I Took Some Profits on Palantir, Rocket Lab and SoFi. Here's Why.
Don't panic, I'm still long these names, but something just didn't feel right about Thursday's action; let's also look at German's Google tax, and that 'Day of Confirmation'.
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"It's a Trap"
- the fictional Admiral Ackbar in "Star Wars: Return of the Jedi"
Is this a trap? The answer is definitely "maybe." Equities rallied on Thursday, as did Treasury debt securities. That rally, though some might refer to what transpired as a "day of confirmation" and from my rules-based approach, it might be... just did not feel right. Did it? I know. Is there any room left for instinct in this sport? Having a rules-based approach sure does work for me the majority of the time and sure does keep me from hanging out with the "Ugly Stick" on days when in my youth, I would have.
Equity markets opened at their highs of the regular session on Thursday in response to news that a federal trade court had struck down Pres. Trump's reciprocal tariffs on all nations stating that he had overstepped his authority. Markets were not as strong early in the regular session, however, as equity index futures markets had been overnight. Later in the day, a "stay" was placed on that decision by the U.S. Court of Appeals for the Federal Circuit.
That certainly tempered any enthusiasm that had existed, though I must say that most human traders had expected a quick appeal. The early morning surge had something of a hollow, algorithm-driven feel to it. Technically, I loved the way the Thursday session played out. My instincts forced upon me an uncomfortable feeling though, going into the weekend.
As far as trading goes, I did something I usually do not do. I took some money off of the table without specific levels being reached. I did not cancel any target prices and still have large, long positions in several of my favorite names, but I used late afternoon and after-hours strength and took an extra round of profit-taking across some of my beloved "Stocks Under $10" plays, namely Palantir Technologies PLTR, Rocket Lab USA RKLB, and SoFi Technologies SOFI.
If I see some green this morning in BlackBerry BB and Peloton Interactive PTON, I might take some profits there as well as we also have nice gains to protect in those names. Before anyone panics, I repeat, I remain long all of these names in decent size. I have not changed target prices for any of them. This is just risk management. These shares can always be added back if I am wrong. Aside from a heavy slate of macro this morning, there are some obvious bumps in the road developing.
Taxing Big Tech
News broke overnight that the German government is drafting possible legislation that would impose a 10% tax on American internet giants such as Alphabet GOOGL, and Meta Platforms META, according to Culture Minister Wolfram Weimer who spoke to Stern magazine. Weimer said, "Monopoly-like structures have developed that not only restrict competition, but also over-concentrate media power, putting media diversity at risk."
I don't know what a "Culture Minister" is, but it's probably a positive that we don't have one on this side of the Atlantic.
Stall Speed
Overnight, U.S. Treasury Sec. Scott Bessent told Fox News that trade talks with China were "a bit stalled." Bessent added, "Given the magnitude of the talks, given the complexity, this is going to require both leaders to weigh in with each other. They have a very good relationship, and I am confident that the Chinese will come to the table when Trump makes his preferences known."
Bessent said that the two nations will continue to negotiate over the next few weeks, but emphasized... "I believe we may, at some point, have a call between the president and party chair Xi."
Take 'Em
It was a great day for U.S. Treasuries. Not only did the yields for the U.S. Ten- and Two-Year Notes drop by four and five basis points respectively (to 4.44% and 3.95%), but the Treasury Department held another strong auction and wow, was this auction strong.
On Thursday, Treasury went to market with $44 billion worth of new Seven-Year Notes. The high yield awarded was 4.194%, which stopped through the "when issued" by a whopping 2.2 basis points, the largest "stop through" for the series in 2025. Bid to cover landed at 2.7, well above the six-month average of 2.64, and just check out these internals:
Indirect bidders (foreign accounts) took down 71.5% of this issuance, up from 59.3% in April, with direct bidders (domestic accounts) bringing home 23.6%. This left dealers with just 4.85% of the auction, which is the smallest slice of the pie that dealers had been "stuck" with in the history of this series. That may not even cover their needs.
Equities
On Thursday, the S&P 500 closed up 0.4% while the Nasdaq Composite gained a very similar looking 0.39%. Of all of the mid-major to major indexes I follow, the KBW Banks led the way at +0.59%, while the laggard was the S&P Midcap 400 at +0.26%.
Ten of the 11 S&P sector SPDR ETFs closed out the regular session in the green. But none of these funds gained even 1% on the day, and defensive sectors took three of the top four slots on the daily performance tables. That's not usually a good sign. The REITs XLRE were the day's leader at +0.92%. Communication Services XLC were the day's only outright loser at -0.82%.
Winners beat losers by more than 2 to 1 at the NYSE on Thursday, and by less than 3 to 2 at the Nasdaq. Advancing volume took a 56.4% share of composite NYSE-listed trade and a more commanding 67.7% share of composite Nasdaq-listed activity.
So, was Thursday a "Day of Confirmation?" Sort of. Almost. Aggregate trade decreased by 2.1% on day over day basis across NYSE-listings but exploded by 36.2% on a daily basis across Nasdaq-listings. Trading volume ebbed just a smidgen across the membership of the S&P 500, so in final judgment, I would have to say that we do not have a true confirmation. This is my opinion, and for now, at least one reason why I was proactive Thursday afternoon into evening.
Keeping an Eye on the Consumer
The University of Michigan's May revision to its Consumer Sentiment Survey this morning is worth watching. Will the revisions show the same burst of optimism expressed in the Conference Board's Consumer Confidence Survey for May released on Tuesday? We'll soon know. Look for an algorithmic reaction either way.
Economics (All Times Eastern)
08:30 - Personal Income (Apr): Expecting 0.3% m/m, Last 0.5% m/m.
08:30 - Consumer Spending (Apr): Expecting 0.2% m/m, Last 0.7% m/m.
08:30 - PCE Price Index (Apr): Expecting 0.1% m/m, Last 0.0% m/m.
08:30 - Core PCE Price Index (Apr): Expecting 0.1% m/m, Last 0.1% m/m.
08:30 - PCE Price Index (Apr): Expecting 2.1% y/y, Last 2.3% y/y.
08:30 - Core PCE Price Index (Apr): Expecting 2.6% y/y, Last 2.6% y/y.
08:30 - Good Trade Balance (Apr): Last $-161.99B.
08:30 - Wholesale Inventories (Apr-adv): Expecting 45.1, Last 44.6.
09:45 - Chicago PMI (May): Expecting 62.2, Last 61.9.
10:00 - U of M Consumer Sentiment (May-F): Flashed 50.8.
10:00 - U of M One Year Inflation Expectations (May-F): Flashed 7.3%.
10:00 - U of M Five Year Inflation Expectations (May-F): Flashed 4.6%.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 566.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 465.
The Fed (All Times Eastern)
12:20 p.m. - Speaker: Atlanta Fed Pres. Raphael Bostic.
7:30 - Speaker: Chicago Fed Pres. Austan Goolsbee.
Today's Earnings Highlights (Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long PLTR, RKLB, SOFI, BB, PTON equity.
