Stocks Accelerate Losses Into Closing; Feb. Turnaround?; Oil Surges Bottom, or Head Fake?; 2 Potential Bio-Pharma Blockbusters
Stocks sold off into the closing bell on Friday, as the outlook on Greece darkened; while oil gushed and had its best one-day gain since June of 2012. Digby Larner, writing in this weekend’s Barron’s, wrote that “European stocks were caught between Greece and its creditors — as they traded blows over the country’s bailout terms.
“Last Tango In Athens?”
Fridays stock sell-off in the U.S. began last week with the resounding election of Greece’s radical leftist Syriza Party, headed by Alexis Tsipras, who staunchly opposes austerity measures imposed on the country by EU, in return for its 240B Euro ($269B), bailout. Tsipras who was named Prime Minister last Sunday, is arguing for a new deal from the EU and the IMF that would write off some of Greece’s debt, and free up cash that he would like to pump into financial relief for the country’s poor,” Mr. Larner wrote.
“With European investors basking in the afterglow of the European Central Bank’s (ECB’s) quantitative-easing (QE) plan announced the previous Thursday, Jan. 22nd. when the ECB pledged to pump billions of Euros into markets between March and September, the STOXX Europe 600 Index ended 0.6% higher last Monday,.” Mr. Larner noted. “But, that initial calm faded by midweek, as neither Greece, nor its creditors appeared to be in a mood to compromise. German Foreign Minister Wolfgang Schuable took a swipe at Greece on Thursday, when he told the European Parliament that Greece’s problems stemmed from decades of neglect by the country’s elite; rather than austerity measures favored by Berlin and the EU.”
More generally, there is an unease in investor land over the ‘age of Central Bank intervention,’ QE, and the devaluing of currencies — in a race to the bottom — to stay competitive.
As January Goes — So Goes The Market? A February Turnaround Coming?
On Friday, the Commerce Department said that the U.S. GDP rose 2.6 percent in the fourth quarter of 2014, below expectations, and far below the 4.6 percent to 5 percent seen in the previous two quarters,” wrote Vito Ricanelli in this weekend’s Barron’s.
For the wee, the DOW lost more than 500pts., or 2.9 percent, to 17, 165, while the S and P 500 fell 57pts;, or 2.8 percent, to 1995; and, the tech-heavy NASDAQ closed down 123pts., or 2.5 percent, to 4,635. For the year, the DOW is -3.69 percent, while the S and P is -3.1 percent, and the NASDAQ is -2.13 percent. January 2015 was the worst month for the DOW since Jan. 2014, when the DOW was down nearly 6 percent.
The last five February’s (all since the launch of QE) have all ended positive for stocks, with Consumer Discretionary being the biggest winner in each of those five years — averaging a gain of 5 percent or better each time. Individually, Macy’s stock averaged a 10 percent gain; while, The Gap was the biggest winner with a 14 percent gain.
Oil Surges On Last Trading Day Of January 2015 — Finding A Bottom? Or, A Head Fake?
While the stock market was tanking, oil was gushing, as the black gold settled 8.3 percent higher by day’s end, the best single-day gain for oil in 3 years. Benchmark, U.S. oil rose $3.71 to $48.24 per barrel on the NYSE, with most of that gain coming in the last 45 minutes of the trading day Brent crude climbed $3.86, or, 7.9 percent to $52.99 on the ICF Futures Europe Exchange, the largest percentage gain for Brent since April 2009.
Oil-Field Services giant, Baker Hughes reported that another 94 U.S. oil rigs were shuttered last week, a decline of 7 percent, to 1,223 –the largest weekly drop in nearly 30yrs. U.S. oil drillers have now idled 24 percent of their available rigs just since last summer. With that sharp of a decline in production, many traders are betting that oil is likely near a bottom; and, that a turnaround in pricing may be close. The significant decline in rigs/production along with short-covering, drove prices sharply higher by day’s end. After hours, oil had retreated by $1.
We will likely get a strong indication of where oil is headed in the near-term this week, as Exxon Mobil reports earnings on Monday, while National Oil well Varco and BP report on Tuesday.
Two Potential Bio-Pharma Blockbuster Drugs/Stocks
Ritu Baral, Cowen and Company Managing Director and Senior Bio-Pharma Analyst, highlighted two potential blockbuster bio-pharma stocks/companies — both of which I currently have an investment footprint in — one I have owned for the past three years — Acadia Bio-Pharma (ACAD), and one I recently bought Raptor (RPTP) Therapeutics. ACAD, Ms. Baral said, has a great drug candidate for Parkinson’s psychosis, an area with a “clear-cut need,” and believes that the company could see FDA approval by year’s end — and a $1B in U.S. sales alone.
The other potential bio-pharma blockbuster she said is — Raptor Therapeutics. She thinks May 2105 could be a big catalyst-type month for the stock.
No guarantees of course. Do your own due diligence and homework. V/R, RCP