The wintertime blues seem to be settling in as this very strange year comes to a close. Perhaps my mood is colored by the Chicago Bears’ inexplicable loss the previous Sunday, or the grey skies and blustery weather, but the news on Main Street seemed pretty downbeat as the week progressed. The surge in COVID-19 cases raged on, with record new cases and deaths. The $908 billion stimulus package stalled out (what happened to the $2.0 trillion discussed in October?). Maybe we will end up with a chicken in every pot and two cars in every garage? The market seems to think both of those cars will be Teslas. New claims for unemployment jumped 137,000 to 853,000 in the latest week, intensifying concerns over the deteriorating jobs market. Additionally, the soaring coronavirus cases are forcing new shutdowns, including on indoor dining in New York City starting on Monday. As a result, food-service employment could plunge by 500,000 in December. It is worth pausing for a moment to grasp the magnitude of the weakness in the jobs market. Prior to the shutdown of the U.S. economy this March, the previous record number of weekly initial claims was in March 2009 at 665,000. Last week was 28% higher than that “financial crisis” peak. It is also 265% higher than a year ago.
OK. Let’s try to make the glass half full. The vaccine is here! On Monday the first doses will be given to the front-line health care workers. There is light at the end of the tunnel, although my guess is that the tunnel will prove to be about four months long. We also believe the economic team being put together by President-elect Joe Biden will develop sound policies to facilitate a strong recovery in 2021. Janet Yellen as Treasury Secretary is a great example. Inflation remains suppressed, as the producer price index rose a modest 0.1% in November, which suggests that the Fed will continue to have the freedom to use all its monetary tools in the absence of inflationary pressures. Perhaps to honor John Lennon in commemoration of the 40th anniversary of his death, Congress will “come together” and pass some legislation to provide much-needed economic relief to the unemployed as well as State and Local governments?
The S&P 500 declined 0.96%, the Nasdaq dropped 0.69%, but small caps rallied 1.01%. The dollar and gold were both steady, while the yield on the Ten-Year Treasury slipped 4 basis points to 0.89%. IPO mania continued as DoorDash and Airbnb rocketed 86% and 113% respectively on their first day of trading. Those gains were pocketed by favored institutional investors, while the public paid the elevated prices. There were 596 new highs made and only 15 new lows as the breadth of the market continued to improve (think small-cap value). Wall Street is partying like it is 1999.
The Chicago Bears looked like they got the vaccine in dismantling the Houston Texans on Sunday. Will 9-7 be good enough to make the playoffs? (Evidence that I remain an optimist)
Once again “PNP” (Politics and Pandemic) will dominate the narrative. Stimulus talks, like cowards, seem to die a thousand deaths. Speaking of deaths, the pandemic toll will continue to mount, but the market will probably focus more on the pace of the vaccine rollout. The Federal Open Market Committee announces its monetary-policy decision. The FOMC is expected to keep its federal-funds rate unchanged near zero but might make changes to its bond-buying program when it meets on Wednesday.
Stocks on the Move:
-16.4% CarParts.Com Inc (PRTS) retails automobile parts online. The Company offers mirror, engine, headlights, brakes, interior, and exterior accessories, tools, wheels, lighting, bumpers, and other auto body parts. On Monday, PRTS released Q3 EPS of $0.03, which beat by $0.04, and revenue of $117.41M, up 69.5% Y/Y. PRTS is a 4.5% holding in the North Star Micro-Cap Fund and a 1.0% holding in the North Star Opportunity Fund.
+18.1% John Wiley & Sons, Inc (JW.A) publishes print and electronic products. The Company specializes in scientific, technical, and medical books and journals, as well as professional and consumer books and subscription services. Wiley also provides textbooks and educational materials. On Tuesday, JW.A released Q2 EPS of $1.00, which beat by $0.36, and revenue of $491M, up 5.3% Y/Y. JW.A is a 0.6% holding in the North Star Dividend Fund.
-15.8% NAPCO Security Technologies, Inc (NSSC) manufactures electronic security devices, fire detection products, access control systems, and digital lock equipment used in residential, commercial, institutional, and industrial installations. On Thursday, the stock fell almost 2% after it was disclosed NAPCO board chairman and CEO, Richard Soloway, will sell 2.2 million shares. Soloway will continue to own about 20% of the company’s stock. NSSC is a 1.7% holding in the North Star Micro-Cap fund.