After Chinese Shortage, Chip Makers Dominate

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Posted: Feb 12, 2021 11:52 AM
After Chinese Shortage, Chip Makers Dominate

Source: AP Photo/Richard Drew

Ford Motor Company became the latest to warn that a lack of supply of semiconductor chips would harm their business - or more precisely, the production of F-150 trucks. When the top-selling vehicle in the country gets held up, the White House takes notice.

The Biden administration now says that an executive order is in the works to alleviate the problem. The White House will review supply chains and develop a long-term strategy to avoid future shortages. I think it’s another reason to make and stack chips here in America.

Sadly, some will use this development as an excuse to go easy on China.

Whatever the solution might be, it had Wall Street seeing dollar signs. In an otherwise boring session, chip makers dominated, and in the process, dragged the S&P 500 and NASDAQ into the plus column right at the closing bell. The irony is unlike other sessions this week, where the internals were impressive, yesterday’s market breadth was negative.

Market Breadth

Winners kept winning, while many stocks stumbled to new lows. But volume flipped as sellers were more motivated, or maybe buyers were taking a break.

 Market Breadth

NYSE

NASDAQ

Advancing

1,477

1,772

Declining

1,763

2,171

52 Week High

242

442

52 Week Low

8

16

Up Volume

1.92B

4.43B

Down Volume

2.71B

6.23B

Only four sectors were higher, but one was the almighty Technology sector, which powered those aforementioned semiconductor chips.

S&P 500 Index

+0.17%

 

Communication Services XLC

+0.11%

 

Consumer Discretionary XLY

 

-0.28%

Consumer Staples XLP

 

-0.44%

Energy XLE

 

-1.54%

Financials XLF

 

-0.32%

Health Care XLV

+0.19%

 

Industrials XLI

 

-0.21%

Materials XLB

+0.10%

 

Real Estate XLRE

 

-0.18%

Technology XLK

+1.10%

 

Utilities XLU

 

-0.57%

Biden Can Save the Chips While Powell Saves the World

Don’t look now, but the Fed balance sheet edged up to $7.44 trillion and looks like a coiled spring ready to move even higher.

To see the chart, click here.

Let’s Get Ready to Bumble

The Initial Public Offering (IPO) parade started back up yesterday with the debut of Bumble (BMBL); the dating app started in 2014 by Whitney Wolfe Herd. She now has the distinction of being the youngest woman to take a company public on a major exchange.

The stock rallied to $79.60 +77% before finishing at $70.31 +63%.

Of course, it’s all about Special Purpose Acquisition Companies (SPACs) right now, which are fast and have less scrutiny - and since they can be anything, it leaves a lot to the imagination of the buyer. They are amazing trading vehicles, but it is difficult to separate hype from a timeline of success. And many will not be successful.

With that in mind, I like the IPO process more as an investor. But I love the SPACs as a nimble trader, where you have to float like a butterfly and sting like a bee.

Portfolio Review

We closed out three positions to take cash in the Hot Model Portfolio to 15%.


Today’s Session

Looks like another sluggish start out the gate, but there is more cash piling into equities via ETFs and other routes. 

This week was one of the few where money actually pulled out of bonds as a big slug was going into stocks.  More telling is the fact a plurality poured into US equities.

This is a strong trend and could continue for some time, as bond yields continue to climb.

 ETF Fund Flows

Net Flows ($, mm)

AUM ($, mm)

% of AUM

U.S. Equity

2,549.41

3,316,344.42

0.08%

International Equity

2,157.30

1,167,472.96

0.18%

U.S. Fixed Income

-442.44

984,555.88

-0.04%

International Fixed Income

263.23

129,010.39

0.20%

Commodities

-206.41

144,647.16

-0.14%