Following yesterday's surge to a new record high close by the S&P 500 (SNPINDEX:^GSPC), investors have to be quite pleased with the tight trading range and minor dip in the iconic index today despite mixed economic data.
On the bright side, the latest ADP employment report noted the addition of 139,000 private-sector jobs in February, which was a nice addition from the 127,000 reported in January. This figure was, however, a tad below what economists had forecast. The most important jobs figure, nonfarm payrolls, is due out on Friday from the Labor Department. I would suggest keeping your eyes peeled for that release, especially following two consecutive months of what appears to be subpar jobs growth.
The Mortgage Bankers Association on Wednesday also released its weekly mortgage index which gained a whopping 9.4% from the prior week. This index, which measures loan origination activity (i.e., mortgages plus refinancing), has been under pressure since May as rates have bumped up slightly off their lows. An improvement here would signal to banks and homebuilders that consumers are still intrigued by these historically low lending rates, meaning there could still be upside potential in both industries.
On the other hand, the Institute for Supply Management's services index fell to a reading of 51.6, meaning service-sector companies are expanding, but at a much slower pace than they were in January when the reading came in at 54. This dip likely is connected to the cold winter weather that has weakened growth for a number of retail and service-oriented businesses around the country.
Finally, the release of the Federal Reserve's Beige Book confirmed that cold weather has negatively affected the U.S. economy thus far in the first quarter. The good thing about the weather is that it's an unpredictable and perfect scapegoat to cover up weak top-line corporate growth for the time being. It could drastically slow the pace at which the Fed has been tapering its quantitative easing efforts.
By day's end, the S&P 500 had dipped a fractional 0.10 points (-0.01%) to close at 1,873.81.
Leading all stocks to the upside today was clinical-stage biopharmaceutical company Peregrine Pharmaceuticals (NASDAQ:PPHM), which jumped a whopping 47.6% after disclosing that it would have three pre-clinical data presentations at the upcoming Keystone Symposia conferences. Peregrine's phosphatidylserine-targeting antibodies will be the primary focus, which has investors excited since its lead product, bavituximab, is phosphatidylserine, or PS, targeting drug. PS is an immunosuppressant often found on the inside of healthy cells, but which is actually located on the outside of cancer cells. Bavituximab, which is being studied as a second-line non-small cell lung cancer treatment, blocks this suppressive quality and trains the body's immune system to locate and attack these cancer cells. In a midstage study bavituximab more than doubled median overall survival, so there's a lot of hope surrounding this technology platform. Investors should still remain cautious, though, as small-cap biotechs have a notoriously bad record of success when it comes to experimental cancer therapies.
Sticking within the biotech sector, clinical-stage biopharma Arrowhead Research (NASDAQ:ARWR) surged 24.5% after both RBC Capital and Deutsche Bank initiated coverage on the company. RBC Capital started Maxwell off with an outperform rating and a $35 price target, while Deutsche Bank issued a buy rating and a $45 price target. The targets respectively imply 66% and 113% upside based on yesterday's close, and they follow an OK for Arrowhead to begin phase 2a trials for ARC-520, its investigational hepatitis B therapy. While the therapy has shown promise, it's still very early in the development process. That said, I'd suggest that shareholders reassess the risk-versus-reward for Arrowhead, as the company is already valued at $1.2 billion and losses are expected for years to come even in ARC-520 sails through trials.
Finally, energy storage and power delivery products manufacturer Maxwell Technologies (NASDAQ:MXWL) soared 22.8%, its third huge gain in the past four trading sessions, after announcing that it would expand its ultracapacitor-based engine start module for medium duty diesel trucks. This product is designed to extend battery life and to work in brutally cold and hot temperatures, and is generally low maintenance. Despite the surge over the prior couple of days, which was mostly based on no material news, I'd suggest that Maxwell Technologies' shares may be a bit ahead of themselves. With revenue expected to remain essentially stagnant over the next two years, and the company only marginally profitable, there are likely safer places to put your money to work.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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