Good morning. Happy Friday.
The Asian/Pacific markets leaned up. Japan, Hong Kong, New Zealand, Australia and Indonesia did well; Hong Kong, India and Malaysia were weak. Europe, Africa and the Middle East are currently mixed. Poland, the UAE, Hungary and Israel are up; Denmark, Germany, South Africa, Finland and the Netherlands are down. Futures in the States point towards a moderate gap down open for the cash market.
VIDEO: State of the Market
The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
NFTs are becoming wildly popular among investors as the latest crypto craze takes the digital art world by storm. Auction house Christie’s just sold Beeple’s Everydays – The First 5000 Days for $69.3M, far eclipsing anything that has been bought in the industry. The JPEG is a mosaic of every image that artist Mike Winkelmann, who goes by the name Beeple, has made since 2013.
What is an NFT? As mentioned earlier this week, it’s a type of encrypted file – run on Ethereum blockchain – that’s used to represent a unique asset and is valued as collectors’ items. They offer ownership of memes, GIFs and videos, not just a screenshot or copy of an item. NFTs work like other speculative assets, where buyers hope their value goes up and they can be sold for a profit. Some investors caution the market could represent a price bubble, but ARK Invest feels NFTs will “unlock more value for content creators than any platform in history.”
The latest sale vastly outstrips the previous record for a Beeple work, which was the $6.6M paid last week for a 10-second video. It would also make Beeple among one of the top three most valuable living artists. Many didn’t even think Everydays – The First 5000 Days could hit such an astronomical figure, given that the two-week online auction originally commenced bidding at $100.
Bigger picture: Earlier this month, Twitter (TWTR) founder Jack Dorsey listed an NFT of his first tweet for auction; the highest offer currently stands at $2.5M. Square’s (SQ) agreement to buy Jay-Z’s Tidal platform could also be an opportunity for another Dorsey company to use NFTs to help musicians sell their works directly to fans and collectors, rather than relying on streaming services such as Spotify (SPOT). NFTs have also been gaining traction in sports, with the NBA offering NFTs of sports “moments” that fans can bid on. A LeBron James dunk sold for more than $200K in late February.
Rising yields spook tech – again
Bond jitters are resurfacing despite a festive atmosphere over stimulus checks, which could begin hitting bank accounts this weekend and supplement the missing hour of sleep on Sunday (reminder to change your clocks). This morning, the 10-year Treasury yield is up another 7 bps, returning to the 1.6% level, triggering some fresh fears for investors. The developments saw stock futures decline overnight, led by tech shares, implying the recent uptick in demand for growth stocks was giving way at the end of the week. Dow -0.1%; S&P 500 -0.5%; Nasdaq -1.7%.
Statistics: Data for the week up to March 10 showed investors piling into equities, while pulling money from traditional hedges and fixed income. In fact, traders put $31.5B into stocks, while taking $1.8B out of gold and $15.4B out of bonds, according to BofA Global Research. Last week also saw the third-largest flows into emerging market plays ever and the second-largest into value stocks.
Does the latest move suggest another shakeout or does it point to a bigger trend? Take your pick, but one thing is clear – market volatility remains in the driver’s seat.
Grab your shopping list: “While we expect conditions to remain volatile, the most recent developments on three of the main market drivers – stimulus, pandemic news, and inflation data – point to further equity upside,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management. “This windfall comes on top of existing signs of pent-up demand from U.S. consumers.
Better on the sidelines: “We think the U.S. 10-year yield has further room to go and could reach 1.8%,” said Sebastien Galy, a senior macro strategist at Nordea Investment Funds. “Growth stocks maintain a high sensitivity to rates, which continues to suggest that they are quite overvalued.”
Vaccines for everybody
In his first prime-time address from the White House, President Biden told states he wants all adults in the U.S. made eligible for vaccines by May 1. The new goal follows another he made of getting 100M doses jabbed into American arms in his first 100 days, though the U.S. was already approaching a pace of 1M shots a day when he was inaugurated, nearly guaranteeing the target would be achieved. However, Biden did outline the country would hit the threshold next week, just 60 days into his presidency, with vaccinations sharply accelerating to a pace of more than 2.2M shots per day.
He also expects enough doses from Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) and J&J (NYSE:JNJ) to fully vaccinate nearly 300M people by June. Alaska this week already became the first in the nation to open vaccine eligibility to all adults, and many states and municipalities are expected to follow soon.
Quote: “If we do all this, if we do our part, if we do this together, by July 4 there’s a good chance you, your families and friends will be able to get together. But a lot can happen. Conditions can change. And scientists have made clear that things may get worse again as new variants of the virus spread.”
Other efforts: The speech came just hours after Biden signed into law a $1.9T coronavirus relief package, also known as the American Rescue Plan. His administration also announced it would double the number of retail pharmacies and federal mass vaccination sites, as well as mobilizing thousands of vaccinators, including active-duty military, FEMA and retired doctors and nurses. The government is additionally launching a new website and opening a 1-800 number to help Americans find available shots, while offering technical support to states developing their own such services.
Streamers may become more aggressive on password sharing as the industry becomes more mature. Some Netflix (NASDAQ:NFLX) subscribers have been recently noticing a message when logging on to their accounts that reads, “If you don’t live with the owner of this account, you need your own account to keep watching.” It then prompts users to verify the account with an e-mail or text code, or create a new account with a 30-day free trial.
According to Netflix’s current terms, an account can only be shared with members of a household, but the streamer has been facing intense competition. Disney+ (NYSE:DIS), AT&T’s (NYSE:T) HBO Max, NBCUniversal’s (NASDAQ:CMCSA) Peacock and ViacomCBS’s (NASDAQ:VIAC) Paramount+ are all making waves in Netflix’s traditional business, and it must ensure users aren’t moving to other services.
Outlook: While about a third of all Netflix users share their password with at least one other person, according to research firm Magid, the company hasn’t done much to stop password sharing. Strong subscriber growth appears to offset any concerns about lost revenue. So far, the streamer has only set limits on simultaneous streaming, but doesn’t limit users on the number of devices a single account can be logged into.
Go deeper: Back in January, the company said it topped 200M global subscribers in January, though its shares have underperformed the S&P 500 this year as investors moved away from high-growth stocks.
What else is happening…
ECB will significantly pick up pace of bond buying program.
Europe clears J&J’s (NYSE:JNJ) single-shot vaccine as rollout hits snags.
Roblox (NYSE:RBLX) gains after Cathie Wood scoops up shares.
Alibaba (NYSE:BABA) faces easier Chinese regulator settlement than Ant Group.
Grab (GRAB) and Altimeter said to be exploring latest SPAC deal.
Deutsche says investor ‘positioning’ a big reason for GE (NYSE:GE) stock weakness.
Firearm shares diverge as House passes two gun control bills.
Fabrics and crafts retailer Joann reportedly prices IPO below range.
Real-world evidence: Pfizer (NYSE:PFE) vaccine shows 97% efficacy after second dose.
Thursday’s Key Earnings
DocuSign (NASDAQ:DOCU) -3.7% AH despite upside report, strong sales forecasts.
JD.com (NASDAQ:JD) +0.8% amid strong customer growth.
Ulta Beauty (NASDAQ:ULTA) -7.6% AH on soft profit guidance, CEO exit.
Today’s Economic Calendar
8:30 Producer Price Index
10:00 Consumer Sentiment
10:00 Quarterly Services Report
1:00 PM Baker-Hughes Rig Count
Good morning. Happy Thursday.
The Asian/Pacific markets did well. China, Hong Kong, South Korea, Taiwan and Indonesia each gained more than 1%. Europe, Africa and the Middle East currently lean up. Denmark, the UAE, Russia, Greece, Finland, Hungary, the Netherlands, Italy, Portugal, Israel and Sweden are leading. Futures in the States point towards a moderate gap up open for the cash market.
VIDEO: State of the Market
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Pandemic, a year on
Exactly one year ago, the World Health Organization declared the COVID-19 outbreak a pandemic, acknowledging what seemed clear for some time – the virus would spread to nearly every country on the globe. Economies worldwide were upended as nations locked down to contain the virus (called novel at the time) and unemployment skyrocketed. Unprecedented amounts of monetary and fiscal stimulus also poured into the global economy, as many people got used to a stay-at-home world and extended gratitude to essential workers who helped keep things running.
In financial markets, the fastest bear to bull market recovery was seen as continuous waves of investors poured money into equities following one of the quickest crashes on record. Program after program was unveiled by the Fed, helping backstop those gains, while retail traders armed with stimulus checks and a commission-free trading environment helped return market sentiment to all-time highs. With a flood of stimulus measures saturating capital markets, billions of dollars also went to special acquisition companies, better known as “SPACs.”
Fast forward: The rates of new infections and deaths have begun to fall nationwide. More than 62M Americans have already received one dose of a coronavirus vaccine (33M are fully vaccinated), and President Biden appears on track for his goal of vaccinating 100M people by the end of April (his first 100 days in office). On Wednesday, he announced plans to buy another 100M doses of Johnson & Johnson’s (JNJ) single-shot vaccine, and with the doses from Pfizer (PFE) and Moderna (MRNA), it is more than enough supply to vaccinate every American.
Outlook: Biden is also set to sign another $1.9T emergency relief package after Congress gave final approval on Wednesday to one of the largest economic stimulus measures in American history. Stock futures climbed on the news overnight, with tech leading the rally: Dow +0.1%; S&P 500 +0.5%; Nasdaq +1.8%. Biden said he’d announce the “next phase” of the U.S. COVID-19 response this evening as the administration turns its focus to a multi-trillion dollar infrastructure package. Democrats say they want a bill with bipartisan support – unlike the most recent stimulus – but compromises would have to be worked out in many areas like climate change and racial equity.
Rising yields and inflation
All eyes are the European Central Bank this morning as worries over rising bond yields remain a concern for investors. No changes to rates or the amount of bond purchases are anticipated, though policymakers will decide whether rising borrowing costs are a threat to the EU’s pandemic-stricken economy. While the ECB has a current quota to purchase €1T through next March, purchase volumes have decreased over the past two weeks.
Is a stronger response needed? The central bank may signal faster money printing to prevent financing conditions from tightening, though many are expecting verbal reassurances rather than actual changes to monetary policy. ECB President Christine Lagarde will also be keen not to overstate the rise in yields, which are still low by most standards. Still, the region’s recovery is lagging far behind the U.S., where a broad vaccine rollout and $1.9T fiscal stimulus package are turbocharging a recovery.
“At a minimum, the ECB would want to forestall a further increase in yields from current levels and would probably prefer to engineer a decline,” BNP Paribas said in a statement. “We would expect a reference to increased pace but not a firm commitment to buy certain amounts per unit of time.”
What about inflation? The ECB will likely see a spike in consumer prices at the start of the year as temporary, which will speed up inflation in 2021 though it wouldn’t continue in following years. Price growth in 2023 would be around the 1.4% level, which the ECB forecast three months ago. That means current revisions to inflation estimates should be marginal, leaving room for any upside shocks.
The ‘meme’ trade is back
Shares of GameStop (NYSE:GME) jumped 18% in early trading on Wednesday, putting the video game retailer on track for its sixth session of gains, and even rose to an intraday high of $348.50. The stock was then halted after a plunge to around $200 per share, though it still closed the session up 7% at $265. This morning, GameStop is trending lower, down 11% to $236.
The swings weren’t only limited to GME. Volatile trade saw headphone maker Koss (NASDAQ:KOSS) skyrocket nearly 70% on Wednesday, though its shares fell 12% overnight. Meanwhile, AMC Entertainment (NYSE:AMC) sold off before earnings yesterday, only to climb another 8% to regain the $10/level after its quarterly announcement.
What’s happening? Some are pointing to renewed WallStreetBets squeezes that began in January, though only about 20.5% of GameStop’s share float is sold short, the lowest in at least three years. Others may already be factoring in the coming stimulus checks and the Reddit trades that may follow. Younger investors, who are likelier to receive the direct payments, are more inclined to invest in so-called “meme stocks,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab.
Analysis: GameStop bulls are hoping for a profit boost due to a transition to e-commerce, led by shareholder and Chewy.com founder Ryan Cohen, who is on the company’s board, though many feel the run-up is pure speculation. “I think this is a cult stock,” declared Michael Pachter of Wedbush Securities, saying even the most successful transition would not justify the stratospheric levels. To support a trading price of $235, GameStop would need to earn between $10 and $12 a share annually on a sustainable basis, he added, though he only expects the company to earn $1 a share for the fiscal year ending in January 2022.
Board diversity plan
In addition to seeking further public comment on the matter, the SEC has postponed a decision on Nasdaq’s (NASDAQ:NDAQ) proposal to require greater diversity on corporate boards. The exchange needs the approval for its plan to take effect, though a final decision is now only likely to be reached in the summer. The notice also didn’t provide any color on the SEC’s thinking, which has created tensions between those advocating for greater corporate diversity and those seeing it as an industry quota system.
What’s the proposal? Companies listed on the Nasdaq would be required to have at least one woman on their boards, in addition to a director who is a racial minority or one who self-identifies as LGBTQ. Companies with small boards of five or fewer directors would be allowed to meet targets with just one diverse director instead of two. Companies would also be required to disclose diversity metrics regarding their boards, or explain in writing why they aren’t doing so, and would be given a one-year grace period if they fall short of diversity targets.
The new delay means a decision will likely happen under President Biden’s pick to lead the SEC: Gary Gensler. On Wednesday, he cleared a key hurdle toward becoming SEC chairman when the Senate Banking Committee approved his appointment. At a hearing earlier this month, Gensler indicated the agency could soon move to force companies to disclose more about their political spending, climate risks and board diversity.
Thought bubble: Nasdaq’s proposal is another example of how Corporate America is emerging as an increasingly dominant political force. That power was traditionally limited to lobbying or marketing, though it is now developing into a kind of governance system. Think back to the silencing of President Trump on Twitter (TWTR), as well as Parler’s removal from the Apple (AAPL) and Google (GOOG, GOOGL) app stores and web hosting by Amazon (AMZN).
What else is happening…
In market debut, Roblox (NYSE:RBLX) jumps to $38B market cap.
COVID-19 variant vaccine from Moderna (NASDAQ:MRNA) begins human testing.
GE (NYSE:GE) loses ground after surprise reverse stock split proposal.
Boeing (NYSE:BA), Southwest (NYSE:LUV) close in on deal for 737 MAX jets.
Tesla’s (NASDAQ:TSLA) lead in batteries expected to last through decade.
Despite sights on Amazon (NASDAQ:AMZN), the EU is struggling with antitrust case.
Facebook (NASDAQ:FB) rolls out ‘Instagram Lite’ to 170 countries.
ESPN (NYSE:DIS) inks seven-year deal for rights to NHL games.
Reports suggest Apple (NASDAQ:AAPL) is cutting iPhone 12 Mini production.
Wednesday’s Key Earnings
AMC Entertainment (NYSE:AMC) +9.5% AH as revenues beat estimates despite 89% drop.
Bumble (NASDAQ:BMBL) +7% AH on first report since going public in February.
Cloudera (NYSE:CLDR) -8.4% AH amid disappointing full-year forecast.
Oracle (NYSE:ORCL) -4.3% AH posting soft earnings guidance.
Today’s Economic Calendar
Initial Jobless Claims
10:00 Job Openings and Labor Turnover Survey
10:30 EIA Natural Gas Inventory
1:00 PM Results of $24B, 30-Year Note Auction
4:30 PM Fed Balance Sheet
Good morning. Happy Wednesday.
The Asian/Pacific markets leaned up. Hong Kong, India, New Zealand, Malaysia, Indonesia, Thailand and the Philippines did well; South Korea, Australia and Singapore were weak. Europe, Africa and the Middle East currently lean up. Denmark, Poland, France, Hungary and Saudi Arabia are leading; South Africa is down. Futures in the States point towards a positive open for the cash market.
VIDEO: State of the Market
The dollar is flat. Oil and copper are up. Gold is unchanged; silver is down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
The American Rescue Plan
Congress is set to give the final green light to President Biden’s $1.9T economic stimulus plan today, clearing the way for one of the largest relief packages in U.S. history. It’s being hailed as a centerpiece of Biden’s first 100 days, and includes $1,400 payments for most Americans, expanded unemployment insurance, funding for schools and public health, and state and local government aid. The legislation also includes a per-child cash payment of at least $3,000 for one year, an expansion of “Obamacare” subsidies for two years, as well as aid for restaurants, agriculture and small businesses.
Thought bubble: The consensus among economists is that the stimulus will boost the economy and supercharge the recovery. A forecast from Moody’s says the plan can add up to 7M American jobs – which is important given the levels of unemployment – while the OECD said Tuesday that the program highly enhances the economic outlook even outside the U.S. But there are also those that have raised concerns that the sheer scale of the spending could lead to a spike in inflation, as well as deficit hawks who have expressed worries about additional borrowing and what that might mean for the national debt.
That conversation is also playing out in the political sphere, where Democrats have dubbed it the “largest anti-poverty measure in a generation” or what White House Press Secretary Jen Psaki called the “most progressive piece of legislation in history.” On the other side of the fence, GOP members have said the package goes too far in its expansion of public assistance, pointing to the only $75B (7% of the $1.9T price tag) which is directed at COVID testing, contact tracing and vaccine distribution.
Statistics: A Pew Research Center poll released yesterday found that 70% of U.S. adults favor the $1.9T coronavirus relief bill, including 41% of Republicans and Republican-leaning independents and 94% of Democrats and Democratic leaners. In assessing the proposed spending in the aid package, 41% of Americans view it as about right, while another 25% say it spends too little, and only a third of Americans say the legislation spends too much money.
Where are the stimulus checks going?
Back in January, we reported on the usages of stimulus checks, which have provided a financial lifeline to millions of Americans, though for others, they represented an opportunity to boost their savings. That was thanks to the $2.3T CARES Act enacted in March 2020 and the $908B stimulus bill passed in December, which provided $1200 and $600 to all Americans making under $75,000 – regardless of their employment and financial situation.
Backdrop: Securities trading was among the most common uses – across nearly every income bracket – for the checks issued in April, according to software and data aggregation company Envestnet Yodlee. For many consumers, trading was the second or third most common use for the funds, behind only increasing savings and cash withdrawals. In fact, Americans that earned between $35,000 and $75,000 annually traded stocks about 90% more than the week prior to receiving their stimulus check.
Things aren’t likely to change this time around. “I do think that you will find a lot of that stimulus money will end up in the market, and I think if anything it’s a bullish catalyst,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab. A Deutsche Bank survey of 430 retail investors last month also found that on average they plan to put 37% of any stimulus checks directly into equities.
Go deeper: Goldman Sachs even recently raised its 2021 net equity demand estimate from households from $100B to $350B, reflecting “faster economic growth and higher interest rates than we had assumed previously, additional stimulus payments to individuals, and increased retail activity in early 2021.” “We expect households will be the largest source of equity demand this year,” wrote strategists from the firm. JJ Kinahan, chief market strategist at TD Ameritrade, has a similar forecast. “You have really started to see an interest from the individual investor in a way that we have never seen before,” he added.
Direction after relief rally?
Tech made a huge comeback on Tuesday, reversing a recent downtrend over the past few weeks as U.S. 10-year Treasury yields appeared to stabilize. The Nasdaq ended the day up 3.7%, notching its best day since November, with big gains seen for Tesla (+20%), Nvidia (+8%) and Twitter (+6.4%), as well as popular names Riot Blockchain (+34%), GameStop (+27%) and FuelCell Energy (+21%). A day earlier, the index slid into correction territory, leading investors to bargain-hunt for some beaten-down shares.
The Dow also ended in the green, while the index’s futures climbed 0.3% overnight, though contracts tied to the S&P 500 flatlined and the Nasdaq slipped 0.3%. That could suggest the broader “reflation” trend – favoring higher rates and cyclical industries – likely remains intact, though volatility could remain. Concerns center around whether additional stimulus from Congress will lead to greater inflation or if high-growth stocks remain expensive. Investors will be watching today’s 10-year auction for clues as to where yields may be headed, as well as the latest Consumer Price Index data.
Value bulls: “I think the outperformers are going to be basically non-tech over the next six to 12 months,” Wharton School finance professor Jeremy Siegel declared. “The so-called value stocks are going to be sought out for their yield because I think interest rates are still going to be headed much higher here on the long bond. I don’t think we’re done with this rise in these long-term interest rates.”
Growth bulls: “We see the rollover in the Nasdaq to be actually an opportunity to add to positions,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “We think going forward the ubiquitous nature of technology, and the fact that it is deeply embedded in lives of consumers and business with the reopening of the economy, stands in the path of opportunity.”
Roblox goes public
Roblox (RBLX) is set to begin trading today on the NYSE via a direct listing process, rather than a traditional route to an initial public offering. Yesterday evening, the exchange set a reference price of $45/share, which is in line with a recent Series H funding round that resulted in a valuation of $29.5B (up 7x its last round in February 2020). The company previously delayed a traditional IPO planned for December and also postponed a direct listing it sought in February.
Backdrop: Roblox is a social gaming platform that allows users to play, create games and hang out with their friends – all in one place. More than half of the kids in America currently play on the platform, which has been a huge beneficiary of the COVID-19 pandemic. Daily active users jumped 85% in 2020 to 32.6M, while the number of hours that players spent on the app more than doubled to 30.6B. CEO Dave Baszucki’s ultimate vision for the company is an online world where users can work, play and entertain themselves (a.k.a. the “Metaverse”).
In its latest update to its prospectus, Roblux said it paid developers $328.7M in 2020, up almost 200% from 2019. That heavily surpassed the company’s sales growth of 82% last year, when it booked $923.9M in total revenue. In addition, more than 1,250 developers earned at least $10K in the digital currency Robux, which can be exchanged for real money. Over 300 earned $100K or more, while the company plans to spend additional cash on incentivizing higher-quality content and funding bigger teams of engineers and designers.
Outlook: Atlantic Equities expects great things, rating it Overweight with a price target of $60. The firm points to plans for international expansion and attempts to “age up” the demographics, along with diversified platform use cases and solid monetization. Seeking Alpha contributor Donovan Jones also notes that the company has seen sales and marketing expenses decline as a percentage of total revenue, even as sales have risen.
Disney + 100
Disney Plus (DIS) has crested the 100M subscriber mark just 16 months after its launch, becoming the most successful emerging streamer trying to chip away at Netflix’s (NFLX) dominance. The service is still on track to meet the company’s projection of 260M subscribers by 2024, powered by fan favorites like The Mandalorian and WandaVision. Contrast that with the 203.7M subscribers of Netflix, which topped 100M subs in 2017, a decade after it introduced streaming and upended the industry.
Quote: “The enormous success has inspired us to be even more ambitious, and to significantly increase our investment in the development of high-quality content,” CEO Bob Chapek said at the company’s virtual annual meeting. “In fact, we set a target of 100+ new titles per year, and this includes Disney Animation, Disney Live Action, Marvel, Star Wars, and National Geographic. Our direct-to-consumer business is the company’s top priority, and our robust pipeline of content will continue to fuel its growth.”
Comments from the competition: “It’s super impressive what Disney has done,” Netflix co-founder Reed Hastings said during an earnings call in January. “It’s incredible execution for an incumbent to pivot to take on the insurgent. It shows members are willing and interested to pay for more content because they’re hungry for great stories. And Disney does have great stories.”
Disney even temporarily halted its dividend last year following calls from Dan Loeb to permanently end the $3B annual shareholder payment. While the activist investor urged Disney to plunge that cash into original content, as it centers its operations around streaming, it also hasn’t forgotten about theme parks. The company is opening Disneyland in late April, while its Florida parks are operating at 35% capacity.
What else is happening…
Cathie Wood’s ARK Innovation (NYSEARCA:ARKK) surges on record performance.
Biden expected to name Big Tech critic Lina Khan to FTC.
Hackers breach Verkada surveillance cameras at Tesla (NASDAQ:TSLA).
Russia throttles Twitter (NYSE:TWTR) over failure to remove banned content.
Aerojet Rocketdyne (NYSE:AJRD) shareholders clear Lockheed (NYSE:LMT) takeover deal.
U.S. crude supply rose 12.8M barrels last week – API.
Curaleaf (OTCPK:CURLF) announces EMMAC acquisition as revenue growth slows.
Conagra (CAG) in talks to sell Hebrew National brand to JBS.
Pfizer (NYSE:PFE) could have capacity for 3B COVID-19 vaccines in 2022.
Today’s Economic Calendar
MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $38B, 10-Year Note Auction
2:00 PM Treasury Budget
Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed. Japan, India, Malaysia and Singapore did well; China, Hong Kong, South Korea and Indonesia were weak. Europe, Africa and the Middle East are currently mostly up. Denmark, Poland, Turkey, Russia, Greece, South Africa, Italy, Portugal and Saudi Arabia are leading. Futures in the States point towards a relatively big gap up open for the cash market.
VIDEO: State of the Market
The dollar is down. Oil and copper are down. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Correcting the correction?
The Nasdaq is leading the charge on Wall Street this morning, with futures tied to the index ahead by 2.5%, followed by a 1.2% advance for the S&P 500 and 0.6% gain for the Dow. It marks some renewed momentum for tech shares, which have been beaten down in recent weeks as investors rotated into value sectors like energy, financials and industrials. In fact, the Nasdaq closed in correction territory on Monday, down 11% from an all-time high in February.
Bigger picture: “The Nasdaq is quite sensitive to yield changes at the moment,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg Bank. Overnight, the 10-year Treasury yield halted its recent rally, dropping 6 bps to 1.53%. “Even though we got somewhat of a respite from the rising-rate reaction, we do think that’s really important to keep an eye on,” added Lisa Erickson, head of traditional investments at U.S. Bank Wealth Management. “Certainly the trajectory for rates is up as the economy reopens, so a lot of it just depends on the speed and the pace of how quickly rates go up.”
Yesterday, U.S. Treasury Secretary Janet Yellen also echoed comments made by Jerome Powell on inflation. She dismissed fears that the $1.9T coronavirus relief bill is so big that it will cause price problems, or that it is excessive given the economy’s signs of a recovery. Yellen additionally called the impact on women and minorities from COVID-19 “absolutely tragic,” but said the U.S. would return to pre-pandemic levels of employment in 2022.
Latest on the aid package? According to Democratic aides and lawmakers, the bill will return to the House from the Senate today. Changes were made to appease moderates and comply with parliamentary rules (i.e., dropping a proposed minimum wage increase), though the modifications were likely mild enough to have progressive Democrats climb aboard. The final House vote could potentially slip to Wednesday due to logistics, though if passed, some Americans might start receiving direct payments as soon as this week.
Shares of prominent crypto exchange Coinbase (COIN) changed hands at a roughly $90B value last week, according to a fresh report from Bloomberg. It’s an astounding valuation given that the company was appraised at $8B in October 2018. The valuation is based on $350 a share, the price the stock was trading on the Nasdaq Private Market on Thursday. The auction was the last before Coinbase goes public in late March, though private trading is usually more restrictive and volumes are smaller, so it’s not a perfect picture of a company’s value.
Backdrop: Coinbase started operations in 2012 and operates one of the largest digital currency exchanges. The bulk of its revenue comes from trading fees, though it also launched the Coinbase Index Fund in 2018, which is available only to accredited investors (defined as those with an annual income of $200K or a net worth of $1M or more). Going public can help push cryptos like Bitcoin (BTC-USD) and Ethereum (ETH-USD) towards mainstream adoption and may give investors more optimism for digital finance. Bitcoin is up 8% this morning to $54,153.
By the numbers: Coinbase boasts 43M retail users and 7,000 institutional clients. There are also 115K partners based in over 100 countries worldwide. Last year, the crypto exchange swung from a prior loss to a profit of $322M, while net revenue more than doubled to $1.14B.
Bigger picture: The offering will be the first major direct listing (where a company floats existing private shares) to take place on the Nasdaq. All the previous ones happened on the New York Stock Exchange – like Spotify (SPOT), Slack (WORK), Asana (ASAN) and Palantir (PLTR). Direct listings, along with SPACs, have grown in popularity over the past year as companies sideline the traditional IPO process via cheaper and less complicated ways to go public.
Corporate Covid response
Looking to speed up vaccinations of their employees, many corporations are getting clearance from public health officials to administer COVID-19 jabs. Among them: AbbVie (NYSE:ABBV), Abbott Laboratories (NYSE:ABT), American Airlines (NASDAQ:AAL), Caterpillar (NYSE:CAT), Deere (NYSE:DE), Exxon Mobil (NYSE:XOM), Tyson Foods (NYSE:TSN) and United Airlines (NASDAQ:UAL). In many cases, the companies are giving priority to those over 65 years old or who work in operations/manufacturing, while some of the events are “closed,” meaning only their staff are eligible and not the public.
Other corporations are offering incentives to encourage their workers to get a shot. Dollar General (NYSE:DG) and McDonald’s (NYSE:MCD) are providing four hours of paid time to employees who receive the vaccine, while Trader Joe’s and Aldi are giving two hours’ worth of pay. Target (NYSE:TGT) is also offering compensation for the time its workers may have to take off, as well as $15 each way for staff who use Lyft (NASDAQ:LYFT) to get to their appointments.
Thought bubble: Can your boss fire you if you refuse to get a COVID vaccine? Yes, but most companies are leaving that decision up to their employees. If it were to be mandated, only a few exceptions would be permitted under law, such as medical reasons, the workforce is unionized, or if taking it is against a “sincerely held” religious belief.
Note: Corporations are also weighing in on mask policies as states update their COVID restrictions. An example can be seen in Texas, where Gov. Greg Abbott recently announced plans to open businesses to full capacity and repeal the state’s mask mandate. While grocer Albertsons (NYSE:ACI) has dropped the requirements, others like Hyatt (NYSE:H), Starbucks (NASDAQ:SBUX), CVS (NYSE:CVS) and Target are keeping mask restrictions in place.
Next tech frontier
With recent data from Gartner showing smartphone sales dropping for the last two years, Big Tech is looking around for the next big thing. Some are pointing to the wide world of mixed reality, which brings together real-world and digital elements. It also allows users to interact with and manipulate both physical and virtual items and environments, using next-generation sensing and imaging technologies.
Flashback: Back in 2007, Apple’s (NASDAQ:AAPL) Steve Jobs unveiled the iPhone. While it was not the first smartphone to hit the market (remember BlackBerries?), it created a whole new way to interact with the devices via touch screens, “pinching” to zoom in or out, as well as an App Store. It eventually revolutionized the entire industry, replacing everything from digital cameras to GPS systems, and building entire app ecosystems.
Notable Apple analyst Ming-Chi Kuo is now saying the tech giant will release a mixed reality headset in the middle of next year. It would be priced at around $1,000 and weigh as little as 100-200 grams (if Apple can solve some technical problems). Augmented reality glasses would follow by 2025, while the TF International Securities analyst thinks a “contact lens type” wearable will arrive between 2030 and 2040.
Go deeper: Facebook (NASDAQ:FB) CEO Mark Zuckerberg said on Monday that by 2030, people could use advanced smart glasses to “teleport” to locations like other people’s homes, or allow workers to “basically teleport to work.” The company plans to release a pair of smart glasses in partnership with Ray-Ban later this year, although they won’t be “full AR.” Meanwhile, Microsoft’s (NASDAQ:MSFT) augmented reality headset, Hololens, is still a niche device at a cost of $3,500, while Alphabet (GOOG, GOOGL) started re-selling Google Glass last year for $999 through some of its hardware resellers.
What else is happening…
Another hearing on GameStop (GME), Robinhood (RBNHD) and retail investing.
Zoom (ZM) CEO Eric Yuan transfers stock worth over $6B.
Cathie Wood says underlying bull market is strengthening.
Tesla (TSLA) aims to plug in gigantic battery to Texas grid.
House Democrats to push electric vehicle legislation.
Apollo (APO) reabsorbs Athene (ATH) in $11B all-stock deal.
Disney (DIS) rises to new record as California begins to ease park restrictions.
Pfizer-BioNTech (PFE, BNTX) COVID-19 jab neutralizes Brazilian strain.
MoneyGram (MGI) falls after partnership with Ripple breaks up.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $58B, 3-Year Note Auction
6:05 PM Fed’s Kaplan Speech
Good morning. Happy Monday.
The Asian/Pacific markets closed mostly down. Japan, China, Hong Kong, South Korea, New Zealand and the Philippines were weak; Singapore was strong. Europe, Africa and the Middle East are currently doing well. Denmark, Poland, France, Germany, Finland, Switzerland, Spain, the Netherlands, Italy and Sweden are leading. Futures in the States point towards a mixed open for the cash market (small caps up, Nas down).
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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Over the weekend, the Senate passed a $1.9T coronavirus relief bill that contains $1,400 stimulus checks for many Americans, $300/week more in jobless benefits, as well as aid for state and local governments. The measure is expected to pass in the Democratic-held House on Tuesday. It would then be sent to President Biden’s desk before a March 14 deadline to renew unemployment aid programs.
“With the Senate’s passage, we expect growth momentum to accelerate and forecast global GDP growth will surge to a 7.5% annualized rate in the middle quarters of the year,” JPMorgan wrote in a research note. “Every $1T of fiscal stimulus adds around $4-$5 to EPS, implying 6-7% upside for the remainder of the year.”
Outlook: This time around, investors are getting worried about a sharp acceleration in inflation, with the 10-year Treasury yield rising another 5 bps overnight to 1.6%. Contrast that with a stock market where bulls were rooting for another big stimulus package during the push-and-pull negotiations at the end of the Trump administration. In fact, stock futures are pointing to another fall to start the week, particularly in the tech space, where high-growth valuations have been underpinned by low rates: Dow -0.3%; S&P 500 -0.8%; Nasdaq -1.9%
Thought bubble: While many are concerned about inflationary effects, the Fed has been vocal that it has no immediate plans to tighten monetary policy. In fact, its main worry doesn’t appear to be inflation, but rather the damage done to the labor market by the pandemic. The last time the U.S. had a bad bout of sustained price increases was in the 1970s, when its economy was more insulated from the world, it depended on foreign oil and ended the Bretton Woods system that rendered the dollar a fiat currency. That picture looks much different today, and since the 2008 financial crisis, the U.S. economy has even struggled to achieve its inflation goals.
Brent crude tops $70
Brent crude oil futures (CO1:COM) popped above $70 a barrel overnight, while U.S. WTI crude (CL1:COM) hit its highest level in more than two years, after a key Saudi oil site came under attack by missiles and bomb-laden drones. Iranian-backed Houthi rebels in Yemen claimed responsibility for the assault on the Ras Tanura export terminal, which is capable of exporting about 6.5M barrels a day (nearly 7% of global demand). While such attacks rarely result in big damages, their frequency has created unease in the Gulf and in oil markets.
Quote: Such acts of sabotage do not only target the Kingdom of Saudi Arabia, but also the security and stability of energy supplies to the world, and therefore, the global economy,” said a spokesman for the Saudi Ministry of Energy. “They affect the security of petroleum exports, freedom of world trade, and maritime traffic.”
Last month, the Biden administration said it would remove the Iran-backed Houthi rebels in Yemen from the Foreign Terrorist Organization and Specially Designated Global Terrorist lists. It also announced the end of U.S. support for offensive operations by its allies in Yemen, which has been devastated by a six-year civil war in which more than 110,000 people are believed to have died.
Outlook: Crude prices have been rising sharply since OPEC and allied producers decided to keep output cuts largely unchanged in April, accelerating a rally this year that has seen prices surge more than 35%. The OPEC move sparked several analysts to raise their price forecasts, with Goldman Sachs estimating Brent crude will hit $75/bbl by Q2 and top $80/bbl during Q3.
Tesla runs out of charge
Besides a broader correction that has weighed on tech stocks in recent weeks, the halo of the electric vehicle sector has been fading. That can be clearly seen with poster EV maker Tesla (NASDAQ:TSLA), whose shares are down nearly another 6% in premarket trade to $560. The company led by Elon Musk has seen its shares fall from an intraday high of $900.40 at the end of January to a low of $539.49 on Friday, marking a 40% plunge over the course of six weeks.
What happened? Frothy valuations are having a reckoning, while semiconductor shortages have caused many automakers to temporarily close some lines at their factories. There has also been an onslaught of EV competition from Ford (F), Volkswagen (OTCPK:VWAGY) and Lucid Air (CCIV), while others, like former Tesla board member Steve Westly, have suggested the automaker is “not going to be king of the hill in electric forever.” There have been additional concerns like Musk’s Bitcoin (BTC-USD) purchases, and some big Tesla backers have even cashed out a chunk of their stakes, like famed investor Ron Baron (he still hopes to hold the stock for years, but has also invested in two rivals, GM-owned Cruise and Amazon (AMZN)-backed Rivian).
The moves have meanwhile triggered a diversification reassessment of how much exposure investors should have to high-flying shares that offer “big potential” but not necessarily big profits (at least in the near term). Take, for example, Cathie Wood’s ARK Innovation ETF (NYSEARCA:ARKK), in which Tesla shares account for about 10% of the fund. The ETF is off another 4.8% premarket to $111.50 and is down 30% since the end of January.
Go deeper: While it’s still up for discussion how long all this will last, market cycles have been increasingly moving at a rapid pace in the current trading atmosphere. It took just 16 trading days for the S&P 500 in 2020 to fall from its record into a bear market, and its rebound was the quickest bear to bull market recovery in history. The pace of action is even more pronounced in speculative corners of the market (think GameStop), but has also manifested in Tesla itself. After a S&P 500 inclusion announcement on Nov. 16, shares rocketed 120% – from $408 to eventually $900 – in the span of ten weeks.
Jack Dorsey is the latest entrepreneur to jump on the non-fungible token (NFT) bandwagon, listing his first ever tweet for sale. “Just setting up my twttr,” reads the post from March 2006. The highest offer is currently from Sina Estavi, CEO of Bridge Oracle, for $2.5M. While the buyer will receive a certificate – digitally signed and verified by Dorsey – the post will remain publicly available on Twitter (NYSE:TWTR) even after it has been auctioned off.
What is an NFT? It’s a type of cryptocurrency – run on Ethereum blockchain – that’s used to represent a unique asset and is valued as a collectors’ item. They are usually art, but can also be a meme, GIFs, songs, videos or items in video games. NFTs work like other speculative assets, where buyers hope that their value goes up and they can be sold for a profit. Investors, however, caution the market could represent a price bubble.
Bigger picture: A video by a digital artist who goes by “Beeple” recently sold for $6.6M and a crypto art rendition of the Nyan Cat meme sold for $590K. Even musicians like Grimes, 3LAU and the Kings of Leon have dabbled in the sector. That’s helped NFT marketplace OpenSea grow its monthly sales to $86.3M in February, while auction house Christie’s just launched its first ever sale of digital art.
NFTs seem to be a natural extension of Jack Dorsey’s advocacy of cryptocurrencies. He’s been displaying “#bitcoin” in his Twitter bio for some time, while his digital payments company Square (NYSE:SQ) scooped up another 3,318 Bitcoins (BTC-USD) in late February (it purchased 4,709 in October 2020). Square’s Cash App is also a major venue for retail investors to purchase crypto, while Dorsey has invested in Lightning Labs, a second layer on the Bitcoin network.
Dr. Seuss under fire
It’s getting harder to find one of the six Dr. Seuss books the writer’s estate has pulled from publication. Some of the titles can still be found on eBay (NASDAQ:EBAY), albeit at steep collector prices, despite the company announcing last week that it will ban their resale on its marketplace. The books can also be bought for hundreds of dollars on Amazon (NASDAQ:AMZN) via third parties, though the titles have been pulled from Barnes & Noble’s (NYSE:BKS) online platform.
What happened? Last week, Dr. Seuss Enterprises decided that six of the famed author’s books – And to Think That I Saw It on Mulberry Street, If I Ran the Zoo, McElligot’s Pool, On Beyond Zebra!, Scrambled Eggs Super! and The Cat’s Quizzer – would no longer be published because they “portray people in ways that are hurtful and wrong.” The statement added that “ceasing sales of these books is only part of our commitment and our broader plan to ensure Dr. Seuss Enterprises’s catalog represents and supports all communities and families.”
As the Dr. Seuss books get pulled from the market, Universal Orlando, a division of NBCUniversal (NASDAQ:CMCSA), is weighing whether to redesign or remove an area of its theme park inspired by material from If I Ran the Zoo. Certain parts of “Seuss Landing” are based on the animals and characters portrayed in the book, which has been decried for its depiction of Asian people, though none of that imagery is featured in the section. The Mulberry Street Store gift shop also gets its name from And to Think That I Saw It on Mulberry Street.
Go deeper: While some companies have been removing controversial legacy content, others have been experimenting with warning labels. Among those attaching disclaimers are streamers like Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX), which appear more hesitant to dent much of their lucrative libraries. In recent weeks, warnings have even been applied to certain episodes of The Muppet Show, on top of labels for Peter Pan, Dumbo, The Aristocats, The Jungle Book, Lady and the Tramp and Swiss Family Robinson.
What else is happening…
Microsoft (NASDAQ:MSFT) hack worsens, White House warns of ‘active threat.’
GE (NYSE:GE) nears $30B deal to sell plane leasing unit to AerCap (NYSE:AER).
Air Force prepares to test Lockheed Martin’s (NYSE:LMT) hypersonic missile.
Sovereign borrowing expected to hit $12.6T in 2021 – S&P.
Ongoing M&A deals back in focus as SPAC combos lose luster.
Royal Caribbean’s (NYSE:RCL) newest ship stuck at port due to COVID-19 cases.
Skepticism over one-shot regimen for Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA) vaccines.
Four tech stocks that offer solid yield and dividend growth – Barron’s.
Today’s Economic Calendar
10:00 Wholesale Inventories (Preliminary)
12:30 PM Investor Movement Index