Time to Learn About 2 Education Stocks
Also: Dissecting Treasury Sec. Scott Bessent's words and a look at some Sarge semiconductor and quantum computing stocks.
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Anyone else watch Larry Kudlow's interview of our new Secretary of the Treasury, Scott Bessent, on Fox Business on Wednesday afternoon? Bessent said that he and President Trump "are focused on the Ten-Year Treasury (Yield). He is not calling for the Fed to lower rates."
On the Fed, Bessent stated, “I will only talk about what they've done, not what I think they should do from now on.” He then added, “The bond market is recognizing that energy prices will be lower, and we can have non-inflationary growth. We cut the spending, we cut the size of government, we get more efficiency in government. And we're going to go into a good interest-rate cycle.”
This is all part of Bessent's "3-3-3" policy plan that he has repeated before, which means getting the federal government's fiscal deficit down to 3% (currently above 7%), increasing production of WTI crude by 3 million barrels per day, and sustaining economic growth (gross domestic product and gross domestic income) of 3%+. Sounds great? Indeed. My only concern? Former Secretary Janet Yellen's greatest failure in Bessent's position, was in not stretching out duration of debt as far as possible, but in borrowing extensively at the short end of the yield curve.
While this allowed for lower yields at the long end, it put the government at risk of having to roll over large chunks of debt often, creating fiscal cliffs. Then again, that was under an administration less concerned with the potential pitfalls of rampant deficit spending. How this goes... we shall see.
Winding Down Education
There's no doubt that the expected executive order that will shut down the Department of Education will be controversial. It's not controversial, however, to say that over decades, this department has failed miserably in its mission. The controversy is over what to do about it. Reform the department? That could be like throwing good money after bad. Return oversight of education to the states? That's where the president appears to be going.
His order will likely shut down department activities that are not written into federal statute, while, according to the Wall Street Journal, oversight of student loans will be moved to the Department of the Treasury. On Wednesday afternoon, Bill Alpert, who writes for Barron's, named two private education stocks that have already done better since the election and could potentially thrive in this new educational environment. I am invested in neither of these names, but they do pique my interest. Perhaps now, with education atop the news cycle, is not the time, but there will be a bout of profit taking at some point.
Adtalem Global Education ATGE appears to have already broken out technically....
The rally seems less fully developed for Grand Canyon Education LOPE, but said rally is far more organized, and seems more like something foundational is being built from a technical perspective. Take a look...
As I said, I am not in these names yet, I am in the earliest stages of checking them out. I have not even gone through their books yet. Just food for thought, that perhaps some readers had not thought of and perhaps I would not have thought of without Bill Alpert's help.
Marketplace
Treasury debt securities rallied sharply on Wednesday as the yield on the U.S. Ten-Year Note dropped to 4.43% from 4.51%. The Two-Year Note paid 4.18% by day's end, down from 4.21%. This helped nudge equities in a northerly direction with small caps and semiconductors in the lead.
The Philadelphia Semiconductor Index popped for a gain of 2.31% as the Dow Jones U.S. Semiconductor Index ran amok for a gain of 3.87%. Leadership within that group (among large caps) came from Arm Holdings ARM, which was up 6.82% going into earnings, but has been down 4.36% overnight. Marvell Technology MRVL and Nvidia NVDA followed ARM, gaining 6.17% and 5.21% respectively.
As for small caps, the Russell 2000 ran 1.14% as the S&P 600 gained 0.88%, outperforming the S&P 500 and Nasdaq Composite as those two "majors" were up 0.39% and 0.19% in that order. Eight of the 11 S&P sector SPDR exchange-traded funds shaded into the green on Wednesday as the REITs XLRE led the way, followed by Tech XLK. Discretionaries XLY were the day's big loser as the autos, led lower by Tesla TSLA, caught a nasty beat-down.
Winners beat losers for the session at the NYSE by about 5 to 2 and at the Nasdaq by a little better than 2 to 1. Advancing volume took a 59.8% share of composite NYSE-listed trade and a 62.7% share of composite Nasdaq-listed activity, as trading volume increased on a day-over-day basis, in the aggregate, for names domiciled at both exchanges. Is this a "day one" to the upside? Well, now, because we never declared a trend reversal to the downside, so as far as your author is concerned, the "uptrend" is still intact.
Note that while breadth has been positive the past three sessions, it still has not reached the level of this past Friday, which was obviously a negative day. That said, this week, the index has regained both its 21-day exponential moving average and 50-day exponential moving average. These are obviously positive developments. Readers should note, however, the closing pennant that has developed over the past month or so. This does set up the increased probability for an explosive move one way or the other in the short to medium term.
About Those Semis...
While I was downgrading Advanced Micro Devices AMD on Wednesday and stated my intent to work my way out of that name (for now), two other Sarge semiconductor names made some positive news. Nikkei Asia reported that Intel INTC had partnered with Japan's National Institute of Advanced Industrial Science and Technology to build out the next generation of quantum computers. D-Wave Quantum QBTS, and Quantum Computing QUBT both Sarge longs, both rallied on that news.
Elsewhere, shares of Super Micro Computer SMCI popped on Wednesday as the company announced full production availability of its end-to-end AI data center "Building Blocks Solutions" which is accelerated by Nvidia's Blackwell platform. Super Micro considers this to be a "transformative moment" in AI and mentioned the company's close collaboration with Nvidia and its Blackwell architecture chips more than once.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 214K, Last 207K.
08:30 - Continuing Claims (Weekly): Last 1.858M.
08:30 - Non-Farm Productivity (Q4-adv): Expecting 1.8 q/q, Last 2.2 q/q, SAAR.
08:30 - Unit Labor Costs (Q4-adv): Expecting 3.6 q/q, Last 0.8 q/q, SAAR.
10:30 - Natural Gas Inventories (Weekly): Last -32B cf.
The Fed (All Times Eastern)
12:30 - Speaker: Reserve Board Gov. Christopher Waller.
3:30 - Speaker: San Francisco Fed Pres. Mary Daly.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: BDX (2.99), BMY (1.47), LLY (5.16), HSY (2.38), HON (2.32), PTON (-.16), RL (4.51), RBLX (-.44), SNA (4.81)
After the Close: AMZN (1.49), PINS (.65), TTWO (.56)
At the time of publication, Guilfoyle was long AMZN, NVDA, INTC, AMD, QBTS, QUBT equity.
