Good morning. Happy Friday.
The Asian/Pacific markets were split. China, Hong Kong, New Zealand, Taiwan and Indonesia did well; Japan, India, Thailand and the Philippines were weak. Europe, Africa and the Middle East are currently mostly down. The UAE is doing well, but the UK, Poland, France, Germany, Switzerland, Spain, Italy and the Czech Republic are weak. Futures in the States point towards a positive open for the cash market.
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The dollar is down. Oil is flat; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
Tax the rich
President Biden is set to announce tax increases on the wealthy as soon as next week to pay for an increase in funding for childcare and education. The proposal, called the “American Families Plan,” would reverse some of former President Trump’s tax cuts from 2017, while the capital gains tax for Americans making over $1M per year could nearly double to 39.6%. Coupled with an added 3.8% tax linked to the Affordable Care Act, that’s a potential 43.4% levy. The new package would also include an increase in the top income tax rate, building on a recent infrastructure proposal to raise the corporate tax rate to 28%.
The news knocked sentiment on Wall Street yesterday, which turned south towards the end of what had been a positive session (unemployment claims hit a pandemic low). All of the major stock indexes ended the day down 1%, though the sentiment didn’t carry into the overnight session, with futures inching up about 0.2%. “It is more of a short-term, knee-jerk reaction,” declared Paul Nolte, portfolio manager at Kingsview Investment Management. Others say the upcoming proposal would be hard to pass in Congress.
Quote: “We’re still finalizing what the pay floors look like,” White House Press Secretary Jen Psaki told reporters, in response to questions about deterring long-term investing. “The president’s calculation is that there is a need to modernize our infrastructure, invest in childcare and early childhood education, and he should propose a way to pay for it.”
“His view is that can be on the backs of the wealthiest Americans, as well as corporations and businesses, who can afford it, and that won’t have a negative impact,” she added. “There are alternative views, and there are proposals that don’t exist yet on how to pay for it. That will be part of the discussion.”
Go deeper: Biden’s proposals on capital gains would only affect the federal rate. Wealthy individuals who live in California and New York, which tax capital gains as regular income at 13.3% and 11.85% (plus 3.88% in NYC), would see total capital gains duties of nearly 60%. Could the changes shake up markets? While the top 1% have always controlled 70% to 80% of stock market value in the U.S., according to the Federal Reserve, the top 10% of households by net worth owned 87.2% of American equities in 2020, the highest level of ownership ever.
Bitcoin decline deepens
Biden’s capital gains proposal also weighed on the price of Bitcoin (BTC-USD), which fell on Thursday for the sixth time in seven sessions. The slide pushed the crypto down as much as 8% to about $50,500, and it fell to the $48,000 level overnight. U.S. investors already face a capital gains tax if they sell the cryptocurrency after holding it for more than a year, and the fast action in alt-coin names like Dogecoin (DOGE-USD), Litecoin (LTC-USD), ZCash (ZEC-USD) – and plenty of others – is drawing comparisons to the late-2017 blow-off top in all cryptocurrencies.
Stats: Yesterday was the first time since 2018 that Bitcoin accounted for less than 50% of total crypto market cap.
Bitcoin futures volumes have soared in recent months, becoming a crucial part of the market that can intensify price swings in the underlying cryptocurrency itself. The quick drop earlier this week reportedly followed a large liquidation in futures contracts, highlighting some of the biggest growing pains for the crypto market.
Other news: One of Morgan Stanley’s newly-offered Bitcoin funds has raised $29.4M from 322 investors just 14 days after opening. That already makes the fund among the most popular private investment vehicles for Bitcoin, but only clients with at least $2M in net worth may invest, and bet sizes are limited to 2.5% of net worth. The average investment in the fund was about $91K.
The scientist who helped develop the Pfizer/BioNTech (PFE, BNTX) vaccine, Dr. Ozlem Tureci, has said that the people who got vaccinated against COVID-19 will likely need a third shot as the immune response against the virus diminishes. Should booster shots be required, the government would likely need to make plans with drugmakers for additional supplies, as well as enhancing the network vaccine distribution.
Quote: “We see indications for this also in the induced, but also the natural immune response against SARS-COV-2,” she told CNBC. “We see this waning of immune responses also in people who were just infected and therefore [it’s] also expected with the vaccines.”
Annual coronavirus vaccinations could mean the jab would become like the seasonal flu shot. Tureci’s views are in line with the comments from Pfizer CEO Alfred Bourla, who also said last week that the people might need a booster shot within six to twelve months of getting fully vaccinated.
By the numbers: Updating the top-line data from their Phase 3 study, Pfizer and BioNTech recently announced that their messenger-RNA-based vaccine had long-term effectiveness of 91% against COVID-19 from seven days through up to six months following the second dose. It also had more than 95% effectiveness against severe disease in the same time frame.
Commodity prices have risen over the last few months, but one in particular has been on a major rip: Wood. Lumber futures (LB1:COM) are used by a variety of traders to lock into prices and hedge against future risks. The contracts are up about 50% this year, currently trading at $1,324.50 per thousand board feet. That’s well above the average prices have been for the past three decades.
There has even been calls for government intervention to help put a lid on prices. In late November, the U.S. Commerce Department lowered duties on Canadian lumber coming into the U.S. by more than half, from 20% to 8.9%. Some have also suggested the Biden administration should further cut tariffs on imports from Canada, which is the top lumber exporter to the U.S.
What’s causing the price jump? Producers shuttered many loads of production last year as the coronavirus pandemic hit, expecting declining demand as the economy shut down. Instead, homebuilding continued at a much faster pace than forecast, while many people began DIY projects while they were stuck at home. Stockpiles of wood also got used up over the course of 2020 and the supply of new lumber is still not there (it takes a while to grow trees).
Outlook: Many expect the work-from-home model, or at least a hybrid model, to continue beyond the pandemic, as droves flee the city for the suburbs or to states where they can afford more space. The current wood shortage also highlights how manufacturing can resurface after the pandemic to stave off bottlenecks in supply. Operations will need to run at full speed to recover much of the lost ground.
What else is happening…
In another first, SpaceX (SPACE) sends crew to ISS on used rocket.
Amazon (NASDAQ:AMZN) to let Whole Foods shoppers pay with their palm.
House Democrats reintroduce bill to lower drug prices.
Solar stocks on fire amid Biden climate plans.
Model Y (NASDAQ:TSLA) tricked into self-driving with empty front seat.
J&J (NYSE:JNJ) vaccine found effective against COVID-19 variants.
Citi (NYSE:C) retail banking units seen fetching $6B – Bloomberg.
Thursday’s Key Earnings
American Airlines (NASDAQ:AAL) -4.5% despite seeing Q2 recovery demand.
AT&T (NYSE:T) +4.2% with wireless and HBO Max strength.
Biogen (NASDAQ:BIIB) -4% due to revenue growth concerns.
Blackstone (NYSE:BX) +3.3% boosted by private equity, real estate gains.
Dow (NYSE:DOW) -6% despite smashing through estimates.
Freeport-McMoRan (NYSE:FCX) -3.2% on set of mixed results.
Intel (NASDAQ:INTC) -2.2% AH following a 20% data center decline.
Mattel (NASDAQ:MAT) +7.6% AH on surging Barbie sales.
Snap (NYSE:SNAP) +4.9% AH showing positive free cash flow.
Southwest Airlines (NYSE:LUV) -1.6% reporting steep losses.
Valero (NYSE:VLO) -2.6% as the Texas storm weighed on earnings.
Today’s Economic Calendar
9:45 PMI Composite Flash
10:00 New Home Sales
1:00 PM Baker-Hughes Rig Count
Good morning. Happy Thursday.
The Asian/Pacific markets leaned did well. Thailand was weak, but Japan, Hong Kong, India, Australia, Malaysia and Singapore were posted solid gains. Europe, Africa and the Middle East are currently mostly up. The Denmark, Poland, France, Turkey, Germany, the UAE, Russia, Greece, Finland, Norway, Hungary, Spain, Italy, Portugal and Austria are doing well. Futures in the States point towards a flat open for the cash market.
Online Course: Masterclass in Trading
The dollar is unchanged. Oil and copper are up. Gold and silver are down. Bonds are mixed. Bitcoin is down.
Stories/News from Seeking Alpha…
President Biden announced his latest steps against climate change today as he convened a virtual climate summit with 41 world leaders. He pledged to cut U.S. greenhouse gas emissions by at least in half by 2030, though the initial proposal will offer broad strokes rather than a detailed breakdown. The target would represent a near-doubling of the U.S. commitment under the 2015 Paris climate agreement, when then-President Obama vowed to slash emissions by 26-28%, compared with 2005 levels.
Bigger picture: The announcement builds on other climate policies Biden has proposed in his first 100 days in office, including a plan to integrate climate risk into the financial system and a $2T infrastructure package. He’s also set to issue an executive order on climate disclosure within the capital markets, a move that could shift investments and allocations in the fossil-fuel and renewables sectors. “Suddenly people are going to be making evaluations considering long-term risk to the investment based on the climate crisis,” said U.S. climate envoy John Kerry.
It may already be happening. Electric vehicle stocks jumped after the latest climate headlines on Wednesday, as well as shares of solar companies. According to Bank of America, 90% of companies in the S&P 500 also now publish sustainability reports, up from 20% in 2011, suggesting the trend has gone mainstream.
Go deeper: Corporate America is warming up to Biden’s new climate target. More than 400 businesses and investors, including Apple (NASDAQ:AAPL), Alphabet (GOOG, GOOGL), Coca-Cola (NYSE:KO), General Electric (NYSE:GE), Unilever (NYSE:UL) and Walmart (NYSE:WMT), have signed an open letter that backed cutting U.S. greenhouse gas emissions by at least 50% below 2005 levels by 2030. Green investing advocate Ceres said the signatories employ a combined 6M American workers across all 50 states and represent more than $4T in annual revenue.
Data and earnings
Stocks closed higher on Wednesday following two days of declines, though futures hugged the flatline for much of the overnight session. Traders are meanwhile looking out for more economic data that could give another snapshot of the ongoing recovery. Small caps are also in focus given the strength seen yesterday, with the Russell 2000 ending the session up 2.4% to log its best day since March 1.
On the calendar: The Labor Department is set to release the latest count for new jobless claims. Expectations are for 617,000, but there could be another surprise, following the pandemic low of 576,000 seen the prior week. Another key report is existing home sales for March. The National Association of Realtors is forecast to show sales of previously owned homes slipping half a percent month-over-month in March to a seasonally adjusted annual rate of 6.19M units.
The earnings parade will also continue, with two DJIA members posting results this morning – chip giant Intel (INTC) and chemical maker Dow (DOW). We’ll also get numbers from American Airlines (AAL), AT&T (T), Biogen (BIIB), Blackstone (BX), Freeport-McMoRan (FCX), Snap (SNAP), Southwest Airlines (LUV) and Valero (VLO).
Commentary: “Significant stimulus, with more coming from the Biden administration, has driven economic forecasts up and might push overall EPS expectations from the $174 consensus projection currently to $180-$185,” Citi’s Tobias Levkovich said in a research note. “We think that equities are reflecting something closer to $190, which suggests that much is already priced in and that any shortfall could cause a meaningful pullback.”
More Archegos fallout
It would have been one of Credit Suisse’s (NYSE:CS) best quarters in history, though it turned out to be one of the worst. Revenue at the Swiss bank soared 31% to $8.3B due to client activity in robust markets, but it logged a net loss of 252M Swiss francs ($275M) due to the Archegos disaster. The damage isn’t done. While Credit Suisse has exited 97% of its trading positions related to the collapse of the investment firm, it still predicts an additional loss in Q2 of around 600M Swiss francs ($655M).
Backdrop: In late March, Archegos defaulted on margin calls from several global investment banks, including Credit Suisse, Nomura, Morgan Stanley and Goldman Sachs. The fund had large, concentrated positions in ViacomCBS (VIAC), Baidu (BIDU) and other companies, but its use of total return swaps helped hide its high exposure from the banks. The derivative contracts exposed the firm to severe losses when the trades went sour, and the news came just weeks after Credit Suisse warned of other major losses. Earlier in March, the bank froze $10B in funds connected to client Greensill Capital, after marketing funds that financed the company’s operations.
Looking to counter the damage, Credit Suisse intends to raise about $2B (through 203M new shares), shoring up capital via convertible notes. That would help lift its common equity Tier 1 capital ratio, or main measure of resilience, back towards 13% (after slipping to 12.2% from 12.9% at the end of December). The bank also cut its dividend and pushed out its heads of risk, investment banking and equities.
Outlook: “The loss we had in Archegos was unacceptable,” Credit Suisse CEO Thomas Gottstein said after the results, but didn’t offer his resignation following the Archegos and Greensill cases. “This is the time for solutions. We do not have a risk culture problem.” Switzerland’s financial regulator, FINMA, still opened enforcement proceedings against the bank over how it handled the recent risks, which could possibly shorten Gottstein’s tenure at the helm. He took over only a year ago after his predecessor, Tidjane Thiam, was ousted from the bank following a spying scandal on a recently departed executive.
TikTok is facing a lawsuit over alleged misuse of children’s information, which is being backed by Anne Longfield, the former children’s commissioner for England. She maintains the social media app has been collecting personal data on millions of children across the U.K. and Europe since May 2018, including phone numbers, videos, locations and biometric information. The app then gives this data to unknown third parties for profit, according to the suit, which is demanding billions of pounds and transparency over what data is collected.
Bigger picture: Longfield is also demanding clarity over what ages the app is meant for (it currently targets people 13 and older). She further cited a government study from Ofcom that showed 44% of 8-12 year olds use the app, calling it a “data collection service that is thinly-veiled as a social network.” TikTok has more than 800M users worldwide, with 100M users in Europe alone.
“Privacy and safety are top priorities for TikTok,” the company responded in a statement. “We believe the claims lack merit and intend to vigorously defend the action.”
Go deeper: This is not the first time TikTok has been in the spotlight over its data practices. Back in 2019, U.S. trade regulators fined TikTok’s parent company, Chinese tech firm ByteDance (BDNCE), $5.7M over allegations of illegally collecting personal information on children under 13. The Trump administration also attempted to force a sale of TikTok’s U.S. operations to an American company – Oracle (ORCL), Walmart (WMT) and Microsoft (MSFT) were interested – citing national security concerns surrounding data security and privacy. Last December, a U.S. district court judge prevented the Commerce Department from imposing the restrictions on TikTok, though the app has been banned in other countries like India.
Gambling or investing?
A new term is hitting financial markets called “swarm trading.” We’ve seen the trend many times over the past year, ranging from the GameStop (GME) and AMC (AMC) short squeeze to the Hertz (OTCPK:HTZGQ) bankruptcy bid-up and Kodak (KODK) craze that preceded it. Other events that did not fare as well was the highly publicized “Doge Day” (DOGE-USD) this week that was supposed to take the crypto to $1. The tactic sees people pile into these names, ignoring fundamentals, technicals and other catalysts, until the last trader is left holding the bag.
Meet the newest target: Greenlight Capital’s David Einhorn cited a deli in New Jersey last week as proof of a “quasi-anarchy” market that’s “fractured and possibly in the process of breaking completely.” The store, located in a Philly suburb called Paulsboro, generated only $35,748 in sales over the last two years, but is publicly listed as Hometown International (OTCPK:HWIN) and valued at over $100M. “The pastrami must be amazing,” Einhorn remarked, as share volumes surged, with swarms of traders adding on the Russian dressing.
“It used to be that people ran away from brewing bubbles, eschewing stocks and other financial assets that seemed massively overvalued or just plain stupid. Nowadays people run towards them,” writes Tracy Alloway at Bloomberg.
The latest: Hometown International was delisted from the OTCQB over-the counter market overnight “for not complying with the rules” and was slapped with a warning label, according to the group’s CEO Cromwell Coulson. The retail trading sensation is also under the microscope, while its effects are being assessed in relation to market quality. Will newly confirmed SEC Chair Gary Gensler, Wall Street’s top cop, make some regulatory moves?
What else is happening…
India records world’s biggest single-day rise in coronavirus cases.
ECB likely to keep policy unchanged, but next steps on watch.
Spider-Man and other Marvel titles are coming to Disney+ (NYSE:DIS).
Apple (NASDAQ:AAPL) launches long-awaited Tile rival called AirTags.
Coming to Vegas… Dish (NASDAQ:DISH) partners with AWS on 5G network.
Pressure on Biden administration to waive COVID-19 vaccine patents.
Mortgage delinquency rate drops to 5.02% in March.
Marvell (NASDAQ:MRVL) closes deal for Inphi (NASDAQ:IPHI) in $10B acquisition.
MKM sees low impact from Apple (AAPL) ad change on Facebook (NASDAQ:FB).
Verizon (NYSE:VZ) -0.4% despite Fios strength, fewer postpaid losses.
NextEra Energy (NYSE:NEE) -3.2% on drop in Y/Y renewables sales.
Halliburton (NYSE:HAL) -3.6% hobbled by a slower growth forecast.
Kinder Morgan (NYSE:KMI) +3.1% AH notching gains from Texas freeze.
Chipotle (NYSE:CMG) +0.6% as online sales topped in-person orders.
Las Vegas Sands (NYSE:LVS) -1% AH posting a 15.6% drop in revenue.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Fed Balance Sheet
Good morning. Happy Wednesday.
The Asian/Pacific markets were very weak. Japan, Hong Kong, South Korea, New Zealand and Singapore suffered teh biggest losses. Europe, Africa and the Middle East are currently mostly down. Poland, Turkey, the UAE, Norway, Portugal, Israel and the Czech Republic are down the most. Futures in the States point towards a down open for the cash market.
BLOG: Many High-Growth Names Have Done Round Trips
The dollar is up. Oil down; copper is up. Gold and silver are up. Bonds are unchanged. Bitcoin is down.
Stories/News from Seeking Alpha…
Coming of age?
Growth worries surrounded Netflix (NFLX) following its earnings report after Tuesday’s close, sending the stock down nearly 9% in AH trading. The streamer only added 3.98M paid net subscribers during Q1, short of its guidance for 6M and consensus forecasts of 6.29M. Despite the headlines, Netflix is turning into a cash cow (reporting net income of $1.71B, or $3.75 a share) and is even returning some of that cash to investors via its first stock buyback plan in nearly a decade.
Bigger picture: Netflix has missed its own subscriber forecasts before and the company has repeatedly warned of a slowdown following a pandemic-fueled expansion, but investors were looking for something else. The company projected net adds of just 1M for the second quarter, meaning it would end the first half of the year nearly 6M subscribers short of where the Street projected it would be by that time. Netflix would also require an addition of nearly 21M subscribers in the second half of 2021 to reach analysts’ year-end target of 229.4M.
In its quarterly shareholder letter, Netflix blamed part of this year’s lag on a “lighter content slate” caused by last year’s pandemic-related production shutdowns. For 2021, the streaming giant is splurging another $17B on content and “we’ll continue to deliver an amazing range of titles for our members.” That includes new seasons of The Witcher and Cobra Kai, and some even expect a new season of the company’s blockbuster series Stranger Things in that period as well.
Outlook: Many rivals are coming after Netflix, including Prime Video (AMZN), Disney+ (DIS), HBO Max (T), Peacock (CMCSA) and Paramount+ (VIAC). But the platform still believes the entertainment market is huge and it has plenty of room to grow. It cautions against comparing services on subscriber figures alone – considering the noise of “bundles, discounts and other promotions” – saying instead the focus should be on engagement and revenue as key performance indicators. However, with millions of Americans getting vaccinated and the economy opening up, the question remains whether people will cut back on their streaming subscriptions for other forms of public entertainment.
Market enthusiasm ebbs
Wall Street notched its first back-to-back decline since late March on Tuesday as a number of factors disrupted the bullish mood seen last week. The declines came during what was forecast to be a bumper earnings season, but sky-high valuations and the lack of catalysts to improve upon lofty expectations may prove to be a stumbling block. “With stock markets, it is often better to travel than to arrive,” said Trevor Greetham, investment strategist at Royal London.
Other concerns are weighing on the market as well, but in this investing atmosphere, those could go away as soon as they come. Dow and S&P 500 futures inched down 0.1% overnight, while contracts linked to the Nasdaq dipped 0.3%.
COVID-19 – Coronavirus cases are soaring across the globe, with a new variant pummeling India with a devastating second wave. That had reopening plays lead the market lower as the State Department said it would increase “do not travel” advisories to 80% of the world’s countries. Some health experts have also suggested that herd immunity may be off the table and are rather talking about control.
Inflation – Pricing pressures were already been seen in the market last week, with the biggest monthly rise in the consumer price index since 2012. Consumer giants have since come out and said they’ll have to raise prices because of higher commodity and input costs. The latest to boost price tags are Procter & Gamble (PG) and Coca-Cola (KO), which unveiled the increases this week along with their Q1 results.
Yields – The rate on the 10-year Treasury crept up another 2 bps overnight to 1.58% and even touched 1.6% on Monday. Traders will keep an eye on an auction today for $24B of 20-year bonds, as a gauge of demand for longer-term government debt. Another $35B auction will be held for 119-day bills.
George Floyd verdict
Fresh calls for police defunding are underway after a jury in Minneapolis found former police officer Derek Chauvin guilty on three charges in the killing of George Floyd. His death in May of 2020 set off massive protests across the nation as many local city councils debated shifting parts of the police’s budget to social services. President Biden also said the conviction was a “giant step forward in the march toward justice in America, but it’s not enough. We can’t stop here.”
Snapshot: In Minneapolis itself, there are currently some defunding proposals that could be on the ballot this November. One from the city council would replace the police department with a department of public safety, which would have divisions like mental health services. Another one would put the police department under civilian control and allow a commission to deal with police misconduct. Mayor Jacob Frey has already redirected $8M from the Minneapolis Police Department to crime prevention programs and mental health crisis response teams, but he kept police staffing numbers at current levels.
While some activists would like to see the reallocation of police resources from enforcement to other types of services, others are calling for the flat out abolition of contemporary police departments. Critics say the steps could lead to more violence and therefore less investment into the affected communities. In turn, that could escalate crime, especially with municipal budgets already strained from the coronavirus pandemic. Other reforms are also being discussed at the Congressional level, such as social programs and accountability for police, along with better education, training and making officers’ jobs better defined.
Investing sphere: “Prison stocks have continued to decline, even as REITs in general are rebounding,” writes Seeking Alpha Marketplace author Ian Bezek. “The Biden Administration will be tough on the sector, while prisons became exposed to lawsuits for potential COVID-19 liabilities at their facilities.” In fact, the industry’s two leaders, CoreCivic (NYSE:CXW) and GEO Group (NYSE:GEO), are off 62% and 50%, respectively, since the “defund the police” slogan became common during the George Floyd protests. Differing trends have been seen in the personal defense and firearm sector, where Smith & Wesson (NASDAQ:SWBI) and Axon (NASDAQ:AXON) have climbed 90% and 100%, respectively, since May 2020.
Amazon (AMZN) is launching a new hair salon in London as a place where “customers can experience some of the leading technology, products, and services in hair care and styling.” Located in the Spitalfields shopping district, Amazon Salon will include augmented reality hair consultations and point-and-learn technology for hair care products. Customers can even use Fire tablets while waiting or receiving hair services, while there’s a “dedicated creative area” for taking pictures after the service.
Quote: “We have designed this salon for customers to come and experience some of the best technology, hair care products and stylists in the industry,” said John Boumphrey, Amazon UK Country Manager. “We want this unique venue to bring us one step closer to customers, and it will be a place where we can collaborate with the industry and test new technologies.”
The two-story, 1,500-square-foot store is currently open to Amazon employees and will become available to the general public in the “coming weeks.” However, there aren’t plans for more locations. The salon is an “experimental venue” for Amazon to showcase products and techs, not a push into a new vertical, though the company did recently introduce a professional beauty section on its U.K. website.
Go deeper: While Amazon has made its name in e-commerce, digital subscriptions and other web services, it has been increasingly focused on physical retail. The company opened its first bookstore in Seattle in 2015 after opening kiosks in shopping malls to sell devices and Amazon-branded accessories. In 2017, it bought popular grocery chain Whole Foods for $13.7B and began to open a number of Amazon Go stores that showcased its cashier-less “Just Walk Out” technology.
What else is happening…
Schumer calls for pot to be decriminalized by next 4/20.
J&J (NYSE:JNJ) will resume vaccine rollout in Europe following EMA review.
Apple (NASDAQ:AAPL) rolls out first iMac redesign in a decade.
Cathie Wood continues to add shares of COIN, sells NVDA and SPCE.
Discord ends deal talks with Microsoft (NASDAQ:MSFT).
European Super League on the brink of collapse.
American Airlines (NASDAQ:AAL) to resume hiring as travel recovers.
Boeing (NYSE:BA) skids on CFO shock retirement, CEO extended.
Google (NASDAQ:GOOG), Apple (AAPL) executives to testify in app store hearing.
Tuesday’s Key Earnings
Abbott Laboratories (NYSE:ABT) -3.6% as 2021 guidance missed estimates.
Johnson & Johnson (JNJ) +2.3% raising outlook and quarterly dividend.
Lockheed Martin (NYSE:LMT) -1.1% following mixed results and forecasts.
Netflix (NASDAQ:NFLX) -8.7% AH on disappointing subscriber numbers.
Philip Morris (NYSE:PM) +2.5% lifting guidance amid strong start to the year.
Procter & Gamble (NYSE:PG) +0.8% maintaining outlook, boosting buybacks.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 20-Year Bond Auction
Good morning. Happy Tuesday.
The Asian/Pacific markets leaned down. Hong Kong, South Korea and the Philippines did well, but Japan, India, New Zealand, Australia and Singapore were weak. Europe, Africa and the Middle East are currently posting big losses. The UK, France, Germany, Russia, South Africa, Finland, Switzerland, Sweden, Norway, Spain, Italy and Austria are very weak. Futures in the States point towards a moderate gap down open for the cash market.
BLOG: False Breakouts Everywhere
The dollar is up. Oil and copper are up. Gold is up; silver is down. Bitcoin is down.
Stories/News from Seeking Alpha…
Up in smoke
Tobacco stocks like Altria (MO) and Philip Morris (PM) are continuing to sell off premarket amid reports of new regulatory efforts by the Biden administration. Under consideration is requiring tobacco companies to lower the nicotine levels of all cigarettes sold in the U.S. to a level at which they are no longer classified as addictive. The move comes as administration officials approach another deadline on whether or not to ban menthol cigarettes.
Bigger picture: The FDA must respond in court by April 29 to a citizen’s petition to ban menthols by disclosing whether the agency intends to pursue such a policy. The Biden administration is weighing whether to move forward on a menthol ban or a nicotine reduction in all cigarettes – or both. The moves are intended to push smokers to either quit or switch to lower-nicotine alternatives such as nicotine gums, lozenges or e-cigarettes, as well as targeting smoking in younger people.
“Any action that the FDA takes must be based on science and evidence and must consider the real-world consequences of such actions, including the growth of an illicit market and the impact on hundreds of thousands of jobs from the farm to local stores across the country,” an Altria spokesman said in response to the deliberations.
Go deeper: Both policies would take years to implement and would likely face a long stretch of legal challenges, but they add to recent government efforts to curb smoking across the globe. New Zealand last week proposed sharply reducing nicotine levels in cigarettes and gradually raising the legal smoking age. A “smoke-free generation policy” could also ban smoking for anyone born after 2004 in a bid to make the country smoke-free by 2025.
While tobacco is out of favor, marijuana is making big inroads. More on International Weed Day below…
Earnings and Doge
Stock index futures are wobbling once again, all down 0.5%, ahead of a big day of earnings from several blue-chip companies. The reports and the outlooks will determine whether recent stock valuations are justified and could provide a forecast of what things will look like for the rest of the year. “The only risk is that expectations across the board are so high, they are going to be very difficult to meet,” explained Seema Shah, chief strategist at Principal Global Investors. “We are getting into territory – both with earnings and economic data – where it will be very difficult to have positive surprises.”
Who is reporting today? Johnson & Johnson (JNJ) is up this morning, and it will likely provide more clarity into its paused vaccine rollout, while defense spending will be analyzed following results from Lockheed Martin (LMT). Other data will provide clues about how the pandemic is still shaping demand. Shares of Procter & Gamble (PG) and Netflix (NFLX) have soared over the past year due to the necessity of home care/cleaning products, as well as stay-at-home entertainment, but we’ll see whether those trends continue as the companies publish their results.
Who already reported? The big banks announced bumper results last week and investors got some more marks on Monday. Coca-Cola (KO) rose after an organic sales beat, while Harley-Davidson (HOG) climbed nearly 10% after topping expectations and a guidance lift. After the bell, United Airlines (UAL) slipped 2% on its fifth straight quarterly loss, while IBM (IBM) rose 3% after returning to revenue growth via cloud strength.
Also on tap for today: It’s 4/20. While there was some pot news – the U.S. House approved a cannabis banking bill – Dogecoin (DOGE-USD) fans are attempting to turn the celebrations into “Doge Day.” Supporters are hoping to see the crypto hit $1, just one week after it was valued at just $0.09 (it has been valued at half a cent for most of its seven-year history). The coin, which started as a meme currency, already hit some milestones that didn’t seem possible, and at $0.40, its market value has already topped $50B. That makes Dogecoin larger than even some blue-chip companies, which are set to report earnings this week.
Global carbon emissions are on track to jump 4.8% this year, according to the IEA, marking the biggest annual gain since 2010’s record-setting increase, when the world was bouncing back from the global economic crisis. A similar situation is occurring now. While the coronavirus pandemic shut many of the world’s largest economies, sending demand for CO2-emitting fuels into the dumpster, recent economic reopenings are changing the energy landscape.
Quote: “This is a dire warning that the economic recovery from the Covid crisis is currently anything but sustainable for our climate,” said Fatih Birol, executive director of the IEA. “Unless governments around the world move rapidly to start cutting emissions, we are likely to face an even worse situation in 2022.”
The report comes as policymakers are under pressure to deliver on promises made as part of the Paris Agreement. The latest report card from the United Nations showed that 75 signatories to the accord – responsible for a third of global emissions – “fell far short” of what is needed to meet the deal’s goals. If those targets were implemented, their combined emissions would fall just 0.5% by 2030 (compared to 2010 levels), which is far lower than the 45% fall in global emissions needed to limit warming to 1.5C.
Go deeper: While the U.S. consumed more renewable energy than coal last year – for the first time since the 1880s – and as Europe’s coal-fired electricity generation “is disappearing or becoming negligible,” attention is turning elsewhere to meet the Paris climate accord. The agreement treats China, the world’s second-largest economy, as a developing nation, granting it more time to lower its emissions. President Biden already dispatched climate envoy John Kerry to China this week, where the two sides discussed the possibility of enhancing Beijing’s climate commitments (the country alone will account for more than 50% of 2021’s new coal use). Biden will also hold a virtual summit on Friday to discuss climate objectives with dozens of world leaders, before global talks are held in Scotland in early November.
Apple (AAPL) is allowing Parler to return to its App Store after banning the conservative social media app following the storming of the U.S. Capitol on January 6. Users had talked about violence on the platform in the days leading up to the attack, including calls to assassinate former Vice President Mike Pence. Apple says it is now satisfied with Parler’s proposed moderation policies, and the app will become available once it releases the updates.
Bigger picture: It’s not yet clear what Parler has agreed to, or how the conservative platform will be moderated, though it previously branded itself as a “free speech” alternative. That meant leaving virtually all moderation decisions up to individuals, collecting almost no user data and excluding content-recommendation algorithms (it shows users all the posts from everyone they follow, in reverse chronological order). Regarding the new changes, interim Parler CEO Mark Meckler said the company had “worked to put in place systems that will better detect unlawful speech and allow users to filter content undesirable to them, while maintaining our strict prohibition against content moderation based on viewpoint.”
Following the attack on The Capitol, Google (GOOG, GOOGL) also removed Parler from its Play Store, while Amazon (AMZN) dropped Parler from its Web hosting service. Parler’s suit against Amazon has so far fared poorly in court (private firms aren’t subject to the First Amendment), while Google has continued to bar Parler from its Play Store. Users can still install the app directly on Android, making the ban far less of a liability.
Outlook: Back in February, Parler said its service had grown to over 20M users (vs. 192M DAUs on Twitter) and would be hosted by SkySilk Inc., which operates out of a Los Angeles area data center. But many that had previously emigrated to the platform continued to post on Twitter (NYSE:TWTR), raising questions of whether Parler will eventually fizzle, complement or replace larger platforms with much bigger audiences. Republican mega donor Rebecca Mercer has also emerged in recent months as Parler’s shadow executive after bankrolling the company after founder John Matze was ousted as CEO.
First controlled flight on another planet
NASA’s Ingenuity helicopter lifted off from the dusty red surface of Mars on Monday, making history with the first powered, controlled flight on another planet. Altimeter data showed the drone climbed to its prescribed maximum altitude of 10 feet and maintained a stable hover for 30 seconds. It then descended, touching back down on the surface of Mars after logging a total of 39.1 seconds of flight.
Fun facts: The helicopter’s twin rotor blades needed to spin at 2,500 revolutions per minute, five times faster than on Earth, due to the thin Martian atmosphere. NASA also hailed the accomplishment as a Wright Brothers moment, with the 4-pound copter even carrying a bit of wing fabric from the Wright Flyer that made similar history at Kitty Hawk, North Carolina, in 1903. That flight lasted 12 seconds.
Ingenuity’s initial flight demonstration was autonomous – piloted by onboard guidance, navigation and control systems running algorithms. It couldn’t be flown with a joystick because the data must be sent to and returned from the Red Planet over hundreds of millions of miles via orbiting satellites and NASA’s Deep Space Network. The project was led by operators at NASA’s Jet Propulsion Laboratory, while other contributors included AeroVironment (AVAV).
Go deeper: NASA’s Perseverance rover touched down with Ingenuity on Feb. 18 and was deployed to the surface of the Jezero Crater on April 3. Over the next three sols, or Martian days, the helicopter team will receive and analyze all data and imagery from the test, and formulate a plan for the second experimental test flight, scheduled for no earlier than April 22. If the helicopter survives the second flight test, the Ingenuity team will consider how to scout interesting targets and expand the flight profile.
What else is happening…
Union claims Amazon (NASDAQ:AMZN) interfered in Alabama warehouse election.
Nvidia’s (NASDAQ:NVDA) deal to buy arm faces U.K. security concerns.
Zuckerberg says Facebook (NASDAQ:FB) is working on a Clubhouse clone.
Oprah Winfrey-backed oat-milk brand Oatly files for IPO.
McDonald’s (NYSE:MCD) announces partnership with K-pop megastars BTS.
PayPal (NASDAQ:PYPL) launches crypto trading on Venmo app.
Exxon Mobil (NYSE:XOM) proposes a $100B carbon capture project.
Musk says Autopilot, FSD not involved in fatal Tesla (NASDAQ:TSLA) crash.
Will Coinbase (NASDAQ:COIN) become the Amazon of crypto?
Today’s Economic Calendar
8:55 Redbook Chain Store Sales
Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets were mixed. China did great; Hong Kong, New Zealand and Thailand did well too. India, Malaysia, Indonesia and the Philippines were weak. Europe, Africa and the Middle East are currently mixed and little changed. Spain is up; Turkey, Greece, South Africa and Norway are down. Futures in the States point towards a down open for the cash market.
My interview with WorldClassPerformer.com
The dollar is down. Oil is flat; copper is up. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Rev up the earnings
Stocks are set to begin today’s session at record highs as trends continue to remain bullish. All three market indexes logged weekly gains last week, with the major banks driving a strong start to the first quarter earnings season. Investors additionally appear to be focusing on the economic recovery despite mounting concerns about new COVID-19 variants, while many of the tech and growth stocks that have long been market favorites showed a resurgence in sentiment.
On tap this week are earnings from a broad swath of Corporate America, including AT&T (T), Coca-Cola (KO), IBM (IBM), J&J (JNJ), Netflix (NFLX) and Lockheed Martin (LMT). Just one week into the season, companies are already beating estimates by a wide margin of more than 84%, according to Refinitiv, which projects Q1 earnings growth will surge 24% from a year earlier. Particular attention this time around will also center around margins. Those will determine whether rising costs are pressuring profits or suggest a buildup of inflation in the economy, but could also signal whether supply chain shortages are affecting companies’ bottom lines. The impacts from the reopening theme are also likely to show up in reports, while stock buybacks are set to soar with many U.S. corporations sitting on a cash hoard.
Overnight, Dow Jones futures dipped 0.2%, while the Nasdaq was ahead by 0.1%. Contracts linked to the S&P 500 inched down 0.1% as traders size up what the deluge of earnings reports may mean for the market.
The bulls: “First quarter earnings are coming in very strong. Looks like we could be up 30% year over year. The earnings recession is over,” said Federated Hermes’ Phil Orlando. “In the second quarter, which will enjoy the full benefit of some of this fiscal stimulus, we could be looking at an earnings growth rate twice that on a year over year basis.” He believes the S&P 500 could hit his year-end price target of 4,500 by July (8%+ upside) and “at the pace the economy is growing and earnings are growing, you know we might get there earlier.”
The bears: “I’m not necessarily convinced that Q1 earnings season is really going to be all that wonderful,” PNC Financial’s Amanda Agati declared. “We’ve seen a lot of those value-oriented stocks, a lot of the lower-quality names, rally pretty hard in anticipation of earnings season. While we think the high bar is likely to be achievable, we’re not really convinced we’re going to see that outsized beat rate that we’ve seen over the last couple of quarters. In our view, Q1 earnings season may unfortunately be ‘buy the rumor, sell the news’ until we get a more meaningful, broad-based acceleration.”
Bitcoin (BTC-USD) has recouped some of its steep losses after sliding to as low as $52,148.98 on Sunday morning, just days after notching an all-time high above $64,800. As of 6:00 a.m. ET, Bitcoin was trading up 2% at $57,271 as the weekend carnage tests the resolve of crypto investors. It follows a big week for the industry, which saw the value of all coins swell to $2.25T due to a frenzy of demand in the runup to Coinbase’s direct listing.
What happened? The number one reason for the plunge was attributed to the crypto frothiness seen last week. Take Dogecoin (DOGE-USD) for example, which soared 400% to hit an all-time high of $0.45 after trading at a fraction of a penny not long ago. Another unverified report on Twitter claimed that the U.S. Treasury was looking into charging several financial institutions with using cryptocurrencies for money laundering. Others blamed the selloff on a near-50% decline in the Bitcoin Hash Rate – which measures the processing power of the Bitcoin network – due to power outages in China.
Meanwhile, Coinbase Global (NASDAQ:COIN) is off 4.2% premarket to $327/share, with some likening the decline to a “hangover” after the hype seen last week. Others cited factors like “excess leverage” due to Coinbase insiders dumping equity following the direct listing. Whatever the case may be, the public debut is forcing more Sell-Side analysts to engage in the crypto space, which could bring more transparency and analysis to the asset class.
Go deeper: The argument over the future of Bitcoin will only accelerate due to the recent selloff. HODLers are seeing another “buy the dip” moment, calling the recent plunge a case of FUD, or the dissemination of fear, uncertainty and doubt. They see crypto as a modern-day store of value and inflation hedge, as well as a decentralized finance network that will be adopted by the masses. On the other side of the coin, opponents fear that a speculative bubble is building, and even if cryptos were to achieve more mainstream acceptance, regulators would tighten oversight of the sector.
Latest on the J&J vaccine
The CDC advisory panel is set to meet this Friday to discuss the next steps for Johnson & Johnson’s (NYSE:JNJ) COVID-19 vaccine, and Dr. Anthony Fauci wouldn’t be surprised if there is a decision that would resume vaccinations. “My estimate is that we will continue to use it in some form. I doubt very seriously if they just cancel it. I don’t think that’s going to happen. I do think that there will likely be some sort of warning or restriction or risk assessment,” he told NBC’s Meet the Press. Meanwhile, in a letter published in The New England Journal of Medicine just before the weekend, three J&J scientists said there wasn’t enough evidence to support a link between its vaccine and blood clots.
Backdrop: Last Tuesday, U.S. health regulators recommended that the use of the J&J’s inoculation be paused “out of an abundance of caution” following reports of six cases of rare brain blood clots in women aged between 18 to 48 (one even died and another is in critical condition). That’s out of some 7.8M people who have received the jab across United States. JNJ’s single-dose shot was developed using an adenovirus vector similar to AstraZeneca’s (NASDAQ:AZN) two-dose vaccine, which has also led to blood clot concerns in Europe.
Later in the week, White House COVID-19 Response Coordinator Jeff Zients said the Johnson and Johnson halt would not have a significant impact on the overall U.S. vaccination program. “We have more than enough supply of Pfizer and Moderna vaccines to continue the current pace of about 3M shots per day,” he told reporters at a press briefing. The country is averaging 3.3M daily vaccine doses administered over the past week, and 3M when counting only Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA).
Was it the right decision? Critics point to the fact that COVID-19 has killed 566,000 Americans, while blood clots from the vaccines have resulted in one death. There are also concerns about vaccine credibility, especially among populations that have so far been hesitant to take it, while some suggest that regulators should have just stopped giving the J&J jab to younger women, who appear to be most at risk of developing the rare blood clots. However, given the fact that the U.S. vaccination can continue at 3M shots per day even without J&J, others are supporting the suspension until more data is available.
Bringing back the world’s biggest IPO?
Ant Group is exploring options for founder Jack Ma to divest his stake in the fintech giant and give up control, Reuters reported, citing meetings with Chinese regulators. The decision would help draw a line under Beijing’s scrutiny of the business after it pulled Ant’s listing in November, which was set to be the world’s largest IPO. Ant denies that a divestment of Ma’s stake has ever been under consideration, but then again, a lot of things related to the crackdown on Ant has been happening behind closed doors.
While Ma only owns a 10% stake in Ant (worth billions) and has stepped down from corporate positions, he retains effective control over the company via related entities, according to Ant’s IPO prospectus. He also has significant influence over e-commerce affiliate Alibaba (NYSE:BABA), which has a one-third stake in Ant.
Divestment options? Ma’s stake could be sold to existing investors in Ant or Alibaba without involving any external entity. Another possibility would be to transfer his stake to a Chinese investor affiliated with the state. Some sources say Ma was told that he would not be allowed to sell his stake to any entity or individual close to him, and would instead have to exit completely.
Thought bubble: Ma’s fight with Chinese authorities is another example of the escalating tensions between the state and China’s private sector as President Xi exerts tighter control over the economy. Ant’s IPO was pulled last year after Ma criticized the Chinese government for tightening financial regulation, but his exit could help clear the way for Ant to revive plans to go public. While Beijing further retaliated with an antitrust investigation, that also wrapped up last week with a $2.75B fine on Ant for “abusing its dominant market position.”
JPMorgan takes role in soccer split
Some major upheaval is in store for the soccer world after Europe’s wealthiest clubs agreed to join a breakaway Super League. The group currently includes 12 elite English, Spanish and Italian teams like Liverpool, Chelsea, Real Madrid, Barcelona and AC Milan. The plan is backed by $6B in debt financing by JPMorgan (NYSE:JPM) and would be the biggest change to the sport in decades.
Bigger picture: The project is being launched as the UEFA was due to sign off on plans for an expanded and restructured Champions League, which currently dominates European soccer. The teams were not on board with the changes for more matches and teams, and had asked UEFA for equal control of the Champions League, like media and sponsorship contracts. Super League teams would also receive more than €350M for participating in the group, which is more than 5 times what they’d earn in the Champions League.
The Super League will see a total of 20 participating clubs, including 15 founding teams and a further five groups that will be able to qualify annually based on their achievements during the previous season. It is slated to begin in August with clubs participating in two groups of 10, with the top three in each group qualifying for the quarter-finals.
Outlook: If the new league materializes, it could supersede the Champions League or completely eliminate it altogether. The Super League deliberately intends to play mid-week, which is the same time as the Champions League, so teams won’t be able to play in both. Skilled clubs will also draw outsized attention, while the plans follow the coronavirus pandemic, when many teams took huge revenue shortfalls in spectator-less matches.
What else is happening…
Two die in fiery Tesla (NASDAQ:TSLA) crash with ‘no one’ driving.
New funding round values Clubhouse at $4B.
Apple Music (NASDAQ:AAPL) pays artists twice as much as Spotify (NYSE:SPOT).
Disney (NYSE:DIS) makes the cover of Barron’s as streaming star.
Succession plan? GameStop (NYSE:GME) CEO Sherman to step down.
U.S. on pace to reach herd immunity in 1.9 months.
Drugmakers go on trial in California over opioid epidemic.
U.S. government issues warning over Peleton (NASDAQ:PTON) treadmills.
SpaceX (SPACE) beats Blue Origin (BORGN) to build NASA lunar lander.
Apple (AAPL) may launch new iPad Pro, iMac models at Spring Loaded event.
Coming up… House floor vote on marijuana banking legislation.
Today’s Economic Calendar
No event scheduled