February flip

02/08/21
  • Small caps and tech lead stocks to new records
  • Jobs report misses, crude oil soars
  • This week: Busy IPO calendar, inflation data, stimulus debate

The implosion in chat-room stocks and weak employment data didn’t prevent the US market from ringing in February with more record highs and renewed strength in small-cap and tech names.

The S&P 500 (SPX) started last week with its best day since November 24, and kept rolling to its best week since November 6:

Chart 1: S&P 500 (SPX), 11/30/20–2/5/21. S&P 500 (SPX) price chart. Best day, best week since Nov.

Source: Power E*TRADE


The headline: Stimulus, vaccines take center stage as chat-room day-trading frenzy fades.

The fine print: The market may turn its attention back to the Capitol Hill stimulus debate and COVID vaccination progress—two areas Morgan Stanley analysts think could play out more positively than some people expect.

The number: 49,000, the slightly-lower-than-expected number of new jobs created in January. Following December’s loss of 227,000 jobs, some market watchers may feel labor market weakness will put pressure on Democrats and Republicans to strike a stimulus deal.1

The move: After skyrocketing 344% from Monday–Wednesday, Cassava Sciences (SAVA) shot up another 34% early Thursday on positive news about its Alzheimer’s drug—but reversed to close down 28%, then tumbled another 29% on Friday.

The quote: “The fundamental thesis remains but obviously the price got out of whack and we still expect that intrinsic value from $20 to $30.” Andrew Smith, Chief Investment Strategist at Delos Capital Advisors and an early GameStop (GME) bull, on where he thinks the stock should be trading.2

The scorecard: The Russell 2000’s (RUT) surge pushed its year-to-date gain into double digits:

US stock index performance table for week ending 2/5/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE


Sector roundup: The strongest S&P 500 sectors last week were energy (+8.2%), communication services (+7.1%), and financials (+6.6%). The weakest sectors were health care (0.5%), utilities (2.3%), and consumer staples (2.5%).

Highlight reel: Viela Bio (VIE) +52% to $52.81 on Monday, and Twist Bioscience (TWST) -20% to $158.02 on Friday.

Futures action: March WTI crude oil (CLH1) broke out of its trading range and didn’t look back last week, closing Friday at an 11-month high of $56.85/barrel. On Thursday April gold (GCJ1) tumbled below $1,800/ounce for the first time since December 1, but bounced Friday to end the week at $1,813.

Last week's biggest futures up moves: March natural gas (NGH1) +12.2%, March WTI crude oil (CLH1) +9.2%, February bitcoin (BTCG1) +9.1%. Last week's biggest futures down moves: March VIX (VXH1) -17.4%, February milk (DCG1) -4.3%, March rough rice (ZRH1) -3.4%.

Coming this week

Here’s a sample of the names from this week’s packed earnings schedule:

Monday: Loews (L), Chegg (CHGG), Global Payments (GPN)
Tuesday: Cisco (CSCO), Incyte (INCY), Enphase Energy (ENPH), Mattel (MAT), Yelp (YELP), LYFT (LYFT), Martin Marietta (MLM), Twitter (TWTR)
Wednesday: Crispr Therapeutics (CRSP), O'Reilly Automotive (ORLY), Spirit Airlines (SAVE), Coca-Cola (KO), General Motors (GM), Zillow (ZG), Uber (UBER), Paycom (PAYC), XPO Logistics (XPO)
Thursday: Laboratory Corporation of America (LH), Molson Coors (TAP), Kraft Heinz (KHC), Zebra Technologies (ZBRA), Kellogg (K), Walt Disney (DIS), GoDaddy (GDDY), Yeti (YETI), Verisign (VRSN), Roku (ROKU), PepsiCo (PEP)
Friday: Dominion Energy (D)

IPOs this week include:

Tuesday: Adagene (ADAG)
Wednesday: Viant Technology (DSP)
Thursday: Bumble (BMBL), Bioventus (BVS), Apria (APR), Signify Health (SGFY)
Friday: LONGEVERON (LGVN)

This week's numbers:

Monday: Consumer Inflation Expectations
Tuesday: NFIB Business Optimism Index, JOLTs (job openings)
Wednesday: Consumer Price Index (CPI), Wholesale Inventories, US Budget Plan (full-year 2021)
Thursday: Weekly jobless claims
Friday: Preliminary Michigan Consumer Sentiment

Go to the E*TRADE market calendar for an up-to-date earnings schedule and complete list of splits, dividends, IPOs, and economic reports. The Active Trader Commentary also lists earnings announcements, IPOs, and economic report times each morning.

Fab Feb: Finally, last February wasn’t particularly kind to bulls, but if you follow historical market trends, you may have noticed that the second month of the year has been on a bit of a roll lately: The SPX’s median February return of 3.1% over the past 10 years has been the highest of any month of the year.

If the market manages to parlay last week’s rally into a gain for the entire month, it will be the ninth time since 2010 that February has closed higher—its best 12-year stretch of the past six decades, and quite a departure from days of yore (e.g., 1960–1990), when fewer than half of Februarys landed in the plus column.  

 

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1 Bloomberg.com. Futures Climb as Weak Jobs Bolster Stimulus Bets: Markets Wrap. 2/5/21.
2 CNBC.com. Strategist called GameStop a top buy idea before the short squeeze. Here’s where he stands now. 2/2/21.

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