'Cause they say two thousand zero zero

Party over, oops out of time

So tonight I'm gonna party like it's 1999

-1999, Prince

It was a fun session with all kinds of fireworks, from the kind that shines bright and dazzles in the sky to the kind that makes the CEO visit the legal department to personally announce all Christmas vacations have been canceled…forever.

The star of the show was DoorDash (DASH). It lived up to the hype, rocketing out of the gate with the first trade of $182.00, then drifting for a while before finishing with a bang. Priced at $102.00, the stock raced out of the gate in frenetic action as 25 million shares changed hands.

Open	High	Close
$182.00	$195.00	$189.51

Invariably, the move recalled the late 1990s Initial Public Offering (IPO) boom that (for a while) had many people from all walks of life thinking they would retire early and buy their own island. There is no doubt there is something in the air more akin to froth than frost, but this is not 1999.  To be sure, a lot of recent IPOs are overbought, but most of these companies are going to make it, and many will see share prices significantly higher in the years to come.

In 1999, the biggest IPO pop in history was set by VA Linux. The stock gained 733% on its first day of trading. A few months after that day, the would-be rival Red Hat (RHT) saw its shares jump 271% on the first day of trading. Neither company was making money, and there was talk they never would.  Today, VA Linux has become a part of GameStop (GME) after being bought for $140 million, while Red Hat commanded a huge premium when the International Business Machines (IBM) paid $34.0 billion.

VA Linux Revenue: $18.0 million (YTD99) Loss: $14.5 million IPO Price: $30.00 First Day Close: $250.00 Market Cap: $9.5 billion Fate: GameStop subsidiary sold for $140 million

Red Hat Revenue $10.8 million (FY98) Loss $91,000 IPO Price $14.00 First Day Close $52.06 Market Cap: $3.0 billion Fate: Bought by IBM for $34.0 billion

Message of the Market

During the summer, a spate of IPOs went public, including Snowflake (SNOW), that were so hot that investors sold off some of their favorite tech names to get in the game. There was a similar move yesterday that saw tech and other hot instruments, like Bitcoin (BTC), lose fast money traders.

Then came the news that shocked Facebook (FB), which knew 48 states would formally level charges at the company. But Mark Zuckerberg and his lawyers underestimated the demands from the Federal Trade Commission (FTC). It has long been speculated the federal government would demand FB (and other tech giants) to unravel major acquisitions that allowed them to maintain supremacy.

However, most saw this happening under a potential Democratic presidency. Instead, the request came yesterday when the FTC demanded the divestitures of Instagram and WhatsApp. Facebook shares swooned but closed off the lows. As I mentioned, many felt this was inevitable, but perhaps not this soon.

Interestingly, those were money-losing companies when Facebook acquired them, and even now, they are not being fully monetized. If they had gone public instead of being acquired, these companies could likely have been acquired anyway but at lower prices.

Perhaps they would have figured it out and become successful; however, I think this is going to be a long road for the government. I think competition will be more impactful than a decade-long legal battle.

Tech Tumble

Be that as it may, Technology (XLK) stocks took it on the chin as decliners led advancers two to one, and the down volume was two and half times the up volume.

There were 439 stocks on the NASDAQ that finished at new 52-week highs, and 335 with the same distinction on the New York Stock Exchange.

Market Breadth	NYSE	NASDAQ
Advancing	1,589	1,286
Declining	1,520	2,406
52 Week High	335	439
52 Week Low	2	13
Up Volume	2.40B	1.69B
Down Volume	2.84B	3.44B

A Nice Jolt

It’s more backward-looking than most data, but the monthly Jobs Opening Report (JOLTS) was encouraging. 

October JOLTs saw job openings climb 158,000 to 6.652 million, putting it ahead of the consensus of 6.3 million. The news underscores the current strength that materialized in this economy so much faster than anyone, or should I say, any experts thought possible.

Highlights	October 2020	September 2020	October 2019
Manufacturing	525,000	492,000	403,000
Durable	290,000	267,000	258,000
Non-Durable	235,000	225,000	145,000
Health & Social Ass	1,232,000	1,110,000	1,176,000

 

We are still below pre-pandemic levels, and there is no telling local lockdowns will stall or derail the momentum. But it’s good to be reminded over and over again of the resolve of the American economy.

Maybe a Six-Handle

Today, we get weekly jobless claims data. While each metric is important, I’m going to be more focused on those special pandemic programs, which expire in less than three weeks. Each week, I think enough members of Congress will gasp at the same time and get something done.

Meanwhile, I will be rooting for the Initial Jobless Claims to slip under 700,000. A six-handle is not pretty, but much better than where we were.  

Portfolio Approach

We continue to be very active with the model portfolio, so make sure to contact your representative or research@wstreet.com

Today’s Session

The futures have been under pressure all morning, as we await approval from the FDA for Pfizer (PFE) and BioNTech (BNTX) Covid-19 vaccine.  The vaccine couldn’t get here fast enough.  Futures worsened after the initial jobless claims were released showing a rise in claims to 853,000 last week up from 716,000 in the prior week, and topping estimates of 725,000. Claims are at a two and half month high, as coronavirus cases rise, and more lockdowns and restrictions are imposed.  

The number of people applying for Pandemic Unemployment Assistance rose to 428,000 from 288,000 in the prior week.  These are the folks that do not qualify for initial claims.

Hopefully, folks in Washington pay close attention and do something more than the one-week extension to federal government funding.

On the IPO front, Airbnb (ABNB) goes public today and priced at $68.

Comments

Good morning Mr. Payne; I would love to hear any form of opinion/commentary/statement from you in regards to after hours/pre_market trading. Seems as though the little guy receives a sucker punch every twenty four hours with zero options to return fire. Thank you and have a great day Sir. Mack Sherman on 12/10/2020 9:19:21 AM

Air BnB goes public at $68 but what will the buy price be? $70-$90-$120? William Blanken on 12/10/2020 11:33:02 AM

Good job! Lorin K on 12/10/2020 2:19:37 PM

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