WASHINGTON. Mr. Market’s wild and wacky mood shifts continued in Tuesday morning trading action. Starting after Monday’s so-so closing bell and picking up steam Monday evening, reasonably well-founded Washington rumors, hearsay and crystal ball readings began to predict that Congress had coalesced around a compromise Federal budget breakthrough bill that would end, for now, further threats of another Federal shutdown at the end of this week.
Great Walls Enhanced Security and plenty of comfy beds
Though details change by the hour, the rumored Federal budget breakthrough agreement allegedly involves completely funding and thus keeping open the Federal government for this fiscal year in return for funding a small part of President Trump’s
Great Wall defensive barrier sophisticated border protection measures whatever you want to call it. Except don’t call it a Wall.
Again allegedly, Republican budget negotiators fought back a cynical Democrat attempt to minimize the amount of temporary beds and housing the Department of Homeland Security (DHS) could provide to accommodate the current World War Z surge of illegal aliens.
These “caravans,” funded indirectly by George Soros and other sympatico rich globalists, remain hell-bent on taking advantage of the Obama administration’s endless immigration loopholes. They also enjoy protection that’s unconstitutionally enforced by Obama- and Clinton-era judicial appointees. These Marxist charlatans seem to enjoy extracurricular legislating activities as long as they thwart President Trump’s executive branch directives.
(Apparent) Federal budge breakthrough agreement ignites Wall Street rally
In any event, the mere thought that there might be a meeting of minds anywhere in the nation’s official Swamp was cause for rejoicing on Wall Street this morning. This ongoing Federal budget breakthrough story mitigated, to some extent, negative weekend reports on the trade front. These stories indicated that Chinese and US negotiators would most likely not meet President Trump’s March 1 negotiating deadline. That would likely lead to the imposition of further tariffs on Chinese goods by the US.
While REITs and oil stocks are having a mild case of the vapors today, most industry groups and stock averages sharply surged at the opening bell on the Federal budget news.
As of approximately 1:15 p.m. ET, Tuesday’s market blast-off continues to steam ahead. As we’ve learned countless times in recent years, the current rally might not survive until today’s 4 p.m. closing bell. But at the moment, it feels pretty unstoppable. If somehow, news of a China accord starts flittering across the Wall Street rumor mill, those always lurking bears might suddenly find they’re completely out of ammo. On the other hand, if the Federal budget breakthrough stories fall through, watch investors stampede for the exits.
But we and our bullish dreams get ahead of ourselves.
Major averages looking very positive in Tuesday trading action
As we write this article, the Dow Jones Industrials (DJI)are up approximately 345 points. That’s an impressive 1.36 percent gain on the day thus far. The tech-heavy NASDAQ is only slightly behind that pace, up 93.35 points for a 1.28 percent gain. The broader-based S&P 500 average lags the first two only slightly, gaining 33.15 points for a 1.22 percent gain. Let’s see how much of this holds by today’s close. A real, confirmable Federal budget breakthrough, while hard to believe at this point, could prove an enormous tonic for this cronically confusing market.
As duly noted, property REITs and common and preferred stocks involved in the fossil fuel industries remain weak Tuesday, although oil and gas prices are nicely up on the day. As for real estate? It’s actually been on a tear since January 1, even though sales are currently off due to higher mortgage interest rates. Plus, we think, the Polar Vortex Effect. Not too many house hunters were out hunting during the nasty visit from that unwelcome Canadian import.
Bond buying has picked up somewhat in both Federal and private sector markets, while the US dollar remains so-so against most other currencies.
Our continueing Allergan saga. Good news?
At the moment, our rather large and seriously beleaguered position in Allergan (trading symbol: AGN) has caught an unexpected bullish wave today. This positive trading action may have been kicked off by the company’s promise to discuss and “seriously consider” suggestions from an influential activist investment firm. As per a Monday wire report via MT Newswires (no link).
“Allergan (AGN) acknowledged late Friday the call by Appaloosa founder David Tepper for new strategies and a recommendation that the company separate the CEO and chairman roles.
“‘Allergan’s board of directors has received Appaloosa’s proposal and is committed to continuing to engage with them, as we do any shareholder who has input and constructive ideas,’ the company said in a filing with the Securities and Exchange Commission.
“‘The board of directors is committed to strong governance practices and independent board leadership. The company has been executing its strategy to drive growth and value for shareholders as it transforms into a global biopharmaceutical leader. Allergan has a strong long-term outlook across its four key therapeutics areas and a highly promising R&D pipeline,’ the company said.”
Reading the fine print
Cutting through the polite legalese, this means that Allergan’s board is not dismissing Appaloosa’s and Tepper’s concerns out-of-hand. Although they’re not backing Tepper, either. Surely, the board must know Allergan’s grossly undervalued shares seriously lag nearly all companies in the healthcare sector.
Shareholders (like us) feel thatAGN stock morphed into a value trap well over a year ago. The company’s annual meeting looms, and they must address this issue in that forum – seriously – one way or the other.
AGN shares are currently up over $5 per share, and currently stand at just under $140 per share. That’s a far cry from just a week or so ago. The shares then flirted with another plunge below $130 per share. It was the second such drop that occurred over the last few months.
Perhaps the latest news might propel AGN shares still further. We should get some clarity on this issue as summer 2019 approaches.
The Daily Wrap
That’s it for now. We’ll enjoy this ride as long as it lasts. But what if the rumored Federal budget breakthrough becomes another bullish pipedream? And what if Government Shutdown II and / or new, higher tariffs look likelier than not? You guessed it. All bullish bets will be off once again.
We’ve seen this movie before. And after all, President Trump, quite expectedly, is not exactly sure he likes this “deal,” which still falls far short of his budget request for his
Wall barrier. So we’re still keeping a decent position in cash or cash equivalents.
The upcoming months on Wall Street, to steal a quote from Charles Dickens, could be the best of times. Or the worst of times.
— Headline image: Falcon Heavy, successful booster rocket landing. (Image via SpaceX website)