Jobs Report Spooks Market; Dollar Rises To 11yr. High; Two ‘New’ BioPharma Stocks – AMRN, EYES
The number of net new jobs created in the United States in the month of February surprised analysts on the street, up 295,000, while the unemployment rate fell from 5.7 percent to 5.5 percent. As Eric Morath wrote in this weekend’s Wall Street Journal, “the latest improvement put the jobless rate at the top of the 5.2-5.5 percent range that many Fed policy makers consider to be full employment, or the rate the economy can sustain without stocking too much inflation. It sets the stage for central bankers, at their meeting this month, to drop an assurance they will be patient before lifting rates from near zero.” Thus, investors and institutions began to price in a Federal Reserve interest rate hike of at least .25 percent of a basis point by June; and, their language in their March statement is a lock to be more hawkish in their language — and as a consequence — stocks tumbled and the dollar rallied to an 11yr. high.
The DOW lost 276pts — it had been down some 300pts. late Friday afternoon — or, -1.5 percent, to close at 17,856; while the S and P fell 33pts., or -1.6 percent, to 2,071; and, the NASDAQ — which last Monday crossed the 5,000 mark for the first time in fifteen years — declined by 36, or -0.7 percent to close at 4,927. For the year, the DOW is +0.19 percent, while the S and P is +0.6; and, the NASDAQ is the star of the indices at +4.04
Laissez les bon temps roulez: ‘Let The Good Times Roll’
Many analysts considered what happened on Friday as being overdone and a classic knee-jerk reaction. Legendary investor Laszlo Birinyi, who has been dead on regarding this bull market, said on CNBC Friday afternoon that he thinks that the S and P could climb to 2250 (a 9 percent gain from here) by the end of June. Mr. Birinyi cites his reasoning as: oil has stabilized; Europe has seen the worst; and, 2015 is not 1999, and there is no parallel [bubble] to 1999.”
“When the Fed hikes, is less important to stocks than the fact that rates will remain accommodative, regardless,” says Michael Arone, Chief Investment Strategist for State Street Global Advisors. “Central banks around the world are keeping rates lower, and a tremendous amount of liquidity will be seeking a home, chasing asset values [stocks] higher,” Mr. Arone added.
So, unless and until proven otherwise, Friday’s nearly 300 point loss is not a cause for alarm. A fly in the ointment on the jobs report: “the report showed few signs of a pickup in wages, one of the biggest pieces of the economic expansion.” In this Obama economy, those at the very upper end and those at the very bottom end of the wage scale have seen a rise in income; while the middle class continues to suffer.
Gold Takes A Beating, Oil Retreats
In reaction to the jobs report and the expectation that the Fed will raise interest rates sooner, rather than later, the U.S. dollar surged to an eleven year high, climbing more than one percent Friday against all the major world currencies. Meanwhile, as the dollar strengthened, gold and oil fell. U.S. crude fell $1.15, to close at $49.61, while Brent crude lost 65 cents to close at $60. And, as the dollar strengthened, gold had its worst day since December 2013; and erased all of 2015’s gains. The yellow metal declined by $29.50 per ounce, to close at 1,164, a loss of 2.5 percent. Societe Generale’s Commodity Analyst, Robin Bahr said, “if we close below January levels, then the most obvious downside [for gold], would be November’s lows of $1,131 per ounce; with, solid support around the $1,150 per ounce level.” “We continue to forecast further strengthening of the U.S. dollar, which will keep gold under pressure,”[as well as oil], Deutsche Bank said in a note to clients on Friday. There is no need to chase gold here.
ACAD, CLDX, ZIOP, MACK, Hold Their Own In Midst Of Friday’s Selloff; May Start A Position In AMRN, And EYES On Monday
In the face of Friday’s stock meltdown, the biopharma stocks I have been writing about these past few weeks and months — fared exceptionally well, considering their stellar gains up to this point, It would not have been a surprise to see some profit taking in these names; but, for the most part, investors held their positions and these names saw minimal losses across the board. ACAD fell 32 cents, or -.82 percent to close at $38.94, on slightly less than average volume — which indicates that most investors are holding their positions. CLDX fell 39 cents,or -1.31 percent to close at $29.39, also on less than average volume. MACK shares declined by 10 cents, or -0.8 percent, to close at $12.39; while shares of ZIOP fell 43 cents, or -3.11 percent to $1338. I own shares in all four companies and stood pat on Friday.
Two new companies — at least to me — that I will likely take a position in tomorrow morning (Mon.) are Amarin Corporation (AMRN), who’s shares rose on Friday by 11 cents, or +6.6 percent, to close at $1.78 — on significantly higher than average volume. Amarin is a Dublin, Ireland-based biopharmaceutical company focusing on the development and commercialization therapeutic products for the treatment of cardiovascular diseases in the United States. According to the company’s website, the company develops products in the areas of lipid science and therapeutic benefits of polyunsaturated fatty acids. The company makes Vascepa, a prescription-only, omega-3 fatty acid capsule, used as an adjunct to diet to reduce triglyceride levels in adult patients with severe hypertriglycerdemia. The other company I may start a position in tomorrow morning, is Second Sight Medical Products (EYES). Shares of EYES rose on Friday, +37 cents, to $17.44, or +2.17 percent, on nearly triple the average volume — a very bullish sign. EYES is a visual prosthetics company announced that two newly approved centers have successfully completed their first commercial implants of Argus II Retinal Prosthesis System (“Argus II”) in patients with outer, retinal degeneration.
I probably will start an investment position in both of these companies tomorrow morning. Remember, there are no sure things — other than death and taxes. Do your own due diligence and homework; and, understand your risk tolerance and investing timelines. Otherwise, good luck. V/R, RCP