Top News  Shutterstock Stocks finished a volatile week with a surge into the close Friday, helped by a boost from President Biden's doubling of the U.S. vaccine rollout target and the Federal Reserve's decision to free banks from restrictions on dividends and buybacks. Also, the final consumer sentiment index for March rose to 84.9 from a preliminary reading of 83.0, the highest since March 2020. Stock market gains were relatively broad, with 10 of the 11 S&P sectors closing higher, led by energy as crude oil futures jumped nearly 4%. For the week, the Dow and S&P 500 rose 1.4% and 1.6%, respectively, but the Nasdaq slipped 0.6%. Treasury yields drifted lower on the week but popped on Friday, with the 10-year adding 6 basis points to 1.67%.    | | Top News Shutterstock Stocks finished a volatile week with a surge into the close Friday, helped by a boost from President Biden's doubling of the U.S. vaccine rollout target and the Federal Reserve's decision to free banks from restrictions on dividends and buybacks. Also, the final consumer sentiment index for March rose to 84.9 from a preliminary reading of 83.0, the highest since March 2020. Stock market gains were relatively broad, with 10 of the 11 S&P sectors closing higher, led by energy as crude oil futures jumped nearly 4%. For the week, the Dow and S&P 500 rose 1.4% and 1.6%, respectively, but the Nasdaq slipped 0.6%. Treasury yields drifted lower on the week but popped on Friday, with the 10-year adding 6 basis points to 1.67%. | |
| Global Emerging markets were on watch after Turkish President Recep Tayyip Erdogan sacked another central bank governor a few days after a larger-than-expected interest rate hike. It was the fourth time Turkey's premier fired the head of the country's central bank since taking office in 2014, adding to the drama for both local and foreign investors. The lira responded by tumbling as much as 17% against the dollar on Monday, while the BIST 100 plunged nearly 10%, highlighting how money managers can never be too at ease with monetary policy in Ankara.
Backdrop: Turkey's interest rate currently stands at 19%, which has attracted foreign investors to park their cash in the currency. The lira was at one point the best-performing emerging market currency of 2021, having recovered almost a fifth from a low against the greenback. Naci Agbal, appointed in November, had been raising interest rates to fight an inflation rate running above 15%, and sharply increased the rate last week by 2 percentage points, double what economists expected. That was the final nail in the coffin for Naci, as Erdogan believes in an unconventional approach that higher rates cause inflation rather than prevent it.
Turkey has lost "one of its last remaining anchors of institutional credibility," wrote Phoenix Kalen, director of emerging market strategy at Societe Generale. Local individual investors are likely to stock up on dollars again and foreign investors could sell Turkish assets, she added, warning, "Turkey may soon be headed toward another currency crisis."
Outlook: Turkey already spent billions of dollars to support the lira in 2020 due to the economic shutdowns related to the coronavirus pandemic. Interventions could return again if investors continue to pull funds from developing markets. Sahap Kavcioglu, the newly appointed head of the central bank, has defended similar monetary approaches expressed by Erdogan, and was a member of parliament in AKP from 2015 until 2018. "At this point, it doesn't matter who Agbal's replacement is or what they say, as it's clear that Erdogan is running the show," declared Win Thin, global head of currency strategy at Brown Brothers Harriman. (50 comments) | |
| On The Move Next rip or further selloff? A bit of both. Shares of the video game retailer plunged nearly 12% in after-hours trading on Tuesday, bringing the stock back to the $160 level, following a rise of as much as 10% in the minutes following earnings and a decline of 6.5% during the regular session. Later in the week, the stock climbed another 50%, suggesting volatility is still the name of the game for this "meme stock."
What happened? While the company achieved its first quarterly sales increase in two years, GameStop (GME) missed estimates on both the top and bottom lines. That dose of reality hit sentiment, but the bigger news was a secondary stock offering under consideration. "Since January 2021, we have been evaluating whether to increase the size of the ATM (at-the-market) Program and whether to potentially sell shares of our Class A Common Stock under the increased ATM Program during the course of fiscal 2021, primarily to fund the acceleration of our future transformation initiatives and general working capital needs," GameStop wrote in an SEC filing.
By the numbers: E-commerce sales jumped 175% over the quarter and accounted for more than a third of GameStop's sales during the period. February comparable store sales also increased 23%, thanks to strength in hardware sales worldwide, and GameStop ended the quarter with $635M in cash and restricted cash. While the company is continuing to suspend guidance, it updated fulfillment operations to boost the speed of its delivery and services. The video game retailer also named former Amazon (AMZN) and Google (GOOG, GOOGL) executive Jenna Owens as its new chief operating officer.
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Outlook: Some say GameStop might be too late in the game to insulate itself against long-term industry changes, though others point to turnaround efforts that are underway. Ryan Cohen, the co-founder of Chewy, was recently added to the company's board, while Matt Francis, a former engineering leader at AWS, was brought on as GameStop's first-ever chief technology officer. GME is rated with four Holds and three Sells on Wall Street, but that has never stopped the retail crowd and others from buying in. (
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| Trending Tugs and diggers couldn't immediately dislodge the Ever Given, a massive container ship stuck in the Suez Canal after losing the ability to steer amid high winds and a dust storm. The best chance for freeing the ship may not come until Sunday or Monday, when the tide will reach a peak, but others caution it could take weeks. In response, WTI (CL1:COM) and Brent (CO1:COM) crude prices soared nearly 6% on Wednesday as worries grew over oil shipments. Efforts to free the ship will continue over the weekend during high tide after more dredging operations.
Broader concerns? Supply chains have already been strained by the coronavirus pandemic, and it's been harder for suppliers to get their hands on well-priced shipping rates. If the situation in Suez continues for a significant amount of time, rates may rise along with oil prices. Multinationals could also begin worrying about disruptions to their supply chains, and any imported goods from Asia to Europe will see delays.
Some shipping firms are already re-routing vessels around the southern tip of Africa, which would add roughly a week to the journey. About 12% of global trade and roughly 30% of the world's shipping container volume transit through the Suez Canal, making it one of the world's most important waterways. A rough estimate shows the blockage is costing about $400M an hour, based on calculations from Lloyd's List.
Go deeper: Supply chain disruptions have already been seen across the globe due to pandemic factors like pent-up demand for consumer goods and a growing semiconductor shortage. Difficulties in securing raw materials and other inputs have recently worsened and prompted the Biden administration to mandate a 100-day review of critical product supply chains in the U.S. The executive action issued in February is focused on semiconductors, key minerals and materials, active pharmaceutical ingredients and advanced batteries like the ones used in electric vehicles. (83 comments) | |
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| Events The latest round of Big Tech vs. Congress took place on Thursday in a nearly six-hour virtual hearing with the House Energy and Commerce Committee. The lineup featured the CEOs of Alphabet (GOOG, GOOGL), Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) and started with some big blows. "It is now painfully clear that neither the market nor public pressure will force these social-media companies to take the aggressive action they need to take to eliminate disinformation and extremism from their platforms," Committee Chair Frank Pallone Jr. (D-NJ) said in opening remarks. "And, therefore, it is time for Congress and this Committee to legislate and realign these companies' incentives to effectively deal with disinformation and extremism."
"The [Capitol Hill] attack started and was nourished on your platforms. Your business model itself has become the problem," Pallone continued, adding that the companies in the past have just "shrugged off billion dollar fines." Other representatives also took some jabs. "These platforms are hotbeds of disinformation despite new policies," said committee member Jan Schakowsky (D-IL), while Doris Matsui (D-CA) declared, "Big Tech is handing our children a lit cigarette and they become hooked for life."
Is regulation in the cards? At least two pieces of legislation are in progress, with the "Protecting Americans from Dangerous Algorithms Act" being reintroduced this week. It seeks to narrowly amend Section 230 of the Communications Decency Act, which provides a liability shield for social media companies, by holding platforms liable "if their algorithms amplify misinformation that leads to offline violence." Another bill, called the "Online Consumer Protection Act," could also hold tech companies more accountable.
Outlook: While efforts toward regulating Big Tech under the Trump administration focused on antitrust law and the censorship of views, Democrats have expressed fears over disinformation, hate speech and conspiracy theories. Regulation faces a long road ahead given the economic engines provided by Big Tech, their global reach and lobbying efforts within Washington. The transformation of society's relationship to these companies is also unprecedented, with the products used to manage most of people's professional and private lives, and have only gained in importance during the coronavirus era. (58 comments) | |
| Covid President Biden set a new goal of administering 200M COVID-19 vaccine doses by the end of April, doubling his target for his first 100 days in office. The objective is doable at the current pace of inoculations and may even exceed Biden's new target as manufacturers ramp up production. Johnson & Johnson (JNJ) is poised to sharply increase shipments after its vaccine was given emergency use authorization by the FDA a month ago, while Pfizer (PFE) and Moderna (MRNA) have also steadily increased their production.
"The recovery is really hitting full steam again, and all of the conditions will be in place for a real, explosive liftoff in the summer when hopefully we've reached a higher vaccination threshold," said Julia Pollak, labor economist at ZipRecruiter.
Across the Atlantic: EU leaders clashed over vaccine distribution at a marathon virtual summit on Thursday and failed to settle a fight about supply of the jabs among member states. Austrian Chancellor Sebastian Kurz criticized the allocation of shots, demanding additional supplies to Vienna, while some brought up the vaccine share of poorer Eastern European states. The countries failed to come to an agreement, but pledged to strengthen vaccine export controls and production on EU soil.
Other happenings: A new study, a pre-proof of which was published in the American Journal of Obstetrics & Gynecology, found the mRNA COVID-19 vaccines made by Pfizer and Moderna are safe and effective for pregnant women. Pfizer also started clinical trials of its COVID-19 vaccine on healthy children aged 6 months to 11. They will begin receiving a 10 microgram dose of the vaccine before progressively moving to higher doses, though the option for 3 microgram doses is also available (vaccines for adults require two shots that contain 30 micrograms per dose). (70 comments) | |
| Financials Following the completion of the current round of stress tests, the Federal Reserve Board will end its temporary restrictions on most banks paying dividends and buying back shares after June 30. "The banking system continues to be a source of strength and returning to our normal framework after this year's stress test will preserve that strength," Vice Chair for Supervision Randal Quarles said in a statement. Firms with capital levels above those required by the stress test will no longer have to face the curbs, while banks with capital levels below those required will remain subject to the limitations.
Backdrop: The central bank had prohibited the largest U.S. banks from buying back stock in order to conserve capital as the pandemic tore through the U.S. economy. The full restrictions were set to expire on March 31 after being enacted in June of 2020. Last week, the Fed also announced that the temporary change to its supplementary leverage ratio rule, which was implemented during the coronavirus crisis, would expire at the end of this month.
Go deeper: The Fed had previously allowed banks to restart buybacks in the first quarter, though the banks couldn't return to shareholders more than they have been making in profit over the past year. The latest announcement will provide more clarity for investors and to a financial sector that has become one of the biggest stock market leaders. The group is up 14.7% year to date on the S&P 500, while the SPDR S&P Bank ETF (NYSEARCA:KBE) is more than 20% higher YTD. (35 comments) | |
 U.S. Indices
Dow +1.4% to 33,073. S&P 500 +1.6% to 3,975. Nasdaq -0.6% to 13,139. Russell 2000 -3.1% to 2,216. CBOE Volatility Index -10.% to 18.86.
S&P 500 Sectors
Consumer Staples +3.9%. Utilities +2.8%. Financials +1.%. Telecom -1.5%. Healthcare +2.1%. Industrials +2.2%. Information Technology +2.5%. Materials +2.5%. Energy +3.%. Consumer Discretionary -0.2%.
World Indices
London +0.5% to 6,741. France -0.2% to 5,989. Germany +0.9% to 14,749. Japan -2.1% to 29,177. China +0.4% to 3,418. Hong Kong -2.3% to 28,336. India -1.7% to 49,009.
Commodities and Bonds
Crude Oil WTI -1.1% to $60.73/bbl. Gold -0.6% to $1,731.3/oz. Natural Gas +1.% to 2.559. Ten-Year Treasury Yield -0.6% to 131.63.
Forex and Cryptos
EUR/USD -0.92%. USD/JPY +0.73%. GBP/USD -0.53%. Bitcoin -5.9%. Litecoin -9.1%. Ethereum -6.4%. Ripple +6.1%.
Top Stock Gainers
Dolphin Entertainment (NASDAQ:DLPN) +133%. Support.com (NASDAQ:SPRT) +123%. Wah Fu Education Group Ltd (NASDAQ:WAFU) +113%. Recon Technology (NASDAQ:RCON) +90%. Summer Infant (NASDAQ:SUMR) +67%.
Top Stock Losers
Odonate Therapeutics (NASDAQ:ODT) -84%. Frequency Therapeutics (NASDAQ:FREQ) -75%. GSX Techedu (NYSE:GSX) -55%. RLX Technology (NYSE:RLX) -53%. ViacomCBS (NASDAQ:VIAC) -50%.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section. | |
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