Maybe it was just investors and traders having second thoughts about selling stocks on a day when the economy delivered a surprisingly strong jobs report for February. After all, isn’t stronger economic growth a good thing for company revenue and earnings? Maybe it was just the normal desire not to be too long or too short going into a weekend. Maybe some of the technicians saw something that yelled “REVERSE!” If so I don’t yet see it. The NASDAQ Composite closed the day at 12920. Earlier in this drop it had sliced through the 20-day Moving average at 13609 and the 50-day a 13340 like a warm knife through butter. The 200-day moving average, the next big support isn’t until 11618. Way, way lower than where we closed today. My tentative explanation?
Stocks broke out of the gate today seemingly determined to turn a big three-day losing streak into an even bigger four day plunge. At 11:30 a.m. today, March 5, the Standard & Poor’s 500 was down 1.04%. The NASDAQ Composite was lower by 2.6%. The high momentum technology growth stocks were taking another drubbing. Taiwan Semiconductor Manufacturing (TSM), down 5.46% yesterday had slipped another 0.16% as of 11:30 a.m. Twilio (TWLO), clobbered yesterday to the tune of a 7.16% loss, had plummeted another 9.88% as of 11:30 a.m. And then, the market turned on a dime.
While the NASDAQ Composite and Standard & Poor’s 500 were flirting with a correction on March 4, Marvell Technology Group (MRVL) has moved into its own better than 10% drop in just the last week. The stock is down 13.89% in the last week as of the close yesterday March 4 at $40.10. The stock is now down 15.66% for 2021 to date. I’m going to use this correction to add the shares to my Jubak Picks Portfolio on March 5 with a target price of $48 a share. The stock pays a tiny 0.60% dividend.
The NASDAQ Composite closed the day down 2.11% on March 4. That was a third straight day of losses including the 2.7% drop on Wednesday. At its low for the day–12,555.1 at 1:59 p.m.–the index briefly dipped into correction territory with a 10.92% loss from the February 12 high of 14,095.47. A slight improvement at the end of the day to 12,723.47 left the index down 9.93% from the February high, right at the brink of correction territory. The drop to the close at 12723.47 erased all of the indexes gains for 2021 to date.
Just so we’re all on the same page: My buy of CPER and KWBW hedges posted yesterday and an add of the KWBW hedge to the Jubak Picks Portolio today
Yesterday in my YouTube video and in my latest addition to my Special Report: “Profit and Protect” I added the U.S. Copper Fund ETF (CPER) and the Invesco KBW Bank ETF (KBWB) to my Perfect Five ETF Portfolio. In that portfolio they will replace the SPDR Gold Trust ETF (GLD) and the Vanguard Intermediate Term Treasury Bond ETF (VGIT), respectively. The two new ETFs will keep the portfolio weighting of the out-going ETFs at 25% and 20%, respectively. You can find more about the logic of these hedges and about the specifics of these ETFs in my video and in my Special Report update. Tomorrow I’ll also be adding the Invesco KBW Bank ETF to my Jubak Picks Portfolio.
I’m not sure that it rises to the level of a “taper tantrum” but the financial markets wanted Fed chair Jerome Powell to signal that the central bank would increase its bond buying at the 10-year end of the yield curve in order to depress rising Treasury yields. And it got nothing of the sort from Powell speaking at a Wall Street Journal event today. Powell trotted out the same old assurances–the Fed wouldn’t raise rates even if inflation spiked in the short term. And the Fed would continue its program of buying $120 billion in bonds and mortgage-backed assets a month. But the same old assurances weren’t enough today. The yield on the 10-year Treasury jumped to 1.55% from 1.42% yesterday and took the stock market down with bond prices.
Last time, way back on February 23, when I posted on an everything is down market, I said that I didn’t think we were yet at buy on the dip time, but that I was doing a little selective nibbling at stocks such as Applied Materials (AMAT) that had extraordinarily strong 2012 growth stories. Well, I’ve been doing a little nibbling today–again I’m not buying everything on the drop since I can’t tell where the bottom might be.
Back on February 23, I wrote a post with the headline “Everything is down today” and added that while I wasn’t buying everything on the dip I was doing some selective nibbling. Today’s market looks almost exactly the same–if a bit more so because this drop is coming after recent weakness.
Special Reports: Profit and Protect–What you need to know about stock market stages for 2021–my first two hedges (copper and banks) for Stage #2
Hedges that can pay off on the downside and the upside are the most useful and most valuable. They also tend to be relatively rare. There aren’t a lot of these bets floating around in most markets just waiting for you to snap them up. However, I have found two hedges of just this sort in today’s market that I’m going to recommend to you today. (In this post I’m going to give you some of the nitty gritty numbers that support my recommendation for these two hedges. If you want to see some charts for copper and gold, banks and bonds check out the video I posted today.) I’m going to add these new recommendations to my standing Special Reports post tomorrow.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The thirteenth YouTube video “2 Hedges for All Your Market Worries” went up today.
Private employers added 117,000 jobs in February, according to today’s National Employment Report from ADP. The ADP report leads into Friday’s Labor Department report on the job market. The Labor Department report will include jobs gains or losses in the public sector that has been hit hard by the pandemic. Economists had projected that the ADP survey would show private payrolls adding 165,000 jobs in February.
At 3:30 p.m. New York time today, March 3, the yield on the 10-year Treasury was 1.47%. That’s up from yesterday’s 1.42%. So much for any thoughts that yesterday’s rally in bonds and drop in yields might be the beginning of a larger move.
So what’s the matter with Incyte stock? Just about nothing although you wouldn’t know it from the recent price movement
Shares of biotech stock Incyte (INCY) have been down significantly in 2021. For the year to date, as of the close on March 2, the shares were down 8.45%. In the last month they’ve tumbled 12.42%. So what’s wrong? Pretty much nothing. With the individual stock anyway. What we’re watching is a lot of selling in the biotech sector as part of the recent sell-off on risk. And on substantial profit taking.
Don’t expect too much movement from stocks in the next couple of days–there’s just too much news due on Thursday and Friday
Stocks are neither moving ahead to follow up on yesterday’s big gains. Nor selling off under the wave of profit taking. Given the news calendar on Thursday and Friday that’s about what I’d expect. We’re due for a bushel of potentially market-moving news on those two days. And I’d be surprised if anyone wants to get too far ahead of those announcements.
Treasury yields ended the day slightly lower (which means prices were slightly higher) than earlier in the day. The 5-year Treasury note, for example, ended with a yield of 0.69% after trading with a yield of 0.72% earlier in the day. (The low yield for the day was 0.68%.) The yield on the 2-year Treasury finished at 0.12% and the yield on the 10-year closed at 1.42%, up 2 basis points. At 2 p.m. New York time the yield had been 1.45%. With bonds saying “No worries,” many stock indexes edged up by the end of the day.