Palantir Gets Gut Punch, Microsoft 'Matters' in Quantum Race, Fed Frets Over Inflation
Let's see how a Sarge fave got a reality check, explore a new chip development in Quantum computing, reread some FOMC quotes and more.
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Well, they say it's kind of frightenin'
How this younger generation swings
You know it's more than just some new sensation
Well, the kid is into losin' sleep
And he don't come home for half the week
You know it's more than just an aggravation
And the cradle will rock
Yes, the cradle, cradle will rock
And I say rock on, ooh
Rock on
- "And the Cradle Will Rock" E. Van Halen, A. Van Halen, Anthony, Roth (Van Halen), 1980
When the Bough Breaks
... The cradle will fall. So, did the bough break? It appeared to come out of nowhere, but did it really? Palantir PLTR ... the stock that became the greatest investment and greatest investment call of my career had to hit a wall at some point. Right? That point came on Wednesday. The stock apexed at $125.41. up a rough 1,856% from where we had entered the name for the old "Stocks Under $10" portfolio at what used to be called Real Money Pro and became TheStreet PRO.
I think our first target price for PLTR was, in fact, $10. Our current target stands at $133. I had indeed enjoyed becoming Wall Street's "go-to" analyst on this stock and on lower-priced stocks in general. It had become rather easy to keep piling on the wins. It's not supposed to be like that. The time has come to once again earn our place. We shall. So, let us unsheath our terrible swift swords and our mighty Ka-Bars and wade into the abyss.
Reaching that $133 target will be decisively more difficult after what happened on Wednesday than it had appeared to be less than 24 hours ago. What happened? The stock, which by any traditional metric used for valuing equity, had become very expensive, ran into not one, but two headlines that caused traders and trading algorithms alike to take some lofty profits. Not surprisingly, once there was a crack in the armor, so to speak, there were no dip buyers, at least there were none anywhere close to the stock's highs. I will admit to shaving my existing long position during the day's melee, though I have already bought those shares back (and more) overnight. I am actively trading the name.
I know that some readers are worried about their positions in this name. How could one not be concerned? Especially those who do something other than manage money occupationally. I will be back in a few hours with a full-length article on Palantir Technologies and try to explain what I am doing about these recent headlines and their impact on my profit / loss ratio.
Remember, my friends, that fear is but for the wicked, so let the wicked tremble before us. It is the challenge that we embrace for triumph tastes sweetest after identifying obstacles and targets of opportunity and then adapting to a changed environment. Rock & roll.
Microsoft Matter
Incredibly, on Wednesday, Microsoft MSFT debuted a new kind of quantum computing chip that it terms a "topological superconductor" that is not solid, liquid, nor gas. Yes, you read that right. Microsoft's new chip, named "Majorana 1," is made of some fourth type of matter unknown to the world since the "Big Bang" created the Universe. The new type of matter will allow this new chip to produce building blocks that can be scaled up into a powerful quantum computer.
Microsoft has said that this new chip made of this new kind of matter could eventually hold a million quantum bits or "qubits" that could fit in the palm of one's hand without hinting at how long this would take. Competitors such as Alphabet's GOOGL Google have also been working on their own breakthroughs in quantum computing. MSFT was only up 1.25% on the news, and yes, your pal is still long the name. Interestingly, or maybe oddly, other Sarge quantum computing names such as D-Wave Quantum QBTS and Quantum Computing QUBT surged 8.3% and 7.9% respectively, on that news as well and are up further overnight.
Hold on a Minute
The Federal Reserve released the Minutes of the Federal Open Market Committee policy meeting of Jan. 28 to 29 on Wednesday afternoon. There were a couple of passages in the 21-page document that I think will matter to investors and common folk. While the committee seemed generally satisfied with economic growth and the underlying health of labor markets, there did seem to be some anxiety across membership in regard to consumer level inflation. These quotes taken from the document itself, I think will be of interest:
"In discussing the outlook for monetary policy, participants observed that the Committee was well positioned to take time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance. Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate."
One paragraph later, the document cements the committee's concern over the recent (since September) re-acceleration seen in consumer level inflation:
"...a majority of participants observed that the current high degree of uncertainty made it appropriate for the Committee to take a careful approach in considering additional adjustments to the stance of monetary policy."
A Less Than Convincing 'Up' Day
Sure, the S&P 500 gained 0.24% on Wednesday, setting yet another new all-time closing record. Sure, the Nasdaq Composite gained just a smidgen for the day, up 0.07%. What we heard was the sound of one hand clapping. Maybe it was nothing. Children still played. Somewhere. Birds still flew. Somewhere. Waves still crashed upon the beach and bells still rang from on high. Somewhere.
That said, there was a kind of caution in the price discovery witnessed at 11 Wall Street near the statue of George Washington at Federal Hall on Wednesday. There was a sort of nervousness seen in the action up at Times Square across from the statue of the "Fighting Chaplain"... Father Frank Duffy on Wednesday.
Winners beat losers by a rough 4 to 3 at the NYSE on Wednesday and by about 5 to 4 at the Nasdaq. But advancing volume took a minority share (48%) of composite NYSE-listed trade and a 60% share of composite Nasdaq-listed activity. Aggregate trading volume ebbed as well on a day over day basis, across those names domiciled at both of New York's equity exchanges as well as across the membership of the S&P 500. That's one way that markets try to tell us that professional money has become less confident.
Another way that markets try to signal us is in market leadership. On Wednesday, though nine of the eleven S&P sector SPDR exchange-traded funds managed to close out the day in the green, the action was led north by Health Care XLV and the Staples XLP, which are both sectors that are considered to be defensive in nature. As a matter of fact, four of the top five leading sectors for the session could be characterized as defensive sectors, while cyclicals took four of the bottom five rungs on the daily performance tables.
Fun Fact
Roundhill Investments on Wednesday filed a proposal for an exchange traded fund with the Securities and Exchange Commission that would seek to provide investors with exposure similar to the U.S. sovereign wealth fund (which does not yet exist). The fund would be named the Roundhill U.S. Sovereign Wealth Fund ETF and would try to mimic a still theoretical U.S. sovereign wealth fund's asset allocation and investment strategies across the equities, debt securities, real estate and derivatives investment universe.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 215K, Last 213K.
08:30 - Continuing Claims (Weekly): Last 1.85M.
08:30 - Philadelphia Fed Manufacturing Index (Feb): Expecting 19.5, Last 44.3.
08:30 - CB Leading Indicators (Jan): Expecting 0.0% m/m, Last -0.1% m/m.
10:30 - Natural Gas Inventories (Weekly): Last -100B cf.
12:00 p.m. - Oil Inventories (Weekly): Last +4.07M.
12:00 - Gasoline Stocks (Weekly): Last -3.035M.
The Fed (All Times Eastern)
09:35 - Speaker: Chicago Fed Pres. Austan Goolsbee.
12:05 p.m.- Speaker: St. Louis Fed Pres. Alberto Musalem.
2:30 - Speaker: Reserve Board Gov. Michael Barr.
5:00 - Speaker: Reserve Board Gov. Adriana Kugler.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: CHH (1.48), HAS (.35), SO (.51), WMT (.65), W (.00)
After the Close: DBX (.62), RNG (.97)
At the time of publication, Guilfoyle was long SO, PLTR, MSFT, QBTS, QUBT equity.
