Good morning. Happy Friday.
The Asian/Pacific markets closed mostly down. India did well, but China, Hong Kong, South Korea, Turkey and the Philippines were weak. Europe, Africa and the Middle East are currently weak. Portugal is up, but the UK, Poland, France, Turkey, Germany, Greece, South Africa, Spain, Austria and Saudia Arabia are posting the biggest losses. Futures in the States point towards a positive open for the cash market.
VIDEO: Entering and Exiting Trades
The dollar is up. Oil and copper are down. Gold is up; silver is flat. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
In search of stability
Another day, another yield battle. The bond market went on a wild ride over the last 24 hours, with the 10-year Treasury yield shooting up 11 bps to a 14-month high of 1.75%, before ending the session at 1.72%. The move weighed on equities, especially the tech sector, with the Nasdaq tumbling another 3% on Thursday to re-enter correction territory. It didn’t last long. The 10-year yield then fell back 4 bps to 1.68%, prompting Nasdaq futures to rebound 1% and lead overnight gains.
What’s going on? Some are attributing the movement to the differing reactions of bond market players. At first, they focused on the Fed’s “no hikes through 2023,” but then absorbed its plan to let inflation run hot. In reality, the volatility may just be a broader symptom of Treasury market unpredictability. Investors don’t like uncertainty and markets definitely don’t like uncertainty, and until we reach a broader consensus over how the inflation equation will play out, we could see unstable moves in every direction.
The bulls: “It’s a mistake to dump growth stocks out of fear of rising inflation,” said Mad Money’s Jim Cramer. “The Fed’s basically saying, ‘Party on, industrials’ which causes the hedge funds to buy them hand over fist. Problem is, if they want to buy the banks or the smokestack stocks, they need to sell something else like the high-growth tech stocks that they always dump, and that’s called the hedge fund playbook.”
The bears: “If the yield on the 10-year Treasury note climbs to 2.0%, that could be enough to tip the risk market scales and lead to a 10% correction in the S&P 500. If the 10-year climbs to 2.5%, bonds may even start becoming more attractive instead of stocks,” according to the latest BofA fund manager survey. “Higher growth and higher inflation is now the consensus.”
Are value stocks turning into their tech-based momentum rivals? Bernstein thinks so, and believes a rotational shift could accelerate in coming weeks to give the sector a fresh boost.
Quote: “There is a significant overlap emerging between deep value stocks and momentum stocks – there are a number of autos, banks, materials, and energy stocks which are screening as both value and momentum,” wrote strategists led by Sarah McCarthy. “This is the holy grail of quant and value investing.”
To back up the outlook, Bernstein points to market movement around the time of the $1.9T coronavirus stimulus package, which sent investors rushing to buy stocks exposed to an accelerating economy and rising inflation. That resulted in a portfolio changeover to financials, energy and industrials and away from tech, which had dominated momentum investing for much of the last decade.
Go deeper: The catalyst for this value rotation “is very different to any period in history,” Bernstein continued. “It is being driven by the re-opening trade, and improving macro outlook, and is directly linked to continuously increasing nominal yields, a steepening yield curve and increasing inflation expectations. We are in a very different policy environment and possibly are at the start of a much bigger change in the inflation regime. We are tactically long Value and think there is further to go.”
‘Just Do It’
Emerging as an e-commerce powerhouse during the pandemic, Nike’s (NKE) traction suffered a setback last quarter due to supply chain issues. Widespread port congestion in the U.S. kept products from reaching North America, its biggest market, while it was also stung by ongoing store closures in Europe. Nike fell as much as 5.7% in after-hours trading on Thursday, before paring losses by around 4% to $137/share.
By the numbers: Sales totaled $10.4B in FQ3, far below the $11B expected by analysts, though net income of $1.45B, or $0.90 per share, topped the $0.76 per share predicted by consensus estimates. North America revenue declined 11% on a currency-neutral basis, largely driven by the shipping challenges, which delayed the flow of inventory in the quarter by more than three weeks. Meanwhile, sales in China (where the coronavirus has largely receded) jumped 51% during the quarter, while gross margins increased 130 basis points to 45.6%. The sneaker giant also forecast fiscal 2021 revenue to rise by a low-to-mid-teens percentage from the prior year vs. analyst estimates of 15.9% revenue growth.
A bright spot for the company has been e-commerce, which has helped Nike weather the disruption from COVID-19. Digital sales of its Nike brand skyrocketed 59% last quarter, with strong growth in every region. “We continue to see the value of a more direct, digitally enabled strategy, fueling even greater potential for Nike over the long term,” Nike CFO Matt Friend said in a statement.
Analyst commentary: “Even though the stock is not oversold, it’s kind of in a neutral area, maybe slightly above, but it’s not overbought and certainly not as overbought as it has been at recent highs in the last couple of years,” said Matt Maley, chief market strategist at Miller Tabak. “It’s kind of at a key technical juncture right now. A break above $147 and it’ll run, but wait, just wait for that.”
Business Roundtable talks Dream Act
Lawmakers in the House of Representatives passed two bills on Thursday that would establish paths to citizenship or legal status for millions of undocumented migrants. The American Dream and Promise Act and the Farm Workforce Modernization Act were approved largely along partisan lines, with Democrats in favor and Republicans opposed. While the bills are narrower than the comprehensive immigration package introduced in February, they face an uphill path to passage in the evenly split Senate, where the chamber’s 50 Democrats will need at least 10 Republican supporters to break GOP filibusters.
What’s in the bills? The Dreamer Act would grant conditional legal status to many migrants up to the age of 18 who were brought into the U.S. illegally before 2021. To obtain a green card, they’d have to acquire a higher education degree, serve in the military or be employed for at least three years (they could then apply for citizenship after five years). The second measure would permit migrant farm workers who have worked in the country illegally over the past two years to get certified agriculture worker status. To earn green cards, they’d have to pay a $1,000 fine and work up to an additional eight years.
“As we work to reinvigorate the U.S. economy, we need their continued contributions as equal partners in the American story, and we urge Members on both sides of the aisle to vote in support of the American Dream and Promise Act to help make that possible,” Apple (AAPL) CEO Tim Cook said in a statement on behalf of the Business Roundtable. “The American Dream and Promise Act is a promise fulfilled for the over 450 Dreamers at Apple and those across this country.”
Outlook: The U.S. has been overwhelmed at the Mexico border in recent months, with the number of migrants attempting to enter the country tracking toward a 20-year high. The 100,441 encountered last month was the highest tally since March 2019. Republicans are opposed to any immigration policy that won’t simultaneously bolster border security, while Biden has suspended work on Trump’s wall along the Mexican border. “It’s going to be really hard to get a bipartisan bill put together on anything that has a legalization component until you stop the flow,” said Sen. Lindsey Graham (R-S.C.), a leader on immigration policy in the Senate.
ESG investing landscape
The world’s largest asset manager is looking to push more companies on sustainability efforts, including protecting the environment from deforestation, biodiversity loss and the pollution of water supplies. In newly published guidelines, BlackRock (NYSE:BLK) announced it was ready to vote against the re-election of directors if companies had not effectively managed or disclosed risks related to the depletion of the world’s natural resources. It could also vote in favor of shareholder proposals that highlight natural capital risks.
Backdrop: In 2020, CEO Larry Fink promised to put environmental stewardship at the heart of how BlackRock invests its nearly $9T in assets after becoming one of the industry’s most prominent supporters of sustainable investing. The company even voted against 62 board directors over the course of the year that it felt weren’t taking climate change seriously enough. BlackRock also said it would vote for shareholder resolutions on climate change, double the number of ESG index offerings and provide more transparency on how it votes at annual meetings.
There has still been quite a bit of criticism. Some say the asset manager is still way behind its peers in Europe, which are being much harder on companies around climate change issues and stewardship. BlackRock has also been accused of “greenwashing” in the past and has pledged to integrate ESG into all of its actively managed portfolios, though more than half of its assets are managed passively. It has further promised to divest from companies that generate a quarter of their revenues from coal – and it has done that – but that metric doesn’t take in some of the biggest coal producers in the world.
Is BlackRock having an impact on ESG? While the firm did make big progress on its goals last year, it could be too early to say how things will play out. Under scrutiny is whether BlackRock’s strategy will spread to passively managed funds or if it will use its huge industry position to change the corporate response to climate change. Critics have argued that the investment titan has not used its immense influence effectively, particularly when exercising its voting power on sensitive ESG issues.
What else is happening…
Europe is ready to resume use of AstraZeneca’s (NASDAQ:AZN) coronavirus vaccine.
Volkswagen (OTCPK:VLKAF) plunges as trading frenzy draws regulatory attention.
Insurance giant Chubb (NYSE:CB) offers to buy rival Hartford (NYSE:HIG) for $23B.
Amazon (NASDAQ:AMZN) gets exclusive Thursday Night rights in NFL deal.
Dollar General (NYSE:DG) will open more than 1,000 stores this year.
Peloton (NASDAQ:PTON) CEO says child died in treadmill accident.
Biden considering new sanctions to block Nord Stream 2 pipeline.
Boeing (NYSE:BA) moon rocket passes critical NASA engine test firing.
Chip shortage prompts Ford (NYSE:F) to cancel shifts, partially assemble vehicles.
Plug Power (NASDAQ:PLUG) gets ‘expected’ Nasdaq non-compliance notice.
Thursday’s Key Earnings
Accenture (NYSE:ACN) +1% after FQ2 beats, raising full-year outlook.
FedEx (NYSE:FDX) +3.8% AH on ‘unprecedented’ holiday shipping season.
Nike (NYSE:NKE) -3.8% AH as shipping snafus hurt revenue.
Today’s Economic Calendar
1:00 PM Baker-Hughes Rig Count
Good morning. Happy Thursday.
The Asian/Pacific markets leaned up. Japan, Chin, Hong Kong, South Korea, Indonesia, Singapore and the Philippines did well; India, New Zealand and Australia were weak. Europe, Africa and the Middle East currently lean up. Turkey, Germany, Russia, Hungary and the Czech Republic are doing well; Greece is weak. Futures in the States point towards a moderate gap down open for the cash market.
VIDEO: Entering and Exiting Trades
The dollar is up. Oil and copper are down. Gold is down; silver is up. Bonds are down. Bitcoin is unchanged.
Stories/News from Seeking Alpha…
The yield curve
The Fed’s optimistic, but are investors? On Wednesday, the central bank sharply upgraded its 2021 GDP growth forecast to 6.5%, the largest annual output since 1984, and also said it expected unemployment to drop. Fed Chair Jerome Powell added that inflation was forecast to reach 2.4% this year, but called it a temporary surge. The biggest news was a pledge not to raise interest rates until 2024 and the continuation of an asset purchase program in which the central bank buys at least $120B of bonds per month.
Some are wondering if the Fed is so confident in the outlook, why not raise rates sooner? The Fed’s new framework that it rolled out last August wants to let inflation run consistently above its 2% target, as well as keeping rates steady until it sees maximum employment. The central bank may also want to view that “surge in activity” as durable, before proceeding to tighten monetary policy.
Cue the inflation concerns: Stocks staged an afternoon rally on Wednesday following the news, including the beaten-down tech sector, but mellowed in overnight trading as Treasury yields soared. At the time of writing, the yield on the 10-year Treasury was up 10 bps to 1.74%, while futures linked to the Nasdaq were off 1.3%, continuing a rotation from growth stocks to value. Inflation concerns continue to rattle investors as the yield curve steepens, with some concerned by the fact that Powell was quick to dismiss inflation as being short-term in nature. “Powell and the Fed did a pretty good job of navigating an uncertain market and delivered just enough to make sure equity volatility didn’t rise, but that said, it hasn’t put a cap on yields,” said Edward Park, chief investment officer at Brooks Macdonald.
Policy around the globe: Even as the U.K. economic outlook brightens, the Bank of England will likely emphasize its high bar for tightening monetary policy in its decision today, matching a message from the Fed Chair Jay Powell. Meanwhile, reports suggest the Bank of Japan will agree to allow yields to trade in a wider band when it ends a two-day policy meeting on Friday.
Many entertainment venues that were shut down more than a year are starting to show signs of life as companies continue to make reopening announcements. The theme can be clearly seen in financial markets, where the cyclical trade has been on fire. The Dow Jones Industrial Average (NYSEARCA:DIA) closed at a record 33,015.37 on Wednesday, just five trading days after clearing the 32,000 milestone (get out your “Dow 33K” caps).
The latest? Disneyland (DIS) in Anaheim, California will reopen April 30, with the parks operating at around 15% capacity to start. “I think as people become vaccinated, they become a little bit more confident in the fact that they can travel, and, you know, stay Covid-free,” CEO Bob Chapek told CNBC. “Consumers trust Disney to do the right thing, and we’ve certainly proven that we can [open] responsibly, whether it’s temperature checks, masks, social distancing, [or] improved hygiene around the parks.”
That’s not all. AMC Entertainment (NYSE:AMC) anticipates that 98% of its U.S. circuit will be open by Friday following the theater chain’s toughest year in history. AMC repeatedly came close to filing for Chapter 11 in 2020 and saw most new films delayed because of the coronavirus pandemic. Reopened theaters will still have capacity restrictions to allow movie goers to social-distance and will “operate with the highest devotion to the health and safety.” AMC +4% premarket.
Outlook: Corporations are not the only ones experiencing a windfall from a broader vaccine rollout and declining COVID caseloads. More than half of U.S. small businesses are fully reopened as many local restrictions were lifted, according to a report from Kabbage, a fintech owned by American Express (AXP). Will pre-pandemic commercial occupancy rates return? 33% of surveyed businesses said they would expand digital operations to supplement or replace in-person operations, while only 15% would scale back digital operations to pre-pandemic levels.
Medical experts in the U.S. are trying to calm fears that COVID-19 vaccines may be unsafe after several European countries suspended AstraZeneca’s (NASDAQ:AZN) jab amid reports of blood clots among some recipients. The European Medicines Agency, which evaluates drug safety for the EU, has maintained that the benefits of the shot when it comes to preventing hospitalizations and deaths still “outweigh the risks of side effects.” It has called a meeting for today to release its findings, while the World Health Organization has subsequently agreed with the verdict, urging countries on Wednesday to continue using AstraZeneca’s vaccines.
Bigger picture: It’s hard to say whether the inoculations are causing the reported blood clots without more data. Medical events in the older population occur every day, even without vaccines, and it is hard to determine whether vaccines can accelerate, precipitate or cause these events. Of the more than 17M people in the EU and the U.K. who have received a dose of the Oxford-AstraZeneca vaccine, fewer than 40 cases of blood clots had been reported as of last week.
What’s clear is that AstraZeneca has a public relations mess on its hands. “There’s now been a pall over this vaccine,” said Dr. William Schaffner, an epidemiologist and professor of preventive medicine at Vanderbilt University. “I think if the vaccine is cleared – not guilty – there will have to be a substantial PR effort made in Europe and around the world in order to restore confidence in this vaccine.
Go deeper: When Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) initially distributed their vaccines in December, there were reports of severe allergic reactions, or anaphylaxis. However, those cases appear to be rare, according to Dr. Anthony Fauci, with the U.S. having administered 113M doses to date. “Thus far, and you have to keep following these things very carefully, there are no safety signals that turn out to be red flags,” he said regarding the currently deployed vaccines in the U.S. While the AstraZeneca vaccine hasn’t been cleared for American use, there will likely be enough safety and efficacy data to grant the vaccine emergency use authorization in April.
Beijing will seek a meeting between President Biden and Xi Jinping next month if today’s first high-level U.S.-China talks in Alaska are productive, WSJ reports. The meeting as envisioned by Chinese officials would be organized around Earth Day to show both leaders are focused on the fight against climate change, though the U.S. is wary that China will try to use the issue to get Washington to back off in other areas. Both sides have set low expectations for the talks in Anchorage, which will feature Secretary of State Antony Blinken and National Security Adviser Jake Sullivan.
Thought bubble: Biden has continued to take somewhat of a hard line against China and has not been quick to unravel the tariffs and sanctions imposed during the Trump presidency. This week, the Biden administration even expanded penalties on Chinese officials that have “undermined Hong Kong’s autonomy from Beijing,” while the Commerce Department served subpoenas on multiple Chinese companies that could threaten national security.
China’s goal: Beijing hopes to renew the so-called strategic dialogue format, which was put in place during the Bush administration and continued through the Obama years. The framework set up recurring meetings to hash out differences in economic, trade, security and other areas, but was abolished under Trump due to “endless discussions.” Beijing also wants the U.S. to drop limits on American sales to Chinese firms like Huawei and Semiconductor Manufacturing International (OTCQX:SMICY), as well as visa restrictions on Communist Party members, Chinese students and state media journalists.
U.S. goal: Washington sees the meeting as a way to present American complaints about Chinese actions, such as curtailing freedoms in Hong Kong, naval expansion in the South China Sea, economic pressure on U.S. allies, intellectual property violations and cybersecurity breaches (recent Microsoft hack?). The U.S. also plans to discuss ways the two countries could work together on topics like climate-related issues and global health.
What else is happening…
Bitcoin (BTC-USD) surges after Fed meeting, more mainstream adoption.
Anheuser-Busch (NYSE:BUD) Cacti hard seltzer sold out within days.
VW (OTCPK:VLKAF) and Apple (NASDAQ:AAPL) vs. Tesla (NASDAQ:TSLA).
Lordstown Motors (NASDAQ:RIDE) drops after revealing SEC inquiry.
Boeing (NYSE:BA) 787 Dreamliners to face added scrutiny from FAA.
Palantir (NYSE:PLTR) CEO tells short-term investors to consider other stocks.
Coinbase (COIN) registers 114M shares ahead of public direct listing.
Nikola (NASDAQ:NKLA) slips as partner Hanwha sells half its stake.
Climate policy expert warns on subsidies for electric cars.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
Good morning. Happy Wednesday.
The Asian/Pacific markets leaned down. Hong Kong is well, but South Korea, India, New Zealand and Taiwan were weak. Europe, Africa and the Middle East are currently weak. Denmark, Poland, Russia, South Africa, Finland, Hungary, Spain, the Netherlands, Portugal, Israel and Austria are down the most. Futures in the States point towards a moderate down open for the cash market.
Online Course: Masterclass in Trading
The dollar is up slightly. Oil is down; copper is up. Gold is up; silver is down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Fed in focus
When the Federal Open Market Committee announces its monetary policy decision this afternoon, there’s scant chance the Fed will raise rates or make significant changes to its asset purchases which are totaling $120B/month. Rather, investors and economists will be focused on the Fed’s Summary of Economic Projections (SEP), specifically with an eye to whether any Fed officials move up their expectations for a rate hike in 2023. This will also mark the first real test of the central bank’s adherence to its new framework.
Backdrop: Last summer, the Fed committed to letting inflation run above its 2% average for a time to offset years of inflation lagging its target. That change means the Fed won’t raise rates until the data shows inflation is on its way to exceeding its target for a considerable amount of time. Chairman Jerome Powell has said in many statements that the central bank will be “patient,” or in other words, it doesn’t want to slow the recovery by jumping the gun and raising rates too early (that’s what happened after the 2008 financial crisis).
To review December’s SEP, only one of the 17 Fed officials expected a rate increase next year, and only five of them projected a hike in 2023 as seen in the Fed’s so-called dot plot. The December SEP called for median real GDP growth of 4.2% in 2021, 3.2% in 2022 and 2.4% in 2023; median unemployment projection was at 5.0% in 2021, 4.2% in 2022 and 3.7% in 2023. So back in December, the Fed members didn’t expect unemployment return to the pre-pandemic level of 3.5% for the next three years and core personal consumption expenditures weren’t expected to rise to 2.0% until 2023.
Outlook: Since then, there have been two stimulus plans enacted – $900B in December and $1.9T in March – and investors are now more optimistic about economic growth, but also worried that inflation will surge. The latest economic projections and policy statement are scheduled to be released at 2 p.m. ET, while Powell will hold a news conference 30 minutes later, in an event that could prove tricky for the Fed chief.
What does it all mean for markets?
U.S. bond yields and the dollar could jump if the FOMC’s post-meeting statement and Powell’s press conference are not deemed dovish enough, but the opposite is also true. Stocks could take off with renewed vigor if runaway inflation fears are put to rest and the Fed strongly commits to an easy money policy stance. Rising interest rates have been an overhang for equities in recent weeks, specifically the tech sector. The jump in yields has forced a shift into value stocks from growth, pushing the Dow Jones and S&P 500 to hover near record highs.
Bank of America’s economic team is calling the meeting “one of the most critical events for the Fed in some time.” Traders are responding in kind, with stock futures strongly hugging the flatline overnight as they wait to hear more from the Fed before making any big decisions, while the 10-year Treasury yield notched a fresh 13-month high at 1.64%. Let’s look at the possible outcomes…
Status quo: “We expect Powell to note the FOMC has the tools to intervene if the bond market becomes disorderly or constrains the economic recovery,” wrote analysts of Commonwealth Bank of Australia. “But we expect Powell to push back against talk of policy tightening because of the large amount of labor market slack.”
Calming fears: “It’s Nirvana for the markets. The Fed is going to keep rates extremely accomodative,” said Joseph LaVorgna, former White House chief economist. “The Fed’s modus operandi has been time and time again to get inflation higher and now they want to run it hot for a period of time.”
No immediate concern: “Powell’s been pretty sanguine about the whole increase in yields. We think he’ll maintain that stance,” said Wells Fargo Securities’ Michael Schumacher. “Our view is he will not really try to slow it down.”
Reviving Operation Twist: That’s where the Fed buys longer-dated bonds and sells shorter-dated bonds to bring down rates at the longer end. “I have a hunch that what was known as Operation Twist may be in our future,” legendary bond trader Bill Gross declared. “We might have even had Operation Twist in the last two weeks, but that might just be conjecture on my part.”
Expectations are wrong: “Whether it’s negative rates or rates which are barely positive, I think that over the course of the next 18 months, we should expect to see a high likelihood that we end up with significantly lower long-term rates than we have today,” said Scott Minerd, Guggenheim’s global chief investment officer.
Retail sales fell by a whopping 3% in February from the revised 7.6% advance seen in January, but climbed 6.3% on a year-over-year comparison. Harsh winter weather and the timing of stimulus checks were big factors in the monthly drop that caught economists off guard, though much of that money is expected to head into the stock market when it arrives. In fact, retail investors are likely to buy almost $3B worth of equities when the payments are transferred, according to Vanda Research. That would be around $1.5B more than the typical daily inflow over the previous month and represent “by far the largest single day of buying from retail ever.”
Bigger picture: The coming stimulus deluge highlights the increasingly large role retail investors are playing in the world’s biggest equity market. It could also set the stage of another retail trading frenzy, though GameStop (NYSE:GME), the poster-WSB/Reddit stock, fell for a second day on Tuesday, leaving it on pace for its worst two days in more than a month.
This is all happening ahead of the latest Congressional hearing on retail investing and short selling. Today, the House Financial Services Committee will continue its investigation into the short squeeze of meme stocks that occurred in late January, convening seven expert witnesses to weigh in with proposals to reform U.S. market structure. That could help the system avoid a repeat of the events, when Robinhood (RBNHD) and other retail brokers restricted purchases of popular stocks to manage a surge in clearinghouse demands for collateral.
Go deeper: Expect the discussion to center around “payment for order flow,” regulations between public exchanges and topics surrounding “gamification” of investing. Witnesses include Michael Blaugrund, COO of the New York Stock Exchange (NYSE:ICE), as well as Michael Piwowar, executive director at the Milken Institute and former acting chair of the SEC.
Sotheby’s enters the NFT art world
It was only a week ago that Christie’s sold a Beeple JPEG collage to an investor who paid $69M in cryptocurrency, but it may have marked the beginning of the digital art revolution. Rival auction house Sotheby’s is joining the non-fungible token craze through a collaboration with digital artist Pak. It’s also considering an option to eventually allow collectors to pay, and potentially get paid, using digital currencies.
Quote: “We’ve been following the NFT space for some time,” Sotheby’s CEO Charles Stewart declared. “In the last 12-18 months there has been an acceleration in everything digital. In the art world, there’s been a pivot towards digital in almost everything, perhaps, except the art. Now we’re getting there with the art as well.”
Skeptics note the ascent of NFTs has coincided with a massive crypto rally and have dismissed them as a fad whose values will fall over time. Others, like ARK Invest, feel NFTs will “unlock more value for content creators than any platform in history.”
Outlook: A move to accept digital currencies for physical works or NFTs could potentially fuel sales if it prompts crypto millionaires to start bidding on high-end art. The demographic could also help prop up the market, which leaned heavily on millennials to lift slumping sales last year and has struggled with fresh art auctions due to the coronavirus pandemic.
Match Group (MTCH), the parent company of Tinder, Match, OkCupid and other dating services, has made a seven-figure investment into a non-profit called Garbo, enabling the latter to accelerate a national expansion. The background check platform allows users to view criminal records, court actions and public information of prospective dates using only their name or mobile number. Match hopes to integrate Garbo’s background check technology into Tinder later this year, followed by its other U.S. dating apps.
Backdrop: Garbo was founded in 2018 by Kathryn Kosmides, a “survivor of gender-based violence” who wanted to make it easier to find information about people users may meet online. The platform aggregates numerous data sources to provide details on an individual, including “arrests, convictions, restraining orders, harassment, and other violent crimes.” The service also performs what it calls an “equitable background” check, which means it excludes drug possession charges from its results, as well as traffic tickets.
“This is an industry first,” said Tracey Breeden, head of Safety and Social Advocacy for Match Group. “For far too long women and marginalized groups in all corners of the world have faced many barriers to resources and safety. We recognize corporations can play a key role in helping remove those barriers with technology and true collaboration rooted in action.” The news may also take aim at Bumble (BMBL), which requires women to reach out first in hetero dating situations.
Bottom line: The move by Match is part of a broader effort to rethink safety across its services. Late last year, Match hired Breeden as its first head of safety and partnered with the Rape, Abuse & Incest National Network to audit the company’s assault prevention systems. In early 2020, the company also invested in Noonlight – to help it power new safety features inside Tinder – and included a new date check-in feature and photo verification.
What else is happening…
Moderna (NASDAQ:MRNA) vaccine study extends to babies 6 months old.
Uber (UBER) reclassifies more than 70,000 U.K. drivers as workers.
Chevron (NYSE:CVX) accused of ‘greenwashing’ in latest FTC complaint.
Direxion’s Innovators ETF (NYSEARCA:MOON) has outperformed Cathie Wood’s ARKK.
Plug Power (NASDAQ:PLUG) plunges on need to restate financial results.
Supply chain issues have Honda (NYSE:HMC) temporarily cut production.
Facebook (NASDAQ:FB) testing paid deals for new writer publishing platform.
Wedbush touts cybersecurity favorites as hacks bring ‘new age’ for sector.
Sell GameStop (NYSE:GME) options? Bond legend Bill Gross just made $10M.
Solar stocks dim on worry over proposed California rule changes.
AstraZeneca (NASDAQ:AZN) vaccine ineffective against S. Africa COVID-19 variant.
Tuesday’s Key Earnings
CrowdStrike (CRWD) +5.5% AH as ARR crossed the $1B mark.
Eastman Kodak (KODK) -5.7% posting a net loss of $541M for 2020.
Lennar (NYSE:LEN) +1.6% AH boosting guidance for margins, sales price.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Housing Starts and Permits
10:30 EIA Petroleum Inventories
2:00 PM FOMC Announcement
2:30 PM Chairman Press Conference
Good morning. Happy Tuesday.
The Asian/Pacific markets did well. Japan, China, Hong Kong, South Korea, New Zealand and Australia posted solid gains. Europe, Africa and the Middle East currently lean up. The UK, Denmark, Turkey, Germany, Greece, Switzerland, Hungary, Italy and Sweden are leading. Futures in the States point towards a flat open for the cash market.
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The dollar is down. Oil and copper are down. Gold is up; silver are down. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
President Biden is planning the first major federal tax hike since 1993 to help pay for a long-term economic program designed as a follow-up to the $1.9T coronavirus relief package, according to Bloomberg. The next initiative, which could come at a cost of $2T-$4T, would be paid for via increases in both the corporate tax rate and the individual rate for high earners. The goal is funding key initiatives like infrastructure and climate change, as well as expanding help for the poorest Americans.
What’s on the table? While the White House has rejected an outright wealth tax, as pitched by Senator Elizabeth Warren, it does target the wealthy. Proposals: Raising the income tax rate on individuals earning more than $400,000 per year, expanding the estate tax’s reach and implementing a higher capital gains tax rate for individuals earning at least $1M annually. It could also raise the corporate tax rate to 28% from 21%, pare back tax preferences for so-called pass-through businesses (such as LLCs or partnerships), as well as revise laws to stop U.S. companies from shifting jobs and profits offshore.
“While the next major fiscal proposal might come with a large headline number, it is likely to have a much smaller impact on growth in 2021 and 2022, as the spending will be more evenly distributed over several years and some of it will likely reflect spending that would have happened in any case,” Goldman Sachs wrote in a research note.
Go deeper: Helping to pay for Biden’s domestic agenda, Treasury Secretary Janet Yellen is reportedly working with countries worldwide to forge an agreement on a “global minimum tax” for multinationals. Back in January, at her confirmation hearing, she said she wanted to work with the OECD to prevent a “race to the bottom” on corporate taxation. However, any OECD deal could be challenging because of its non-binding nature, and would likely need to be approved by Congress, which may be difficult depending on the specifics.
Fears grow over AstraZeneca vaccine
Germany, Italy, France and Spain joined the ranks of European countries that have temporarily halted use of AstraZeneca’s (AZN) COVID-19 shots after several countries reported possible serious side-effects. The move is another blow to the continent’s sluggish vaccination rollout and threatens the credibility of the jab itself. Denmark and Norway stopped giving the shot last week after reporting isolated cases of bleeding, blood clots and low platelet count. Iceland and Bulgaria followed suit, Ireland and the Netherlands announced suspensions on Sunday, while Sweden and Latvia have also jumped on the bandwagon.
Quote: German Health Minister Jens Spahn announced that although the risk of blood clots was low, it could not be ruled out. “This is a professional decision, not a political one,” he said, adding he was following a recommendation of the Paul Ehrlich Institute, Germany’s vaccine regulator. Seven cases of blood clotting were reported in Germany following the administration of 1.6M doses in the country.
Others feel differently. The World Health Organization reiterated there was no proven link and people should not panic, while agency chief Tedros Adhanom Ghebreyesus said an advisory committee meeting on AstraZeneca would be held today. The European Medicines Agency also declared there was no evidence of a link between the reported blood clots and the vaccine and recommended the use, saying the benefits outweigh possible risks.
Outlook: “If the vaccine rollout is delayed in Europe and that were to mean that there were some more extensive lockdowns on the economy in Europe – then that could slow down the pace of global trade,” said Steve Cochrane, chief Asia-Pacific economist for Moody’s Analytics. “It adds some modest risk to the role that Asia plays in terms of the global economic turnaround.”
Turning point for the airline industry?
Americans are taking to the air again as COVID-19 restrictions ease across many parts of the U.S. About 2.5M passengers went through airport checkpoints nationwide this past weekend, according to the TSA, and nearly 1.4M traveled on Friday, making it the busiest day for air travel since before the pandemic. The news sent airline stocks higher on Monday, with United Airlines (NASDAQ:UAL) climbing 8.3%, while shares of American Airlines (NASDAQ:AAL) and Delta (NYSE:DAL) rose 7.7% and 2.4%, respectively.
Some optimism? United CEO Scott Kirby, who has been generally pessimistic when it comes to a return to air travel in the near term, announced that the carrier would see positive cash flow from March. It’s not only about last weekend’s numbers – bookings are also way up. Southwest (NYSE:LUV), JetBlue (NASDAQ:JBLU) and Alaska Air (NYSE:ALK) also said Monday that more people were making plans to travel, helping to pare expected revenue declines this quarter.
Delta CEO Ed Bastian added that daily net sales for the first couple of weeks of March were about 30% higher than the average for February, and airlines are seeing increased bookings that are more than 60 days out. “We’ve seen some glimmers of hope over the last year, but they’ve been false hope,” he declared. “This seems like it’s real.”
Outlook: While it’s definitely a rosy picture, other figures still need to be accounted for. Airlines face some hefty payments from the pandemic, like paying down their debt and severance costs for employees that took buyouts. In fact, U.S. airlines carried 60% fewer passengers in 2020 than in 2019 – bringing passenger traffic to the lowest level since the 1980s – and major carriers lost about $35B. The CDC still advises against travel, while the rise of more contagious COVID variants and new testing requirements for people arriving from abroad could also have a chilling effect.
Starting in the early spring, a feature dubbed “App Tracking Transparency” will be rolled in an update for iOS 14, requiring apps that gather tracking data to ask Apple (NASDAQ:AAPL) users for permission. The update was already supposed to arrive in September of last year, but it was delayed following pushback from firms including Facebook (NASDAQ:FB). The new rules also stipulate that if companies use alternatives to the identifier for advertisers, called the IDFA (somewhat analogous to an advertising cookie on the web), their app can be blocked or suspended from the App Store.
Backdrop: Apple has been positioning itself as a protector of digital privacy, hoping to draw users by marketing itself as a privacy-focused company. But many have been angered by the move, like Google (GOOG, GOOGL) and Facebook, whose business models greatly depend on monetizing eyeballs on every possible platform. Apple has been sparring with the companies over data collection practices, both privately and publicly, with the latter arguing that it will undermine connectivity, as well free services supported by targeted advertising. Apple may also have to justify the billions of dollars a year it receives for making Google the default search engine on Safari, which likely uses the same data gathering techniques that it has criticized.
How will Apple’s new feature work? The next update will create a prompt asking users if they are okay with being tracked while moving from app to app so their ads can be personalized. Experts think that about 70%-80% of people will say “No” to the tracking feature, which could spell trouble for tech companies that make big bucks on targeted advertising. Several other privacy changes will see the notification LED light up when apps are accessing the device’s microphone or camera, while users will be able to share specific photos with apps instead of giving them permission to their entire camera roll.
Some of China’s tech giants, like TikTok owner ByteDance (BDNCE) and Tencent (OTCPK:TCEHY), are testing a tool that would bypass the new rules and would be able to continue tracking iPhone users without consent. It’s an area companies are interested in preserving, given the big business that it has generated over the past decade. If firms can get around the privacy prompt, they can continue to track how users take action from one app to another, aggregate the data and then target them with specific advertisements. Will Apple turn a blind eye or will the company enforce its rules?
What else is happening…
Facebook (NASDAQ:FB), News Corp. (NASDAQ:NWS) reach deal on Australia news.
China reportedly asks Alibaba (NYSE:BABA) to divest media assets.
CBS (NASDAQ:VIAC) sees Grammy ratings crash to all-time low.
Electric stuff from Volkswagen (OTCPK:VLKAF) sends EV stocks higher.
Latest SPAC deal… eToro (ETORO) may go public at $10B valuation.
Maxar (NYSE:MAXR) and Nikola (NASDAQ:NKLA) trade lower on stock offerings.
Bullish GE (NYSE:GE) analysts defend jet leasing deal.
AbbVie (NYSE:ABBV) in talks to sell $5B women’s drugs portfolio – Reuters.
New restructuring will see Nokia (NOK) cut up to 10,000 jobs.
Roblox (RBLX) gets first sell-side rating: Stifel starts at Buy.
Today’s Economic Calendar
FOMC meeting begins
8:30 Import/Export Prices
8:30 Retail Sales
8:55 Redbook Chain Store Sales
9:15 Industrial Production
10:00 Business Inventories
10:00 NAHB Housing Market Index
1:00 PM Results of $24B, 20-Year Bond Auction
Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets leaned down. Japan and New Zealand did well, but China, Hong Kong, India, Indonesia and the Philippines were weak. Europe, Africa and the Middle East currently lean up but are mostly quiet. Denmark, the UAE, Russia, Finland and the Netherlands are up; South African down. Futures in the States point towards a moderate flat open for the cash market.
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The dollar is up. Oil is down; copper flat. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Most valuable startup
Digital payments giant Stripe (STRIP) is raising $600M in new funding at a $95B valuation, making it the most valuable startup in the U.S. It’s nearly triple the $36B valuation Stripe secured last April, when it raised another $600M from investors including Andreessen Horowitz and Sequoia Capital. Investors in this round include Allianz, Fidelity and Baillie Gifford, as well as the sovereign wealth fund of Ireland, which is the home country of Stripe founders John and Patrick Collison.
Backdrop: Stripe was founded in 2010 by the two Irish siblings (their net worth jumped to $11.4B each with the latest valuation). The company’s software, which competes with PayPal (NASDAQ:PYPL) and Square (NYSE:SQ), is used by businesses to accept online payments and has been a big beneficiary of the e-commerce boom accelerated by the coronavirus pandemic. Customers include Amazon (AMZN), Instacart (ICART), Salesforce (CRM) and Lyft (LYFT).
Stripe is “highly capital efficient” and didn’t really need the money in spite of the fundraising, CFO Dhivya Suryadevara declared. “I view this as a bit more opportunistic,” she said in an interview on Sunday. “It will just sit on the balance sheet,” added Mike Moritz, partner at Sequoia and a Stripe board member, emphasizing that the money will be used as a “a rainy day fund.” Some of the capital will also be invested in Stripe’s European operations and its dual headquarters in Dublin.
Outlook: While Stripe isn’t focusing on an initial public offering right now, both Suryadevara and Moritz said the company will continue to seek out acquisitions. In December, the company branched out to offer checking accounts to businesses through e-commerce providers, inking partnerships with banks including Goldman Sachs (GS) and Citigroup (C).
Could a ban happen in the U.S.?
Bitcoin (BTC-USD) hit a record high of $60,000 on Saturday, nearly doubling in value this year, as the Beeple NFT sale continued to draw attention to the cryptocurrency, as well as more institutional investment. Prices then pulled back 7% to the $56,000 level on reports that India would propose a law banning cryptos, giving holders of the virtual assets up to six months to liquidate. The bill, one of the world’s strictest policies against cryptocurrencies, would criminalize everything from possession, issuance and mining to trading and transferring crypto assets.
Why is India doing this? It’s not the first nation to take action against Bitcoin, with similar bans or restrictions seen in countries like China, Pakistan, Russia, Bolivia, North Macedonia and Morocco. There are concerns that Bitcoin’s decentralized system will make it more complicated for central banks to create their own CBDCs (central bank digital currencies), as well as worries that cryptos could be used to finance illicit activities. CBDCs are a promising tool that will allow central banks to have real-time data about their economies, offering the ability to track money flows, spending and savings data and what sectors are suffering or doing well. Leaving privacy concerns aside, a central bank could be more informed on monetary policy when armed with that information, while the government could possibly link future stimulus payments, universal basic income or fiscal policy to CBDCs.
Many Americans are unaware that it was illegal to own gold from 1934 to 1974, though the prohibitions were relaxed starting in 1964. A U.S. citizen couldn’t own or trade gold anywhere in the world, with exceptions for some jewelry and collector’s coins, as the federal government and banks shored up their financial soundness. Turning to cryptos, the Secret Service and the IRS have already worked with Coinbase (COIN) and exchanges to hold private crypto wallet keys, while the US Marshals Service has seized and auctioned many a Bitcoin. What would happen if the U.S. government or Fed felt threatened by the rise of decentralized banking? What if it interfered with their plan for CBDCs?
Go deeper: Bringing forth a Bitcoin ban could be legally difficult for the U.S. government, but even if would go through, enforcing the ban would be the harder part of the equation. Unless the government would exert strict control over the internet, individuals could download Bitcoin wallet software, run a node and complete transactions. That may render the currency out the realm of widespread adoption, but could also increase its demand for the exact same reason. Over the last decade, Bitcoin has also made inroads into the U.S. financial system, where it is treated as a commodity, so a ban could face other barriers like stymieing innovation and closing down institutions overseeing billions of dollars in crypto assets.
What’s next for stocks?
Futures contracts linked to the Dow, S&P 500 and Nasdaq are all starting the week up 0.4% as the debate over whether a $1.9T stimulus bill will prompt a serious pickup in inflation continues to play out in the markets. Bond yields are turning lower for now, with the 10-year Treasury yield down 2 bps to 1.61%, suggesting a positive start to the week for equities, especially the hard-hit tech sector. A wide rollout of COVID-19 vaccinations in the U.S. is also helping stoke a bullish sentiment.
Analyst talk: “Most market participants and policy-makers have been surprised by the speed of the recovery. On our estimates, the U.S. economy will reach pre-COVID-19 output levels by the current quarter,” said Chetan Ahya, global head of economics at Morgan Stanley in New York. “Fiscal policy is doing much more than fill the output hole. Transfers to households have already exceeded the income lost in the recession. As reopening gathers pace, the labor market is poised for a sharp rebound.”
Past estimates suggest part of the coming $1,400 in direct stimulus payments could find its way into the stock market, though this time around, it is joined with some concerns. Rising inflation expectations could persuade the Fed to signal it will start raising rates sooner when it announces its latest economic projections at the end of FOMC meeting on Wednesday.
More commentary: “Following the fiscal stimulus packages it is inevitable that Fed GDP forecasts will be revised up, and some FOMC members might think rates will have to move higher sooner than they anticipated last December,” wrote economists at ANZ. “The Fed is aiming for higher inflation which means higher interest rates. I think the market has misread the Fed in thinking about yield curve control,” added Steven Ricchiuto, chief U.S. economist for Mizuho Securities.
SPACs catch attention of short sellers
One of the hottest growth areas on Wall Street, special purpose acquisition companies, is becoming a target for short sellers, WSJ reports. In fact, the dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7B from $724M at the start of the year, according to data from S3 Partners.
Some examples: Social Finance (SOFI) is a popular target, with 19% of its outstanding SPAC (NYSE:IPOE) shares sold short, while short interest in Churchill Capital Corp. IV (NYSE:CCIV), a SPAC that is merging with EV startup Lucid Motors, more than doubled in March to about 5%. Others are wagering against companies after they combine with SPACs, like Muddy Waters’s bet against XL Fleet (NYSE:XL). Shares of Lordstown Motors (NASDAQ:RIDE) also stumbled 17% on Friday after Hindenburg Research released a report saying the EV startup misled investors on its orders and production.
“These are all momentum stocks, and a lot of people want to short them,” said Matthew Tuttle, whose firm recently launched “The SPAC and New Issue ETF (NYSE:SPCX),” the first actively managed ETF that gives investors direct exposure to a broad portfolio of SPACs.
Go deeper: The dangers of shorting were made clear in recent months when retail traders organized on social media to push up stocks like GameStop (GME) (the movement also apparently attracted institutional interest). Continued strong investor demand for SPACs could catch short sellers in a similar squeeze. Shorting can also be risky because SPAC shares have a price floor of $10 and they are prone to sharp price moves.
AstraZeneca vaccine scare
Concerns are growing over a coronavirus vaccine from AstraZeneca (AZN), which was once anticipated to be a mainstay of protection for much of the globe. The jab, developed with the University of Oxford, does not need to be kept at ultra-low temperatures and costs about $4 a dose, compared to the $20 per dose from Pfizer (PFE) and $33 for Moderna’s shot (MRNA). But controversy has erupted as more countries limit AstraZeneca’s use and scientists warn of the need for governments to tread carefully.
What happened? Over the weekend, the Netherlands joined a growing list of about a dozen countries, including Italy, Ireland, Denmark and Norway, moving to suspend the shot over concerns about possible side effects. While regulators said there was no indication of any direct link with the vaccine, reports of serious blood clotting triggered suspensions stretching as far as Thailand, though some have already resumed its usage.
AstraZeneca is defending its vaccine, saying in a statement that more than 17M doses have been administered in Europe and the U.K., with no evidence of an increased risk of pulmonary embolism, deep vein thrombosis or thrombocytopenia. So far across EU and Britain, there have been 15 events of DVT and 22 events of pulmonary embolism reported among those given the vaccine, based on the number of cases registered as of March 8, lower than the hundreds of cases that would be expected among the general population.
Quote: “You have to be very careful because it’s also sending a message that there could be something very wrong with the vaccine when in fact, it’s very unlikely that there is,” said Helen Petousis-Harris, a former World Health Organization adviser on vaccine safety. “We’re doing massive mass vaccination campaigns and people get sick all the time. We can’t panic every time it happens. But we also need to take all precaution. And it’s a hard balance.”
What else is happening…
Does Daylight Saving Time affect the stock market?
New titles at Tesla (TSLA): Technoking and Master of Coin.
Roche (OTCQX:RHHBF) buys COVID test maker GenMark (NASDAQ:GNMK) for $1.8B.
China’s economic activity surged at the start of 2021.
Google (GOOG, GOOGL) will face $5B lawsuit over internet tracking.
ARK Invest buys 3D Systems (NYSE:DDD) on the post-earnings dip.
Cruise industry… Carnival (NYSE:CCL) forecasts at least two more rough years.
Xiaomi (OTCPK:XIACF) notches court win to halt U.S. investment ban.
Big Pharma one of the best pockets of value in the market – Barron’s.
AMC (NYSE:AMC), WarnerMedia (NYSE:T) making peace with new streaming windows.
Today’s Economic Calendar
8:30 Empire State Mfg Survey
4:00 PM Treasury International Capital