Sale! Sale! Sale!
All was quiet on the Wall Street front prior to the Thanksgiving holiday, with a modest rally triggered Monday morning after President Biden renominated Federal Reserve Chairman Jerome Powell for a second term. The economic data was in-line with expectations, as consumer spending rose 1.3% and personal incomes were up 0.5% in October, while weekly jobless claims fell to the lowest level in 52 years. Before investors could digest their turkey dinners, however, global stock markets plunged alongside oil prices and U.S. Treasury yields Friday after South Africa identified a fast-spreading strain of the coronavirus, sparking concern that travel restrictions and other curbs will disrupt the global economic recovery. The World Health Organization called the new Omicron strain a “variant of concern” that could be more transmissible than other strains of the virus. Travel-related stocks, banking shares, and small caps were particularly hard hit, with the Russell 2000 sliding 4.15%, the S&P 500 losing 2.2%, and the Nasdaq dipping 3.52%. Bond yields fell in a flight to safety, with the benchmark 10-year yield tumbling 12 basis points to 1.52%, and U.S. crude oil collapsing more than 10% to break below $70 per barrel, although oil and gas stocks posted a 1.35% gain. The Dollar remained stable near its 18-month high, and Gold sank 3.7%.
Volatility spiked with many investors off for the holiday, resulting in more exaggerated price movements than would have been likely in a more liquid trading environment. Apparently, shoppers were more interested in Black Friday sales on apparel and electronics than looking for bargains in the stock market.
Mild Concerns
The tone of the market will be dictated by the assessment of the risks of the Omicron strain by scientists. Unfortunately, it will likely take time for that analysis to be completed, potentially leading to elevated volatility in the near term. The first move looks higher as U.S. equity futures rose along with stocks in Europe and Treasury yields Monday morning, as investors were comforted by the news that a vaccine for the new strain should be available within a few months.
Under normal circumstances, reports on November Consumer Confidence on Tuesday and Employment on Friday would be in focus for traders. We still will be paying attention to those reports and would like to remind investors to stick to the time-tested principles of value-based long-term strategies, including maintaining appropriate asset allocations.
Stocks on the Move
-30.4% Sono Group N.V. (SEV) manufactures and sells electric cars with integrated solar cells and panels. In addition, the Company monetizes its variable battery technology for integration in numerous types of vehicles, including buses, trucks, camper vans, trains, and boats, as it aims to reduce carbon emissions and provide clean and affordable transportation for the masses. Last week, Sono Group settled back near its IPO price as the Omicron variant encouraged investors to de-risk their portfolios by dumping positions in electric vehicle companies.
SEV is a 1.3% position in the North Star Opportunity Fund.
+16.3% Movado Group Inc (MOV) designs, manufactures, retails, and distributes watches, as well as jewelry, tabletop, and accessory products. Its brands include Movado, Hugo Boss, Lacoste, Ferrari, Coach, and Tommy Hilfiger. Movado Group gained last week after the Company shared a Q3 beat and a 25% increase in its quarterly dividend.
MOV is a 0.7% position in the North Star Micro Cap Fund.
+14.6% Q.E.P. Co Inc (QEPC) manufactures, markets, and distributes tools and related products for the home improvement market. The Company’s brand names include QEP, O’Tool, and Roberts. Products include trowels, floats, tile cutters, wet saws, spacers, nippers, and pliers that are marketed for the use in surface preparation and installation of ceramic tile, carpet, marble, and drywall. There was no significant Company news last week.
QEPC is a 2.0% position in the North Star Micro Cap Fund.