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US stocks trade mixed ahead of Fed speech following tepid labor-market data

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Fed chair Jerome Powell is due to speak on Thursday

US stocks were mixed on Thursday as investors continue to grapple with a spike in interest rates and weakness in the high-growth technology sector.

Weekly jobless claims of 745,000 represented a slight increase from the prior week's revised 736,000 total and just barely beat economic forecasts for 750,000 claims.

Investors will likely be looking for any clues on how the Fed is thinking about the recent rise in interest rates when Fed Chairman Jerome Powell speaks at the Wall Street Journals' Job Summit this afternoon.

Here's where US indexes stood after the 9:30 a.m. ET open on Thursday:

Billionaire investor Ron Baron told CNBC on Thursday that despite his long-term bullishness on Tesla, he sold about 25% of his clients' stake in the electric vehicle manufacturer after its position size became too concentrated.

The weakness in technology stocks hasn't stopped Cathie Wood's Ark Invest from buying the dip in high-flying stocks. According to Ark's daily trading disclosures, the firm bought millions of shares of Palantir on Wednesday amid the decline.

Going public via SPAC has reportedly caught the interest of Walmart's Flipkart. The Indian e-commerce giant is exploring the possibility of going public in the US via a SPAC.

Gabe Plotkin's Melvin Capital, which was at the center of the GameStop short-squeeze earlier this year, recouped some of its losses and gained 22% in February.

Oil prices were higher. West Texas Intermediate crude jumped as much as 1.68%, to $62.30 per barrel. Brent crude, oil's international benchmark, rose by 1.79%, to $65.23 per barrel.

Gold fell 0.23%, to $1,712 per ounce.

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Billionaire investor Ron Baron trims Tesla stake, bets on electric truck maker Rivian and autonomous driving start-up Cruise

ron Baron
  • A fund managed by billionaire investor Ron Baron trimmed its stake in Tesla after it became a very large percentage of holdings, according to a CNBC interview with Baron.
  • Baron is still bullish on Tesla, and thinks the stock could more than triple over the next decade.
  • Baron still personally owns more than 1 million shares of Tesla, and he has also invested in car companies Rivian and Cruise. 
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Baron Funds, a mutual fund company managed by billionaire investor Ron Baron, has reduced its stake in Tesla after the holding became a very large percentage of client account, according to a Thursday interview with CNBC.

Baron Funds built its stake in Tesla between 2014 and 2016, and since then its initial $318 million stake is now worth about $3.3 billion.

In what was a "painful" moment, Baron sold 1.8 million Tesla shares for clients, about 25% of its stake, between $450 and $900 per share, according ot the interview. 

As for his personal stake in Tesla of more than 1 million shares, Baron has yet to sell a single share, according to the interview. 

The bullish outlook on Tesla remains for Baron, as he thinks the stock could more than triple over the next decade as it capitalizes on its autonomous driving software. What costs a one-time fee of $10,000 today to enable autonomous driving could cost just $100 per month once Tesla reaches scale, according to Baron.

Disruption in the auto sector remains an investment theme for Baron, as evidenced by new investments the fund manager has made over the past year.

In January, Baron purchased a $10 million stake in Cruise, an autonomous driving start-up that was acquired by General Motors in 2016. The firm is based in San Francisco and has been mapping every street in the city in hopes to eventually offer a robo-taxi service in the city, similar to what Alphabet's Waymo is doing in Phoenix, Baron said.

"They want to use machine learning and artificial intelligence to drive just like you, but better... and if they can do it, that business is going to be a giant home run," Barron said of Cruise.

Baron also highlighted his investment in electric truck developer Rivian, which is partially owned by Amazon. Baron called his private investment in Rivian "really exciting."

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The Fed has ‘lost control’, and the historic spike in bond yields points to a looming stock-market crash, Bank of America says

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  • The recent spike in interest rates has Bank of America warning of a potential stock market crash, according to a Friday note.
  • The bank sees 1987 as a potential roadmap for 2021, in which a continued spike in yields helped spark weakness in the market.
  • "Unless the Fed fights back very soon with more treasury/MBS purchases, a similar fate likely lies ahead," BofA warned.
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Last week's spike in interest rates has Bank of America analysts on edge about a potential stock market crash. 

In a note on Friday, the bank highlighted the historic yield spike in mortgage-backed securities and compared the current environment to 1987, when a continued jump in MBS yields preceded a stock market crash of more than 20%.

In 1987, an interest rate shock in April was followed by further rate increases that ultimately led to the October stock market crash, BofA said.

But this time around, the Fed may have "lost control," as its options to combat rising yields dissipate due to rapidly improving COVID-19 cases and a swift economic reopening. 

"The question is whether the Fed wants to respond now with more treasury and MBS purchases or wait for an even larger risk-off event before doing so," BofA explained.

A surprise from the Fed would likely temper bond vigilantes and lead to a decline in interest rates, helping stave off a substantial stock market crash like in October 1987.

"Unless Fed fights back very soon with more treasury/MBS purchases, a similar fate likely lies ahead," BofA warned.

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The ‘most aggressive’ areas of the stock market could be set for more gains as spiking bond yields shuffle portfolios, a Wall Street chief strategist says

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  • The reversal of a multi-year trend could have been accelerated this month as interest rates spiked higher, according to a note from Leuthold Group's James Paulsen.
  • Investor fund flows have started to favor stocks over bonds, which hasn't happened in years.
  • "When fund flows have shifted toward stocks, it has typically led to leadership from the market's 'most aggressive' sectors," Paulsen said.
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Rising interest rates sparked a volatile week of trading for the stock market, but it could also be accelerating the reversal of a multi-year trend that suggests more long-term upside ahead for stocks, according to Leuthold Group's James Paulsen.

As interest rates rise, bond prices fall, which often sparks current fixed income investors to question whether they own too much of the asset class and not enough stocks, Paulsen said in a note on Thursday.

And there are likely a lot of investors asking that question right now, given that over the past decade, fund flows have overwhelmingly favored bonds over stocks. Even since the start of 2019, bonds have seen cumulative fund inflows of more than $1 trillion, while stocks have seen cumulative outflows of about $600 billion. 

And according to Fundstrat's Tom Lee, 94% of retail fund flows have gone into bonds rather than stocks since 2008.

But more recently, this trend has reversed, with stocks seeing an uptick in inflows at the expense of bonds.

"This newfound trend of investment flows probably has a long way to go," Paulsen said, and if so, the stock market should find strong support from the new money pouring into equities.

Sectors that have led the market higher during a sustained trend of fund flows into equities are the "most aggressive," according to Paulsen.

If cumulative fund flows into stocks turn positive, "not only could the stock market continue to surprise to the upside," but the most aggressive sectors might keep leading the market higher, Paulsen concluded. 

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An indicator that’s historically signaled market bottoms with incredible accuracy just flashed again, according to Tom Lee

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  • A rapid rise in interest rates over the past month has led to volatility in the stock market, with high growth stocks tumbling as inflation fears persist.
  • The tech-heavy Nasdaq 100 is off about 7% from its recent high, while the S&P 500 is down 3%.
  • But one indicator that has historically marked a bottom in stocks just flashed again, according to Fundstrat's Tom Lee.
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An indicator that has been historically accurate in marking a bottom in the stock market flashed again this week for the fourth time since 2012, according to a Thursday note from Fundstrat's Tom Lee.

Volatility in the stock market spiked as a rapid rise in interest rates derailed high growth stocks. The Nasdaq 100 is off 7% from its February 16 high, while the S&P 500 is down 3% over that same time period.

The 10-year US Treasury note spiked to a cycle high of more than 1.50% on Thursday, and interest rate volatility saw its biggest spike since March of 2020, as measured by the CBOE Interest Rate Volatility Index.

But according to Lee, the volatility in interest rates feels "capitulatory," which could lead to gains ahead for stocks.

Lee highlighted that soaring interest rate volatility, coupled with an extended 30-week rate of change, occured on the following dates: June 24, 2013, October 15, 2014, March 19, 2020, and February 24, 2021.

What's significant about the first three of these dates is that after each of these instances it marked the bottom in the stock market "to the day," Lee said. 

But just because the indicator marked the bottom in stocks during the past 3 instances, "this does not mean it has to happen a 4th time," Lee warned.

To take advantage of a potential bottom in the market, Lee recommends investors increase their exposure to cyclical stocks that will benefit from a continued reopening of the economy. 

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Fundstrat’s Tom Lee urges investors to buy oil stocks as energy ‘FOMO’ picks up, see’s 278% upside in this ETF

FILE PHOTO: An oil pump jack pumps oil in a field near Calgary, Alberta, July 21, 2014. Pump jacks are used to pump crude oil out of the ground after an oil well has been drilled. REUTERS/Todd Korol
FILE PHOTO: An oil pump jack pumps oil in a field near Calgary
  • The fear of missing out is likely starting to pick up for investors who have little exposure to energy stocks, according to Fundstrat's Tom Lee.
  • The energy sector is up 32% year-to-date, but with such a low weighting in the S&P 500, investors have little exposure to the sector.
  • Lee said one oil ETF could surge 278% if the price of oil makes its way to $80 per barrel.
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The surge in energy stocks so far this year is likely creating "FOMO" for investors who have little exposure to the sector, Fundstrat's Tom Lee said in a note on Wednesday.

Lee points out that the S&P 500 energy sector has soared 32% year-to-date, making it the best performing sector by a longshot this year. The next best performing sector is financials, with a return of 14%.

But investors have little exposure to the energy sector. According to Lee, the S&P 500 weighting to energy stocks is about 2%. That dynamic "potentially creates performance issues for those underweight energy," Lee said.

Energy is a "misunderstood" sector, according to Lee. Warren Buffett's right-hand man, Charlie Munger, probably agrees, who said on Wednesday that he does not foresee a long-term demise in the oil industry.

To gain exposure to the energy sector, Lee recommended investors buy the VanEck Vectors Oil ETF, which is "ridiculously cheap" relative to current oil prices.

"There is a comparative price gap between oil at $60 and where energy equities trade," Lee explained. 

Based on an analysis of the price relationship between oil and energy stocks since 2009, Lee estimates that the Oil ETF could surge to $530 with oil prices at their current level of $60 per barrel, which represents upside potential of 178% from Tuesday's close.

And if oil prices continue their upward trend to $80 per barrel, Lee estimates the Oil ETF could trade to $720, representing potential upside of 278% from Tuesday's close.

"I recommend at least taking a small market-weight position, but obviously, since energy is one of our top 3 sectors for 2021, we recommend a much larger overweight," Lee said.

The VanEck Vectors Oil ETF traded up 6% in Wednesday trades.

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Bitcoin’s sell-off is ‘part of its DNA’ and could still surge to $100,000, Fundstrat’s Tom Lee says

Tom Lee

The more than 20% sell-off in bitcoin this week shouldn't be a surprise to investors familiar with the cryptocurrency, according to Fundstrat's Tom Lee.

In a tweet on Tuesday, Lee said bitcoin is prone to corrections of 40%-50%, adding that the sizable corrections are "part of its DNA and its history."

After topping out at more than $58,000 over the weekend and eclipsing $1 trillion in market value, bitcoin sold-off to a low of $45,000 on Tuesday amid risk-off sentiment among investors due to concerns of rising interest rates.

But the decline in bitcoin "doesn't change fair value" for the cryptocurrency, Lee said before reiterating his $100,000 price target. A surge in bitcoin to $100,000 would represent potential upside of 117% from Tuesday afternoon levels.

Lee's price target for bitcoin is predicated on his view that 2021 represents a similar setup to 2017 for the cryptocurrency: a parabolic rally following a halvening event. A halvening in bitcoin is when the reward for miners completing problems on the bitcoin blockchain is cut in half. Bitcoin completed a halvening event last year.

"Looks on sale, right?" Lee asked. 

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The Fed is looking carefully at issuing a digital dollar, Chairman Jerome Powell tells Congress

Jerome Powell hearing
  • Federal Reserve Chairman Jerome Powell told Congress on Tuesday that it is looking carefully at issuing a digital US dollar.
  • Powell called the potential digital dollar a "high priority" project, according to the testimony.
  • The potential issuance of a digital dollar would come amid a surge in cryptocurrencies like bitcoin, which briefly surpassed $1 trillion in market value last week.
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Federal Reserve Chairman Jerome Powell told Congress on Tuesday that the Fed is "looking carefully" at whether it should issue a digital US dollar.

A digital currency developed by the fed is a "high priority project for us," Powell told Congress, but he added that there are "significant technical and policy questions" related to a digital US dollar.

"We are committed to solving the technology problems, and consulting very broadly with the public and very transparently with all interested constituencies as to whether we should do this," Powell said.

As the world's reserve currency, Powell stressed that the US doesn't have to be first in issuing a digital dollar, but it needs "to get it right."

"This is something we're investing time and labor in, across the Federal Reserve system," Powell said.

The move would come amid a surge in popularity for cryptocurrencies like bitcoin and ethereum. Bitcoin briefly reached $1 trillion in market value last week and traded above $58,000 over the weekend. 

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Long Blockchain, former iced-tea turned crypto company, has its shares delisted by the SEC

Bitcoin Bubble
Bitcoin replica coins are seen on November 13, 2017

One chapter of the 2017 bitcoin craze ended this week, with shares of Long Blockchain Corporation delisted by the SEC on Monday, according to a filing first seen by Bloomberg.

Long Blockchain, a company based in Farmingdale, New York, saw its shares delisted from the OTC exchange after it failed to file its financial reports in a number of years. The company's last financial report was submitted to the SEC in 2018.

Long Blockchain was formerly known as Long Island Ice Tea Corp., but the company made a pivot to blockchain and changed its name amid the epic rally in cryptocurrencies in 2017. The company was subsequently kicked off the Nasdaq exchange following volatile swings in its share price.

The SEC said in its order that Long Blockchain's supposed pivot to the crypto technology failed to materialize. Long Blockchain agreed to have its share registration revoked without admitting or denying the SEC's findings, according to the order.

Long Blockchain's fortunes would have likely been reversed if it managed to successfully pivot to the crypto space, given that bitcoin is more than double its peak 2017 price of nearly $20,000 this year, even after falling more than 17% this week. 

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Long Blockchain, former iced-tea turned crypto company, has its shares delisted by the SEC

Bitcoin Bubble
Bitcoin replica coins are seen on November 13, 2017

One chapter of the 2017 bitcoin craze ended this week, with shares of Long Blockchain Corporation delisted by the SEC on Monday, according to a filing first seen by Bloomberg.

Long Blockchain, a company based in Farmingdale, New York, saw its shares delisted from the OTC exchange after it failed to file its financial reports in a number of years. The company's last financial report was submitted to the SEC in 2018.

Long Blockchain was formerly known as Long Island Ice Tea Corp., but the company made a pivot to blockchain and changed its name amid the epic rally in cryptocurrencies in 2017. The company was subsequently kicked off the Nasdaq exchange following volatile swings in its share price.

The SEC said in its order that Long Blockchain's supposed pivot to the crypto technology failed to materialize. Long Blockchain agreed to have its share registration revoked without admitting or denying the SEC's findings, according to the order.

Long Blockchain's fortunes would have likely been reversed if it managed to successfully pivot to the crypto space, given that bitcoin is more than double its peak 2017 price of nearly $20,000 this year, even after falling more than 17% this week. 

Read the original article on Business Insider