This week markets were fixated by an astronomical run-up in shares of GameStop Corp., which at one point were up 2,000% in less than a month. Much of the moonshot was driven by retail investors, who used online forums like Reddit's WallStreetBets to organize a concerted push at the expense of hedge funds like Melvin Capital Management LP.  Now, the White House is monitoring the situation. Congress is planning a hearing on it. Federal Reserve Chair Jerome Powell has been asked about the whole saga. Hedge fund losses ran into the billions. U.S. securities regulator says it's watching the drama. GameStop even almost brought Ted Cruz and Alexandria Ocasio-Cortez together. 

In a move that could turn WeWork into a publicly traded company more than a year after its IPO fail, the office leasing company is in talks to combine with a SPAC, WSJ reports. A deal could value the firm at $10B, but it's not known whether that amount includes debt assumed. Bill Ackman, whose Pershing Square Tontine Holdings raised $4B last year, has pointed out that failed IPOs like WeWork is the reason he chose to form a SPAC, but the company has also received offers for private investment rounds and could choose to stay private instead.

Robinhood raised $1 billion overnight from investors to shore up its balance sheet as the brokerage app was set to ease restrictions in the trading of certain volatile stocks.  The money raised was on top of $500 million the broker accessed through credit lines to ensure it had the capital required to keep allowing its clients to trade stocks like GameStop and AMC Entertainment. Robinhood CEO Vlad Tenev told CNBC that tapping the credit lines was a proactive measure and denied it was because of a liquidity issue.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili. 
 

The U.S. economy’s 4% holiday quarter increase wasn’t enough to ward off a full-year contraction, but growth is expected in 2021. But economists say growth in the third and fourth quarters isn’t likely to fully offset the sharp downturn from the first half of the year, leaving the U.S. with a projected 2.4% annual contraction, its first since 2009 when the economy shrank by 2.5% in the wake of the financial crsis.

Heavily shorted companies across the globe are seeing their shares jump as traders race to bet on where the flood of retail money might head next. There is a long list of potential targets - companies that have short-interest levels above 30% of their share float - which have seen rallies in recent days. Shares in GameStop Corp. surged again in premarket trading, moving above $500 at one point. For hedge funds, the attack on their short positions is proving painful, and moving the wider market as they slash their equity exposure at the fastest rate since 2014.

Apple reported its highest-ever net profit in the fourth quarter as revenues surpassed forecasts to hit $111.4bn, driven by a 57 per cent rise in sales in greater China. Net profits rose 29 per cent to $28.8bn, Sales in all five of the $2.4tn company’s product categories grew at double-digit percentages, led by a 41 per cent gain in iPad sales and a 30 per cent climb in its wearables unit, which includes AirPods and the Apple Watch.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.

Microsoft Corp. got big-tech earnings season off to a strong start yesterday, reporting sales that were well ahead of analyst expectations. After the bell today Apple Inc.'s iPhone sales will be in focus when the company reports. For Tesla Inc., which has seen its share price rise almost 8-fold in the last year, revenue from the sale of regulatory credits will be of interest, as well as sales and orders figures. Facebook Inc. may see a jump in revenue 

The Federal Open Market Committee is all but certain to keep interest rates near zeroand the pace of asset purchases unchanged in its decision today at 2:00 p.m. Eastern Time. Despite hopes for a strong recovery, disappointing economic data of late, including on the labor market, means Fed Chair Jerome Powell is likely to restate that now is "not the time" to be discussing an exit from stimulus.  The Fed is currently buying $80B of Treasury bonds and $40B in mortgage-backed securities each month to keep longer-term borrowing rates low.

After surging over 90% yesterday back to the $150 level, GameStop got another boost from a well-known short-seller battler - Elon Musk. It only took a one-word tweet from the master troller, "Gamestonk," to propel GME shares another 46% to $217 in after-hours trading (the stock is up 1000% since Jan. 12)

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.

The stock market rallied to a record close yesterday, sparked by hopes for another stimulus package and smoother vaccine rollout ahead. A slew of strong quarterly results also boosted sentiment, including from Netflix which soared 17%.

The construction industry’s outlook worsened to start the New Year, according to the National Association of Home Builders’.  Their monthly confidence index dropped three points to a reading of 83 in January.  It was the second consecutive month that the index has dropped, though the reading still remains strong.  Index readings over 50 are a sign of improving confidence. Back in April and May, the index dropped below 50 as pandemic concerns mounted, but months later the index hit a series of record highs.

Oregon’s unemployment rate climbed to 6.4% in December, up from 6.0% the prior month. It’s the first increase in seven months as the state hunkered down amid a sharp increase in COVID infections.  The state shed 25,500 jobs last month, according to data from the Oregon Employment Department, with the biggest losses in the leisure and hospitality sector. Ten months into the pandemic, Oregon has regained just 37% of the jobs lost in this recession.
 
Tyler Simones, Partner
Northwest Quadrant Wealth Management

Stocks edged higher yesterday, rebounding from a rough week last week, as investors digested results from the new earnings season as well as signals for another big stimulus and faster pace of vaccine distribution ahead.

Shares of Goldman Sachs traded 1.5% lower as traders took profits after the bank topped expectations for fourth-quarter profit and revenue. The blowout results came on the back of strong performance from its equities traders and investment bankers.  Shares of Bank of America dipped after the bank posted quarterly earnings that exceeded expectations. Revenue came in slightly below estimates.  The first week of earnings season saw a historically high proportion of beats with 88% of the S&P 500 companies that reported exceeding EPS estimates.

Janet Yellen, President-elect Joe Biden’s designated nominee for Treasury Secretary and a former chair of the Federal Reserve, appeared before the Senate Finance Committee yesterday. Yellen’s prepared remarks call for the federal government to enact a large stimulus to help the economy.  The Senate could confirm her as early as Thursday.
 
Tyler Simones, Partner
Northwest Quadrant Wealth Management
 

President-elect Joe Biden’s $1.9 trillion economic relief package includes proposals likely to be opposed by many Republicans, which may lead to drawn-out talks before an agreement is reached. While many of the elements in the plan could pass the Senate with a simple 50-50 partisan split, some such as state aid and money for health care will likely need 60 votes in the chamber. The timing of the impeachment trial of President Donald Trump could add another road block to a swift agreement on new stimulus. 

JPMorgan Chase has released almost $3bn it had reserved for loan losses at the height of the pandemic, contributing to a 42 per cent surge in net income for the biggest US bank in the final three months of 2020 versus a year earlier.  The bank reported record profits of $12.1bn.  JP Morgan’s fourth-quarter revenue of $29.2bn was up 3 per cent year on year.  

The furious pace of IPOs and SPACs is showing no sign of letting up anytime soon as management teams and big name investors take advantage of the easy money sloshing around in financial markets. Case in point: Affirm, a company that helps consumers finance online purchases, finished its trading debut up 98% on Wednesday, giving a nice shot in the arm for Shopify, which holds about 20M shares through warrants. Petco went public for the third time on Thursday, soaring 63% and valuing the retailer at more than $6B.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.

President-elect Joe Biden will tonight unveil a Covid-19 stimulus package that could be as big as $2 trillion. The plan will include direct payments of $2,000, extending unemployment benefits, money for state and local government and tax credits, according to congressional officials. While Biden has said that he is seeking the support of Republican lawmakers in passing the package, Democrat control of all three branches of the legislature means he does not require it to pass his plans.  
 

Intel is bidding farewell to CEO Robert Swan, who has been at the helm for two years, as the semiconductor pioneer faces pressure from activist investor Daniel Loeb. He'll be replaced in mid-February by Patrick Gelsinger, a former chip designer and 30-year Intel veteran who has led software maker VMware since 2012. News of the shakeup sent Intel shares up 7%.  Then overnight, rival manufacturer Taiwan Semiconductor announced strong earnings, and plans to spend as much as a staggering $28 billion to expand manufacturing and solidify its tech dominance.  These divergent trajectories just might be one of the most important trends in the world today.

First-time claims for unemployment insurance jumped to 965,000 last week amid signs of a slowdown in hiring due to pandemic restrictions, the Labor Department reported this morning.  The total was worse than Wall Street estimates of 800,000 and above the previous week’s total of 784,000.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.
 

Affirm, the consumer lender led by PayPal co-founder Max Levchin, sold shares well above its expected price range during an initial public offering, in a sign of the continued exuberance for new US listings. The San Francisco-based company raised $1.2bn in the offering after selling shares at $49 a piece, according to two people briefed on the matter, a price level that exceeded its already bumped up range of $41 to $44.  Affirm would have a market capitalisation of $11.9bn at the IPO price.

Analysts are wavering in their convictionthat the dollar will continue to weaken as a more optimistic outlook about the US economy challenges a key driver of the greenback slide. The US currency fell 5 per cent in the final two months of 2020, and many investors and analysts were expecting further declines in 2021. But the past week has brought a 1.2 per cent recovery. Emerging markets currencies that have performed strongly in recent months have also had their march interrupted by the resurgent dollar. The turnround reflects nagging doubts over whether the Federal Reserve will hold the line with its extremely supportive policy given greater hopes for an economic pick-up in the US.

After setting more than a dozen record lows last year, mortgage rates began 2021 on an upward climb, and that lit a fire under borrowers, fearing they might miss the last of the lowest rates. Mortgage applications to refinance a home loan spiked 20% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That was the highest level since last March. Volume was 93% higher than a year ago.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.
 

With the yield on the U.S. 10-year Treasury rising almost a quarter of a percent already this year, hitting 1.16% this morning, today's record-matching $38 billion auction of 10-year bonds will be closely watched. The beginning of 2021 has also seen a rapid steepening of the yield curve, as the prospect of a unified Democratic government led investors to reprice expectations for economic stimulus and debt issuance in the wake of the Georgia runoff result. The moves in the Treasury market are raising concerns about the resilience of the market rally, particularly in emerging markets.

The uptick in rates has certainly helped Bank stocks, stuck in the investment doghouse for years, and are now back in favour.  The sector suffered a rough 2020 as coronavirus lockdowns threatened to spark a rush of loan defaults, drawing out a period of marked underperformance since long-term interest rates began to fall in 2018, compressing profit margins. bank indices have outperformed the wider market by more than 25 percentage points since.

Five days ago, Elon Musk, the tech billionaire and avid Twitter user prompted his followers to "use Signal" - the encrypted messaging app that's funded by a nonprofit and is seeing a surge in popularity.  There was some confusion and ignorant retail investors responded to Musk's tweet by pushing up the price of Signal Advance, a small component manufacturer with one full-time employee whose stock trades over the counter and hasn't filed an annual report with the SEC since 2019. Shares were trading at just $0.60 before the big tweet, but quickly climbed to $6.64 over Thursday and Friday. The stock shot up again yesterday to close at $38.70, resulting in a whopping 6,380%advance over the three trading sessions, as well as a market cap of more than $3B.

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.
 

The Consumer Electronics Show kicks off today, the big industry event for consumer technology companies that's normally held in Las Vegas. The show is always full of dazzling displays and latest innovations, but it will take place virtually this year due to the coronavirus pandemic.

The China crackdown seen on Wall Street is extending to the Far East, where Goldman Sachs, JPMorgan, and Morgan Stanley said they will delist 500 Hong Kong-listed structured products linked to China Mobile, China Telecom and China Unicom, as well as local indexes including the Hang Seng Index. Last week, the Office of Foreign Assets Control clarified a November order from President Trump that banned Americans from investing in Chinese companies that the U.S. considers to have links with China's military.

Direct payments have provided a financial lifeline to millions of Americans, but for others, they represent an opportunity to boost their savings. That is thanks to the $2.3T CARES Act and the latest $908B stimulus bill, which provided $1200 and $600 to all Americans making under $75,000 - regardless of their employment and financial situation. Securities trading was among the most common uses - across nearly every income bracket - for the government stimulus checks issued in May, according to software and data aggregation company Envestnet. Americans that earned between $35,000 and $75,000 annually traded stocks about 90% more than the week prior to receiving their stimulus check

With Northwest Quadrant Wealth Management a Registered Investment Advisor I am Josh Fenili.

According to the Labor Department the US economy lost 140,00 jobs in December, and economists had predicted it to ad 50,000 jobs. The unemployment rate now stands at 6.7%. The industry that saw the largest losses was the hospitality industry because of the new lockdowns across the country. The U.S. service sector expanded more than anticipated in December, marking a seventh straight month of expansion.

The Institute for Supply Management services purchasing managers’ index (PMI) came in at 57.2 for the month following a print of 55.9 in November. The increase came as new orders, supplier deliveries and inventories increased markedly in the service sector in December.

Oregon recreational-marijuana sales surged in 2020, peaking during a difficult summer of protests and lockdowns. The result was a record year of business for the state’s marijuana purveyors, based on data from the Oregon Liquor Control Commission, which oversees marijuana sales. Total marijuana sales in Oregon jumped from $795 million in 2019 to more than $1 billion in 2020, led higher by Multnomah County.

US Stock rallied yesterday led higher by banks of all sizes and scopes rallied as a rise in long-term rates promised to allow financial firms to hike the interest banks can charge on their loans, a key driver of commercial lending profits.

U.S. private employers in December slashed jobs for the first time in six months, suggesting the labor market's recovery from the coronavirus crisis has stalled amid a resurgence in cases nationwide. According to the ADP National Employment Report companies shed 123,000 jobs last month, missing the 88,000-job increase that economists had predicted.

New orders for U.S.-made goods increased more than expected in November and business investment on equipment was solid, pointing to sustained recovery in manufacturing. The Commerce Department said that factory orders rose 1.0% after increasing 1.3% in October.

With Northwest Quadrant Wealth Management, I’m Tyler Simones

Stocks fell in the first trading session of 2021, as concerns over a post-holiday spike in virus cases compounded with uncertainty over the outcome of the Georgia Senate runoff elections spooked traders.

U.S. manufacturing activity picked up at its briskest pace in more than six years in December, extending a recovery in the factory sector that has spurred the strongest pricing environment for goods producers since 2011 as the coronavirus pandemic upends supply chain networks. U.S. construction spending rose to a record high in November, boosted by a robust housing market amid historically low mortgage rates, which could help blunt some of the hit on the economy from raging COVID infections.

The Commerce Department said that construction spending increased 0.9% to $1.459 trillion, the highest level since the government started tracking the series in 2002.

Flir, the maker of night vision devices, and one of Oregon’s last big tech companies, said they will sell their business to California-based Teledyne Technologies in a deal initially valued at $8 billion in cash and stock. That would represent a 28% premium on Flir’s closing share price last week.

With Northwest Quadrant Wealth Management, I’m Tyler Simones

The US Stock Market as measured by the S&P 500 Index was 16.26% higher in 2020 a number that nobody thought was possible back in March when the market was down over 30% at the outset of the COVID-19 pandemic.  The tech heavy NASDAQ was 43.6% higher its best year since 2009.

This week Wall Street will be  keeping a close eye on Georgia as the state prepares for a Senate runoff election on Tuesday, which could change their  majority in the chamber.

The number of people filing for unemployment benefits for the first time unexpectedly fell last week, marking its second straight decline.  Initial jobless claims declined by 19,000 to 787,000.  Continuing claims, which include those who have received unemployment benefits for at least two straight weeks, fell by 103,000 to 5.2 million.  The number of people receiving benefits across all unemployment programs dropped by 800,000 to 19.6 million.

Tesla reported better-than-expected 2020 vehicle deliveries, driven by a steady rise in electric vehicle adoption, but narrowly missed its ambitious full-year goal during a punishing year for the global auto industry.  The company delivered 499,550 vehicles during 2020, above Wall Street estimates but 450 units shy of CEO Elon Musk's target.

Tyler Simones
Partner
Northwest Quadrant Wealth Management