Stocks rose across the board Friday and finished mostly higher on the week. Moving stocks today was a much worse than expected April jobs report that showed the economy adding jobs at a quarter the pace that was expected in April.
During the week, potential tax hikes on businesses, as well as support for waiving removal of Intellectual Property protections for Covid vaccines by the Biden Administration, comprised the majority of the news. While the labor market’s stumble was the big news Friday.
Intellectual Property Rights
One of the biggest talking points of the week was certainly President Biden’s move to support the waiver of intellectual property protections for the Covid vaccines at the World Trade Organization. The development, which is likely to take some time due to needing consensus, and Germany being on the record in opposition to the idea, would allow other manufacturers around the world to produce the vaccines.
The vaccine makers have argued that, even if countries had access to the vaccine formulas, that it won’t make a difference due to global supply limits on ingredients. Furthermore, the vaccine makers argue that even if global supply was better, the vaccines are created with new technologies which other producers may not be able to replicate in a timely manner.
This could prove difficult according to Moderna Chief Executive Officer Stephane Bancel, who said, "There is no mRNA in manufacturing capacity in the world." She added "You cannot go hire people who know how to make the mRNA. Those people don’t exist. And then even if all those things were available, whoever wants to do mRNA vaccines will have to buy the machine, invent the manufacturing process, invent verification processes and analytical processes."
Despite these, both Pfizer (PFE) and Moderna (MRNA) have raised supply forecasts, however, being the companies that comprise the skilled labor potentially needed, likely provides a bit of an advantage in doing so. This means that even if the IP protections are waived, supply of the vaccines may not increase much, especially in the near term.
Given the difficulty to pass such a measure, and the technical problems which may stand in the way, the end-goal of the proposal may in fact be that the Biden Administration trying to leverage these vaccine makers into being more liberal with their partnerships and licensing deals than they perhaps would have been if it were not for the pandemic.
Whatever the end game, the proposal will be good for portfolios as only a few companies would be hurt, while the rest would be allowed to get back to everyday operations at a quicker pace.
Big Miss
Another big talking point this week came first thing Friday morning: a giant miss in the labor market. April's jobs report report showed the economy adding 266,000 jobs last month after a downwardly revised 770,000 (previously reported at 916,000) added in March. Not only was it a third of the job growth experienced in March, it was also just a fourth of what economists had predicted, as April consensus estimates rested at a cool million jobs for the month.
This was an extremely unexpected development given that initial claims set a new pandemic low Thursday when data showed 498,000 people filed new unemployment claims during the week ended May 1.
In response to the poor report, Treasury Secretary Janet Yellen said that the jobs report “underscores the long-haul climb back to recovery.”
Despite the miss, the silver lining to the report was that the parts of the economy that represent the reopening narrative, gained, while things that had been open this whole time were among those that tended to lag. Temporary help services lost 114,000 jobs, while transportation and warehousing lost 74,000 jobs. Meanwhile, Leisure and Hospitality added 331,000 jobs.
Crypto Boom
Beside the investments that are rooted in reality, cryptocurrencies boomed this week ahead of Tesla Technoking Elon Musk's forthcoming appearance on SNL and after relatively positive tweets from Mavericks co-owner Mark Cuban. Dogecoin has risen about 60% since Monday, while Ethereum Classic advanced a massive 163%.
Following the boom, SEC Chairman Gary Gensler, who previously taught classes on blockchain and other financial technologies, said that cryptos ought to fall under SEC regulation. Gensler wants cryptos to fall under the SEC’s scope in order to provide retail investors with protection from misleading and deceptive statements and narratives that get promoted to manipulate markets.
Crypto currencies, particularly the smaller, so-called alt-coins, are common targets for pump-and-dump schemes due to a lack lack of regulation and transparency in trading. Cryptos often get promoted for next to no reason other than a belief that we can all get rich together if we just buy and hold, oftentimes including arbitrary price targets which are way above current values. As interest for a token soars, the promoters sell out while their followers continue buying, leaving late investors to enjoy steep losses as interest fades and the promoters happily move on to their next "investment".
All told, the S&P advanced 1.23% while the Dow outperformed adding 2.67%, and the Nasdaq dropped 1.51%.