Split personality. The regular trading session had gone well enough. Performance across the large-cap indices had been mixed, from just barely in the green for the blue chips to "up on the day" for the broadest of measures, to outright bullishness the more tech-centric or health-care centric you wanted to go.
Interestingly, trading volume ebbed just a bit at the New York Stock Exchange, and across the S&P 500 on rather negative looking breadth. This occurred while simultaneously trading volume soared at the Nasdaq Market Site, as well as across the Nasdaq Composite, and on profoundly positive looking internals. A tale of two markets. It has been some time, but you are acquainted with Dr. Alexandre Manette, no? Surely you have been introduced.
Of course, performance broken down by individual sectors did have something to do with the way the cards fell on Thursday. While weaker oil prices continued to take the Energy sector lower, the banks continued to drag on the Financial sector. Meanwhile, healthcare providers, biotechs, semiconductors and software names all worked their magic on key corners of the marketplace. The Thursday action did add credibility for us to the idea, expressed in this column, that many portfolio managers had largely taken a pass on the Wednesday selloff.
Oh, the Futures...
It took just a glance. Thursday evening. Waiting for the president's task force press briefing, as has become my custom throughout this lock-down. Reading the day's financials, even if I thought I already knew what I needed to know. Prepping dinner for a family of four. What's that? S&P futures just went bananas. Maybe something's wrong with my iPad? Quick, to the bat cave... I mean the television. "What the heck is '90 Day Fiance?' Throw on something financial. Let me see where the futures are trading."
The Governor of New York State had told us that we were shut in for another month. I did not think markets would enjoy that news all that much. The Mayor of New York City seemed outright discouraged as he talked about shutting things down into the summer months. I had seen the Boeing (BA) news. Positive? Yes, maybe. Enough to move the marketplace? I had not taken it that way when I saw it.
The pop in equity index futures pricing was indeed born of optimism, and that optimism came from two directions. One, the president's task force had at least a guideline toward reopening parts of the U.S. economy in a measured way that could possibly be implemented by some states soon, but there would be no power struggle. These decisions would be left up to regional leaders. Excellent. What we all needed to hear. There's more...
In addition, news broke out of Chicago. According to Stat News, 125 Covid-19 patients recruited by the University of Chicago for Phase 3 trials taking Gilead's (GILD) investigational anti-viral remdisivir, 113 of whom were considered to be severe cases. (Gilead is an original member of our "Virus Group," you may recall; see my new multi-group pandemic portfolio strategy.) Most of these individuals apparently have improved enough to be discharged and within six days, not the 10 days of therapy that those running the trials had looked for. A few supposedly did go out to the 10 days, and two patients of the 125 did pass away. From the Barron's website, I see that University of Chicago Medicine infectious disease expert Kathleen Mullane has cautioned "against drawing strong conclusions," given that there was no placebo group to make comparisons to. She did acknowledge however that in aggregate, the patients had done well.
It appears that overnight, financial markets have taken their own strong conclusions. Gilead Sciences closed on Thursday at $76.54, +2.56%. The last sale that I see, still several hours away from the opening bell in New York, is $86.66, up a rough 13%. To think, I thought about selling this one on Thursday after a couple of trials in China had been cancelled. In fact, I had the sell order teed up, but noticed the stock trading higher throughout the day and just let it ride. Sometimes lucky is better than good.
While, as a trader, I would love to see a successful tests of the mid-March highs, I would really just be thrilled to see the center trend line of this pitchfork, which has been more resistance than support, simply hold on Friday morning. We'll see.
'Opening Up America Again'
Realistic? I guess we'll know when we know. While it is nice to hear positive news in regards to treating this coronavirus as we all wait for a vaccine, we also all know that mass production of both treatments and vaccines take time, and that's if there are no issues with either. This may be unrealistic in itself. Only time will tell.
The Trump administration's guideline for the governors to follow in reopening their individual states is broken down into three phases. To even approach Phase One, a state must have exhibited a downward trajectory for documented cases, or positive test results for a 14-day period. Under that first phase, various businesses could reopen with strict social distancing rules in place. These businesses include the cinema, restaurants, sporting events and gyms. (Psst.. I ain't going to the gym again until you do and maybe not even then.) Houses of worship could also reopen. Bars, schools and day care centers are to remain closed, and visits to nursing homes and hospitals remain off-limits.
Phase Two allows for bars to reopen with restrictions in place. Schools may reopen, and non-essential travel may resume. Visits to nursing homes and hospitals remain a no-go at this point, and working from home remains the preferred employment option where possible.
Phase Three is where there are no restrictions on the workplace and visits to nursing homes and hospitals may resume. Of course, this is probably a ways off, and it would not be improbable for there to be fits and starts along the way. Quoted in the Wall Street Journal, Dr. Anthony Fauci said, "There may be some setbacks, Let's face it." He then added, "We may have to pull back a little, and then go forward."
You See That?
A second original member of our "Virus Group" took flight overnight. Moderna (MRNA) closed on Thursday at $40.60, up just about 9% on the day. Overnight the shares have stayed hot. The last sale that I currently see is $47.70, or up another 17% or so. What gives? News broke on Thursday evening that the U.S. government agency BARDA (Biomedical Advanced Research and Development Authority) has awarded Moderna up to $483 million to help with accelerating the development of the firm's vaccine candidate (mRNA-1273) for Covid-19 toward licensure with the Food and Drug Administration. The candidate is expected to start Phase 2 trials shortly and Phase 3 trials as soon as this autumn.
The idea is to invest in the manufacturing process in order to enable large-scale production more rapidly. The hope, should mRNA-1273 prove successful in clinic, would be to have millions of doses per month available prior to year's end, and then tens of millions of doses available per month by 2021.
Readers will quickly see the breakout for this name earlier this week from the $36 pivot created by the two month long ascending triangle. By my own rules, this would place my target price at the $43 level, as well as placing a panic point at $33. I will do neither. This name stays on my book for the duration. Should this firm get where it is trying to go, I don't know how to price... should they fail, that is the price of risk. In that case, I remain long Johnson & Johnson (JNJ) .
Economics (All Times Eastern)
10:00 - CB Leading Indicators (Mar): Expecting -7.0% m/m, Last 0.1% m/m.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 504.
The Fed (All Times Eastern)
No public events scheduled for today.