The pols have set a deadline for mid-March, when extended unemployment benefits run out. Getting the bill to Biden's desk - where he is sure to sign it - is the top priority for the Democrats and Republicans in the Senate may want to inflict some political pain after the second failed impeachment of Donald J. Trump. A staged floor fight may be on the agenda as the Republicans want to look like they're fiscally responsible participants and they'll be joined by a few Democrats in making some changes to the legislation.
In the end, the bill will pass through with the payments of $1400 to individuals mostly intact, but some other non-COVID-related items stripped out. It will be another huge waste of time and taxpayer money, but in the end most of it will be borrowed, boosting the federal budget deficit well past the $2 trillion mark. Already, the cumulative FY21 deficit through January 2021 (four months) is $736 billion, putting the current spendthrifts in Washington, DC are on pace to shatter last year's $3.13 trillion deficit.
By the time congress passes the current handout proposal before them, the federal debt will have surpassed the $28 trillion mark which is currently just $36 billion short of that number. With a run rate of about $3.67 billion per day, the national debt should be pretty close, if not beyond $28 trillion, by this time next week.
The latter part of the week saw round two of the attempted short squeeze by the group known as WallStreetBets over at reddit.com, as some unwary hedge funds layered back into short positions and put options against GameStop (GME) while the redditers waited for the ambush.
While this second go wasn't nearly as successful as the first round in late January, GameStop stock did see its share of wild-riding activity. On Wednesday, when the assault began, the price rose from the low to mid-40s earlier to nearly 100 by the close of trading. On Thursday, the shorts were sweating, as the stock opened at 150 per share and rose as high as 177, before coming in somewhat to 109. Friday, which was also options expiration day, the price went as high as 143 and as low as 87 and change, finally ending the week at 101.74.
Individual results surely vary, but it's a safe bet to say some shorts got smoked and some "amateur" traders from the reddit crowd gained a few shekels in the process. The organized efforts have now gone mainstream and are probably going to remain a feature of Us markets for the foreseeable future. Hedge fund managers beware: the proletariat are on the march for your money.
Equity investors were hardly alone in their sorrow. They were joined by all manner of plungers including those in Bitcoin and other cryptocurrencies and especially in precious metals, as gold and silver were hammered lower on the criminal COMEX.
Bitcoin suffered some serious losses after hitting an all-time high of $58,367 last Sunday morning (Feb. 27). It dropped as low as $43,365 just minutes prior to this posting. The world's leading crypto was down 24% on the week, presenting a buying opportunity for those intrepid enough to believe in a future devoid of central banks.
Etherium also took some blows by sellers. It reached an all-time apex on February at $2041 and currently is holding ground around the $1320 to $1375 level.
Yields on treasuries threatened to run off the page, with the 10-year note hitting 1.54% on Thursday before settling out at 1.44% Friday, sitll a full 10 basis points above the previous week's close. The 30-year was under stress as well with the yield topping out at 2.33% on Thursday. Friday's miracle bond rally send the yield back down to 2.17, which was still three basis points better than the prior week's close.
This is a very jittery market in fixed income and those with money on the line are extremely risk averse, so more volatility should scare yields higher and prices lower unless the Fed and the federal government can convince the world that price inflation is not an issue. Good luck with that, Jerome and Janet.
Crude oil (and other commodities) seemed to be the only place to hide, though it wasn't pretty. WTI crude opened the week at $61.67 per barrel and closed out on Friday at $61.66, but not before reaching a 52-week high of $63.53 on the 25th.
Precious metals were summarily dismissed on the COMEX and by the LBMA price fix in London. Goldbugs received no mercy at the hands of the control freak bullion banks. Gold was as high as $1809.95 on Monday, but spent the remainder of the week dropping off the charts, finally diving to $1734.40, its lowest level since last June.
In the face of a reddit.com-inspired raid on short sellers, silver was similarly battered, topping out around $28.15 on Monday, only to slide down to $26.68 the troy ounce at the New York close on Friday. The constant badgering and rampant mauling of gold and silver prices by the four large bullion banks has become a bone of contention for many in the precious metals space, but more optimistic souls continue to buy the dips and hope for a better future.
While the effect on the gold price at retail was obvious, with premiums still significant but prices lower all around, smaller silver retail buyers were still hungry for metal, which has been in short supply recently, though the shortages seem to be abating with the silver short raid a few weeks in the rear view. Nonetheless, one ounce prices for immediate delivery on eBay and elsewhere continue to ratchet higher. Silver seems to have separated the price of 1000-ounce bars, the province of COMEX and the LBMA, from single ounces and bars and coins up to 10 troy ounces. There appears to be a quite healthy appetite for the money of gentlemen.
Here are the most recent sales on eBay of common gold and silver one ounce items (numismatics excluded, shipping, often free, included):
Item: Low / High / Average / Median
1 oz silver coin: 38.00 / 68.95 / 47.88 / 43.79
1 oz silver bar: 39.00 / 64.90 / 44.95 / 40.75
1 oz gold coin: 1,849.00 / 1,995.22 / 1,909.88 / 1,886.01
1 oz gold bar: 1,846.45 / 1,873.83 / 1,859.07 / 1,856.91
Results of this week's survey puts the Single Ounce Silver Market Price Benchmark (SOSMPB) at $44.34, 40 cents higher than last week's price ($43.94) and the fourth consecutive weekly gain for Money Daily's proprietary silver gauge.
Upcoming this week are some interesting names reporting fourth quarter 2020 and full year results, leading off with Warren Buffett's Berkshire Hathaway (BRK.A), which actually reported on Saturday (Feb. 27). The results are likely to give the indices a boost come Monday, as the holding company delivered outstanding numbers.
Earnings per share (EPS) were $23,015, up 28.5% year-over-year (YOY). EPS beat the consensus estimate of $16,177.03 by 42.3%. Net investment gains were $30.8 billion, up by 24.6% YOY. Buffett also released his annual letter to shareholders [PDF].
After the close on Monday, high-flying Zoom Video Communications (ZM) reports what figure to be exceptional numbers. The mood may not be as bright on Tuesday when retailers Nordstrom (JWN), Target (TGT), Abercrombie & Fitch (ANF), and Kohl's (KSS) release. Keep an eye out after the bell for emerging discount grocer, Grocery Outlet (GO), which has beaten EPS estimates handily in each of the past four quarters.
Wednesday gives us Dollar Tree (DLTR) before the open and American Eagle Outfitters (AEO) after the close. Thursday's releases include grocery chain Kroger's (KR), BJ's Wholesale (BJ), and Costco (COST). Big Lots (BIG) and Ruth's Hospitality (RUTH), operator's of the famous Ruth's Chris Steak Houses close out the releases Friday, prior to the opening bell.
Also, of great interest at the end of the coming week is the Labor Department's release of February Non-farm Payroll. The current estimate is for 110,000 new jobs created during the month, following some months of disappointment. January saw a mere 49,000 jobs created nationwide, taking some shine off the recovery bloom.
That's a wrap.
At the Close, Friday, February 26, 2021:
Dow: 30,932.37, -469.64 (-1.50%)
NASDAQ: 13,192.35, +72.92 (+0.56%)
S&P 500: 3,811.15, -18.19 (-0.48%)
NYSE: 15,010.47, -196.20 (-1.29%)
For the Week:
Dow: -561.95 (-1.78%)
NASDAQ: -682.12 (-4.92%)
S&P 500: -95.56 (-2.45%)
NYSE: -352.23 (-2.29%)
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