Wall Street Breakfast: What Moved Markets

- U.S. stocks spent most of the week inching up as investors waited for Federal Reserve Chairman Jerome Powell's Jackson Hole speech on the economy, specifically hoping for clues on the Fed's plan to taper asset purchases. That muted activity changed on Friday when Powell said the central bank could start tapering its purchases of Treasury bonds and mortgage-backed securities by the end of the year. In Friday's trading, the Nasdaq advanced 1.2%, the S&P 500 gained 0.9% and the Dow rose 0.7%. For the week, the Nasdaq added 2.8%, while S&P increased 1.5%, and the Dow went up 1.0%. The 10-year Treasury yield fell almost 5 basis points on Friday, but ended the week at 1.31%, up almost 5 basis points from a week ago. Crude oil had a strong week, gaining 10% to $68.72 per barrel. By S&P 500 industry sector, Energy turned in the best performance, rising 4.9%, Financials followed with a 2.8% increase, and Consumer Discretionary drove up 2.7%. The lagging sectors for the week were Consumer Staples, down 1.5%, Utilities, off 0.9%, and Real Estate, falling 0.8%

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Top News Shutterstock U.S. stocks spent most of the week inching up as investors waited for Federal Reserve Chairman Jerome Powell's Jackson Hole speech on the economy, specifically hoping for clues on the Fed's plan to taper asset purchases. That muted activity changed on Friday when Powell said the central bank could start tapering its purchases of Treasury bonds and mortgage-backed securities by the end of the year. In Friday's trading, the Nasdaq advanced 1.2%, the S&P 500 gained 0.9% and the Dow rose 0.7%. For the week, the Nasdaq added 2.8%, while S&P increased 1.5%, and the Dow went up 1.0%. The 10-year Treasury yield fell almost 5 basis points on Friday, but ended the week at 1.31%, up almost 5 basis points from a week ago. Crude oil had a strong week, gaining 10% to $68.72 per barrel. By S&P 500 industry sector, Energy turned in the best performance, rising 4.9%, Financials followed with a 2.8% increase, and Consumer Discretionary drove up 2.7%. The lagging sectors for the week were Consumer Staples, down 1.5%, Utilities, off 0.9%, and Real Estate, falling 0.8%       Outlook A new gig The battle over the gig economy is far from over. Last year, companies like Uber (NYSE:UBER), Lyft (NASDAQ:LYFT), DoorDash (NYSE:DASH), Postmates (POSTM) and Instacart (ICART) sunk $200M into Proposition 22, which exempted them from treating drivers as employees in California. Instead, the app-based businesses promised new protections to workers, such as giving drivers 30 cents a mile driven to account for gas and other vehicle costs, healthcare subsidies for drivers who work 15 hours or more a week and occupational accident insurance coverage while on the job. Fast forward: While California voters ended up passing the measure with an overwhelming majority, a new ruling from California Superior Court Judge Frank Roesch said treating drivers as independent contractors was unenforceable. The effort broke the state constitution by unfairly limiting the power of the Legislature in regards to workers' compensation and collective bargaining. He also declared that Proposition 22 hampered the state legislature's authority and its ability to pass future legislation, which is unconstitutional. Uber, Lyft and other gig companies don't need to immediately change their way of doing business, but the ruling complicates their efforts to preserve their independent worker models. It's also a setback in their years-long fight which culminated in the most expensive ballot measure in the history of California. The companies had hoped to establish a "third type" of employment, in which drivers are treated as contractors but are given more benefits under certain conditions. Response: "We believe the judge made a serious error by ignoring a century's worth of case law requiring the courts to guard the voters' right of initiative," said Geoff Vetter, a spokesman for the companies' Proposition 22 campaign. "This outrageous decision is an affront to the overwhelming majority of California voters." Proponents of the plan are already saying they will appeal the court's decision and the group is fighting to get a similar measure enacted next year in Massachusetts.       Sponsored By World Gold Council Sponsored By World Gold Council Get all the latest insights and research on gold investing with our reports, analysis, and interviews with industry experts. Leverage gold data with our cutting-edge online tools. Discover the strategic advantages of gold. Visit Goldhub from the World Gold Council. Covid Unvaccinated premiums Vaccine mandates are spreading across the U.S., especially after the FDA issued full approval of a jab from Pfizer-BioNTech (PFE, BNTX). The Pentagon on Wednesday even ordered military troops to begin vaccinating immediately and the measures against the unvaccinated are expanding even in the corporate sphere. While some firms have been strict in their requirements, others have taken a lighter tone, like denying fitness rooms, free coffee or other perks. Levies are coming: As the more infectious Delta variant circulates nationwide, the airline known by the same name is taking a more punitive approach toward getting its staff inoculated. Starting Nov. 1, Delta Air Lines (DAL) will raise health insurance premiums for unvaccinated employees by $200 a month, in a move that is reminiscent of what some companies already do for smokers. Delta says the surcharges are to cover higher COVID costs, with the average hospital stay due to the virus costing the carrier $50,000 per person. CEO Ed Bastian also noted that vaccine holdouts represented 100% of hospitalizations. Delta's unvaccinated employees will face other restrictions as well, including indoor masking effective immediately and weekly COVID tests starting Sept. 12. Earlier this year, Delta stopped short of instituting an outright vaccine mandate, requiring only new employees to provide evidence of a jab, unlike rival United Airlines (UAL). By the numbers: 75% of Delta's workforce is already vaccinated against the coronavirus, so it will be interesting to see if the policy has any effect on the 25%, or about 17,000 workers. A $200 drawdown per paycheck a month would result in an annual cost of $2,400 for that employee.       Tech Someone tell Putin Following a year that was marred by some high-profile cyberattacks, including the SolarWinds (SWI) and Kaseya breach, Colonial Pipeline hack, and supply disruption at meatpacker JBS (OTCQX:JBSAY), President Biden is calling in the big boys. The CEOs from Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) headed to the White House on Wednesday afternoon to discuss efforts in beefing up cybersecurity. Following the meeting, which also included top players in the finance and insurance industries, Google (GOOG, GOOGL) and Microsoft (MSFT) pledged a combined $30B over five years to deliver more advanced cyber tools, as well as training hundreds of thousands of Americans in technical fields. Backdrop: Last month, the White House issued a National Security Memorandum that was meant to help the private sector establish new standards in beefing up their cybersecurity strongholds. Given the order's primary objective of defending U.S. critical infrastructure, it makes sense that "infrastructure" will be high up on the list of today's conversation. Reports also suggest that the executives are likely to discuss how software can drive better security in the supply chain. "What I think is more likely, if we're going to end up in a war - a real shooting war with a major power - is going to be the consequence of a cyber breach of great consequence, which is increasing exponentially in terms of capabilities," Biden warned back in July. Cyber stocks are also in focus ahead of today's security summit.

Statistics: According to Check Point Software's (CHKP) Mid-Year Security Report, there were 93% more ransomware attacks in the first half of 2021 than in the same period last year. In addition, the attacks were marked by the rise of "Triple Extortion" ransomware, whereby hackers steal data and threaten to release it unless a payment is made, as well as going after the target's customers or vendors in the same way. IBM estimates data breaches now cost companies $4.24M per incident on average, with costs rising 10% compared to 2020.

     

Real Estate

Eviction friction

Ending protections for millions of Americans who have fallen behind on their rent, the U.S. Supreme Court dissolved the pandemic-related federal moratorium on residential evictions in a 6-3 vote (it was set to run until Oct. 3). A coalition of landlords and real estate associations brought the case against the Biden administration, which had acknowledged that the legal odds of the ban were on shaky ground earlier this month, but said it was worth pursuing as it would allow more time to distribute more than $45B in rental assistance. Disappointed by the latest Supreme Court decision, the White House urged states, local governments, landlords and cabinet agencies to "urgently act" to help stop evictions.

Quote: "It would be one thing if Congress had specifically authorized the action that the CDC has taken. But that has not happened," the court said in an unsigned opinion. "It strains credulity to believe that this statute grants the CDC the sweeping authority that it asserts. If a federally imposed eviction moratorium is to continue, Congress must specifically authorize it."

The eviction moratorium was put in place under the Trump administration during the onset of the pandemic and aimed to shield tenants who missed monthly rent payments from being forced out of their homes (they still owe back rent). It was originally set to expire on Dec. 31, 2020, but Congress stretched the order until late January, and it was then extended several more times under the Biden administration. While the moratorium has protected tenants nationwide, it has also resulted in financial hardships for landlords. Property owners, which say they are losing $13B a month in unpaid rent, are still liable for taxes, insurance and maintenance costs tied to their real estate.

Homebuying is also expensive: Housing prices have only continued to escalate in 2021, driven by historically low interest rates, savings accumulated during lockdowns and a desire for more space as people work from home. That has triggered increased demand, while supply has lagged due to material prices and labor shortages. In fact, the price of the typical U.S. home rose 13.2% over the past year, per Zillow, marking a record rise since the firm started collecting data in 1996. More supply may help put a lid on a prolonged period of price growth, which if left alone might eventually turn into an unsustainable boom that could push activity into reverse.

     

Central Banking

Powell takes the stage

All eyes were on Fed Chair Jerome Powell as he spoke at the central bank's annual economic symposium in Jackson Hole. Powell stuck mostly to the Fed's July meeting minutes in his virtual speech. He stated that the U.S. economy is making progress toward the Federal Reserve's twin goals of full employment and price stability, meaning the central bank is considering reducing its purchases of Treasury bonds and mortgage-backed securities. The Fed will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time. The timing and the pace of the coming reduction in asset purchases won't be a direct signal for the timing of an interest rate liftoff, he noted. That will require a more stringent test

Remarks from the U.S. Federal Reserve's hawkish wing arrived earlier in the week when Dallas President Robert Kaplan said he believes the economic recovery warrants tapering to commence in October, St. Louis's James Bullard called for a start in the fall, while Kansas City's Esther George said a move should be made sometime this year (none of them vote on policy in 2021).

Go deeper: A divergence of opinions among FOMC members was already seen in minutes from the Fed's July meeting, with "most" officials preparing to reduce the $120B in monthly asset purchases this year, though "several" thought the move should wait until 2022. For his part, Powell has said the central bank is "a ways off" from meeting the threshold for tapering. There also might be some other subjects to focus on in Jackson Hole, given this year's topic: "Macroeconomic Policy in an Uneven Economy." In a note last week, HSBC's Steven Major argued that a discussion of income inequality could potentially have an effect on bond yields, saying "economic inequality is one of the longer-run structural drivers that has contributed to rates being so low."

     

U.S. Indices
Dow +1.% to 35,456. S&P 500 +1.5% to 4,509. Nasdaq +2.8% to 15,130. Russell 2000 +5.1% to 2,278. CBOE Volatility Index -11.7% to 16.39.

S&P 500 Sectors
Consumer Staples -1.4%. Utilities -2.1%. Financials +3.5%. Telecom +2.8%. Healthcare -1.2%. Industrials +2.2%. Information Technology +1.4%. Materials +2.6%. Energy +7.3%. Consumer Discretionary +2.6%.

World Indices
London +0.9% to 7,148. France +0.8% to 6,682. Germany +0.3% to 15,852. Japan +2.3% to 27,641. China +2.8% to 3,522. Hong Kong +2.3% to 25,408. India +1.4% to 56,125.

Commodities and Bonds
Crude Oil WTI +10.3% to $68.72/bbl. Gold +2.% to $1,820.3/oz. Natural Gas +14.6% to 4.413. Ten-Year Treasury Yield -0.2% to 133.89.

Forex and Cryptos
EUR/USD +0.85%. USD/JPY +0.05%. GBP/USD +1.08%. Bitcoin +0.4%. Litecoin -3.1%. Ethereum +0.6%. Ripple -4.1%.

Top Stock Gainers
Support.com Inc (NASDAQ:SPRT) +199%. Trillium Therapeutic (NASDAQ:TRIL) +184%. Vinco Ventures Inc (NASDAQ:BBIG) +121%. Takung Art Ltd (NYSE:TKAT) +115%. Gambling.com Group Ltd (NASDAQ:GAMB) +111%.

Top Stock Losers
Cassava Sciences Inc (NASDAQ:SAVA) -44%. Theravance Bio Ord (NASDAQ:TBPH) -41%. Selectquote Inc (NYSE:SLQT) -37%. Owlet Inc (NYSE:OWLT) -37%. Flora Growth Corp (NASDAQ:FLGC) -26%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

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