Comirnaty, Semiconductor-Palooza, Infrastructure Snag, Trading Cybersecurity (original) (raw)

Oh, Happy Day!

It was as recent as last Wednesday. The Nasdaq Composite had given up both its own 21-day expoential moving average (EMA) and 50-day simple moving average (SMA). The S&P 500 had surrendered its own 21-day EMA, and would pierce the 50-day SMA the next day. Last week ended with two "up days" that did change the complexion of what had been a very negative week over the first three days, to something that though still negative, appeared far more palatable.

Monday was different.

Not only was breadth far stronger (actually spectacular) from top to bottom, but sector performance sent a completely different message as economically sensitive, or cyclical groups, such as Energy, took market leadership away from more defensive-type stocks. The only negative takeaway from Monday's action would be that trading volume remained on the light side as the above mentioned S&P 500 and Nasdaq Composite once again ended the day in record territory.

Reasons for Monday's green light rally were three-fold. One of the three had been expected but perhaps came a day or two early. The other two were truly surprises. None of the three had anything to do with the immediate trajectory of either fiscal or monetary policy.

The U.S. 10-Year Note? The Treasury yield curve? Neither has moved much in over a week. Yet, on Monday, much more so than on Thursday or Friday, risk was indeed "on." Small-caps were hotter than large-caps. The Nasdaq Composite and Nasdaq 100 were hotter than the Transports, Industrials or market itself at large. Commodities were generally stronger away from agriculture, as metals and anything energy related took off.

Positive Number One

We knew that it would come this week. We did not know it would come early Monday morning.

The FDA (Food and Drug Administration) granted full authorization to the two-dose messenger RNA vaccine co-developed by Pfizer (PFE) and BioNTech (BNTX) , which will now be sold under the brand name (that nobody will refer to it as) "Comirnaty." This creates legal grounds for employers and municipal or state leaders wishing to mandate that employees, and/or customers be vaccinated. This also removes one big reason that many of the unvaccinated have cited (30%) as either "the" or ''a" reason for opting to remain so.

Almost immediately, New York City Mayor Bill de Blasio gave all teachers and staff at New York City's public schools until Sept. 27 to get at least their first jab. Readers should note that vaccine mandates for teachers and staff had already been imposed ahead of this FDA approval by school districts in Los Angeles, Chicago and the state of Washington. The Pentagon also made clear that vaccination would not be optional for members of the armed forces.

This came on top of Sunday's news of a study published by the Israeli Ministry of Health showing that for those above the age of 60, a third jab or "booster shot" of Comirnaty creates four times the protection from infection and disease related to Covid-19 10 days after the booster than seen in similar patients 10 days after their second shot.

The feeling from this Wall Street person was similar to the feeling that we all felt last November when it was learned that there was indeed any vaccine (this one) designed to take on Covid and that the highly vulnerable would start getting their first shots shortly. It is believed that Moderna's (MRNA) messenger RNA vaccine may be less than a month behind the Pfizer/BioNTech vaccine in receiving FDA full approval, but that Johnson & Johnson's (JNJ) adenovirus vaccine will file for full approval later this year.

Comirnaty will continue to be used under Emergency Use Authorization for 12 to 15 year-olds, as well as for booster shots.

Positive Number Two

Cresting Covid?

I noticed this over the weekend. I chart every stock I am either trading in or somewhat interested in regularly. On Sundays, however, I dedicate several hours just to this task alone. Then, as I am prone to do, I shifted from stocks to Covid infection rates, state by state focusing on states I live in, am likely to travel through, or have been "problem" spots.

I noticed new infections in Florida, where the numbers are reported to Johns Hopkins University weekly instead of daily, moved sideways. Other hot spots showed sideways movement or even slight contraction. This is a call that we would not want to make early, but there is a chance that this wave of Delta variant fueled infection could be showing fatigue. As so many areas across the nation are running low, or have run out of not just ICU beds but hospital beds, this would be fantastic.

Then Bloomberg News pointed out the same possible trend as did Dr. Scott Gottlieb on CNBC. Gottlieb, who is a former Commissioner of the FDA and currently serves on the Boards of Pfizer and Illumina (ILMN) , has become for many, the comforting face of the nation's fight against this pandemic.

Facts are facts, and new cases of Covid appear to have possibly peaked in hard-hit regions. Seven-day moving averages of new infections have, for now, stopped rising. Moving sideways and contraction are two different things. Trends in hospitalizations and deaths lag new infections by a few weeks. No victories to claim as of yet. But certainly a reason for optimism, and ahead of Labor Day at that, if this cresting or rounding pattern holds.

Positive Number Three

Semiconductor-palooza?

Out of the blue as if lightning from the sky came Chinese regulatory approval for the Analog Devices (ADI) acquisition of Maxim Integrated Products (MXIM) that had been announced more than a year ago (July 2020). Having already received U.S. and European approval, Analog Devices expects the deal to close this week.

This set off a wave of optimism for other large U.S. chip manufacturers with pending deals awaiting Beijing's approval. Nvidia (NVDA) soared 5.5%, screaming past a pivot point discussed here 24 hours ago and in a separate piece at Real Money last Thursday. Advanced Micro Devices (AMD) popped 3.9% on Monday. Those two firms, respectively, have acquisition deals in place for Arm Holdings and Xilinx (XLNX) that will require a Chinese OK to proceed.

In other news, Intel (INTC) announced that the company's Foundry Services unit will lead the first phase of the Department of Defense's multi-phase Rapid Assured Microelectronics Prototypes - Commercial program to establish a domestic foundry infrastructure. Intel will have to work with International Business Machines (IBM) , Cadence Design (CDNS) and Synopsys (SNPS) to support the federal government's need for designing and manufacturing assured integral circuits.

Interestingly, at up 2.4% for the day, Intel, while outperforming the broader marketplace, badly underperformed its own industry group, as the Dow Jones U.S. Semiconductors Index ran 3.2%, and the Philadelphia Semiconductor Index gained 2.6% for the session.

Possible Negative?

As expected, House Democrats hit a snag on moving forward with President Biden's economic agenda. As anyone with a pulse knows by now, Speaker Nancy Pelosi has tried to tie passing the 1T−ish(1T-ish (1T−ish(550B in new money) infrastructure bill, which does have broad and bipartisan support, to the much larger socially focused and highly partisan $3.5T-ish budget resolution that passed in non-binding fashion (not as a bill) in the Senate. The infrastructure bill would, if passed in the House, move on to the president's desk. The larger spending package, if passed, would have to go back to the Senate as a bill where the Democrats could try to pass it through means of "reconciliation" requiring just a simple majority, instead of the usual 60 votes.

On Monday, talks broke down between the Speaker and the 10 or so centrist Democrats that want to move forward with the infrastructure bill in real-time and work on the spending package separately as the larger package is starting to look like it could take quite a while. Pelosi tried to tie a voting rights bill to this spending package that all of these moderate Democrats are known to support in an effort to get them aboard the larger package. There will perhaps be more news on this on Tuesday than there was on Monday.

Either way, it does not appear that our marketplace expects a lot to happen quickly on this front. That also means nothing here is priced in, beyond infrastructure. A breakdown in negotiations that leaves both plans out in limbo would have to be priced out of markets, but full passage of both is certainly not quite priced in. The fiscal football remains a greater threat this week than anything Fed Chair Jerome Powell says on Zoom this Friday.

Eureka!

Palo Alto Networks (PANW) , which I discussed here on Real Money Monday, simply hit the ball out of the park after the closing bell. The company beat fiscal fourth-quarter expectations for both earnings and revenue, and obliterated expectations for billings. Palo Alto also increased expectations for current quarter billings, while guiding FY 2022 earnings and revenue generation to levels well above what Wall Street was looking for. Just to top off the euphoria, the board of directors authorized an additional 676.1Mforsharerepurchases,bringingtheexistingauthorizationuptoaneven676.1M for share repurchases, bringing the existing authorization up to an even 676.1Mforsharerepurchases,bringingtheexistingauthorizationuptoaneven1B. This authorization expires Dec. 31, 2022.

I see Palo Alto trading around 414 overnight, up 11.25%. The company has also announced plans to hold an analyst day on Sept. 13, where trends in cybersecurity as well as the its platforms will be discussed. Other Sarge cyber-security names are up in overnight pin action. I see Zscaler (ZS) trading close to 262,up4.6262, up 4.6%, and CrowdStrike (CRWD) above 262,up4.6257, up 4.7%.

Now, here is where it gets tricky. I know I always preach on never selling cybersecurity. Today is the exception. Not because this is as good as it's going to get. Though, it might be for the moment. I have no intention of going flat any of these names, but this is where traders must prove their mercenary little hearts. Nothing wrong at all with ringing the register. Just let all of the five-star analysts (who were way behind us) react, and increase their price targets first. This is how we school the major broker-dealers and investment banks who will just throw their customer orders into the wood-chipper (algorithmic slicer) and be more than satisfied with their (very) average execution price because they have forgotten how to work.

Today is the day that all of the homework pays off. Today the little guys win, and the big guys never even figure out that they were beaten. Ooh, freakin' Rah.

Economics (All Times Eastern)

08:55 - Redbook (Weekly):Last 15.0% y/y.

10:00 - New Home Sales (July):Expecting 697K, Last 676K SAAR.

10:00 - Richmond Fed Manufacturing Index (Aug):Expecting 25, Last 27.

16:30 - API Oil Inventories (Weekly):Last -1.163M.

The Fed (All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (AAP) (3.06), (BBY) (1.89), (MDT) (1.32)

After the Close: (INTU) (1.59), (JWN) (0.30)

(Nvidia and AMD are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

At the time of publication, Guilfoyle was long PFE, MRNA, NVDA, AMD, PANW, ZS, CRWD equity; short PANW puts; and long PANW puts.