Good morning. Happy Friday.
The Asian/Pacific markets leaned up. China, Hong Kong, Singapore and Thailand led; the Philippines were weak. Europe, Africa and the Middle East are doing great. Denmark, Germany, the UAE, Russia, South Africa, Finland, Saudi Arabia and the Czech Republic are up 1% or more. Futures in the States point towards a positive open for the cash market.
My interview with WorldClassPerformer.com
The dollar is down. Oil and copper are up small amounts. Gold and silver are up. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Crypto stumbling blocks
Market watchers hailed this week and the trading debut of Coinbase (NASDAQ:COIN) as crypto’s road to the mainstream. But it hasn’t been without its speed bumps. Robinhood (RBNHD) has fixed a problem with executing crypto orders that arose late yesterday as the platform faced ”unprecedented demand.” Interest in cryptocurrencies surged this week, coincidental with the direct listing of trading platform Coinbase. “We know some customers may have seen executed crypto orders display as pending; for an extended period of time. We were experiencing a delay in order status updates – this is now resolved. Check your app for up-to-date information about any recent orders,” Robinhood initially tweeted around 6:30 p.m. ET Thursday. At 10 p.m. it said: “We’re currently experiencing issues with crypto trading. We’re working to resolve this as soon as possible.” By 11:46 p.m. it said the problem had been resolved, adding: “Like others, we were experiencing unprecedented demand for Robinhood Crypto services, which created issues with crypto trading. We’ve resolved the issue and apologize for the inconvenience.”
Coinbase surged 30% on its debut Wednesday, but closed well below its opening price. And the stock struggled Thursday, closing slightly lower. But it has garnered a lot of positive commentary from Wall Street analysts. Yesterday, Loop Capital started the stock with a Buy rating and a price target of $394/share. The average price target for the stock is around $520, which represents an upside of more than 60%. Coinbase experienced its own platform problems yesterday, that were later resolved, related to an upgrade of its Berlin Ethereum Network. “Due to an issue with the recent network upgrade, we’ve temporarily disabled ETH and ERC20 withdrawals from Coinbase and Coinbase Pro,” the company tweeted yesterday. Receives of these assets may also be delayed. We’re working on a fix, and we’ll send an update as soon as we have one.
Crypto hype and teething problems: The crypto excitement has seen Bitcoin and Ethereum hit new all-time highs this week and Dogecoin soar. Bitcoin (BTC-USD) and Ethereum (ETH-USD) are down slightly today, but Dogecoin (DOGE-USD) is off to the races again, up nearly 80%. But the frenzy for virtual currencies hasn’t been without its stumbling blocks, beyond trading platform glitches. HSBC (NYSE:HSBC) is prohibiting its customers from buying shares of Coinbase as it sticks to a policy of avoiding virtual currencies. “HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from virtual currencies,” HSBC told CoinDesk. “This is not a new policy.”
Meanwhile, Reddit’s (REDDIT) WallStreetBets forum, which rose to prominence propelling the GameStop squeeze, is grappling with its own policy against crypto discussion. Yesterday, WSB reinstated a ban on all cryptocurrency discussion less than 24 hours after it allowed a crypto discussion thread with limits. The subreddit allowed a daily crypto discussion thread limited to Bitcoin, Ethereum and Dogecoin on Wednesday after Coinbase started trading, but kept in place a “crypto spam” ban. Bloomberg published an article late Wednesday entitled “WallStreetBets Bows to Crypto Wave, Allows Bitcoin Discussion.” Yesterday, WSB moderator bawse1 posted: “Due to the article that was written @bloomberg who somehow felt that ‘WallStreetBets Bows to Crypto’ … Crypto discussion is banned indefinitely. I’ve read a lot of dumb articles written about wsb. This one takes the cake.”
Cash rolls in: For all the difficulties this week, there’s no doubt money is still chasing the crypto story.
Cathie Wood’s ARK Investment Management bought Coinbase on its first day of trading for three of her ETFs. She said she expects lots of volatility in the stock, along with the cryptos themselves, but was a buyer of COIN again yesterday. ARK now holds $352M worth of Coinbase after she added a further 341,186 shares on Thursday, bringing ARK’s total exposure to more than 1M shares.
Hedge fund Brevan Howard has also made its move into crypto, putting 1.5% of its assets into Bitcoin.
Greenlight’s Einhorn takes on GameStop short squeeze
David Einhorn, who runs hedge fund Greenlight, blames the “real jet fuel” for the GameStop (NYSE:GME) short squeeze on investor Chamath Palihapitiya and Tesla (NASDAQ:TSLA) CEO Elon Musk.
He said famed SPAC investor Palihapitiya and Musk’s appearances on TV and Twitter at a critical moment “further destabilized the situation,” according to 1Q letter. “Palihapitiya controls SoFi (SOFI), which competes with Robinhood (RBNHD), and left us with the impression that by destabilizing GME he could harm a competitor,” Einhorn wrote.
Einhorn also partly blames the GameStop and recent Archegos liquidation on lax regulators.
AMC CEO pledges not to issue shares from new 500M authorization
AMC Entertainment (NYSE:AMC) closed nearly 6% higher Thursday alongside an SEC-filed pledge by CEO Adam Aron not to do a 2021 issuance of any of 500M new shares the company is asking investors to authorize.
An upcoming vote to authorize issuance of up to 500M new shares has weighed on AMC investors unsure of the company’s plans as it plots its emergence from the COVID-19 pandemic, which wrecked revenues. But in an interview with Tremayne Collins on YouTube Channel Trey’s Trades, excerpted in an SEC filing, Aron says there are no plans this year to issue any of those.
U.S. oil drillers ‘dying on the vine’
Private equity funding for the U.S. oil sector is drying up, prompting stricken operators to make “last gasp” efforts to boost production and cash flow to attract buyers, the Financial Times reports.
Despite oil’s recovery to about $60/barrel, scores of oil producers are “dying on the vine,” says Kimmeridge managing partner Ben Dell, left without the regular cash infusions to bankroll the capital spending needed to keep on drilling.
Pioneer Natural Resources (PXD) earlier this month agreed to buy privately owned rival DoublePoint Energy for $6.4B – the biggest public-private deal in U.S. upstream oil and gas in a decade – but investors tell the FT that deals of that scale are unlikely to be repeated.
XPeng forms alliance with Zhongsheng
XPeng (NYSE:XPEV) establishes a long-term strategic partnership with Zhongsheng Group (OTCPK:ZSHGY) to further accelerate the Smart EV adoption in China.
Through the partnership, the Company will leverage Zhongsheng’s dealership network and expertise in serving consumers for mid-to-high-end automobiles to further accelerate XPeng’s sales growth, while strengthening its after-sales services capabilities.
United Rentals to buy out General Finance
United Rentals (NYSE:URI) will acquire General Finance (NASDAQ:GFN) for $19/share in cash, representing a total enterprise value of about $996M, including the assumption of $400M of net debt.
What else is happening…
Pfizer (NYSE:PFE) CEO says booster COVID-19 shots likely needed.
Splunk (NASDAQ:SPLK) CTO resigns.
TuSimple (NASDAQ:TSP), Nikola (NASDAQ:NKLA) and Blink Charging (NASDAQ:BLNK) lead down day for electric vehicle stocks.
Online gambling stock Esports Technologies (NASDAQ:EBET) soars in IPO.
Major utilities rip Texas proposals to trim renewables.
Nikola (NKLA) viewed even more bearishly by CFRA Research.
Thursday’s Key Earnings
Alcoa (NYSE:AA) +4.1% AH Q1 sales and profit highest since 2018, expects ‘strong 2021’.
PPG Industries (NYSE:PPG) +4% AH Q1 sales and EPS hit records, guides Q2 EPS above consensus.
Today’s Economic Calendar
8:30 Housing Starts
10:00 Consumer Sentiment
10:45 Fed’s Kaplan Speech
12:30 PM Fed’s Kaplan Speech
1:00 PM Baker-Hughes Rig Count
Good morning. Happy Thursday.
The Asian/Pacific markets were split. South Korea, New Zealand, Taiwan and Australia did well; China, Hong Kong, India and Thailand were weak. Europe, Africa and the Middle East currently lean to the upside. The UK, Denmark, Germany, France, the UAE, Norway and Saudi Arabia are leading while Russia and Portugal are weak. Futures in the States point towards a moderate gap up open for the cash market.
My interview with WorldClassPerformer.com
The dollar is down. Oil is down; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
The market will get some insight into how much the consumer is participating in the economic recovery with the latest retail sales numbers today. S&P futures (SPX), Nasdaq futures (NDX:IND) and Dow futures (INDU) are all in the green.
The Commerce Department will release March retail sales at 8:30 AM ET. Economists, on average, are looking for a strong rebound, with sales rising 5.9%, compared with a 3% drop in February. Core retail sales, which exclude autos, are forecast to rise 5%, reversing a 2.7% decline the month before. Retail sales have posted gains in just four months since the lockdown measures took hold last year, the most recent being a 5.3% gain for January.
If sales rise as anticipated, that would be a good indication that the latest round of $1,400 direct checks are making their way into the economy, providing the stimulus intended by the White House. A miss may indicate that the money is being channeled to other avenues, such as savings or asset purchases. The New York Fed said last week that 42 cents of every stimulus dollar were being saved, while 25% of funds are being spent and the rest is being used to pay down debt.
Reflation trade: For the stock market, a strong retail sales number could kick-start the reflation trade that favors cyclicals, which has lost steam of late. Despite a number of market-moving events, the S&P (NYSEARCA:SPY) has struggled to gain traction in either direction and is down 0.1% for the week.
“The reflation trade has been taking a spring break,” says UBS Global Wealth Management CIO Mark Haefele. “We believe investors should continue to position for reflation” as vaccinations roll out and economies recover, he adds, according to Bloomberg. Financials (NYSEARCA:XLF), Industrials (NYSEARCA:XLI) and Energy (NYSEARCA:XLE) are likely to outperform.
Barclays strategist Emmanuel Cau says value is attractive as a hedge to overheating, but he’s less positive on leisure, food retail and autos.
Economy accelerating, but still moderate: The Fed’s Beige Book, out yesterday, said the U.S. economy is accelerating to a moderate pace, while some of the sectors hit hardest by the pandemic are showing signs of recovery.
“Reports on tourism were more upbeat, bolstered by a pickup in demand for leisure activities and travel which contacts attributed to spring break, an easing of pandemic-related restrictions, increased vaccinations, and recent stimulus payments among other factors,” the report said.
Economic growth and consumer spending “accelerated over the last 6 weeks and pent-up demand for leisure activity and travel are starting to materialize,” DataTrek Research writes. “Inflation has picked up and companies face both labor shortages and supply chain disruptions. In the end, we continue to agree with the Fed that near-term inflation is transitory rather than structural, so we don’t think Chair Powell will view these inflationary pressures as a major red flag.”
“Moreover, the latest Fed Beige Book reports continue to show employers’ challenge of pulling workers back into the labor force,” DataTrek adds. “That will take time as vaccines roll out and childcare becomes more accessible, factors that are out of Chair Powell’s control. That’s why he and the Fed continue to signal holding rates near zero through at least 2022 to let the economy run hot enough to achieve their dual mandate.”
ARK Invest snaps up Coinbase
ARK Investment Management bought shares of newly-public Coinbase Global (NASDAQ:COIN) for three different funds, while selling some of its Tesla (NASDAQ:TSLA) holdings.
Cathie Wood bought 89,589 shares of Coinbase for the ARK Fintech Innovation ETF (NYSEARCA:ARKF). She bought 512,535 shares of the crypto trading platform for the flagship ARK Innovation ETF (NYSEARCA:ARKK). And she added 147,081 COIN shares to the ARK Next Generation Internet ETF (NYSEARCA:ARKW). That was about $246M worth of Coinbase shares.
“There are going to be great opportunities from now and five years to buy (Coinbase) on dips,” Wood told Bloomberg. ARK thinks institutional interest could add $500K to the price of Bitcoin (BTC-USD). ARK sold 185,712 shares of Tesla from ARKK and 57,043 shares of the automaker from ARKW. Tesla is the top holding in ARKW and ARKK. Coinbase rose 30% in its debut yesterday, but closed down from where it opened the day.
SpaceX valued at $74B
SpaceX (SPACE) increased the size of its last equity raise, according to an SEC filing. The company brought in another $314M to add to the $850M previously reported. The new total equity raise of $1.16B values SpaceX at around $74B.
Investors in SpaceX are likely to be looking for a payoff from the Starlink (STRLK) Internet satellite business. There is speculation that Starlink will be set free in an IPO at some point. Looking at SpaceX’s launch plans, a trip to the moon is planned for as early as 2022 with the Falcon 9 rocket slated to deliver an exploration rover on behalf of the United Arab Emirates.
Self-driving truck startup TuSimple is said to have raised $1.35B in IPO.
Self-driving truck startup TuSimple (TSP) is said to have raised $1.35B in an IPO, pricing the shares at $40, above an earlier range. TuSimple and a selling shareholder sold 34M shares at $40 each, above an estimated price of $35-$39, according to a Bloomberg report.
The company is backed by strategic investors, including Volkswagen AG’s (OTCPK:VLKAF) heavy-truck business The Traton Group, Navistar (NYSE:NAV), Goodyear (NASDAQ:GT), U.S. Xpress (NYSE:USX), NVIDIA (NASDAQ:NVDA) and United Parcel Service (NYSE:UPS).
Lucid Motors says its new electric vehicle is ready for the cold stuff
Lucid Motors (LUCIDM) updates on a cold weather test run on the Lucid Air at -40 degrees Celsius.
“Lucid Air hit all its cold weather testing targets from quickly warming up, to starting, charging, and more. And despite cold temperatures, the quietness of the cabin was notable. Typically, interior components of a vehicle get noisier as its temperature drops. Not Lucid Air. Its NVH aspect – or Noise, Vibration, and Harshness rating – tested exceptionally well. And for luxury vehicle owners, that’s a crucial outcome.”
What else is happening…
Taiwan Semiconductor (NYSE:TSM) EPS beats by $0.04, beats on revenue.
Shopify (NYSE:SHOP) loses some key execs amid growth push.
Bitcoin (BTC-USD) hangs near record high.
Oil (CL1:COM) hits highest since mid-March on strong demand outlook.
Copper (HG1:COM) on path to $15K/ton in 2025 thanks to green transition, Goldman says.
AstraZeneca’s (NASDAQ:AZN) COVID-19 vaccine trumps Ocugen’s Covaxin in Indian study.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
8:30 Retail Sales
8:30 Empire State Mfg Survey
9:15 Industrial Production
10:00 Business Inventories
10:00 NAHB Housing Market Index
10:30 EIA Natural Gas Inventory
11:30 Fed’s Bostic: “The Atlantic’s Progress Report: The State of the Black Community”
2:00 PM Fed’s Daly Speech
4:00 PM Fed’s Mester: “Economic Inclusion”
4:00 PM Treasury International Capital
4:30 PM Fed Balance Sheet
Good morning. Happy Wednesday.
The Asian/Pacific markets did well. China, Hong Kong, India, New Zealand, Australia, Indonesia and the Philippines posted solid gains. Europe, Africa and the Middle East currently lean up. Poland, Turkey, Russia and South Africa are up 1% or more; Sweden is down. Futures in the States point towards a flat open for the cash market.
VIDEO: State of the Market
The dollar is down. Oil and copper are up. Gold is down; silver is up. Bonds are unchanged. Bitcoin is up.
Stories/News from Seeking Alpha…
Coinbase in your face
The market is anticipating the direct listing (not technically an IPO) of Coinbase today as cryptocurrencies continue to gain traction. Bitcoin (BTC-USD), rising 5%, is approaching $65K, while Ethereum (ETH-USD) is up 10%, nearing $2,400.
Nasdaq and Goldman Sachs set a reference price of $250 per share for Coinbase’s direct listing. That puts the valuation of Coinbase at $66.5B.
COIN wrote in a news release that as of Monday, it had 130.7M Class A shares and 68.5M Class B ones outstanding, or 261.3M in total when shares are measured on a fully diluted basis. The company wrote that the 261.3M figure includes all Class A and B shares, plus all outstanding stock options and restricted stock units. The number only excludes shares reserved for future issuance under Coinbase’s equity compensation plans, as well as stock set aside for COIN’s “Pledge 1%” charitable commitment.
“Today’s listing is a milestone, but it’s not as important as every new day in front of us,” CEO and co-founder Brian Armstrong writes in a blog today. “Coinbase has an ambitious mission: to increase economic freedom in the world. Everyone deserves access to financial services that can help them build a better life for themselves and their families. We have a lot of hard work to do to make this a reality.”
Bubble worries: Bank of America’s latest fund manager survey indicates an overwhelming contention that Bitcoin is in a bubble. 74% of those surveyed say the crypto is now in a bubble, compared with just 7% who see equities in a bubble (most think stocks are in a late-stage bull market). Bitcoin was considered the second-most crowded trade behind long tech, according to respondents. But how Coinbase trades could be a big indication not just of Wall Street’s acceptance of crypto, but of broader market sentiment.
Morgan Stanley says “the underperformance in IPOs and SPACs is a signal that the excessive liquidity provided by the Fed is finally being overwhelmed by supply.” “My experience is that when new issues underperform this much, it’s generally a leading indicator that equity markets will struggle more broadly,” chief equity strategist Michael Wilson writes. “When combined with the fact that leverage in the system is very high, it could spell more trouble for riskier, more speculative investments.” But DataTrek Research contends that the interest in cryptos could be problematic to the broader market.
Crypto, NFTs, SPACs and recent IPOs “can do well without the S&P seeing any benefit since correlations typically remain low during the middle part of an economic recovery. In fact, capital may leave US stock indices looking for greener pastures elsewhere.”
Digging down into the Coinbase listing: Coinbase will start trading on the Nasdaq under the ticker symbol “COIN,” either right when markets open at 9:30 a.m. ET or sometime thereafter. Certain pre-IPO investors will make as many as 114.85M shares available to the public. Coinbase operates a popular trading platform for Bitcoin and other cryptocurrencies, and also offers services like hosting crypto buyers’ digital “wallets,” which store their holdings. Many see the company’s go-public move as a coming-of-age moment for the crypto industry.
Rather than hiring financial firms to underwrite the IPO and line up institutional investors and wealthy individuals to buy the stock, some of COIN’s major shareholders will simply offer their shares for sale to anyone via the Nasdaq. That will give small investors a chance to buy shares under the same term as large players will get, but also makes it hard to estimate what Coinbase stock should be worth.
Broad crypto rally
The more “alt” the coin, the bigger the rally, with Dogecoin (DOGE-USD) is up 79% and above $0.09 for the first time, and Ripple (XRP-USD) continuing its remarkable run, up 11%.
Coinbase has a long list of cryptos available for trade, but Dogecoin and Ripple aren’t among them (Ripple used to be available, but was pulled over regulatory concerns).
ARK sees a broad bull
Cathie Wood, CIO, and CEO of ARK Invest in a market outlook webinar, put out Tuesday, mentioned how she believes the bull market is broadening out and that it’s a good sign for innovation.
In reference to the fact that growth strategies have recently been hurting, Cathie Wood mentioned: “We do not believe what is going on now is unhealthy, in fact, quite the opposite, the bull market is broadening out. It is becoming stronger, this is good news.”
There has been a clear rotation into value and away from growth with the recent rising of yields. The question now becomes, will inflation rise and for how long? In the webinar, Cathie Wood stated she believes May and June are when we should see the peak inflation levels.
With that being said, ARK understands that there is an apparent rush into value-related areas such as financials, cyclicals, and energy. However, financials and energy are the two areas that are set to be most affected by innovation according to ARK.
Cathie Wood said: “I think there’s a minefield out there in many of the value spaces because of innovation, and we believe financials and energy are likely to be two of the most disruptive spaces or sectors in the market thanks to innovation.”
Credit Suisse still unloading Discovery shares
Credit Suisse today sold 19M of the company’s Class A (NASDAQ:DISCA) shares and 22M Class C (NASDAQ:DISCK) shares.
According to Bloomberg, the 19M Class A shares were offered at $38.40-$39.60, a maximum discount of 1.9% to Tuesday’s closing price, and the 22M Class C shares were offered at $32.35-$33.75, a maximum discount of 3%.
Palantir (NYSE:PLTR) shares closed up 8.9% Tuesday as the company prepares for its Double Click demo event, which kicks off at 11 AM ET.
The event, the first in a series of Double Click demos, will focus on the use of Palantir’s Foundry software in the life sciences and industrials verticals.
Palantir customers in those verticals include Merck, 3M, PG&E, and the NHS.
What else is happening…
Procter & Gamble (NYSE:PG) lifts dividend by 10%.
QuantumScape (NYSE:QS) stock viewed as potential EV winner.
Moderna (NASDAQ:MRNA) says its COVID-19 vaccine has lasting efficacy.
Prudential Financial (NYSE:PRU) may sell retirement business for $2B-plus.
Sasol (NYSE:SSL), Toyota (NYSE:TM) team up for green hydrogen mobility ecosystem.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Import/Export Prices
9:15 Fed’s Kaplan Speech
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
12:00 PM Jerome Powell Speech
2:00 PM Fed’s Beige Book
2:30 PM Fed’s Williams Speech
3:45 PM Fed’s Clarida Speech
4:00 PM Fed’s Bostic: “Redesigning Cities to Tackle Systemic Racism”
6:05 PM Fed’s Kaplan Speech
Good morning. Happy Tuesday.
The Asian/Pacific markets closed mixed. South Korea, India and New Zealand did well; China, Hong Kong, Thailand and the Philippines were weak. Europe, Africa and the Middle East are currently mixed. Denmark, South Africa, Finland, Norway and the Czech Republic are up; the UAE, Hungary, Spain and Saudi Arabia are down. Futures in the States point towards a flat open for the cash market.
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The dollar is up slightly. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Inflation sticker shock
The market is expecting Q2 to be the show-me quarter for economic data, where the numbers confirm the substantial economic progress baked into the run-up for the S&P (NYSEARCA:SPY) to record levels. But Wall Street is also concerned about an unwelcome side-effect of the comeback: a jump in inflation.
The Labor Department will release the March consumer price index at 8:30 AM ET, with a big rise expected in the annual headline number. Economists expect the CPI to rise 0.5% for the month, with the core CPI, ex food and energy, up 0.2%, both 0.1 percentage point higher than February. Year over year, the CPI is forecast to be 2.5%, up from 1.7%, with the core rate at 1.5%, up from 1.3%.
Economists say that inflation numbers are expected to have a kind of sticker-shock effect in the coming months because of base effects. The year-over-year numbers will appear to be large because the comparable 2020 months were at the heart of the economic shutdown.
There are also fundamental concerns, though, with supplier demand outstripping supply, as seen in the ISM numbers, heightening concerns about bottlenecks, that, and pent-up demand for services, could find its way into retail prices.
The March PPI raised some eyebrows last week. Wholesale prices jumped 1%, double expectations, while the Core PPI rose 0.7%, well above the consensus of 0.2%. The headline annual wholesale inflation rate hit 4.2%. ”This is beyond the base effects,” Allianz adviser Mohamed El-Erian said after the report. “This is something between demand pull and cost push and its something to pay attention to.” ”The ever rising cost of product procurement” is showing up in government numbers, Peter Boockvar of Bleakley Advisory Group says. “The y/o/y jump … is more than base effect as the m/o/m numbers are up sharply too.” That said, the stock and bond markets settled down quickly after an initial reaction to the PPI report.
Controlling the narrative: The Federal Reserve has been keen to tamp down these inflation worries, stressing that the upward pressure on prices would be “transitory”. Also, the White House Council of Economic Advisers published a blog yesterday to deliver the “transitory” message.
Fed speakers have also been at pains to remind the market of its new policy to let inflation run hot for a time to balance persistent inflation below its 2% target.
Fed chief Jay Powell said in his weekend interview that inflation would need to be above 2% for a time, Vice Chairman Richard Clarida said the FOMC would need to see inflation above 2% for “at least a year” to change policy and Dallas Fed President Robert Kaplan says inflation could top 2.5% before settling down.
And the Fed is coming out in force after the CPI to hammer the message home. Four FOMC officials are scheduled to speak today. “Economists and the Fed in general will be less concerned about inflation than the market is,” El-Erian said. The Fed is cognizant that it needs to keep Treasury yields in check on the long end of the curve or risk facing another taper tantrum that would require more aggressive measures like yield curve control.
Of late, the 10-year Treasury yield hasn’t seen the sharp moves that took it up to 1.75%. It’s up 2 basis points this morning to 1.69% (NYSEARCA:TBT) (NASDAQ:TLT). But the trend could still be up.
”We’ve seen the initial rate adjustment with the 10 yr yield moving up 75 bps year to date,” Boockvar tweeted. “Once people realize what we’re seeing is not so transitory, you’ll get another leg up.”
Selling a dead parrot? Market inflation expectations are elevated. The 5-year breakeven rate, the difference between nominal and real Treasury yields, is at decade highs around 2.5%. The 10-year breakeven is at levels not seen since 2013 at around 2.3%.
But while inflation expectations are up, inflation “not so much,” according to David Kotok, CIO at Cumberland Advisors. Looking at the gap in nonfarm payrolls compared to February 2020, down about 10M jobs, and also the years of lives lost due to COVID, there is a “big chunk of aggregate demand” that has to be refilled and inflation pressures won’t show up until the second half of this decade, he told Bloomberg.
”The market isn’t afraid of inflation, this good inflation, this is reflation,” Brian Weinstein, Morgan Stanley Investment Management head of global fixed income, said.
Macquarie analyst Viktor Shvets likens the current concerns about stimulus and rebounding employment-boosting inflation (Phillips Curve) to the expired Norwegian Blue in Monty Python’s Dead Parrot Sketch.
Economics “as a profession seems to be stuck with a dead or non-existent parrot, refusing to accept that unlike 1950s-60s, there are no longer any meaningful trade-offs between inflation, wages and unemployment, and that it is next to impossible to estimate capacity constraints,” Shvets wrote in a note.
”We do not anticipate that an inflationary pick-up (mostly due to base effect, demand normalization and supply bottlenecks) would be sustainable, and cheap global products (from textiles to mobile phones, and from batteries to cars) would still be available to the US consumers,” he added. “The peak of inflationary and reflationary momentum should pass by the middle of 2022 (Q2).” The peak of headline U.S. CPI is likely to be around 3%, he predicts.
Banks to boast strong capital markets results
As the big banks get set to report earnings, the brighter economic outlook combined with strong capital-markets revenue should lead to bigger credit reserve releases and faster growth in card-related fees in banks’ Q1 earnings, says JPMorgan analyst Vivek Juneja.
Part of the capital markets activity is driven by “extremely high SPAC volumes,” which will boost investment banking fees, Juneja said. Specifically, he expects that Citigroup’s (NYSE:C) fees will be up sharply.
NVIDIA bullish on revenue
NVIDIA (NASDAQ:NVDA) says Q1 total revenue is tracking above its $5.3B guidance due to “broad-based strength” across its end markets.
The company increases its Q1 revenue outlook for its new cryptocurrency mining processors to $150M from the previous $50M estimate. The CMPs were announced in February for Q1 and Q2 releases.
NVIDIA notes that overall demand remains stronger than supplies, which will likely continue throughout the year, but the company expects to have sufficient supplies to support sequential growth beyond the first quarter.
Coinbase futures rise as IPO approaches
Futures that aim to predict a likely stock price for Coinbase (COIN) following its upcoming Nasdaq direct listing were up some 9% Monday, valuing the company at more than $147B.
A futures contract that trades outside the United States on platform German-based FTX was changing hands at $588.98 shortly after 6 p.m. ET. That estimates Coinbase’s market capitalization at roughly $147.25B, as each contract is supposed to represent 1/250-millionth of the company’s value.
Virgin Galactic slumps as Blue Origin readies test flight
Virgin Galactic (NYSE:SPCE) fell 9% yesterday to trade at its lowest level since the middle part of January.
A development of keen interest for Blue Origin is a report that rocket company Blue Origin (BORGN) has secured a temporary flight restriction from the Federal Aviation Agency to conduct a major test flight with its New Shepard spacecraft as soon as Wednesday.
The flight restriction reportedly limits airspace movement above Blue Origin’s test facility in Van Horn, Texas from April 14 to April 17 in order to provide a safe environment for rocket launch and recovery. The test could be one of the last before Blue Origin flies astronauts.
What else is happening…
Bitcoin (BTC-USD) tops $62K to set new record.
Esports Technologies (EBET) boosts IPO price range.
Intel (NASDAQ:INTC) in talks to serve as foundry for auto chip companies.
Uranium prices may be pressured on Cameco (NYSE:CCJ) mine restart.
Morgan Stanley cuts Baidu (NASDAQ:BIDU) stake.
Lilly’s (NYSE:LLY) Tyvyt ‘significantly improves’ overall survival for lung cancer.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:30 Consumer Price Index
8:55 Redbook Chain Store Sales
12:00 PM Fed’s Daly: “Racism and the Economy: Focus on the Economics Profession”
12:00 PM Fed’s George: “Racism and the Economy: Focus on the Economics Profession”
12:00 PM Fed’s Harker Speech
12:00 PM Fed’s Barkin Speech
1:00 PM Results of $24B,10-Year Note Auction
3:00 PM Fed’s Bostic: “Racism and the Economy: Focus on the Economics Profession”
Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were weak. India and Indonesia posted big losses. Japan, China, Hong Kong and Thailand were also weak. Europe, Africa and the Middle East leaned down. Russia did well, but Denmark, Turkey, South Africa, Norway, Israel and Sweden are weak. Futures in the States point towards a down open for the cash market.
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The dollar is down. Oil is up; copper is down. Gold and silver are down. Bonds are flat. Bitcoin is up.
Stories/News from Seeking Alpha…
Shares of Alibaba (NYSE:BABA) are rising in China trading after the government’s decision to fine the company 4% of 2019 revenue allows it to move forward. The State Administration for Market Regulation (SAMR) said Saturday that it had determined that Alibaba had been abusing market dominance since 2015 by forbidding its merchants from using other online e-commerce platforms.
Alibaba said in a statement that it accepts the penalty and “will ensure its compliance with determination.” The $2.75B fine was the highest-ever antitrust penalty imposed by China. But investors are bidding the stock higher, with the fine not material to the company’s finances and the cloud of regulatory action removed.
Shares are up 8% in China. “Despite the record fine amount, we think this should lift a major overhang on BABA and shift the market’s focus back to fundamentals,” Morgan Stanley wrote in a note on Sunday, CNBC reports. “The final ruling leans significantly towards what investors had been considering the best case outcome,” Macquarie says.
Bullish for U.S. techs? U.S. mega-cap tech companies are also facing investigations into their practices, with the Department of Justice filing an antitrust suit against Alphabet’s (GOOG, GOOGL) Google in October, the FTC and state attorneys general filing against Facebook (NASDAQ:FB) in December and the FTC also launching an inquiry into techs over privacy and data protection in December. Last week, DataTrek Research listed tech regulation as one of five scenarios that could be the catalyst for a bear market.
It noted that Alibaba and Tencent (OTCPK:TCEHY) haven’t really underperformed the broader Chinese market, but rather “the Chinese government’s sudden increase in tech sector regulatory scrutiny is hitting overall investor confidence.”
The relatively benign outcome for Alibaba could increase confidence for U.S. Big Tech to weather any political storm from Washington.
The mega-cap stocks enjoyed strong gains last week, led by Apple (NASDAQ:AAPL), which rose 8%. Amazon (NASDAQ:AMZN) and Alphabet each gained more than 6%.
Alibaba also notched a win as authorities declined to demand any divestiture of non-core assets, but the “all clear” may not have been sounded just yet, Seeking Alpha contributor ALT Perspective writes.
“There is no guarantee that Alibaba can make adjustments to the satisfaction of the regulators. SAMR might also find issues with the self-generated compliance reports. Nonetheless, suffice to say, the greatest heat on the company has been alleviated.”
Powell sees ‘inflection point,’ yields dip
Federal Reserve Chairman Jerome Powell sounded a little more optimistic on U.S. economic prospects in his interview with 60 Minutes, but also cautious enough to keep a lid on any pop in Treasury yields.
The economy seems to be at an “inflection point” with “strong growth” and employment prospects starting “right now,” he said.
Private forecasters are seeing between 6% and 7% GDP growth this year, with the growth in H2 being very strong.
That’s not to say the Fed’s key interest rate will be increased any time soon. When asked about the possibility that rates could be increased this year, Powell answered that it’s “highly unlikely” such an action would be taken this year.
“It’s going to take some time” for the part of the economy hurt most by the pandemic — such as restaurants, hotels, and travel — to recover completely and for all of those jobs to return, he said.
Treasury yields are lower in early trading. The benchmark 10-year Treasury yield is down 1 basis point to 1.65%, while the 5-year yield, more closely associated with Fed rate forecasts, is down 1 basis point to 0.86%.
Stock index futures are down slightly. European markets are down across the board, showing little enthusiasm for the reopening moves in England, which includes shops, gyms and pub gardens.
Powell also said the collapse of Archegos Capital Management raised concerns about one firm causing so much damage, but he didn’t think it raised questions about overall financial stability. “We’re determined to understand what happened and make sure that whatever happened doesn’t happen again,” he said.
Microsoft sets sights on Nuance
Microsoft (NASDAQ:MSFT) is in advanced talks to buy Nuance Communications (NASDAQ:NUAN), Bloomberg reports. Those talks could value the company at $56/share.
Nuance closed Friday at $45.58, implying about a 23% premium. A deal could come as soon as this week, according to the report.
Nuance uses artificial intelligence solutions to offer speech recognition and natural-language interfaces through a variety of fields, particularly medicine. It has a market capitalization of about $13B.
A streaming drought?
With the COVID-19 pandemic bringing previously unseen levels of streaming entertainment consumption, along with a corresponding slowdown/shutdown of content production while new entrants continued to launch their services, the question arose in some quarters whether the fat pipe of new content might finally run a bit thinner.
We may be there, Next TV suggests. “It’s fair to say the content drought is here,” says Kasey Moore, editor of online guide What’s on Netflix.
He says the number of original series episodes and movies debuting on Netflix (NASDAQ:NFLX) is down 12% year-to-date vs. 2020. New programming additions (of any type) are down by more than half: 40 this month vs. 83 in April 2020.
And Bloomberg’s Lucas Shaw notes that aside from HBO Max’s (NYSE:T) release of Generation in March, its other March offerings were a recut film (Zack Snyder’s Justice League), two documentaries and Godzilla vs. Kong, which was finished before the pandemic began. That’s down significantly from HBO’s production over the same period in 2020. Meanwhile, Hulu (NYSE:DIS) had no originals for March, and Amazon Prime Video’s (AMZN) biggest release was another closed-cinema unload: Coming 2 America.
Cathie Wood answers Elon Musk
ARK Invest CEO Cathie Wood tweeted an answer to Tesla (NASDAQ:TSLA) CEO Elon Musk, who asked her last Monday on Twitter: “What do you think of the unusually high ratio of the S&P market cap to GDP?”
Wood, who runs the ARK Innovation ETF (NYSEARCA:ARKK), along with other managed funds, looked to historical precedents and pointed to deflationary forces present today.
“‘This time is different’ are dangerous words in forecasting markets. Most forecasters use post World War II history as their guide,” she wrote in a multi-post answer “On that basis, never has the equity market been higher relative to GDP. In the late 1800’s, however, it seems to have been 2-3 times higher.”
What else is happening…
Regeneron (NASDAQ:REGN)/Roche’s (OTCQX:RHHBY) antibody cocktail reduces risk of COVID-19 infections.
DiaSorin (OTCPK:DSRLF) agreed to acquire Luminex (NASDAQ:LMNX) for $1.8B.
Aphria (NASDAQ:APHA)-Tilray (NASDAQ:TLRY) merger to capitalize on changing legal landscape for cannabis use in the U.S.
Millennials increased mortgage refinancing activity in February, ICE Tracker says.
Watch iRhythm (NASDAQ:IRTC) after Novitas published updated reimbursement rates.
Lilly’s (NYSE:LLY) Retevmo shows antitumor activity in solid tumors.
Double dose of Spectrum Pharma’s (NASDAQ:SPPI) poziotinib improves tolerability in NSCLC patients.
Today’s Economic Calendar
1:00 PM Results of $38B, 10-Year Note Auction
2:00 PM Treasury Statement