Twenty Years Ago
My briefcase stands still
Exactly where I placed it down that day
Untouched for two decades, covered now with years of dust
Inside, a newspaper, some pens and memories of those that went away
I still see their faces
I think of them that way
Alvin's quirky smile
Bing's singing voice
Elvin nervously working hard
Tommy's quick auction market brain
Tough not to recall
Something positive about them all
My brain now grows old
My beard now grows gray
Ahead lies my destiny
Twelve faces own my yesterday
Why we must do this each year
When it brings back for us such woe
So that we always keep fresh
Memories of those lost twenty years ago
Never Forgive
Never Forget
23 October 1983
11 September 2001
Marketplace
First off, for peripheral market followers, equities were probably not nearly as weak on Thursday as you think. Sure, the S&P 500 gave up 0.5%, the Nasdaq Composite 0,3%. Sure, the Dow Transports gave up 1.1% on weakness across the rails, truckers and delivery services despite surprising strength in the airlines. Sure, eight of the 11 Sector Select SPDR ETFs closed in the red, but please note that the four defensive sectors took the bottom four rungs on the daily performance tables, with Real Estate (XLRE) and Health Care (XLV) much weaker than everything else. Big pharma, of course, came under pressure as the Biden administration unveiled a plan to reduce drug prices.
A flip of the coin reveals that cyclical sectors lit what seemed to be a dark road, as Financials (XLF) led the markets on a day where sharp demand for both U.S. sovereign and corporate debt constricted yield spreads. Just a by the way... some of those yields have been on the rise overnight. Investors may be mildly surprised to learn that on what was a supposed "down" day that winners beat losers by a few hundred issues at the Nasdaq, while losers just barely edged winners at the NYSE. However, advancing volume beat declining volume by more than 4 to 3 downtown and by an overwhelming 2 to 1 up at Times Square. Trading volumes, though lighter than on Wednesday, remained elevated in comparison to recent norms.
Another word on debt markets: Treasury once again saw good demand from abroad as $24 billion of 30-year bonds hit auction on top of the $38 billion of 10-year notes sold off earlier in the week. Bid to cover for the long bond was an impressive 2.5, while Indirect bidders took down a truly remarkable 69.6% of the issue. In addition, another 14 investment-grade borrowers tapped corporate debt markets on Thursday, bringing the number of investment-grade issuers up to 52 over three days, and the total amount borrowed across these 52 firms up to more than $75 billion. The first week of September is typically a hot week for new corporate debt, but this week is indeed hotter than is typical.
Friday Morning
U.S. equity index futures have been rather strong all night, as have for the most part both Asian and European equity markets themselves. We know this is not in response to the European Central Bank's decision to "moderately" reduce the pace of its Pandemic Emergency Purchase Program (PEPP), despite ECB President Christine Lagarde's assurances that "the lady isn't tapering." Yeah, that wasn't too weird.
Rather, credit for an off-hours northerly turn for equites, as well as a slightly southerly turn for the already mentioned U.S. debt markets is going (at least by this author) to two things President Biden did on Thursday evening. First, the president got more aggressive in trying to tackle the pandemic. Second, President Biden placed a phone call to President Xi of China supposedly to touch base on areas of mutual concern. Chinese state TV referred to the call as "in-depth" and "extensively strategic." Hey, the more contact there, the better. Better than playing the Navy's version of cat and mouse in the Taiwan Strait or the East China Sea.
Now, about the president's new plan in addressing COVID: The president is directing executive branch federal employees and contractors to be vaccinated against the virus while removing the option to test regularly and mask up. The president also has directed the Department of Labor to finalize plans requiring all private sector employers of 100 employees or more to mandate vaccination across their payrolls, or at least require weekly testing for those still reluctant. Between the two directives, about two-thirds of the U.S. labor force is impacted. The administration is also encouraging all sports and entertainment venues to require customers to show proof of vaccination or a very recent negative test.
Many business leaders are seeing these directives as well as the recent full approval of the Pfizer (PFE) /BioNTech (BNTX) vaccine and expected (shortly?) full approval for the Moderna (MRNA) jabs as potential game changers for the U.S. economy as hopes soar that this allows more businesses to return to more elevated levels of production and more laborers to seek employment. That would still leave those still ineligible for vaccination (young children) and those that care for them on the sidelines.
I try to be fair, and apolitical. Most readers know I have no real allegiance to either major political party -- indeed, I think they both stink -- but that I lean conservative certainly on fiscal and sometimes political matters. That said, I feel if one finds themselves consistently on the same side of the aisle on each and every issue that one probably needs to look themselves in the mirror. What I am getting at is that I have been hard on President Biden and his cabinet for the way we left Afghanistan. I still think a resignation or two is probably appropriate in the wake of that fiasco. I think the president did the right thing last night in regard to vaccination as well as in regard to reaching out to President Xi.
Many folks are still terrified of these vaccines. I know the side effects are different for everyone, but I would line up every five months for the rest of my life to get a booster if that meant I never had to go through COVID again. In my experience, the impacts of the virus itself and the side effects of the vaccine have not been comparable.
On Moderna
On Thursday, the stock of Moderna ran more than $33, or 7.8%, despite broad weakness in both Biotechs and Pharmaceuticals. Thursday was Moderna's Research and Development presentation day. It revealed a number of "improved" vaccines it currently is working on. It's working on three different vaccine combinations specifically targeting the Beta and Delta variants of the SARS-CoV-2 coronavirus. A fourth is a combination of the firm's original vaccine, mRNA-1273, with specific Beta variant fighting properties.
The company is awaiting full Food and Drug Administration (FDA) approval for its original COVID vaccine as well as Emergency Use Authorization for booster shots. In addition, it has enrolled 4,000 participants in a Phase 2 study of the original vaccine in 6- to 12-year-old children.
What I found interesting as someone who will likely end up receiving some kind of shot annually was the announcement that Moderna is working on a new vaccine candidate, mRNA-1073, that is intended to be a one-jab dose that combines a COVID vaccine with a flu shot. How wonderful would that be if it works? I told you back in the early days of the pandemic that I have great faith in the future of messenger RNA technology. I don't know if I will live to see it, but I truly think this is at least the start of mankind's eradication of disease. Almost all disease. Period.
I remain long Moderna. My price target is infinity. Infinity and beyond.
Trading Note
Well, gang, we pretty much got everything we asked for when Zscaler (ZS) reported on Thursday night. Adjusted earnings beat. Revenue beat on growth of more than 56%. Billings up 70%. Deferred revenue up 71%. Fiscal first-quarter and full-year 2022 sales guidance above consensus. Only negative caveats? In-line guidance for current-quarter EPS and midpoint full-year EPS guidance about a penny below consensus. Otherwise, wonderful.
That's why I once again expect to take profits today. This time, it will be only a partial. I have learned that lesson the hard way. Again. Have a good weekend, kids. God bless.
Economics (All Times Eastern)
08:30 - PPI (Aug): Expecting 1.7% y/y, Last 7.8% y/y.
08:30 - Core PPI (Aug): Expecting 1.6% y/y, Last 6.2% y/y.
10:00 - Wholesale Inventories (July-rev): Falshed 0.6% m/m.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 394.
The Fed (All Times Eastern)
09:00 - Speaker: Cleveland Fed Pres. Loretta Mester.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (KR) (.64)
