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Astronomical CEO pay during the pandemic is ‘abuse’: Former Xerox CEO

2021-06-24 10:00:00 by Yahoo Finance Video

Former Xerox CEO Ursula Burns joins 'Influencers with Andy Serwer' to discuss America's wage gap and the fight to raise the federal minimum wage.


Answering the great inflation question of our time

2021-06-19 11:41:53 by Andy Serwer with Max Zahn from Yahoo Finance

August 28, 2020. Piracicaba, SP, Brazil. Preparations to fly a hot air balloon at sunrise.
August 28, 2020. Piracicaba, SP, Brazil. Preparations to fly a hot air balloon at sunrise.
Mauricio Graiki via Getty Images

Prices of everything; a house in Phoenix, a Ford F-150, a plane ticket to New York, have all gone up. That much is true.

Unfortunately pretty much everything else about inflation—a red hot topic these days—is conjecture. And that’s vexing, not just for the dismal scientists (aka economists), but for all of us, because whether or not prices are really rising, by how much and for how long, has massive implications in our lives. Or as Mark Zandi, chief economist at Moody’s Analytics, says: “Inflation is one of the mysteries of economic study and thought. A difficult thing to gauge and forecast and get right. That’s why the risks are high.”

The current debate over inflation really revolves around two questions: First, is this current spate of inflation, just that, a spate—or to use Wall Street’s buzzword of the moment, “transitory,”—or not? (Just to give you an idea of how buzzy, when I Google the word “transitory” the search engine suggests “inflation” after it.) And second, transitory (aka temporary) inflation or not, what does it suggest for the economy and markets?

Before I get into that, let me lay out what’s going on with prices right now. First, know that inflation, which peaked in 1980 at an annualized rate of 13.55%, has been tame for quite some time, specifically 4% or less for nearly 30 years. Which means that anyone 40 years old or younger has no experience with inflation other than maybe from an Econ 101 textbook. Obviously that could be a problem.

As an aside I remember President Ford in 1974 trying to jawbone inflation down with his "Whip Inflation Now" campaign, which featured “Win” buttons, earrings and even ugly sweaters. None of this worked and it took draconian measures by Fed Chair Paul Volcker (raising rates and targeting money supply, as described by Former President of the Federal Reserve Bank of St. Louis, William Poole) to eventually tame inflation and keep it under wraps for all those years.

Until now perhaps. Last week the Labor Department reported that consumer prices (the CPI, or consumer price index) rose 5% in May, the fastest annual rate in nearly 13 years—which was when the economy was overheating from the housing boom which subsequently went bust and sent the economy off a cliff and into the Great Recession. Core inflation, which excludes volatile food and energy prices, was up 3.8%, the biggest increase since May 1992. (For the record, the likelihood of the economy tanking right now is de minimis.)

Used car and truck prices are a major driver of inflation, climbing 7.3% last month and 29.7% over the past year. New car prices are up too, which have pushed up shares of Ford and GM a remarkable 40% plus this year. Clearly Americans want to buy vehicles to go on vacation and get back to work. And Yahoo Finance’s Janna Herron reports that rents are rising at their fastest pace in 15 years.

To be sure, not all prices are climbing. As Yahoo Finance’s Rick Newman points out, prices are not up much at all for health care, education and are basically flat for technology, including computers, smartphones and internet service (an important point which we’ll get back to.)

But that’s the counterpoint really. Americans are obsessed with cars, housing is critical and many of us are experiencing sticker shock booking travel this summer. Higher prices are front and center. Wall Street too is in a tizzy about inflation, and concerns about it and more importantly Federal Reserve policy in response to inflation (see below), sent stocks lower with the S&P 500 down 1.91% this week, its worst week since February.

Given this backdrop, the tension (such as it is) was high when the Fed met this week to deliver its forecast and for Chair Jay Powell to answer questions from the media. Or at least so said hedge fund honcho Paul Tudor Jones, who characterized the proceedings on CNBC as “the most important meeting in [Chairman] Jay Powell’s career, certainly the most important Fed meeting of the past four or five years.” Jones was critical of the Fed, which he believes is now stimulating the economy unnecessarily by keeping interest rates low and by buying financial assets. Unnecessarily, Jones says, because the economy is already running hot and needs no support. The Fed (which is in the transitory camp when it comes to inflation) risks overheating the economy by creating runaway inflation, according to PTJ.

Now I don’t see eye to eye with Jones on this, though I should point out, he's a billionaire from investing in financial markets, and let’s just say I’m not. I should also point out that Jones, 66, is in fact old enough to remember inflation, never mind that as a young man he called the 1987 stock market crash. So we should all ignore Jones at our peril.

As for what the Fed put forth this past Wednesday, well it wasn’t much, signaling an expectation of raising interest rates twice by the end of 2023 (yes, that is down the road.) And Powell, who’s become much more adept at not rippling the waters these days after some rougher forays earlier in his tenure, didn’t drop any bombshells in the presser.

Which brings us to the question of why the Federal Reserve isn’t so concerned about inflation and thinks it is mostly—here’s that word again—transitory. To answer that, we need to first address why prices are rising right now, which can be summed up in one very familiar abbreviation: COVID-19. When COVID hit last spring the economy collapsed, which crushed demand in sectors like leisure, travel and retail. Now the economy is roaring back to life and businesses can raise prices, certainly over 2020 levels.

“We clearly should’ve expected it,” says William Spriggs, chief economist at the AFL-CIO and a professor of economics at Howard University. “You can’t shut down the economy and think you turn on the switch [without some inflation].”

“We had a pandemic that forced an artificial shutdown of the economy in a way that even the collapse of the financial system and the housing market didn’t, and we had a snapback at a rate we’ve never seen before—not because of the fundamentals driving recovery but because of government,” says Joel Naroff, president and chief economist of Naroff Economics.

COVID had other secondary effects on the economy though, besides just ultimately producing a snapback. For one thing, the pandemic throttled supply chains, specifically the shipping of parts and components from one part of the globe to another. It also confused managers about how much to produce and therefore how many parts to order.

A prime example here is what happened to the chip (semiconductor) and auto industries which I wrote about last month. Car makers thought no one would buy vehicles during the pandemic and pared back their orders with chipmakers, (which were having a tough time shipping their chips anyway.) Turned out the car guys were wrong, millions of people wanted cars and trucks, but the automakers didn’t have enough chips for their cars and had to curb production. Fewer vehicles and strong demand led to higher new car prices, which cascaded to used car prices then to car rental rates. Net net, all the friction and slowness of getting things delivered now adds to costs which causes companies to raise prices.

Another secondary effect of COVID which has been inflationary comes from employment, which I got into a bit last week. We all know millions were thrown out of work by COVID last year, many of whom were backstopped by government payments that could add up to $600 a week (state and federal.) These folks have been none too keen on coming back to work for minimum wage, or $290 a week. So to lure them back employers are having to pay more, which puts more money in people's pockets which allows stores for example to raise prices.

Anti-inflation forces

But here’s the big-time question: If COVID was temporary, and therefore its effects are temporary and inflation is one of its effects then doesn’t it follow, ipso facto, that inflation is (OK I’ll say it again), transitory?

I say yes, (with a bit of a caveat.) And most economists, like Claudia Sahm, a senior fellow at the Jain Family Institute and a former Federal Reserve economist, agree. “‘Transitory’ has become a buzzword,” she says. “It is important to be more concrete about what we mean by that. We’re probably going to see in the next few months inflation numbers that are bigger than average, but as long as they keep stepping down, that’s the sign of it being transitory. If we didn’t see any sign of inflation stepping down some, it would’ve started feeling like ‘Houston, we have a problem.’”

To buttress my argument beyond that above "if-then" syllogism, let’s take a look at why inflation has been so low for the past three decades.

To me this is mostly obvious. Prices have been tamped down by the greatest anti-inflation force of our lifetime, that being technology, specifically the explosion of consumer technology. Think about it. The first wave of technology, a good example would be IBM mainframes, saved big companies money in back-office functions, savings which they mostly kept for themselves (higher profits) and their shareholders. But the four great landmark events in the advent of consumer technology; the introduction of the PC in 1974 (MITS Altair), the Netscape IPO of 1995, Google search in 1998, and the launch of the iPhone in 2007 (I remember Steve Jobs demoing it to me like it was yesterday), greatly accelerated, broadened and deepened this deflationary trend.

Not only has technology been pushing down the cost of everything from drilling for oil, to manufacturing clothes to farming, and allowing for the creation of groundbreaking (and deflationary) competitors like Uber, Airbnb and Netflix, but it also let consumers find—on their phones—the most affordable trip to Hawaii, the least expensive haircut or the best deal on Nikes.

So technology has reduced the cost of almost everything and will continue to do so the rest of our lifetime. Bottom line: Unless something terrible happens, the power of technology will outweigh and outlive COVID.

There is one mitigating factor and that is globalism, which is connected to both technology and COVID. Let me briefly explain.

After World War II, most of humanity has become more and more connected in terms of trade, communication, travel, etc. (See supply chain above.) Technology of course was a major enabler here; better ships, planes and faster internet, all of which as it grew more potent, accelerated globalism. Another element was the introduction of political constructs like the World Trade Organization and NAFTA. (I think of the Clinton administration and China joining the WTO in 2001 as perhaps the high-water marks of globalization.)

Like its technological cousin, globalism has deflationary effects particularly on the labor front as companies could more and more easily find lowest cost countries to produce goods and source materials. And like technology, globalization seemed inexorable, which it was, until it wasn’t. Political winds, manifested by the likes of Brexit and leaders like Putin, Xi Jinping, Erdogan, Bolsonaro, Duterte and of course Donald Trump have caused globalism to wane and anti-globalism and nationalism to wax.

The internet too, once seen as only a great connector, has also become a global divider, as the world increasingly fractures into Chinese, U.S. and European walled digital zones when it comes to social media and search for example. Security risks, privacy, spying and hacking of course divide us further here too.

So technology, which had made globalism stronger and stronger, now also makes it weaker and weaker.

COVID plays a role in rethinking globalism as it exposes vulnerabilities in the supply chain. Companies that were rethinking their manufacturing in China but considering another country, are now wondering if it just makes sense to repatriate the whole shebang. Supply chains that were optimized for cost only are being rethought with security and reliability being factored in and that costs money.

How significant is this decline in globalization and how permanent is it? Good questions. But my point here is whether or not "globalism disrupted" is transitory (!) or not, it could push prices up, (in the short and intermediate run at least), as cost is sacrificed for predictability. Longer term I say Americans are a resourceful people. We’ll figure out how to make cost effective stuff in the U.S. It’s also likely that globalism will trend upward again, though perhaps not as unfettered as it once was.

More downward pressure on pricing could come from shifts in employment practices. Mark Zandi points out that “the work-from-anywhere dynamic could depress wage growth and prices. If I don’t need to work in New York anymore and could live in Tampa, it stands to reason my wage could get cut or I won’t get the same wage increase in the future.”

And so what is Zandi’s take on transitory? “What we’re observing now is prices going back to pre-pandemic,” he says. “The price spikes we’re experiencing now will continue for the next few months through summer but certainly by the end of year, this time next year, they will have disappeared. I do think underlying inflation will be higher post-pandemic than pre-pandemic, but that’s a feature not a bug.”

I don’t disagree. To me it’s simple: The technology wave I’ve described above is bigger than COVID and bigger than the rise and fall of globalism. And that is why, ladies and gentlemen, I believe inflation will be transitory, certainly in the long run. (Though I’m well aware of what John Maynard Keynes said about the long run.)

This article was featured in a Saturday edition of the Morning Brief on June 19, 2021. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer

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Influencers with Andy Serwer: David Ricks

2021-06-17 10:00:00 by Yahoo Finance Video

In this episode of Influencers, Eli Lilly Chairman & CEO David Ricks joins Andy to discuss the latest in the pharmaceutical industry, new progress in the fight against COVID-19, and potential groundbreaking advancements for the treatment of Alzheimer’s.


By next summer we'll have enough vaccines to vaccinate the world: Eli Lilly CEO

2021-06-17 10:00:00 by Yahoo Finance Video

Eli Lilly CEO David Ricks joins 'Influencers with Andy Serwer' to discuss progress in the fight against COVID-19.


FDA ‘shifting the bar’ for approval with new Alzheimer’s drug: Eli Lilly CEO

2021-06-16 13:57:11 by Yahoo Finance Video

Eli Lilly CEO David Ricks joins 'Influencers with Andy Serwer' to discuss the FDA's approval of Biogen's new Alzheimer’s drug.


Inflation: Is it transitory or not?

2021-06-15 16:50:36 by Emily McCormick from Yahoo Finance

With the U.S. economic recovery now well under way, one of the most pressing questions for investors, business leaders and policymakers has been whether the price surges that have coincided with accelerating activity will pass. 

The Federal Reserve has so far maintained that inflation will prove "transitory" and begin to ease as the recovery matures and an initial burst of pent-up demand moderates. 

But others are skeptical. 

As vaccinations pick up and social distancing standards roll back, consumers have rushed to spend a record amount of savings built up during the pandemic on traveling, dining out, and generally participating in more in-person activities. Many of the accoutrements that accompany rising mobility — from plane tickets to vehicles to food prices to labor in the services sector — have become increasingly pricey as a result. Supply chain bottlenecks have also generated rising prices for producers across industries, many of whom have sought to pass along these increases to end users. 

Recent data affirmed what many consumers and producers have anecdotally observed in terms of rising prices. Core consumer prices, excluding food and energy, surged in May by 3.8% from a year ago — the most since 1992 — and producer prices excluding food, energy and trade rocketed by a record 5.3% year-on-year. Core personal consumption expenditures – the Federal Reserve's preferred gauge of underlying inflation — also rose at a near three-decade high in April at 3.1%. For years previously, inflation had undershot the Fed's 2% target.

'Team transitory'

Those agreeing with the Fed's "transitory" assessment of inflation have largely focused on the fact that many of the biggest categories of goods and services seeing price increases have been those hardest hit by the pandemic. In other words, the sharp plunges in demand last year are now being met with a commensurate resurgence in demand and prices, which may ultimately drift lower as the distance from last year's lockdowns widens.

Already, some categories have given back some advances from earlier this spring, especially in commodities. Lumber futures, for instance, fell below $1,000 per thousand board feet for the first time since late March earlier this week, as noted by Yahoo Finance's Myles Udland, albeit while still holding at more than double last year's prices.

"I would agree with the Fed that this inflation is going to be transitory," Cheryl Smith, Trillium Asset Management economist and portfolio manager, told Yahoo Finance on Monday. "And I'll point to, for example, lumber prices are down 40% since their high in May. Whenever you have a complex economy with things that take longer to produce than three minutes or even three months, you're going to see spikes as an economy restarts."

"When I think transitory, I think the Fed is really thinking in terms of eight months, nine months, a year. It'll take that long for supply chains to start getting back into shape," she added. "So I think that the Fed is being very appropriate on that wait-and-see."

Others took a similar view. According to Bank of America's June Global Fund Manager Survey, 72% of those surveyed said they believed inflation would be transitory, compared to 23% who said inflation would be permanent. 

"I'm on team transitory, and I think most of the Fed governors are still there," Joshua Lipsky, Atlantic Council GeoEconomics Center director, told Yahoo Finance on Tuesday. “The Fed’s been extraordinarily successful in their narrative—they’ve been consistent.”

'It's longer-term'

However, others think inflation will prove longer-lasting than some policymakers have acknowledged. 

"The continued surge in prices last month was again mostly concentrated in sectors reopening or facing intense supply constraints, which allows the Fed to stick with its 'largely transitory' story for now," Michael Pearce, senior U.S. economist for Capital Economics, wrote in a note published on June 11. "But with signs of cyclical price pressures building and the extremely strong job openings and quits figures pointing to stronger wage pressures, we believe the Fed will eventually have to acknowledge that inflation will remain elevated for much longer."

A number of business leaders also maintained that structurally higher inflation may be here to stay. 

"It's not just the fact that commodity costs are inflating, but it's the pace of that inflation," Clorox (CLX) Chief Financial Officer (CFO) Kevin Johnson said during Deutsche Bank's Global Consumer Conference on June 9. "We've seen a tremendous ramp-up that really started at the beginning of this calendar year. Our view is this is not transitory. And so we're planning as if we're going to be operating in this environment for the better part of our fiscal '22."

"If you think about the backdrop that's created ... you look at the latest GDP forecast showing the U.S. growing somewhere high single digits, low double digits — that hasn't happened in decades," he added. "And then you also look at pretty high government spending. When you put that mix together, that suggests to me that this is not a temporary issue we're going to get through in the next three to four months, but it's longer-term." 

WELLINGTON, NEW ZEALAND - APRIL 15:  A spectator looks on as balloons inflate after poor weather kept pilots grounded during the Park to Paddock Challenge at the Wairarapa Balloon Festival on April 15, 2017 in Greytown, New Zealand. The Wairarapa Balloon Festival is an annual event and this year features two special international balloons - High Kitty from the United States, and Alien Rocket from Canada. The festival runs from 13 - 17 April, 2017.  (Photo by Hagen Hopkins/Getty Images)
Investors, business leaders and policymakers has been whether the price surges that have coincided with accelerating activity will pass.
Hagen Hopkins via Getty Images

3M (MMM) CFO Monish Patolawala similarly noted that the manufacturing conglomerate was "seeing inflation on all sides," from raw material to labor and logistics, according to remarks at UBS's Global Industrials and Transportation Conference earlier this month. And during a company conference presentation, Stanley Black & Decker (SWK) executives also said they're now assuming the inflation they're seeing will continue at least into next year. 

"The demand has not abated and the price increases are sticking," Stanley Black & Decker CEO James Loree said during a UBS conference presentation earlier this month. "We held off on that for a period of time because we weren't sure whether the inflation was transitory, and we didn't want to put our market share and our customers in a place where we all didn't want to be."

"But at this point, we've said that inflation is big enough and is pervasive enough in the market," he added. 

Adding to these concerns are data showing that consumers' expectations for higher inflation are mounting. The Federal Reserve Bank of New York's May Survey of Consumer Expectations showed household expectations for inflation next year rose for a seventh straight month to a record high. And likewise, the University of Michigan's preliminary June sentiment survey showed inflation expectations for next year and the next five years were still elevated compared to prior months.

'Somewhere in the middle'

Others have taken a more middle-ground approach, arguing that it may take more time to ascertain whether price increases do stick. And others noted that price increases could prove more permanent in some categories while ultimately petering out in others.

"I'm going to say I stand somewhere in the middle, but on the side of the Fed is risking getting this wrong," Steve Sosnick, Interactive Brokers chief strategist, told Yahoo Finance. "I think the labor costs tend to be a bit stickier. Commodities go up and down."

"I think that's why you're seeing employers go with signing bonuses or other non-salary type of incentives to get people in," he added. "Because if you give someone a $500 or $1,000 signing bonus, they don't expect another one of those. If you raise salaries by a couple of dollars an hour, that's a sticky cost."

According to the Labor Department's May jobs report, average hourly earnings spiked by a greater-than-anticipated 2% in May over last year, and by 0.5% in May over the prior month. Some economists attributed this in part to fewer lower-wage service sector employees reentering the workforce than in prior months. But others suggested the jump also reflects actual wage increases as employers compete to fill open positions. These wage hikes could in many cases outlast the post-pandemic recovery. 

"The inflation picture seems to be divided into two areas," Omar Aguilar, Charles Schwab chief investment officer of passive equity and multi-asset strategies, told Yahoo Finance on Tuesday. “One is really more related to the supply and demand imbalances … That is mostly driven by supply chain disruptions that happened during the pandemic period as well as significant increases in commodities. Those historically tend to be heavily transitory. As supply and demand start to meet into one place, all of a sudden the price pressures start to go to a normal level."

“The other part [is] related to the labor market and labor growth and the cost of labor,” he added. “And that seems to also be bifurcated into two areas — the service sector and the manufacturing sector. In the manufacturing sector clearly the labor cost is something that is a little easier to adjust with price power … However, in the service sector, which is where we saw the biggest decrease in labor costs prior to 2020, that’s where we actually see those wage growth pressures, and that’s the area that could not be transitory.”

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Fed decision, retail sales: What to know this week

2021-06-13 15:11:32 by Emily McCormick from Yahoo Finance

One of the main focuses for investors this week will be on the Federal Reserve's June policy decision. The central bank's statement and press conference are set to help clarify the path forward for monetary policy as investors contemplate the staying power of higher inflation. A number of key economic data releases are also scheduled for this week, including May retail sales. 

The Fed's monetary policy decision and press conference from Fed Chair Jerome Powell will take place Wednesday afternoon. The focal points for investors will be around commentary about the strength of the economic recovery, and remarks that might suggest when the central bank will begin tapering its crisis-era asset purchase program. Currently, the Federal Reserve is conducting these purchases at a rate of $120 billion per month, with this quantitative easing having served as a key tool the Fed used to provide support and liquidity to the economy during the pandemic. 

Heading into the June meeting, a number of Fed officials suggested it may be time to at least begin discussing tapering. Federal Reserve Bank of Cleveland President Loretta Mester, Philadelphia Fed President Patrick Harker, and San Francisco Fed President Mary Daly have been among those saying the Fed could at least begin "talking about talking about" tapering, given signs of renewed economic activity. 

Others including Federal Reserve Bank of St. Louis President James Bullard, however, have held firm that the economy was "not quite there yet" to warrant serious discussions of policy changes. Powell, for his part, has made clear that central bankers would telegraph their intent to taper before actually beginning the process. 

Recent data have suggested the U.S. economy is inching toward the thresholds necessary to prompt the Federal Reserve to begin tapering, albeit with some distance still to go before triggering such a move. 

The May jobs report showed that more than half a million jobs came back last month and that the unemployment rate dipped to a new pandemic-era low. However, the economy is still more than 7 million jobs short of its February 2020 levels, and joblessness still remains elevated – offering the Fed justification for a still-accommodative tilt to monetary policy. The central bank has targeted reaching maximum employment and price stability, with some flexibility on the latter target to allow for a period of above-target inflation to compensate for years of undershooting.

“The Fed needs to have flexibility. This is true in the past. And it is absolutely true right now. They are going to watch the data, watch the world unfold, and adjust,” Claudia Sahm, senior fellow at the Jain Family Institute and former Federal Reserve economist, told Yahoo Finance. “I think, at this point, markets are starting to figure out what the Fed's plan is. It's a new one. It has some risks attached to it. But they are going to bat for workers, because they have a dual mandate. And we are millions of jobs short.”

FILE - In this Dec. 1, 2020 file photo, Chairman of the Federal Reserve Jerome Powell appears before the Senate Banking Committee on Capitol Hill in Washington.  A Federal Reserve survey has found that the economy was rebounding in late February through early April, helped by billions of dollars in a new round of stimulus payments and the stepped-up rollout of coronavirus vaccines. The new survey released Wednesday, April 14, 2021 showed that the Fed's business contacts around the country were expressing more optimism about the economy's outlook as activity accelerated. (AP Photo/Susan Walsh, Pool)
FILE - In this Dec. 1, 2020 file photo, Chairman of the Federal Reserve Jerome Powell appears before the Senate Banking Committee on Capitol Hill in Washington. A Federal Reserve survey has found that the economy was rebounding in late February through early April, helped by billions of dollars in a new round of stimulus payments and the stepped-up rollout of coronavirus vaccines. The new survey released Wednesday, April 14, 2021 showed that the Fed's business contacts around the country were expressing more optimism about the economy's outlook as activity accelerated. (AP Photo/Susan Walsh, Pool)

On the other hand, rising inflation and price dynamics also make a case for tightening policy, especially if these trends prove long-lasting. Supply chain issues and difficulties finding qualified workers to fill a record number of job openings during the recovery have pushed prices higher across a range of goods for both consumers and producers. Core consumer prices, as measured by the Bureau of Labor Statistics' consumer price index excluding food and energy prices, surged by 3.8% year-on-year for the fastest rise in nearly three decades, though some of this gain came as a result of "base effects" off last year's pandemic-depressed lows. 

And inflation expectations among consumers have risen sharply compared to several months ago, with consumers expecting inflation of 4.0% next year and of 2.8% in five years, according to the University of Michigan's consumer sentiment index. The Federal Reserve, however, has so far reiterated it believes inflationary trends will be transitory and ease once year-over-year comparisons pass the worst points of the pandemic last year. 

"The Fed will likely continue to talk about 'transitory' inflation at next week’s FOMC meeting, but with doubts starting to creep in from various Fed officials we suspect the Jackson Hole Conference in late August could be very interesting," James Knightley, chief international economist at ING, wrote in a note. "This could see a shift in language that really opens the door much wider to a December QE taper announcement." 

"With the economy roaring back, jobs returning and inflation likely to remain higher for longer we continue to see the risks skewed towards an earlier interest rate rise," he added. "The Fed is still saying early 2024, but we think early 2023 is more likely and it could come even sooner." 

Retail sales 

The May retail sales report from the Commerce Department will be among the major economic data reports out next week, offering a look at how consumer spending trends have shifted with the economic recovery now well under way.

Consensus economists expect retail sales will decline by 0.7% on a month-over-month basis. This would be the first monthly drop in retail sales since February, reflecting more moderation after an exceptionally strong 10.7% monthly rise in March. That, in turn, had been aided by the distribution of stimulus checks under Congress's last coronavirus relief package, giving many consumers a short-term boost to spending power.

In April, retail sales came in unchanged on a month-on-month basis. Under the hood, however, some of the categories that had seen some of the strongest rebounds during the reopenings gave back some advances. Clothing and clothing accessories stories, for instance, saw sales drop 5.1% in April over March, though these sales were up by more than 700% on a year-over-year basis, when lockdowns were rampant across the U.S. A similar dynamic played out for sporting good and hobby stores, and food and beverage stores saw sales slow markedly from March.

Other industries saw sales rise more markedly. Auto and other motor vehicle dealers posted a 3.1% increase in sales in April, and sales in that category more than doubled over last year as stay-in-place orders were lifted and mobility picked up. The Bureau of Labor Statistics' May consumer price index showed a 7.3% increase in prices for used cars and trucks, portending what could be another gain in retail sales in this category in May.

Economic Calendar

  • Monday: N/A

  • Tuesday: Retail sales, advanced month-over-month, May (-0.5% expected, 0.0% in April); Retail sales excluding autos and gas, month-over-month, May (0.0% expected, -0.8% in April); Empire manufacturing, June (22.0 expected, 24.3 in May); Producer Price Index, month-over-month, May (0.5% expected, 0.6% in April); Producer Price Index excluding food and energy, month-over-month, May (0.5% expected, 0.7% in April) Producer Price Index, year-over-year, May (6.2% expected, 6.2% in April); Producer Price Index excluding food and energy, year-over-year, May (4.8% expected, 4.1% in April); Capacity Utilization, May (75.1% expected, 74.6% in April); Industrial production, month-over-month, May (0.6% expected, 0.5% in April); NAHB Housing Market Index, June (83 expected, 83 in May); Total Net TIC Flows, April ($146.4 billion in March); Net long-term TIC flows, April ($262.2 billion in March) 

  • Wednesday: MBA Mortgage Applications, week ended June 11 (-3.1% during prior week); Housing starts month-over-month, May (4.5% expected, -9.5% in April); Building permits, month-over-month, May (-0.2% expected, -1.3% in April); Import price index, month-over-month, May (0.8% expected, 0.7% in April); Export price index, month-over-month, May (0.7% expected, 0.8% in April); FOMC rate decision 

  • Thursday: Fed Business Outlook Index, June (30.0 expected, 31.5 in May); Initial jobless claims, week ended June 12 (360,000 expected, 376,000 during prior week); Continuing claims, week ended June 5 (3.499 during prior week); Leading Index, May (1.1% expected, 1.6% in April) 

  • Friday: N/A 

Earnings Calendar

  • Monday: N/A

  • Tuesday: Oracle (ORCL) after market close

  • Wednesday: The Honest Company (HNST), Lennar (LEN) after market close 

  • Thursday: Kroger (KR) before market open; Adobe (ADBE) after market close 

  • Friday: N/A 

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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HRC's Alphonso David has a message for those in power

2021-06-11 07:00:00 by Yahoo Finance Video

Human Rights Campaign President Alphonso David joins 'Influencers with Andy Serwer' to discuss ways we can address issues of diversity and inclusion.


Influencers with Andy Serwer: Alphonso David

2021-06-10 10:00:00 by Yahoo Finance Video

In this episode of Influencers, Andy speaks with Human Rights Campaign President Alphonso David about the ongoing fight for LGBTQ protections, celebrating Pride in 2021 and the road to creating a more equitable America for all.


Florida Gov. DeSantis ‘will lose’ in Supreme Court over anti-LGBTQ law: Alphonso David

2021-06-09 13:06:27 by Yahoo Finance Video

Human Rights Campaign President Alphonso David joins 'Influencers with Andy Serwer' to discuss the recent increase in anti-LGTBQ legislation across the U.S.


Don't expect a 'hot vax summer' for stocks: strategist

2021-06-08 16:56:11 by Jared Blikre from Yahoo Finance

Stocks are grinding higher, with the S&P 500 (^GSPC) approaching record highs and the Nasdaq Composite (^IXIC) at the highest level in one month. But one Wall Street strategist is warning investors that the "hot vax summer" for stocks "might feel a little cold and rocky."

Callie Cox, senior investment strategist at Ally Invest, explained on Yahoo Finance Live that the summer is a historically weak period for stocks. Volume typically trails off as investors leave the office and hit the roads. 

"[W]e could see lower volume in the stock market. And lower volume typically leads to a wandering market, especially with the environment we're in, where investors are kind of looking around the corner and saying, 'what's next? What's the ominous thing on the outlook?' And they're feeling a little more hesitant about putting their money in stocks," she said.

This doesn't preclude market strength or necessarily mean we'll see weakness this summer. Cox pointed out that since 1990, the S&P 500 has risen an average of 0.9% between Memorial Day and Labor Day. But that compares to an average of 3.6% for the months before Memorial Day and 4.2% for the months after Labor Day.

"Stocks have bucked the trend recently, though, with five straight summers of gains (including the S&P 500’s 16% gains last summer). And the market’s path of least resistance is higher," she said. 

The summer slowdown
The summer slowdown

Earlier this year, Cox told Yahoo Finance that year two of a new bull market typically sees more muted returns than those of the first year, which tend to be higher.

Despite the general market strength, investors should still exercise caution. In a separate statement to Yahoo Finance, she writes, "In a (relatively) low-volume environment, bad news tends to hit a hit harder, and small shifts in buying or selling could lead to noticeable market swings. Investors are extra skittish these days, too. We can tell the market’s mindset has changed from 'What could go right?' to 'What could go wrong?,' and that’s led to quick selling on surprise headlines."

It's also possible that under the market's hood, we could see more painful rotation even as the major indices simply wander sideways. "We’ve seen some big sell-offs in certain swaths of the market, though. That could be a stealth correction. If stocks slip, it’s likely that buyers will keep the market afloat. We’ve gone a long time without a significant drop, but there’s just too much interest in stocks at the moment," Cox wrote. 

Keith Bliss, Capital2Markets president, has a slightly more bullish take on U.S. stocks. In a statement to Yahoo Finance, he said, "[W]e still see the longer term bias for equities to be upward. Currently, the major averages are modestly oversold even while some of the internal indicators around breadth remain somewhat healthy. Monetary authorities remain accommodating, interest rates remain low, economies are continuing to recover, and the job market is robust." 

Investors still looking to play the market this summer should "dig for treasure," said Cox. "Stocks rarely fall across the board, and we’ve seen growth stocks and high-flyers get hit unusually hard recently. View pullbacks as opportunities to get stocks on sale, and be intentional about where you put your money. We like defensive sectors like consumer staples and utilities in a flat market. Growth stocks are starting to look more attractive, especially if the market is overreacting to inflation fears."

And it doesn't hurt to stash some cash as well. "Cash gets a bad rap these days, but it helps investors stay agile in a pullback. In a time when markets move faster than ever, it helps to always keep some cash on hand. We all learned that lesson in the great reversal of 2020," she said.

Cash also provides an opportunity to get long stocks on any pullbacks. 

"[I]n times when volume is lower and liquidity is lower, it is smart to prepare for a pullback and not get lulled into a false sense of security. And remember that pullbacks are opportunities. They can feel scary in the moment, but they can also lead to lower prices, especially if you're looking over a longer time frame," Cox said. "It's a really good chance to jump into those stocks you really believe in, especially if you're willing to give it a few years." 

Bliss is also looking to buy on weakness over the short term. "We would be poised to nibble around the margins for any weakness through July and August to be well positioned for a likely acceleration after Labor Day ... [D]espite some inflation (which may be transitory) and some modest political risk, the bias and the trend is higher for equities."

Join Jared Blikre for a special Yahoo Finance Plus webinar with Keith Bliss this Wednesday June 9 @ 2:00-2:45pm ET. Free registration open to all.

Yahoo Finance Plus webinar with Keith Bliss Wednesday June 9 @ 2:00-2:45pm ET

Jared Blikre is an anchor and reporter focused on the markets on Yahoo Finance Live. Follow him @SPYJared


The state of things after Friday's jobs report: Morning Brief

2021-06-07 09:59:49 by Sam Ro from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, June 7, 2021

Good, but with plenty to worry about. As usual.

"The basic story is of an economy that is recovering well, and which can generally find the workers that it needs," UBS's Paul Donovan said on Friday.

With that single sentence, Donovan does a nice job capturing the state of the economy.

And while some economists and policymakers might have been expecting or perhaps hoping for a more robust pace of recovery at this point, most would agree that growth is at least heading in the right direction.

'Good, but not great'

On Friday, we learned U.S. employers added 559,000 jobs in May, a pickup from the 278,000 jobs added in April.

The report wasn't bad, but it unfortunately fell short of the 675,000 number economists were expecting. And the numbers are still a far cry from 1 million initially expected for the April report.

"This was good, but not great," Bank of America economist Michelle Meyer said. Similarly, JPMorgan economist Michael Feroli wrote, "May jobs report is good enough, but not great."

"It’s hard to hate this report, but it’s also hard to love it," Indeed Hiring Lab economist Nick Bunker said. "Adding over a half million jobs in one month is a solid pace of growth, but we will need to keep up this tempo for quite some time to get back to a semblance of the pre-pandemic labor market."

Importantly, however, most economists seem to agree that the shortfall is largely tied to labor supply issues, which is a far better problem than a lack of demand. Indeed, strong demand for goods and services amid the tight labor market explains why prices for things have been heating up.

'Forecasting is hard'

The factors behind labor supply and the demand for goods and services are unusually complicated right now, making any economic data point incredibly difficult to forecast with any accuracy.

After Friday's jobs report, economist Jason Furman tweeted: "The economy is going through 3 massive shocks, which collectively will make all your forecasts wrong because we've never seen anything like it before: 1. Demand shock (fiscal/monetary stimulus, wage gains); 2. Supply shock (vaccinations); 3. Reallocation shock."

The confluence of these forces has rendered conventional forecasting models almost useless.

"Forecasting is hard because this is not a normal economic cycle (so normal models do not work)," UBS's Donovan said. "Past data will be revised significantly. Seasonal adjustment probably is not working—in April, people were behaving like it was the summer. The explosion of business startups is unlikely to be properly captured in the numbers."

And so maybe it's better to attribute "disappointing" data to faulty forecasting models rather than an economy that's not where it should be.

Nevertheless, none of the recent economic data is quite definitive enough to suppress fears that things could go wrong. Another reminder that clarity always comes with hindsight, forcing stock market investors to endlessly climb the so-called "wall of worry."

Then again, there are "always" some big risks that investors in the financial markets will be worried about. And you can bet there will be more big market sell-offs and unexpected economic shocks up ahead, even in markets where stocks usually go up.

By Sam Ro, managing editor. Follow him at @SamRo

What to watch today


  • 3:00 p.m. ET: Consumer credit, April ($20.5 billion expected, $25.8 billion in March)


  • 4:00 p.m. ET: Coupa Software (COUP) is expected to report adjusted losses of 19 cents per share on revenue of $152.33 million

  • 4:05 p.m. ET: StitchFix (SFIX) is expected to report adjusted losses of 25 cents per share on revenue of $510.71 million

ALSO: GameStop earnings, consumer inflation data: What to know this week

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GameStop earnings, consumer inflation data: What to know this week

2021-06-06 14:37:00 by Emily McCormick from Yahoo Finance

This week is set to be a relatively quiet one for investors in terms of economic data releases and earnings reports. Officials from the Federal Reserve will also enter their "blackout period" ahead of their June policy-setting meeting.

Still, new data on consumer price inflation will be of interest, since market participants have been looking for signs that the post-pandemic recovery is generating a surge in prices amid supply chain and labor shortages and booming demand. 

The Labor Department's May consumer price index (CPI) on Thursday will show the latest on these price trends for the average American. Consensus economists are looking for the index to register a 0.4% month-on-month increase after a 0.8% surge in April. And over last year, the headline CPI is expected to jump 4.7%, or by the most since 2008. 

The core CPI, or more closely watched measure excluding volatile food and energy prices, is expected to rise 0.4% month-on-month and 3.4% year-on-year. The latter would mark the greatest jump in nearly three decades. 

"Thursday’s CPI data will be scrutinized after last month’s report sent up a flare on higher inflation," David Donabedian, chief investment officer of CIBC Private Wealth, wrote in an email on Friday. "While the consensus is for a 0.4% monthly increase, the risk is probably to the upside as bottlenecks and other supply constraints push costs higher."

Last month's greater-than-expected surge in the April consumer price index contributed to a 2% selloff in the S&P 500, with concerns over fast-rising and persistent inflation threatening to dampen the growth potential of longer-duration stocks especially. Market participants have also been monitoring inflation data with an eye to its implications for monetary policy, with the Federal Reserve looking for inflation to average above 2% for a period of time before rolling back some of its crisis-era support. 

WASHINGTON, DC - SEPTEMBER 24: Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing on Capitol Hill on September 24, 2020 in Washington, DC. Powell and U.S. Treasury Secretary Steven Mnuchin are testifying about the CARES Act and the economic effects of the coronavirus pandemic. (Photo by Drew Angerer/Getty Images)
WASHINGTON, DC - SEPTEMBER 24: Federal Reserve Board Chairman Jerome Powell testifies during a Senate Banking Committee hearing on Capitol Hill on September 24, 2020 in Washington, DC. Powell and U.S. Treasury Secretary Steven Mnuchin are testifying about the CARES Act and the economic effects of the coronavirus pandemic. (Photo by Drew Angerer/Getty Images)
Drew Angerer via Getty Images

Most Fed officials and outside economists have suggested the jump in inflation reflected in the data for this spring will be transitory, largely reflecting the result of base effects off last year's pandemic-depressed levels. However, consumers have also begun to increasingly expect higher inflation in the future, with this shift in psychology also contributing in part to the Fed's decision-making. In one example, the University of Michigan's final May consumer sentiment index dipped compared to April in part due to concerns that higher inflation would weaken spending power. 

"Shifting policy language and a small rate increase could douse inflationary psychology; it would be no surprise to consumers, as two-thirds already expect higher interest rates in the year ahead," Richard Curtin, chief economist for the University of Michigan's Surveys of Consumers, said in a press statement at the time.

Still, inflation and price stability represents just one prong of the Federal Reserve's dual mandate, with the other being achieving maximum employment. To that end, Friday's May jobs report suggested the economy remained a ways off from the Fed's goals, with U.S. employers adding back just 559,000 payrolls versus the 675,000 expected and leaving the economy still 7.6 million jobs short of pre-pandemic levels. 

"The inflation narrative is secondary for the taper discussion, but it is still a consideration. With inflation pressures rising, the risk assessment has likely shifted a bit," Michelle Meyer, Bank of America U.S. economist, wrote in a note on Friday. "The concern for Fed officials is less about strong core CPI prints and more about the drift higher in inflation expectations coupled with signs of a wage-price push. This can make the temporary gains in inflation more persistent."

GameStop earnings 

Some fundamental news will be coming out this week for investors in GameStop (GME), one of the original names to be swept up in the "meme stock" frenzy at the beginning of this year.

GameStop is set to report fiscal first-quarter results Wednesday after market close, offering an update on the company's business as retail investor interest in the stock remains heightened. 

Consensus analysts expect GameStop will post adjusted losses of 59 cents per share for the three months ended in April, with this loss narrowing from the $1.61 per share reported in the same three months of last year. Revenue is expected to grow 14% to $1.17 billion.

Investors on the Reddit forum r/wallstreetbets pushed up shares of GameStop initially in January, flocking en masse to the heavily shorted stock to force short-sellers to cover their positions and push the stock's price even higher. Shares of GameStop have rallied by more than 1,200% for the year-to-date through Friday's close. 

UKRAINE - 2021/02/05: In this photo illustration a GameStop logo is seen on a mobile phone screen in front of Reddit logo. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
UKRAINE - 2021/02/05: In this photo illustration a GameStop logo is seen on a mobile phone screen in front of Reddit logo. (Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)
SOPA Images via Getty Images

According to data from S3 Partners' Ihor Dusaniwsky, short interest in GameStop totaled $2.99 billion as of Friday's close, with 11.58 million shares shorted for a 20.3% short percent of float. Short sellers in GameStop were down by $294 million last week, he added. 

But in recent weeks, AMC Entertainment (AMC) — another heavily shorted stock — eclipsed GameStop in terms of online interest and in share price appreciation. Shares of AMC have risen by more than 400% over the past one month, compared to a 56% increase in shares of GameStop. And AMC's market capitalization eclipsed that of GameStop last week, with the former's market value jumping above $30 billion. 

The vast majority of the moves in the meme stocks were driven by social media popularity as opposed to traditional measures of stock valuation such as earnings and expected future cash flows. However, some have asserted that there is a fundamental argument to be made for investing in shares of AMC and GameStop, with the consumer-facing, brick-and-mortar businesses benefiting from the same "reopening trade" rotation that has lifted airline, cruise line, leisure stocks and retailers.

Still, most Wall Street analysts remain on the sidelines. Three analysts gave GameStop's shares a sell recommendation and two offered a hold, according to Bloomberg data last week. Likewise, AMC garnered four Sell ratings and five Holds. No analysts rated either stock as a Buy, with the vast majority of analysts suggesting the stocks' prices had outrun the underlying value of the businesses. And last week, major banks including Bank of America, Citigroup and Jefferies tightened rules over which clients could participate in short selling of the meme stocks, in an attempt to limit exposure to the extreme volatility these securities have witnessed recently, Bloomberg reported. 

But given the lasting explosion in meme stocks this year, many have conceded that social media-driven trading represents a paradigm shift in the market.

“This is no longer our grandparents’, or for that matter, our parents' stock market,” Zephyr Market Strategist Ryan Nauman told Yahoo Finance. “Now, investment professionals need to start focusing more on looking at alternative data sets, rethinking their investment thesis to consider this growing cohort of retail investors.”

Others suggested the heightened speculative trading among retail investors may begin to dwindle once more investors are pulled back into workplaces in person and time at home for trading becomes scarcer.

"Participation of the retail investor in U.S. equities has very, very closely followed inversely the COVID timeline. So one of my favorite charts is looking at an Apple mobility index for the U.S., you invert it, and you overlay whatever your favorite measure of retail participation is ... and there is a very striking correlation," Binky Chadha, Deustche Bank chief global strategist, told Yahoo Finance on Thursday. "So I would argue that the participation is following this ... and the thesis is that as markets reopen, retail participation is going to come down."

"We tend to think of it as a flash in the pan as opposed to a change in the trend," he concluded.

Economic Calendar

  • Monday: Consumer credit ($20.000 billion expected, $25.841 billion in March)

  • Tuesday: NFIB Small Business Optimism, May (100.5 expected, 99.8 in April); Trade balance, April (-$69.0 billion expected, -$74.4 billion in March); JOLTS Job Openings, April (8.123 million in March) 

  • Wednesday: MBA Mortgage Applications, week ended June 4 (-4.0% during prior week); Wholesale inventories, month-over-month, April final (0.8% expected, 0.8% in prior print)

  • Thursday: Consumer price index, month-over-month, May (0.4% expected, 0.8% in April); Consumer price index excluding food and energy, month-over-month, May (0.4% expected, 0.9% in April); Consumer price index, year-over-year, May (4.7% expected, 4.2% in April); Consumer price index excluding food and energy, year-over-year, May (3.4% expected, 3.0% in April); Initial jobless claims, week ended June 5 (372,000 expected, 385,000 during prior week); Continuing claims, week ended May 29 (3.771 million during prior week); Household change in net worth, Q1 ($6.93 trillion in Q4); Monthly budget statement, May (-$225.6 billion in April) 

  • Friday: University of Michigan sentiment, June preliminary (84.0 expected, 82.9 in May)

Earnings Calendar

  • Monday: Coupa Software (COUP), StitchFix (SFIX) after market close

  • Tuesday: N/A 

  • Wednesday: RH (RH), GameStop (GME) after market close

  • Thursday: FuelCell Energy (FCEL) before market open; Chewy (CHWY), Dave & Buster's Entertainment (PLAY) after market close

  • Friday: N/A 

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

Read more from Emily:


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Influencers with Andy Serwer: Todd Boehly

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In this episode of Influencers, Andy is joined by Eldridge co-founder and CEO Todd Boehly as they discuss his investment in the LA Dodgers, monetary inflation, and the polarized political environment in Washington.


Does Biden's first summer as president mean a summer stock market rally?

2021-06-01 20:21:02 by Brian Sozzi from Yahoo Finance

The stock market may heat up this summer if for no other reason than it's Joe Biden's first summer as president of the United States. 

BofA strategist Stephen Suttmeier crunched the historical numbers dating back to 1929, and found that the first year of a presidential cycle often brings with it a summer rally in the S&P 500 (^GSPC). Average returns from May (+1.9%), June (+0.49%) and July (+2.28%) have historically been the best three-month stretch for stocks in the first year of a presidency, Suttmeier's data shows. 

No explanation was posited for the historical quirk. But it could be hypothesized that the gains reflect ongoing optimism among investors on a new president's ambitious economic agenda. 

But once the weather begins to turn cooler, investor optimism appears to fade as presidential economic plans are shredded by opponents and kicked down the road. 

"The August-October and September-November are the two weakest three-month periods of the year, which suggest the risk of a fall correction," Suttmeier writes. 

Since 1929, the S&P 500 has dropped in the first year of presidency by an average 2.43% in August. Stocks have fallen about 57% of the time in that month. September isn't much better. The S&P 500 has declined on average 1.38% in September in the first year of a presidency, with declines happening roughly 44% of the time. 

Stocks have historically done well in the first term of a president.
Stocks have historically done well in the first term of a president.
Bank of America

Stocks tended to recover in October (average gain of 0.42%) and go on to notch gains in November (1.87% average increase) and December (1.19% average increase). 

2021 is likely to test the signals inherent in the historical data as the economy is dealing with multiple forces as it tries to recover from the COVID-19 pandemic. First is the headline risk from rising levels of inflation, and what that means to the easy monetary policy provided by the Federal Reserve throughout the pandemic. Investors will unlikely react kindly to any hints this summer by Fed officials of pulling back on ultra-loose monetary policy. 

Meanwhile, there is growing pushback among lawmakers to Biden's $2.3 trillion infrastructure plan that is designed to rebuild the economy from the pandemic. Any smaller plan pushed through Congress by Democrats may unsettle investors banking on a boost to corporate profits from infrastructure. Any tax hikes to fund infrastructure investments may not be welcomed by investors, either. 

"I think within the next 12 months, we are going to be making that shift from an early, mid-cycle economy to a late cycle economy which tends to be a little bit more challenging for equities," said Jefferies Chief Financial Economist Aneta Markowska on Yahoo Finance Live.

If that's the case, there goes the bullish summer for stocks. 

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

What’s hot from Sozzi:

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Best (and Only) Nasdaq ETF for Q3 2021

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Investors who want to own stocks in the technology sector may decide to buy exchange traded funds (ETFs) that track the Nasdaq. When investors refer to the Nasdaq, they typically refer to the tech-heavy Nasdaq Composite Index, which is comprised of more than 2,500 companies. The Nasdaq 100 index is another way for investors to effectively track the broader Nasdaq Composite.


Beware the economic data fog

2021-05-17 09:57:20 by Sam Ro from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, May 17, 2021

Cross-currents make economic data hard to predict and hard to interpret

There's a lot of excitement about the economy as the distribution of COVID-19 vaccines and loosening of restrictions across the country allows more and more people to go about their lives like they did before the pandemic.

And while recent data show how strong demand is right now, a plethora of unusual crosscurrents has made it incredibly difficult for professional forecasters to predict current levels of economic output with a high degree of confidence.

"Forecasting is hard, particularly April," JPMorgan economists acknowledged on Friday.

We've quickly gone from an economy on an unprecedented lockdown triggered by a pandemic to one that's rapidly reopening with the ongoing distribution of vaccines. And that rush of demand for goods and services has also been met with supply chain bottlenecks as it takes time to get suppliers back online. 

Issues on the supply side include labor shortages due to concerns about personal safety, childcare problems, accelerated retirements, workers on furlough awaiting to be recalled by their employers, and potential distortions due to enhanced unemployment benefits.

Let's also not forget the additional spending capacity thanks to stimulus checks and an elevated personal saving rate. Also, tax day was also moved from April 15 to May 17.

"It's really hard to parse through it all and figure out what the consumer is really thinking," said Moody's analyst Charlie O'Shea in an appearance on Yahoo Finance Live last week.

Economic forecasters were juggling all these variables as they predicted retail sales would grow by 1% from March to April. And yet when we learned on Friday that the growth rate was actually 0%, many were quick to conclude this was a disappointment.

"You know, calling it a miss is kind of tough," O'Shea said. "This is just the most unique retail environment I think I've experienced in my career. And that's going back a long time. I don't know that we're going to be able to glean anything meaningful when we start looking at month over month comps or month by month comps, given all the dynamics going on in the economy."

"[I]n truth there were so many cross-currents in April that all forecasts were made with crossed fingers," Pantheon Macroeconomics Ian Shepherdson said.

Atypically uninformative

Credit Suisse economist James Sweeney really drove the challenges of the current environment in a note published following April's U.S. employment report that some forecasters called the biggest disappointment ever.

"Investors are suffering from a data fog: some incoming high-frequency data are atypically uninformative; forecast errors are larger than usual; and unhinged narratives are circulating freely, as observers cherry pick numbers to fit stories," Sweeney said.

"One key question facing investors and policymakers now is about how high US inflation will go and how persistent elevated inflation will be," Sweeney said. "But inflation data are now being thrown higher by base effects, and ubiquitous anecdotes suggest businesses are struggling to hire and in some cases raising wages. US average hourly wage data, which have suffered from pandemic-related composition effects, might give little help signaling wage pressure.

"In the near term inflation and wage data are unlikely to resolve this debate, but perhaps by mid-summer, when stimulus checks are long since sent, clarity could emerge," he added. "For the time being, investors must navigate the fog."

By Sam Ro, managing editor. Follow him at @SamRo

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Optimizing the Virtual Boardroom

2021-05-13 16:26:22 by CorpGov from

By Joan Conley & James Harley, Nasdaq Governance Solutions

It has been a full year since corporate governance teams around the globe had to pivot their organizations’ board meetings from traditional boardrooms to virtual meeting platforms. Public companies everywhere were faced with the challenge of replicating the confidentiality and collegiality of in-person board meetings in a digital environment. As Nasdaq’s corporate governance team navigated an entire board season filled with virtual events and meetings, we found that with the right ideas, tools, people, and support, it is possible to digitize the boardroom without compromising efficiency, confidentiality, or group dynamics. We also learned that there are a number of benefits to hosting board meetings virtually.

Build a Virtual Conference Room Table

It is possible to replicate the experience of sitting at board table in a virtual meeting room by leveraging certain features of video conferencing platforms. With that in mind, look for opportunities to work with your platform provider to customize functionality and meet your organization’s needs. Following are several ways to enhance and implement technology to replicate the in-person board meeting experience as closely as possible.

Freeze the meeting room screen. Video conferencing platforms often have dynamic screen features that automatically shift the view to display the person speaking at any given time. This feature works well for informal meetings and conversations but is not necessarily appropriate to foster a boardroom setting. Freeze the screen to keep the view static during board meetings, so that all board members are visible on screen throughout the entire meeting regardless of who is speaking.

Create a virtual seating arrangement.  To visually replicate a board table in virtual meetings, consider setting up the meeting room to display the presenter and their presentation materials in the center of the screen with meeting participants tiled around them. Place directors at the top of the table (screen) and executives at the bottom to differentiate them.

Customize a virtual background for each meeting participant. It is good practice during virtual meetings for each board member to be visible on video, as it improves engagement.  However, the varied background surroundings of individual participants can be visually distracting and sometimes at odds with a professional atmosphere.  Resolve this issue by creating virtual background images for board meeting participants. Professionally designed, corporate branded backgrounds lend an air of gravitas appropriate to a board-level meeting and eliminate distracting visual clutter. For example, Nasdaq’s corporate governance team created background images for each board meeting participant that displayed the Nasdaq logo and name/date of the meeting.

Color code backgrounds for participants for ease of identification.  To take customized background images a step further, differentiate meeting participants by using one color for board directors, another color for executives and a third color for guest speakers. Color-coded backgrounds make it easy to distinguish at a glance who is in the boardroom during particular discussions and what constituencies they represent. This approach is especially helpful for new directors who have not had the opportunity to attend in-person board meetings.

Utilize a second device to view the meeting materials. In tandem with using a primary device to view the virtual board meeting room, offer directors the option of using a second device, such as an iPad, to log into the board portal and view a full-screen webinar version of the meeting materials and presentations. That way, directors can simultaneously view the virtual board meeting room and a close-up visual of what is being presented—replicating the experience of attending the board meeting in-person as closely as possible. Assign a member of the corporate governance team to facilitate the presentation in the board portal and ensure the display keeps pace with the presenter.

Mitigate Meeting Day Glitches

Have directors join virtual board meetings early. Give your team time to resolve technical glitches by asking directors to join virtual board meetings approximately 15 minutes in advance to conduct audiovisual checks and ensure they have access to meeting materials.

Make it easy for board members to get technical assistance. Staff a board meeting technical support hotline with members of the corporate governance team and technology experts who are familiar with your company’s video conferencing platform, communication platform, and board portal. It’s good practice to open the hotline about two hours prior to every board meeting for any directors who need help downloading the video conferencing platform, uploading and formatting their virtual backgrounds, installing speakers and cameras, or general troubleshooting of connection problems. If possible, keep the hotline open throughout the entire board meeting, so directors have technical support on standby if any issues crop up after the meeting begins. The hotline connection should be separate from the video conferencing platform connection to maintain confidentiality.

Assign roles ahead of time to ensure smooth execution on meeting day. In addition to more prep work, there is a lot more day-of-meeting work for the corporate governance team when executing a virtual board meeting. Plan ahead to be sure there are enough hands on deck to staff the technology hot line, manage the virtual waiting room, run the presentation decks in the board portal webinar, take meeting minutes, and track and moderate questions and comments during the meeting.

Keep It Confidential

Confidentiality of board meeting materials and discussions is always paramount, no matter the venue.  However, it can be harder to preserve confidentiality in a virtual boardroom where participants join from home offices, bedrooms, hotel rooms, or even flexible shared workspaces. Through a combination of equipment, technical support, and gentle reminders, you can ensure that what happens in the virtual boardroom stays in the virtual boardroom.

Equip directors with the right tools. Optimize the virtual meeting experience by equipping board members with high-quality headphones and/or earbuds, a camera, speakers, and a ring light. The headphones in particular help ensure that no one within listening radius of a director’s computer can hear what is being discussed. Issue technology tools such as these with gentle reminders to be vigilant in guarding the privacy and confidentiality of virtual meeting rooms.

Manage conflict of interest with a virtual waiting room.  Confidentiality and conflict of interest management are integral to successful board meeting execution.  It is recommended that any virtual board meeting login for directors should be password protected.  To monitor and control guest presenters to ensure they join the meeting only during their allotted time, you can leverage your video conferencing platform’s “waiting room” functionality to coordinate the flow of guest presenters into and out of the virtual boardroom.  A member of the corporate governance team who is not attending the board meeting should manage the virtual waiting room.  Via chat room or text, the Corporate Secretary can notify the “waiting room manager” throughout the meeting when it is time to admit certain presenters and disable others.  Any executive presenters and guest speakers can join the meeting through the waiting room and conduct their sound checks in there, then remain until they are admitted to the meeting for their presentations.

Screen director and presenter video feeds.  Sound and video checks are a good time to check subtly that directors are following confidentiality guidelines. The waiting room manager can do the same as presenters enter and wait to join the board meeting. If necessary, issue gentle reminders, such as “if you aren’t alone in the house please shut the door to your home office when the meeting starts” or “remember to use your headphones so no one near you can overhear the meeting audio.”

Our most important takeaway from a year of planning and executing virtual board meetings was this:  By creatively leveraging technology to model in-person meetings as closely as possible, the board can continue to operate on all cylinders even in a digital environment.  While executives and board members are no doubt anxious to return to in-person engagement and the connectedness it brings, it is safe to expect that the post-pandemic era will usher in a hybrid board meeting protocol—one that mixes in-person and virtual meeting formats to leverage the advantages of both. In the meantime, virtual board meeting best practices will continue to evolve, and corporate governance professionals will continue to learn from each other as they do.


Joan Conley is a Senior Advisor on Corporate Governance and ESG Programs at Nasdaq. James Harley is a Director at Nasdaq Governance Solutions.



Twitter: @CorpGovernor


Inflation spooks the market

2021-05-13 14:44:51 by Yahoo Finance Video

On Wednesday, inflation data left markets concerned as investors gripped with the idea of higher inflation leading to rate hikes from the Fed. Myles Udland explains how this could be a good thing for corporate profits as consumer demand might be moving faster than expected.


Investing in high growth stocks in the U.S. and Asia during tense times

2021-05-13 11:00:00 by Yahoo Finance Video

Investors are looking to navigate the deteriorating relations between the world’s two largest superpowers — the U.S. and China. Katie Stockton, founder and managing partner of Fairlead Strategies, joins Yahoo Finance’s Jared Blikre to break down the price action and trends behind some of the new opportunities in stocks, bonds and cryptocurrencies, as global economies recover from the COVID-19 pandemic and the U.S. celebrates Asian American and Pacific Islander Heritage Month. Katie explains her top down approach as Jared demonstrates how to leverage the power of Yahoo Finance Plus for technicals, fundamentals and portfolio management. Not a subscriber? Start your free trial to join future webinars live!


A good inflation reading for corporate profits

2021-05-13 10:18:25 by Myles Udland from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Thursday, May 13, 2021

It's all about demand. 

Inflation data published Wednesday left markets spooked. 

Consumer prices rose at the fastest annual pace since 2008 in April, according to the latest data from the BLS, news that sent stocks tumbling with the S&P 500 (^GSPC) falling 2.1% on the day. 

The simplest read on the market's reaction to this data is that higher inflation will lead to earlier rate hikes from the Fed and all else equal higher rates are worse for stocks. This leaves the stocks that have done best — in this case tech stocks — most vulnerable. But in thinking about the "why" driving April's price increases, it becomes less clear that this data is so reflexively negative for the stock market. Janney's chief fixed income strategist Guy LeBas said Wednesday that this data is yet another reflection of what we've covered in the last several editions of the Morning Brief: rising demand

"There just isn't a good historical analog for today's core CPI print in the post-70s era," LeBas said. "I can tell you that what it represents is consumer demand rebounding faster than the economy can create supply in the short term. That's a good thing for corporate profits."

Major sources of the price increase in April included the used car market, lodging away from home, and airfares. Flush consumers looking to move around more and travel is a straightforward re-opening theme.

And as the team at Bank of America Global Research said in a note Wednesday, "more persistent sources of inflation were tamer. Rents and OER both came in at 0.2% mom, which is relatively in line with the recent trend." The firm added that, "medical care inflation was flat as the boost from stimulus around the turn of the year faded."

Prices rising in sectors of the economy that were severely impacted by the pandemic while housing and medical costs remain tame is exactly what Fed officials mean when they say inflation pressures are likely to be "transitory."

At the end of 2020, we argued that the reason for the market's rally amid a global pandemic was driven by the same factor that over the long run always drives stock prices — higher earnings. The ability for firms to exert operating leverage after a recession and also raise prices into a strong demand environment are two positive bottom-line dynamics for corporates today. 

That today's inflationary backdrop should power future earnings growth does not, of course, mean that investors must or should or will price in this dynamic. And as Wednesday's action made clear, the market's interpretation of the most recent inflation data is that higher rates are coming sooner than expected. 

Wall Street economists in our inbox on Wednesday also seemed to agree that even higher inflation readings are coming in the months ahead. 

As those reports stack up, questions about whether the Fed will hold its nerve and still refer to these inflation pressures as "transitory" will only grow louder. How the market handles those data points is anyone's guess. 

But at least for one month, a jarring inflation report still fits cleanly with an economic theme that could not be more clear: this is a demand-driven recovery

By Myles Udland is a reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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CPI +0.8%: Inflation Is Here

2021-05-12 14:27:02 by Mark Vickery from Zacks

Wednesday, May 12, 2021

Certain economic metrics released on a weekly, monthly or quarterly basis have kept the narrative of inflation creep into the economy on its heels. Think back to last Friday, when analysts had been expecting upwards of a million new jobs and we only got a quarter of that. This morning, though Consumer Price Index (CPI) reads do not carry the weight of monthly Employment Situation numbers, they do point straight in one direction: +0.8% on the month. This indicates clear inflation.

April’s CPI was 4x higher than the +0.2% expected, and 20 basis points up from the unrevised +0.6% from March. It set a new all-time high at 266.8 points, which has steadily increased over the past 12 months. Core CPI (subtracting volatile food and gas prices) came in 3x better than expectations: +0.9%, which is also 3x better than the March read. Year over year, CPI headline is +4.2% and core is +3.0%.

Of course, when we look year over year, we’re comparing results from the deepest crater of the pandemic. This is something expected to continue through the spring months; by summer 2020, we had begun to see the first strands of recovery (before the second wave of the coronavirus hit over the fall and winter). But still, +4.2% year-over-year CPI is the highest print since September 2008 — back when everything got shaky ahead of the Lehman Brothers collapse (ask your parents).

Pent-up demand has been expected to make its appearance for a while now, and it has not missed its opportunity for a grand entrance. Used car and truck sales grew 10% month over month — maybe the highest jump on record. Transportation costs gained nearly 3%, and this is with Energy down overall last month. Meaning expect these figures to get even gaudier as other inflation metrics find their way into the discussion. Like next month’s release, for starters.

Markets were already down, in a week getting nosebleeds on valuations for both growth stocks and cyclicals. Both look out of favor mid-week. Inflation means to many market participants one thing: higher interest rates, which will bring the party of “cheaper money for longer” to an end, or at least on the calendar for termination. The Fed continues to assert its dual mission of obtaining full employment and optimum 2% inflation. Though we’re still not officially there yet, these CPI numbers reveal the tea leaves.

Last month’s print on Producer Price Index (PPI), the other shoe dropping in this inflation narrative, went up 1.0%. But tomorrow’s report is expected to garner just +0.3% for April. Are we seeing another ready-made upward surprise in store, or are producers notably lagging the higher price points as they have clearly already passed them along to the consumer? Historically, one always follows the other.

In short: inflation “worries” are real. Although they really don’t need to be worries at all: getting closer to full employment and 2% inflation (the 10-year bond is still 1.65% this morning) is what the Fed wants. That investors should be fearful of this is probably looking at the prism from the wrong angle: it’s not a panic-sell environment, it’s more a “let’s assess where we are” pause. Are your favorite stocks with solid Zacks ranks on sale right now? Maybe it’s time to take another look at them.

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2 important things to remember about bubbles and all-time highs

2021-05-12 14:01:58 by Ethan Wolff-Mann from Yahoo Finance

The S&P 500 has been surfing an all-time high of late, cresting above 4,200, though it’s down around 2% to around 4,130 after a small sell-off. The strong market and inflationary concerns are causing some fear about an overheated economy — and some people are breaking out the “b” word. (“Bubble.”)

But according to analyst after analyst, there are reasons to be bullish about the future, and that maybe investors shouldn’t worry so much about bubbles.

Investors are notorious for sitting out market turbulence only to wait too long, letting big gains pass them by in an attempt to time the market. Doubtless there are many people who pulled money out in March 2020 who are waiting to get back in. That position isn’t hard to understand, of course: The market was roaring as the pandemic raged, which many saw as illogical so didn’t invest.

But the market is about the future, and earnings have exceeded expectations, pushing stocks higher. The all-time highs last summer were just the market pricing in the future before it arrived. (It did arrive.)

This may sound like the market is getting out over its skis, with valuations reaching past fundamentals. And you wouldn’t be wrong if you thought “expensive markets,” as JPMorgan calls them, sounded bubbelicious.

That’s because “bull markets and bubbles are indistinguishable ex ante,” JPMorgan analysts wrote in a recent research note. “Both begin with a compelling narrative that eventually leads analysts to discard previous valuation yardsticks because ‘this time is different.’”

The most important thing to remember about all-time highs

The most important thing for investors to remember about all-time highs is they’re often a step on the way to another all-time high. Right now, the S&P 500 at 4,200 might seem crazy high but so did 4,000. And 3,000. And 2,000. A quick look at a Yahoo Finance chart will show plenty of teeth as the market had its ups and downs but also many ramps.

According to JPMorgan, this even happens in “expensive markets” across asset classes, “though more in equities, commodities, and currencies than in bonds or credit.”

Though they may crash and be down for months or even years, “80% of expensive markets that crash spectacularly eventually make new all-time highs.”

“This last point challenges the notion that bubbles are prevalent at the asset class level,” the analysts wrote. “Perhaps instead, mostly-rational markets simply front-load a macroeconomic scenario that will be validated in the following cycle.”

Looking back at last year, that’s exactly what happened — multiple times. When Covid hit, the market plunged; the S&P 500 index fell more than 30%, and saw multiple days of 5% drops or more. And later in the summer, the market was roaring past all-time highs far before earnings had improved or the pandemic had eased. (In fact, it was getting worse.)

More room to run

The conversation about all-time highs begetting more all-time highs is nice in the abstract, but what about the actual economic and market conditions in this specific market? A lot of the analysis seems positive based on the data coming in.

“With business owners eager to hire and with the Labor Department’s JOLTS index showing around 7,000,000 unfilled job postings from businesses it would seem realistic at this juncture to venture that there’s plenty of opportunity for things to continue to improve,” Oppenheimer analysts wrote in a note this week.

Oppenheimer pointed out that earnings are up 47.2% on revenue growth of 10.1% for the 88% of companies that have reported, exceeding expectations.

DataTrek’s Nicholas Colas believes that analysts are aiming too low still.

“We believe analysts are still too low with their estimates for Q2 and the rest of 2021,” he wrote. “Despite the fact that Q2 earnings are typically just as good as Q1, the Street is looking for the current quarter to come in 9% below Q1 2021. Ditto for Q3, by the way. Why? We’ll chalk it up to a lack of corporate earnings guidance and a resultant conservatism among analysts.”

“This is still a bullish setup for US large cap stocks,” Colas added.

This conservatism could go away with more guidance and the rest of the earnings season, but already BMO’s Brian Belski has bumped up his S&P 500 EPS target for 2021 from $175 to $190, an 8.6% increase.


Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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There's a record number of jobs open in America

2021-05-12 10:23:57 by Myles Udland from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Wednesday, May 12, 2021

The labor demand story continues. 

At the end of March, a record number of jobs were open in the U.S. 

The latest Job Openings and Labor Turnover Survey — or JOLTS report — from the BLS published Tuesday showed some 8.1 million jobs were available at the end of March. The prior high for this series, which dates back to 2001, came in November 2018. 

For readers of The Morning Brief, this report may have come as little surprise. As we covered earlier this week, the most important takeaway from the April jobs report is that while hiring fell well short of expectations there is no lack of demand for labor among employers. 

But the JOLTS data does show how acute the hiring challenge is right now. And also helps us understand how different this labor market recovery is from the last recession. 

Jed Kolko, chief economist at Indeed, noted Tuesday that the job-filling rate — or the number of hires in a given month as a proportion of jobs open — hit an all-time low in March. And this coming during a month when nonfarm payrolls grew by 770,000. It seems likely this measure falls further in April. 

The number of hires per open job hit a record low in March, another way to looking at the challenge employers are facing right now to find workers. (Source: Indeed, BLS)
The number of hires per open job hit a record low in March, another way to looking at the challenge employers are facing right now to find workers. (Source: Indeed, BLS)

The number of jobs open per unemployed worker also fell below 1 last month, a measure that was closely watched after the financial crisis as a sign workers were beginning to gain leverage in the labor market. 

But in another report published Tuesday, the team at Indeed showed that the change in jobs open through last Friday was flat compared to the prior week. A notable shift after a sharp ramp in job listings had been observed over the last two months. 

And while the number of jobs open across the economy are some 23% higher than what Indeed saw in February 2020, hospitality and tourism jobs are still 8% below those levels.

So between April's disappointing job gains, the stalling out in the number of open positions listed on Indeed, and a record JOLTS number, we get a clear portrait of today's labor market. Employers want help, but employees will only accept jobs under certain conditions. Simply listing open jobs is not going to bridge this divide. 

In response to business owner complaints, we've started to see some states around the country end participation in the federal government's enhanced unemployment program. And as we noted in yesterday's Morning Brief, some employers are raising wages and responding to employee requests like more schedule clarity to attract and retain talent. 

Michael Pearce, an economist at Capital Economics, wrote Tuesday that, "wage growth has remained unusually elevated throughout the pandemic, and the signs of labor shortages point to wage growth accelerating further." 

"They are not yet pointing to a surge in wage growth," Pearce adds, "but with labor market conditions tightening further, that could just be a matter of time." 

By Myles Udland is a reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

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One crucial thing to remember after April's jobs report flop

2021-05-10 10:15:41 by Sam Ro from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, May 10, 2021

A labor demand problem would be worse. This wasn't that.

The April U.S. employment report stunned investors when it revealed employers added just 266,000 to their payrolls last month, far fewer than the 1,000,000 expected by economists.

"It is hard to square this middling outcome with a variety of other data indicating that the labor market is scorching hot," JPMorgan's Michael Feroli said. Indeed, lots of measures of activity and sentiment have pointed to the need for more hiring, which has actually been confirmed by falling initial claims for unemployment insurance and alternative reports on hiring.

Friday's report immediately ignited a massive debate among economists, policymakers, and pundits about the degree to which enhanced unemployment benefits are incentivizing capable workers to stay on the sidelines, exacerbating what may be a short-term labor shortage. We're sure this conversation will continue in the week ahead. 

One crucial thing folks do seem to agree on about Friday's report is that it did not reflect a demand problem.

"The miss in nonfarm payroll growth in April certainly gives some credence to anecdotal reports of labor shortages and individuals not returning to work while remaining on supplemental unemployment benefits, suggesting this is a supply-side rather than a demand-side issue," Morgan Stanley economists wrote.

There's certainly no shortage of reports confirming robust demand for labor. 

The National Federation of Independent Business said a record 44% of small business owners had job openings in April. Online job listing giant Indeed said the number of job postings was 24% above pre-pandemic levels. The Bureau of Labor Statistics, which publishes the official monthly payrolls report, recently said job openings were at a two-year high.

"We know from endless surveys that labor demand is very strong, but we also know from both surveys and media-reported anecdotes that firms are finding it hard to recruit people, despite a 6.1% unemployment," Pantheon Macroeconomics' Ian Shepherdson said.

This report still offers plenty of unanswered questions, not the least of which is the impact of enhanced unemployment benefits. How many of would-be workers are still fearful of COVID-19? Or struggling with childcare? Or just waiting to be called off of their furlough?

These are all arguably high quality problems as these labor shortage issues are largely occurring in the context of an economy looking to accelerate.

It may seem odd to put a positive spin on a jobs report that fell short of expectations by a historic margin. But it certainly would've been worse if the shortfall was due to lack of employers seeking workers (demand) instead of employers struggling to fill open positions (supply).

"Lack of labor demand is not the problem," Shepherdson said. "The end."

By Sam Ro, managing editor. Follow him at @SamRo

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Stock market news live updates: Stocks trade mixed as tech shares drop, Nasdaq turns negative

2021-05-03 17:25:33 by Emily McCormick from Yahoo Finance

Stocks ended mixed on Monday, with the S&P 500 and Dow kicking off May on a high note while the Nasdaq declined.

[Click here to read what's moving markets heading into Tuesday, May 4]

The S&P 500 added about 0.3%, while the Dow jumped by 0.7%. On Friday, the S&P 500 ended lower, but still closed out its best month since November with a monthly advance of more than 5%. In April, the communication services and consumer discretionary sectors led gains in the S&P 500, returning to a leadership position after lagging earlier in 2021 amid a rotation into cyclical and "reopening" stocks. However, growth names pared some gains last week, with Federal Reserve Chair Jerome Powell highlighting that some asset valuations appeared "frothy."

Still, a wave of stronger-than-expected earnings results from companies across industries helped fuel the latest move higher in the broader market, with corporate profits rebounding alongside the pick-up in economic activity. As of Friday, 86% of S&P 500 companies had beaten first-quarter earnings expectations, according to FactSet data. This would mark the highest proportion since at least 2008, if it holds through the end of first-quarter earnings season. Companies including Uber (UBER), Lyft (LYFT), Square (SQ), Peloton (PTON) and Pfizer (PFE) are poised to report results later this week. 

Underpinning the economic recovery has been the strong pace of vaccinations in the U.S., which has in turn enabled more business across the country to reopen and bolstered consumers' confidence in a return to a semblance of normalcy. As of Sunday, more than 104 million Americans were fully vaccinated, according to data from the Centers for Disease Control and Prevention, to comprise nearly one-third of the country's total population. 

However, some strategists cautioned investors about getting complacent, with the ample good news on the recovery now well priced into the markets. 

"I think the market is priced almost to perfection, right? We've priced in a good vaccine rollout. We've priced in a strong reopening to the economy. I'm a little concerned about the second half of the year," Allan Boomer, Momentum Advisors Chief Investment Officer, told Yahoo Finance. "I think it's possible that in the short term, earnings have basically peaked and ... this is a great quarter, but I don't know that the rest of the year will be quite as strong."

"One of the things that I think you'll start to see is that we've got a labor shortage in the United States. We talk about the jobs that were lost. We don't really talk about the fact that there's a lot of companies that have a lot of vacancies that are outstanding," he added. "So I think you'll start to see in the second half particularly companies that rely on labor, you'll start to see some issues around a labor shortage for sure."

The Labor Department will release its April jobs report on Friday, which is expected to show a staggering nearly 1 million payrolls came back last month, accelerating from March's gain. 

4:03 p.m. ET: Stocks end mixed as reopening trade reignites; S&P 500 and Dow gain while Nasdaq drops 0.5% amid tech drop

Here were the main moves in markets as of 4:03 p.m. ET:

  • S&P 500 (^GSPC): +11.49 (+0.27%) to 4,192.66

  • Dow (^DJI): +238.38 (+0.70%) to 34,113.23

  • Nasdaq (^IXIC): -67.56 (-0.48%) to 13,895.12

  • Crude (CL=F): +$0.84 (+1.32%) to $64.42 a barrel

  • Gold (GC=F): +$24.00 (+1.36%) to $1,791.70 per ounce

  • 10-year Treasury (^TNX): -2.4 bps to yield 1.6070%

1:19 p.m. ET: 'Both investors and policy makers continue to underestimate the incredible recovery in both the economy and earnings throughout this pandemic': Strategist 

Even with stocks hovering near record levels, some strategists said investors are still under-appreciating the strength of the U.S. economic recovery poised to take place this year, and the wave of spending it will unlock for consumers and corporations alike. 

"What's interesting here is that both investors and policy makers continue to underestimate the incredible recovery in both the economy and earnings throughout this pandemic," Michael Arone, State Street Global Advisors chief investment strategist, told Yahoo Finance on Monday. "So consistent, quarter after quarter, the numbers are beating by wide margins. And analysts are struggling to catch up. And so, I think that's one of the key takeaways, is that the numbers just continue to be incredibly strong. 

"And one of the things I continue to point out is, that there's a lot priced into this market. And one of the things in particular is around the consumer," he added. "I think what's being under-appreciated is that businesses are also influenced by the same dynamics. And their earnings and cash flow is incredibly strong. And I think it's going to unleash an incredible spending boom by businesses over the remainder of this year." 

12:05 p.m. ET: Stocks trade mixed, Nasdaq dips

Stocks traded mixed Monday afternoon, with the S&P 500 and Dow gaining while the Nasdaq fell.

The S&P 500's gains were led by the energy, materials and health-care sectors. Technology stocks lagged, extending last week's stretch of weakness. The Nasdaq turned negative during the afternoon session.

The Dow outperformed, gaining more than 300 points, or 0.9%, at session highs. Materials company Dow Inc (DOW) and Home Depot (HD) led the advances, followed by Walgreens Boots Alliance (WBA) and IBM (IBM). 

11:03 a.m. ET: Construction spending increased far less than expected in March 

Construction spending increased at a pace that came in far below expectations in March, with non-residential structures and public spending still taking place at a weak rate amid the pandemic. 

Construction spending increased 0.2% in March over February, the Commerce Department said Monday. This came following a 0.6% drop in spending in February, which was largely due to inclement weather. Consensus economists were looking for a rise of 1.6% in construction spending during the month. Still, spending was up 5.3% year-over-year, with strength in housing construction still helping buoy the metric overall.

10:56 a.m. ET: U.S. manufacturing sector activity cooled slightly in April as soaring demand pushed prices higher: IHS Markit 

IHS Markit's final U.S. manufacturing purchasing managers' index for April pulled back slightly at the end of the month, with rising costs and supply chain delays weighing on the sector. 

The IHS Markit manufacturing purchasing managers' index closed out the month at 60.5, or below the 60.6 reported in the preliminary print and the 60.7 expected from consensus economists, according to Bloomberg data. Still, the index was strongly in expansionary territory, or well over the neutral level of 50.0. 

“US manufacturers reported the biggest boom in at least 14 years during April," Chris Williamson, chief business economist at IHS Markit, said in a press statement. "Demand surged at a pace not seen for 11 years amid growing recovery hopes and fresh stimulus measures."

“Supply chain delays worsened, however, running at the highest yet recorded by the survey, choking production at many companies," he added. "Suppliers have been able to command higher prices due to the strength of demand for inputs, pushing material costs higher at a rate not seen since 2008." 

9:31 a.m. ET: Stocks open higher

Here's where markets open Monday morning: 

  • S&P 500 (^GSPC): +23.16 points (+0.55%) to 4,204.33

  • Dow (^DJI): +199.09 points (+0.59%) to 34,073.94

  • Nasdaq (^IXIC): +64 points (+0.46%) to 14,028.74

  • Crude (CL=F): +$0.24 (+0.38%) to $63.82 a barrel

  • Gold (GC=F): +$20.90 (+1.18%) to $1,788.60 per ounce

  • 10-year Treasury (^TNX): -1 bp to yield 1.621%

9:27 a.m. ET: Verizon to sell media business including Yahoo Finance to Apollo in $5 billion deal

Telecommunications giant Verizon (VZ) said Monday it agreed to sell its media business segment, including Yahoo and AOL, to private equity firm Apollo Global Management. Verizon is currently the parent company of Yahoo Finance. 

The $5 billion deal is expected to close in the second half of the year, and will rename the business currently known as Verizon Media as Yahoo. Other brands in the portfolio include TechCrunch, Makers, Ryot and Flurry. Verizon's media group reported revenue of $1.9 billion in the first three months of 2021, for a 10% year-over-year increase. 

8:00 a.m. ET: 'Capex, R&D and M&A will account for a majority of corporate cash spending in 2021': Goldman Sachs

With uncertainty from the pandemic lifting, corporations have begun to announce ambitious new strategies, many of which involve massive investments into their future growth. According to Goldman Sachs U.S. chief market strategist David Kostin, this spending will be primarily funneled into one of three key areas.

"Capex, R&D and M&A will account for a majority of corporate cash spend," Kostin wrote in a note Monday morning. "Many firms have used 1Q reporting season to announce substantial new growth initiatives. U.S. spending plans by AAPL ($430 billion over 5 years), and capex boosts by INTC ($20 billion) and WMT ($14 billion) are notable examples."

"We forecast a +19% rebound in cash use in 2021 and +6% growth in 2022," he added. "Tax represents a ey risk to the trajectory of cash spending in 2022 and beyond." 

7:27 a.m. ET Monday: Stock futures point to a higher open

Here's where markets were trading before the opening bell Monday morning: 

  • S&P 500 futures (ES=F): 4,194.75, up 20.25 points or 0.49%

  • Dow futures (YM=F): 33,967.00, up 200 points or 0.59%

  • Nasdaq futures (NQ=F): 13,884.00, up 34.25 points or 0.25%

  • Crude (CL=F): +$0.08 (+0.13%) to $63.66 a barrel

  • Gold (GC=F): +$10.80 (+0.61%) to $1,778.50 per ounce

  • 10-year Treasury (^TNX): +1.3 bps to yield 1.644%

NEW YORK, NEW YORK - APRIL 15: People walk by the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data points to a rebound in consumer spending, U.S. stocks climbed to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
NEW YORK, NEW YORK - APRIL 15: People walk by the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data points to a rebound in consumer spending, U.S. stocks climbed to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
Spencer Platt via Getty Images

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Warren Buffett makes the case for doing what he says, not what he does

2021-05-03 10:11:44 by Sam Ro from Yahoo Finance

This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Monday, May 3, 2021

Picking stocks is so hard, even Buffett makes mistakes

"I recommend the S&P 500 index fund and have for a long, long time to people," Berkshire Hathaway (BRK-A, BRK-B) CEO Warren Buffett said at the company's annual shareholders meeting on Saturday. 

"And I've never recommended Berkshire to anybody because I don't want people to buy it because they think I'm tipping them into something."

Sure, Berkshire is a massive $630 billion conglomerate with all sorts of businesses under its umbrella. But in the investor community, the company is best known for its $282 billion stock portfolio. A portfolio overseen by Buffett, who is widely considered to be the greatest investor of all time thanks to his stock-picking prowess.

And so no matter what Buffett says, there will always be those who will attempt to mirror his performance by tracking his public statements and monitoring Berkshire's regulatory filings.

If you followed Buffett's advice and bought the index last year you probably aren't complaining: the S&P outperformed Berkshire by 16 percentage points in 2020.

Still, none of this is going to stop people from questioning and criticizing Berkshire's various trades.

Buffett and Munger acknowledge poorly timed trades

The first shareholder question during the meeting's hours-long Q&A was about Buffett's decision to dump airline shares at their lows early on during the COVID-19 pandemic — shares that have generated extraordinary returns in the year since Buffett disclosed the sale.

Buffett went into detail about how those airlines may have actually benefited from Berkshire's sale as it potentially accelerated financial support from the government. But his fundamental reasons for selling haven't changed.

"I still wouldn't wanna buy the airline business," he said.

But he didn't shy away from the point of the question, which was why Berkshire appeared to be "fearful when others were greedy." In fact, he actually reminded the audience that Berkshire also trimmed its stake in banks, which have also outperformed the market in the past year.

"Looking back, you know, it'd have been better to be buying," Buffett admitted. "I do not consider it a great moment in Berkshire's history. But also we've got more net worth than any company in the United States under accounting principles."

Of course, these market bottoms only become clear in hindsight. And Buffett's right-hand man Charlie Munger made a blunt point about that.

"It's crazy to think anybody's going to be smart enough to husband money, and then just come out on the bottom deck in some crazy crisis, and spend it all," Munger said in response to a question about why Berkshire wasn't more acquisitive in March 2020. "There always is just some person that does that by accident. But that's too tough a standard. Anybody who expects that of Berkshire Hathaway is out of his mind."

And so while Buffett and Munger might take pride in investing in good businesses that eventually generated attractive returns, they're not exactly aiming to buy at bottoms and sell at tops.

'A great argument for index funds'

Prior to the Q&A, Buffett shared two slides in an exercise illustrating how difficult it is to pick winners in the stock market.

The first slide listed the world's 20 largest companies as measured by market capitalization as of March 31, 2021. It included familiar names like Apple (AAPL), Saudi Aramco, Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG, GOOGL), Facebook (FB), Tencent, and Tesla (TSLA) at the top.

"How many of those companies are going to be on the list 30 years from now?" he asked. "What would you guess? Think about that yourself."

He then followed that with a slide listing the top 20 companies from 1989.

"None of the 20 from 30 years ago are on the present list," he said. "None. Zero."

Warren Buffett gives a clinic on picking stocks at Berkshire Hathaway's annual meeting. (Yahoo Finance)
Warren Buffett gives a clinic on picking stocks at Berkshire Hathaway's annual meeting. (Yahoo Finance)
Yahoo Finance

"It is a reminder of what extraordinary things are going to happen," he said. "We were just as sure of ourselves as investors and Wall Street in 1989 as we are today. But the world can change in very, very dramatic ways."

To be sure, Buffett's slides included a lot of non-U.S. names that you'd never find in an S&P 500 index fund. But his general point is that you're better off investing broadly than putting all your money into what appear to be the winners.

"It's a great argument for index funds," Buffett added. "The main thing to do was to be aboard the ship."

To further his point, he also made the case for why it isn't even enough to know which industries will boom versus bust. He noted that the emerging U.S. auto industry of the early 1900s eventually saw over 2,000 auto companies formed.

"Of course, you remember that in 2009, there were three left — two of which went bankrupt," he said. "So, there is a lot more to picking stocks than figuring out what's going to be a wonderful industry in the future."

During the shareholders meeting, Buffett repeatedly reiterated his recommendation for investors to buy index funds over picking stocks like he does. As Myles Udland puts it: "The advice from Buffett, as always, is do what I say, not what I do."

Though as Buffett said this weekend, "It's not as easy as it sounds."

By Sam Ro, managing editor. Follow him at @SamRo

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Stock market news live updates: S&P 500 retreats from record high, but posts 5.2% gain in April for best month since November

2021-04-30 19:07:17 by Emily McCormick from Yahoo Finance

Stocks fell Friday after a record-setting session a day earlier, with stocks taking a pause after strong earnings results and more encouraging economic data helped fuel the latest leg higher in risk assets. Still, however, the three major indexes posted strong gains for the month of April. 

The S&P 500 dropped about 0.7%, after the index closed at an all-time high of more than 4,200 on Thursday. The index's monthly gain came out to 5.2%, or its best since its nearly 11% rise in November 2020. The Dow and Nasdaq each also retreated during Friday's session. However, the Dow was still up more than 2.5% in April, while the Nasdaq gained more than 5%. 

Shares Amazon (AMZN) bucked the trend and jumped to a record high after reporting first-quarter results and current-quarter guidance that exceeded expectations, with online shopping still booming even as more in-person businesses reopen. Shares of Twitter (TWTR), on the other hand, sank after its current-quarter revenue guidance fell short of estimates, disappointing investors who had hoped to see a stronger pick-up in the company's ad sales to match trends seen at peer social media companies like Snap (SNAP) and Facebook (FB). Overall, companies comprising about two-thirds of the S&P 500 market capitalization have so far reported results, and 84% of these have topped estimates, according to data from Credit Suisse analyst Jonathan Golub. 

Equities have climbed to new highs this week amid these signs of rebounding corporate profits and economic activity, and after more dovish messaging from the Federal Reserve. A new report Thursday showed U.S. gross domestic product increased at a 6.4% annualized rate in the first quarter, bringing overall output within striking distance of its pre-pandemic levels. 

Though concerns over rising inflation during the economy and possible eventual tax hikes remain, investors have at least temporarily set aside these fears until more developments emerge on both fronts. 

"The economic backdrop is still very encouraging. I think there's a lot of really strong tailwinds behind this recovery, whether it's the vaccination story, the fiscal stimulus story, and very clearly an earnings season that's done very well," Jack Manley, JPMorgan Asset Management global market strategist, told Yahoo Finance. "But it wouldn't necessarily surprise me if markets moved more or less sideways moving forward."

"I think what we're going to see, as we've seen throughout the course of this year, is a continued story of winners versus losers," he added. "So we still have to be careful about security selection, about sector selection, moving forward. And to me, I think a lot of that has to do with this continued rotation into some of the more cyclical parts of the market."

Others struck a similar tone. 

"This positive backdrop does not mean that the current period of low volatility will persist. We expect bouts of market turbulence, as investors fret over rising inflation and the uneven global progress in combating the pandemic," Mark Haefele, chief investment officer of global wealth management at UBS, wrote in a note Thursday. "With global stocks close to record highs, the market is also likely to be vulnerable to disappointing news on the economy or COVID-19." 

4:03 p.m. ET: S&P 500 posts best monthly gain since November

Stocks ended the session lower but still closed out a winning month. Here's where the three major indexes settled on Friday:

  • S&P 500 (^GSPC): -30.30 points (-0.72%) to 4,181.17

  • Dow (^DJI): -185.51 points (-0.54%) to 33,874.85

  • Nasdaq (^IXIC): -119.86 points (-0.85%) to 13,962.68

3:05 p.m. ET: Technology remains 'the largest single growth trend of our lifetime' despite recent rotation to cyclicals: CIO 

For the year-to-date, technology stocks have underperformed against cyclical and value stocks, as investors turned away from last year's leaders and instead toward companies that would likely benefit most from a broad-based economic reopening. 

However, some strategists urged investors not to take for granted the future growth potential of technology companies in light of their recent underperformance. 

"These things aren't even remotely priced into their future growth. Technology is the largest single growth trend of our lifetime, and as the world reengages, the decisions you make now set the trends for your portfolio for the next 5, 10 even 20 years," Keith Fitz-Gerald, Fitz-Gerald Group Chief Investment Officer, told Yahoo Finance on Friday.

“The world needs what they make, the world has to have what they make, and everybody, for example in the gig economy, uses what they make," he added. "We're talking about a time when only 30% of the cloud activity reflects the world we do. Imagine what that does when it goes to 50%, 60%, 70% a couple of years from now. The numbers are going to explode."

11:53 a.m. ET: Stocks hold lower as energy, tech sectors lag 

The three major indexes extended losses heading into the afternoon session on Friday, with the energy, materials and information technology sectors contributing most heavily to the S&P 500's 0.6% dip. The consumer discretionary sector rose as shares of Amazon reached a record intraday high after the company posted strong quarterly results. 

Chevron lagged in the Dow after the oil major reported quarterly profit that plunged compared to last year, with its downstream operations especially hit by ongoing pandemic-related impacts and inclement weather, even as rising energy prices helped bolster cash flow. 

9:30 a.m. ET: Stocks open lower 

Here's how markets opened Friday morning: 

  • S&P 500 (^GSPC): -24.25 points (-0.58%) to 4,179.25

  • Dow (^DJI): -168 points (-0.49%) to 33,783.00

  • Nasdaq (^IXIC): -108.66 points (-0.77%) to 13,973.68 

  • Crude (CL=F): +$1.45 (-2.23%) to $63.56 a barrel

  • Gold (GC=F): +$2.00 (+0.11%) to $1,770.30 per ounce

  • 10-year Treasury (^TNX): -0.7 bps to yield 1.633%

9:02 a.m. ET: Employment costs rose more than expected in the first quarter 

Employment costs increased more than expected in the first three months of the year amid a pick-up in wages, the Bureau of Labor Statistics reported Friday.

The quarterly employment cost index rose 0.9% in the first quarter, coming in faster than the 0.7% anticipated, based on Bloomberg consensus data. This followed a 0.7% increase in the fourth-quarter employment cost index. 

The rise came amid a 1.0% increase in wages and salaries, extending an advance of 0.8% in the fourth quarter. Benefits rose 0.6% quarter-over-quarter, representing a similar gain compared to the prior quarter. 

8:35 a.m. ET: Personal income surges by the most on record in March following fiscal stimulus 

Personal income soared by the most ever recorded last month, with historic levels of fiscal stimulus helping increase consumer spending power. 

Personal income jumped 21.1% in March over February, the Bureau of Economic Analysis said Friday. This came in better than the 20.3% rise expected, according to Bloomberg consensus data. This followed a drop of 7.0% in February that was mostly attributed to some payback after the January round of stimulus checks.

Personal spending also increased more than expected last month, gaining 4.2% versus the 4.1% gain expected. The personal saving rate, or percentage that personal savings comprises of disposable personal income, climbed to 27.6%, the second-highest on record after April 2020's rate of 33.7%. 

7:17 a.m. ET Friday: Stock futures point to a lower open 

Here's where markets were trading before the opening bell Friday morning:

  • S&P 500 futures (ES=F): 4,178.00, down 25.5 points or 0.6%

  • Dow futures (YM=F): 33,780.00, down 171 points or 0.5%

  • Nasdaq futures (NQ=F): 13,854.00, down 99.5 points or 0.71%

  • Crude (CL=F): -$1.21 (-1.86%) to $63.80 a barrel

  • Gold (GC=F): +$1.20 (+0.07%) to $1,769.50 per ounce

  • 10-year Treasury (^TNX): -0.2 bps to yield 1.638%

6:03 p.m. ET Thursday: Stock futures drift lower after S&P 500 hits record high 

Here's where markets were trading Thursday evening: 

  • S&P 500 futures (ES=F): 4,200.75, down 2.75 points or 0.07%

  • Dow futures (YM=F): 33,7927.00, down 24 points or 0.07%

  • Nasdaq futures (NQ=F): 13,943.5, down 10 points or 0.07%

NEW YORK, NEW YORK - MARCH 09: The New York Stock Exchange (NYSE) stands in lower Manhattan on March 09, 2021 in New York City. The Dow Jones Industrial Average rallied more than 300 points Tuesday as tech stocks surged and optimism over the recently passed Covid relief bill cheered investors. (Photo by Spencer Platt/Getty Images)
NEW YORK, NEW YORK - MARCH 09: The New York Stock Exchange (NYSE) stands in lower Manhattan on March 09, 2021 in New York City. The Dow Jones Industrial Average rallied more than 300 points Tuesday as tech stocks surged and optimism over the recently passed Covid relief bill cheered investors. (Photo by Spencer Platt/Getty Images)
Spencer Platt via Getty Images

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Electricity usage will take ‘until 2022 to get back to 2019 levels’: Duke Energy CEO

2021-04-30 12:56:29 by Yahoo Finance Video

Duke Energy CEO Lynn Good joins 'Influencers with Andy Serwer' to disccuss the pandemic's long-term impact on the energy industry.


Stock market news live updates: Stocks hit record highs as traders eye Biden's plans, earnings

2021-04-29 20:05:55 by Emily McCormick from Yahoo Finance

Stocks hit record levels as investors considered a batch of stronger-than-expected earnings results from major companies and a sweeping set of proposals from President Joe Biden aimed at revamping the country's infrastructure and supporting families, children and students. 

[Click here to read what's moving markets heading into Friday, April 30]

The S&P 500 rose to a record high of more than 4,200 just after market open. The Dow recovered intraday losses to trade higher by more than 200 points, even as shares of Merck (MRK) declined sharply after missing earnings expectations. The Nasdaq also advanced.

Traders considered Biden's address to a joint session of Congress late Wednesday, during which he declared that "America is back on the move again" after a pandemic that devastated the U.S. economy and killed hundreds of thousands of individuals across the country. The address also served as a forum for him to tout his $2 trillion infrastructure plan and officially unveil a $1.8 trillion proposal aimed at supporting children, students and families, and which will be funded in part through tax increases on wealthy Americans. 

Earnings season has also continued to chug along. Shares of Apple (AAPL) gained after the company posted fiscal second-quarter results that easily exceeded expectations, with sales coming in better-than-expected across the Mac, iPad and especially the iPhone in the months following the launch of the 5G-enabled iPhone 12. Facebook (FB) shares also advanced after quarterly results showed a jump in both users and sales, with customers' advertising spending accelerating as the pandemic abates. 

The strong results from the mega-cap tech names adds to a parade of companies that have so far exceeded expectations this earnings season, with a pick-up in economic activity and consumer confidence driving a surge in corporate profits over the doldrums of last year. As of early Wednesday, companies comprising nearly half of the S&P 500's market capitalization had reported earnings results, with 83% of these corporations topping estimates, and by an average of 21.7%. Companies including Amazon (AMZN) are poised to report results on Thursday.

Traders also considered the Federal Reserve's latest monetary policy statement, which included no changes to policies but did highlight the recent improvements in U.S. economic conditions. In his press conference Wednesday afternoon, Fed Chair Jerome Powell doubled down on his messaging that the Federal Reserve was looking for substantial further progress toward its goals of maximum employment and price stability in the coming months, with these criteria needing to be met by actual economic results rather than mere projections for further improvement. 

"With no meaningful change to monetary policy or communication, this meeting was simply a message to market participants to sit back and observe as the economic recovery continues to unfold," Charlie Ripley, senior investment strategist for Allianz Investment Management, said in an email Wednesday. "The Fed did acknowledge the pick-up in the pace of the economic recovery but came short of signaling any changes to policy at this stage in the cycle. It is difficult to argue the Fed’s position on inflation given the amount of slack that still exists in the labor market. However, if the recovery continues to gain strength, we expect the Fed will need to move away from peak policy accommodation."

4:02 p.m. ET: Stocks end a volatile session higher, S&P 500 reaches record high after more earnings top expectations

Here were the main moves in markets as of 4:02 p.m. ET:

  • S&P 500 (^GSPC): +28.43 (+0.68%) to 4,211.61

  • Dow (^DJI): +242.22 (+0.72%) to 34,062.60

  • Nasdaq (^IXIC): +31.52 (+0.22%) to 14,082.55

  • Crude (CL=F): +$1.10 (+1.72%) to $64.96 a barrel

  • Gold (GC=F): -$0.10 (-0.01%) to $1,773.80 per ounce

  • 10-year Treasury (^TNX): +2 bps to yield 1.6400%

12:25 p.m. ET: Uber, Lyft shares sink after Labor Secretary reportedly supports reclassifying gig workers as employees

Shares of Uber (UBER) and Lyft (LYFT) dropped intraday on Thursday after Reuters reported that President Joe Biden's Labor Secretary Marty Walsh supported reclassifying gig workers as "employees," a title which would confer additional benefits to the workers but that would increase costs for gig economy companies like the ride-hailing giants. Uber shares sank more than 7% around 12:30 in New York, while Lyft shares were down more than 10%. 

"We are looking at it but in a lot of cases gig workers should be classified as employees ... in some cases they are treated respectfully and in some cases they are not and I think it has to be consistent across the board," Walsh told Reuters, according to a report from the news outlet. 

Approximately 55 million people in the U.S. were classified as gig workers in the U.S as of 2017, according to Bureau of Labor Statistics data. This proportion has been estimated to have climbed further in the years since. 

11:06 a.m. ET: Stocks cut gains, Dow briefly turns slightly negative

The three major indexes traded near the flat line Thursday intraday, erasing gains after the S&P 500 and Nasdaq each hit record levels earlier in the session. 

The Dow turned slightly negative as a 5% drop in shares of Merck outweighed gains elsewhere in the index. Both Merck's first-quarter sales and profit missed expectations for the first quarter, bucking the trend of broad-based earnings beats across most major companies for first-quarter results.

The health-care sector underperformed in the S&P 500 alongside the information technology and materials sectors. Communication services outperformed following strong earnings results from Facebook. 

10:00 a.m. ET: Pending home sales rose for the first time in three months in March 

Pending home sales rose in March over February, posting a monthly advance for the first time since December as rising mortgage rates, tight inventory and inclement weather in February cooled some of the housing market's recent surge.

Pending home sales increased by 1.9% in March following a downwardly revised drop of 11.9% in February, the National Association of Realtors said Thursday. The came in short of the 4.4% gain expected, however, according to Bloomberg consensus data. 

“The increase in pending sales transactions for the month of March is indicative of high housing demand,” Lawrence Yun, NAR’s chief economist, said in a press statement. “With mortgage rates still very close to record lows and a solid job recovery underway, demand will likely remain high.”

9:30 a.m. ET: Stocks open at record levels 

Here's where markets were trading after the opening bell: 

  • S&P 500 (^GSPC): +33.19 points (+0.8%) to 4,216.37

  • Dow (^DJI): +169.75 points (+0.5%) to 33,990.13

  • Nasdaq (^IXIC): +151.99 (+1.1%) to 14,209.21

  • Crude (CL=F): +$1.40 (+2.19%) to $65.26 a barrel

  • Gold (GC=F): -$6.60 (-0.37%) to $1,767.30 per ounce

  • 10-year Treasury (^TNX): +5.5 bps to yield 1.675%

8:45 a.m. ET: U.S. economy expanded at a 6.4% annualized rate in the first quarter, with personal consumptions jumping more than expected 

U.S. gross domestic product increased at a 6.4% quarter-over-quarter, seasonally adjusted annualized rate in the first three months of 2021, the Bureau of Economic Analysis said Thursday in its first estimate on GDP. This marked an acceleration from the 4.3% annualized growth rate from the fourth quarter of 2020, but was slightly below estimates for 6.7%, according to Bloomberg consensus data. 

Personal consumption, the biggest contributor to U.S. economic activity, jumped 10.7%, aided by two rounds of stimulus checks sent to most Americans and easing social distancing restrictions that allowed consumers to go out more often to spend. The increase accelerated markedly from the fourth quarter's 2.3% rise in personal consumption, and represented the second-fastest growth rate in about 50 years. 

Weighing on GDP, however, was a drop in private inventories, with demand beginning to strongly outstrip supply during the recovery. This also spurred a jump in imports, with the widening trade deficit also weighing on GDP in the first quarter. 

8:41 a.m. ET: New jobless claims fall to a fresh pandemic-era low, dipping from prior week's upwardly revised level

New weekly jobless claims dipped in the Labor Department's latest report, reaching a pandemic-era low of 553,000 for the week ended April 24. This came in slightly higher than the 540,000 anticipated, but was below the 566,000 reported for the prior week.

New jobless claims held below 600,000 for a third straight week, dipping to the lowest level since mid-March 2020 before the COVID-19 pandemic dealt a major blow to the U.S. economy. During the comparable week last year, new weekly jobless claims totaled nearly 3.5 million.

Continuing claims unexpectedly ticked up slightly during the week ended April 17, totaling 3.660 million after a downwardly revised 3.651 million during the prior week. 

8:15 a.m. ET: New York City Mayor Bill de Blasio says city will reopen fully starting July 1: MSNBC

New York City Mayor Bill de Blasio said on MSNBC's "Morning Joe" Thursday morning that NYC would open with full capacity beginning July 1. 

"Our plan is to fully reopen on July 1. We are ready for stores to open, for businesses to open, offices, theaters, full strength,” de Blasio said. 

The announcement comes after an acceleration in New York City's vaccine roll-out. More than 6.3 million doses have so far been administered in the city, and more than one-third of the adult population of the city has been fully vaccinated. 

7:20 a.m. ET Thursday: Stock futures point to a higher open after Biden's congressional address, strong earnings 

Here's where markets were trading ahead of the opening bell on Thursday: 

  • S&P 500 futures (ES=F): 4,206.25, up 30 points or 0.72%

  • Dow futures (YM=F): 33,873.00, up 149 points or 0.44%

  • Nasdaq futures (NQ=F): 14,038.00, up 145.75 points or 1.05%

  • Crude (CL=F): +$0.89 (+1.39%) to $64.75 a barrel

  • Gold (GC=F): +$1.50 (+0.08%) to $1,775.40 per ounce

  • 10-year Treasury (^TNX): +2.7 bps to yield 1.647%

6:05 p.m. ET Wednesday: Stock futures drift higher after Apple, Facebook earnings top estimates 

Here's where markets were trading Wednesday evening: 

  • S&P 500 futures (ES=F): 4,184.50, up 8.25 points or 0.2%

  • Dow futures (YM=F): 33,725.00, up 1 points or roughly unchanged

  • Nasdaq futures (NQ=F): 13,960.25, up 68 points or 0.49%

NEW YORK, NEW YORK - APRIL 15: People walk by the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data points to a rebound in consumer spending, U.S. stocks climbed to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
NEW YORK, NEW YORK - APRIL 15: People walk by the New York Stock Exchange on April 15, 2021 in New York City. After major companies reported strong earnings and new economic data points to a rebound in consumer spending, U.S. stocks climbed to record levels on Thursday. (Photo by Spencer Platt/Getty Images)
Spencer Platt via Getty Images

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Influencers with Andy Serwer: Lynn Good

2021-04-29 10:00:00 by Yahoo Finance Video

Duke Energy President & CEO Lynn Good joins 'Influencers' to discuss the future of renewable energy and her plans to achieve 'net zero'.


Invesco Canada announces changes to the Invesco QQQ Index ETF

2021-04-28 20:15:00 by CNW Group

TORONTO, April 28, 2021 /CNW/ -- Invesco Canada Ltd. ("Invesco") today announced changes to an existing Invesco Canada Fund, the Invesco QQQ Index ETF (QQC.F).

Invesco will change the name of the Invesco QQQ Index ETF (QQC.F) to the Invesco NASDAQ 100 Index ETF. QQC.F currently holds securities of Invesco QQQ Trust, Series 1 (Nasdaq ticker: QQQ).  Invesco will change the QQC.F investment strategies so that it holds securities of QQQ and/or securities of the Invesco NASDAQ 100 ETF (Nasdaq ticker: QQQM). Each of QQQ and QQQM provides exposure to the NASDAQ-100 Index.  Additionally, the management fee will be reduced from 0.25% to 0.20%.  Each of these changes will be effective on or about May 14, 2021.


New (effective on or about May 14, 2021)

Fund Name

Invesco QQQ Index ETF

Invesco NASDAQ 100 Index ETF

Management Fee (% of NAV)



Please contact Invesco at 1.800.874.6275. You can also connect with Invesco on Twitter (@InvescoCanada), LinkedIn, Facebook, or through the Invesco Canada blog.

About Invesco Ltd.

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Stock market news live updates: Stocks trade below all-time highs, Microsoft and Boeing shares weigh on Dow

2021-04-28 20:06:30 by Emily McCormick from Yahoo Finance

Stocks slipped on Wednesday, with each of the three major indexes trading below the flat line as investors digested an onslaught of corporate earnings results and a monetary policy decision from the Federal Reserve.

[Click here to read what's moving markets heading into Thursday, April 29]

The S&P 500 ended lower after reaching an intraday record high. Shares of Alphabet (GOOGL) gained after the company posted first-quarter sales and profit that easily exceeded estimates, fueled by a resurgence in advertising spending among customers. Shares of peer tech giant and Dow component Microsoft (MSFT), however, declined even after earnings topped expectations across virtually all major metrics. Apple (AAPL) and Facebook (FB) are poised to report results after market close on Wednesday. 

A monetary policy decision from the Federal Open Market Committee punctuated what has otherwise been a busy week full of corporate earnings results. The central bank left rates on hold near zero and their asset purchase program unchanged at a monthly rate of $120 billion, as had widely been expected on both fronts. The FOMC maintained its language saying it was looking to see "substantial further progress" made toward the central bank's goals for maximum employment and price stability before adjusting its policies. However, it also acknowledged the improvement seen in the economy since the last Fed meeting in March. 

"Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened," the FOMC said in its April statement. "The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors."

But the uneventfulness of the April FOMC decision belies the significant role the central bank has continued to play in underpinning markets over the course of the pandemic. As a result, even the slightest hints at tweaks to current policies – whether in the form of tapering the central bank's $120 billion per-month asset purchase program or raising rates – have been closely eyed by market participants. 

“The main directional driver for equities is the fact that the Fed continues to pump money into the market,” Interactive Brokers' Steve Sosnick told Yahoo Finance on Tuesday. "That is what's putting a floor under things and that's what's providing the ammunition so to speak for the market rally that we're seeing."

But in the very near-term, many noted that the economy, at least, remains well positioned to continue on its current, stimulus- and vaccine-fueled trajectory. 

"I think right now we're seeing the perfect equation for near-term growth. We see trillions of dollars in stimulus flooding into the economy, creating a stimulus-fueled consumer that's anxious to rush into the markets and businesses that are anxious to open up and welcome those consumer back in with open arms," Lindsey Piegza, Stifel chief economist, told Yahoo Finance on Tuesday. "So what we're seeing is this flurry of demand prompting a flurry of production, and in fact production now is falling short of that surge in demand which is likely to continue to carry growth forward, not only through the first quarter, but much of 2021." 

4:03 p.m. ET: Stocks dip, S&P 500 drifts below all-time high after Fed leaves policy unchanged after latest meeting

Here were the main moves in markets as of 4:03 p.m. ET:

  • S&P 500 (^GSPC): -3.41 (-0.08%) to 4,183.31

  • Dow (^DJI): -164.29 (-0.48%) to 33,820.64

  • Nasdaq (^IXIC): -39.19 (-0.28%) to 14,051.03

  • Crude (CL=F): +$0.87 (+1.38%) to $63.81 a barrel

  • Gold (GC=F): +$2.70 (+0.15%) to $1,781.50 per ounce

  • 10-year Treasury (^TNX): -0.2 bps to yield 1.6200%

2:07 p.m. ET: Fed keeps interest rates on hold, quantitative easing in place at current rate 

The Federal Reserve voted to keep interest rates on hold near zero and its asset purchase program in place at the current rate of $120 billion per month, as had widely been expected by market participants.

Central bank officials did, however, upgrade their assessment of the economy, saying "indicators of economic activity and employment have strengthened." They also noted that inflation has risen but reflected "transitory factors."

Stocks were little changed following the release of the statement, with both the Dow and Nasdaq lower while the S&P 500 ticked above the flat line. Bond yields pared some gains, with the benchmark 10-year Treasury yield rising just 1.9 basis points to 1.641%.

1:47 p.m. ET: Dow, Nasdaq hold lower as investors await Fed decision

Here's where markets were trading shortly before the Federal Open Market Committee releases its monetary policy decision at 2 p.m. ET: 

  • S&P 500 (^GSPC): +1.00 point (+0.02%) to 4,187.72

  • Dow (^DJI): -140.41 points (-0.41%) to 33,844.52

  • Nasdaq (^IXIC): -14.90 points (-0.11%) to 14,074.87

  • Crude (CL=F): +$1.06 (+1.68%) to $64.00 a barrel

  • Gold (GC=F): -$6.40 (-0.36%) to $1,772.40 per ounce

  • 10-year Treasury (^TNX): +2.6 bps to yield 1.648%

10:49 a.m. ET: U.S. goods trades deficit hits record high in March 

The U.S. trade deficit in goods yawned to a record high in March, data from the Commerce Department showed Wednesday morning.

The goods trade deficit increased by 4.0% to $90.6 billion in March, coming in wider than the $88 billion expected. The prior month's goods trade deficit was also revised to $87.1 billion, from the $86.7 billion previously reported. 

The increase came as goods imports increased 6.8% to $232.6 billion, outpacing an 8.7% rise in exports to $142 billion. 

9:32 a.m. ET: Stocks trade mixed 

Here's where markets were trading after the opening bell:

  • S&P 500 (^GSPC): +4.02 points (+0.1%) to 4,190.74

  • Dow (^DJI): -111.81 points (-0.33%) to 33,873.12

  • Nasdaq (^IXIC): -16.78 points (-0.15%) to 14,068.57

  • Crude (CL=F): +$0.71 (+1.13%) to $63.65 a barrel

  • Gold (GC=F): -$9.00 (-0.51%) to $1,769.80 per ounce

  • 10-year Treasury (^TNX): +0.3 bps to yield 1.625%

8:42 a.m. ET: Boeing shares dip as losses mount in Q1, free cash flow burn comes in greater than expected

Boeing (BA) posted first-quarter results that still reflected a deep hit in the company's commercial airplanes business, with the ongoing pandemic and lingering fallout from its 737 Max crisis weighing on results. Losses and negative free cash flow were larger than expected.

"While the global pandemic continues to challenge the overall market environment, we view 2021 as a key inflection point for our industry as vaccine distribution accelerates and we work together across government and industry to help enable a robust recovery," Boeing CEO David Calhoun said in a statement.

Negative adjusted free cash flow for the first three months of the year totaled $3.68 billion, with this cash burn coming in greater than the $3.34 billion expected. Revenue of $15.22 billion was greater than expected, but was still down 10% over last year. This came as commercial airplanes revenue fell 31%, more than outweighing a 19% gain in defense, space and security revenue. 

Core losses per share were $1.53, whereas a loss of 90 cents per share had been expected. On the 737 Max jet specifically, Boeing said it has delivered more than 85 of these aircraft since it was given approval to fly by the Federal Aviation Administration in November. 

7:23 a.m. ET: Mortgage applications resume declines as low inventory weighs on purchases 

U.S. mortgage applications sank during the week ended April 23, with tight housing inventory weighing on purchase activity even as mortgage rates dipped in recent weeks.

Mortgage applications fell 2.5% week-on-week, according to the Mortgage Bankers Association. This followed a jump of 8.6% last week, which had marked the first rise in seven weeks. Refinance applications were down 1% week-over-week and were 18% lower year-over-year. Purchase applications were down 4% on an unadjusted basis, but were still 34% higher than the same week last year. 

“Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”

7:18 a.m. ET Wednesday: Stock futures drift sideways 

Here's where markets were trading ahead of the opening bell Wednesday morning: 

  • S&P 500 futures (ES=F): 4,183.50, up 4.50 points or 0.11%

  • Dow futures (YM=F): 33,848.00, down 35 points or 0.1%

  • Nasdaq futures (NQ=F): 12,943.75, down 9.25 points or 0.07%

  • Crude (CL=F): +$0.39 (+0.62%) to $63.33 a barrel

  • Gold (GC=F): -$12.70 (-0.71%) to $1,766.10 per ounce

  • 10-year Treasury (^TNX): +1.9 bps to yield 1.641%

6:13 p.m. ET Tuesday: Stock futures edge higher

Here's where markets were trading late Tuesday: 

  • S&P 500 futures (ES=F): 4,180.75, up 1.75 points or 0.04%

  • Dow futures (YM=F): 33,817.00, down 66 points or 0.19%

  • Nasdaq futures (NQ=F): 12,966.75, up 13.75 points or 0.1%

NEW YORK, NEW YORK - MARCH 09: The New York Stock Exchange (NYSE) stands in lower Manhattan on March 09, 2021 in New York City. The Dow Jones Industrial Average rallied more than 300 points Tuesday as tech stocks surged and optimism over the recently passed Covid relief bill cheered investors. (Photo by Spencer Platt/Getty Images)
NEW YORK, NEW YORK - MARCH 09: The New York Stock Exchange (NYSE) stands in lower Manhattan on March 09, 2021 in New York City. The Dow Jones Industrial Average rallied more than 300 points Tuesday as tech stocks surged and optimism over the recently passed Covid relief bill cheered investors. (Photo by Spencer Platt/Getty Images)
Spencer Platt via Getty Images

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Trump tax cut allowed Duke Energy to reduce costs for customers ‘by over a billion dollars’: Lynn Good

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Duke Energy CEO Lynn Good joins 'Influencers with Andy Serwer' to discuss the latest advancements in clean energy technology.


Stock market news live updates: S&P 500 ekes out record high ahead of packed earnings week

2021-04-26 20:06:58 by Emily McCormick from Yahoo Finance

Stocks eked out a new record high on Monday, with traders bracing for a busy week of corporate earnings results, a Federal Reserve monetary policy decision and deluge of economic data. 

[Click here to read what's moving markets heading into Tuesday, April 27]

The S&P 500 ticked up to narrowly eke out a record high. The Dow was little changed, while the Nasdaq edged lower ahead of a bevy of Big Tech earnings. 

Expectations are high heading into one of the busiest weeks of corporate earnings reports this earnings season. The vast majority of companies that have reported first-quarter results so far have handily exceeded estimates, with the vaccine-enabled recovery helping stoke demand across a wide variety of industries. Tesla (TSLA) is poised to post its quarterly earnings after market close on Monday. And altogether, companies comprising nearly half of the S&P 500's total market capitalization will report results this week, including mega-cap tech names like Amazon (AMZN), Alphabet (GOOGL), Facebook (FB), Apple (AAPL) and Microsoft (MSFT).  

Eighty-four percent of the S&P 500 companies that have reported first-quarter results to date posted a positive earnings per share surprise, according to data from FactSet. This would mark the highest percentage of companies reporting upside surprises since FactSet began tracking this metric in 2008, assuming this beat rate holds through the end of earnings season. 

Investors are also continuing to digest reports last week that the Biden administration was eyeing an increase on the capital gains tax rate for individuals earning more than $1 million. The initial reports of this proposal sent stocks plunging on Thursday last week, with traders contemplating the possible net effects of such a move in light of a strengthening economic backdrop that has already helped boost corporate profits. 

"There is also a potential risk from higher capital gains tax if we get indication that it will materialize and go into effect starting next year (vs. retroactive to 2021) causing certain investors to take profits early. However, this proposal would be contentious and likely to face significant opposition," JPMorgan Chase equity strategist Dubravko Lakos-Bujas wrote in a note Friday. 

"With respect to corporate taxes, S&P 500 companies are now better positioned to absorb a potential tax increase given: (1) robust economic and earnings recovery; (2) elevated corporate cash balance of $2.1T ex-financials (up 28% vs. 4Q19); (3) partial offset from large NOL [net operating loss] balance of ~$290B; and (4) the spending component of the plan should boost aggregate demand," he added. 

4:05 p.m. ET: S&P 500 ekes out record high as investors await Big Tech earnings; Nasdaq gains 0.9%

Here were the main moves in markets as of 4:05 p.m. ET:

  • S&P 500 (^GSPC): +7.45 (+0.18%) to 4,187.62

  • Dow (^DJI): -61.92 (-0.18%) to 33,981.57

  • Nasdaq (^IXIC): +121.97 (+0.87%) to 14,138.78

  • Crude (CL=F): -$0.20 (-0.32%) to $61.94 a barrel

  • Gold (GC=F): +$2.80 (+0.16%) to $1,780.60 per ounce

  • 10-year Treasury (^TNX): +0.3 bps to yield 1.5700%

1:57 p.m. ET: S&P 500, Nasdaq hold higher while Dow turns negative 

The three major indexes traded mixed on Monday as investors awaited a slew of earnings results from Big Tech companies especially later this week. 

The S&P 500 added 0.2% intraday, with the cyclical energy, materials and financial sectors leading the way higher. The health-care, utilities and consumer staples companies lagged. 

The Dow erased earlier gains to to trade lower by about 24 points, or 0.1%, as shares of Procter & Gamble and Coca-Cola declined amid a broader drawdown in defensive, staples stocks. The Nasdaq was the outperformer among the three major indexes, extending gains to climb 0.8%. 

9:30 a.m. ET: Stocks tick up as investor await earnings

Here's where markets were trading Monday morning just after the opening bell:

  • S&P 500 (^GSPC): +7.92 points (+0.19%) to 4,188.09

  • Dow (^DJI): +61.47 points (+0.18%) to 34,104.96

  • Nasdaq (^IXIC): +39.65 points (+0.28%) to 14,055.34

  • Crude (CL=F): -$0.79 (-1.27%) to $61.35 a barrel

  • Gold (GC=F): +$1.60 (+0.09%) to $1,779.40 per ounce

  • 10-year Treasury (^TNX): +0.1 bps to yield 1.568%

8:30 a.m. ET: Durable goods orders rise less than expected in March

U.S. orders for goods intended to last three years or longer rose far less than expected in March, rebounding by a smaller than expected margin after inclement weather weighed on the manufacturing sector in February. 

Durable goods orders rose by 0.5% in March over February, according to the Commerce Department's preliminary monthly report. This was below the 2.3% rise expected, and followed an upwardly revised 0.9% drop in February.

However, excluding transportation orders, durable goods orders rose 1.6% as expected. Non-defense capital goods orders excluding aircraft, which serve as a proxy for business spending plans, rose 0.9%, coming in well below the 1.7% increase expected.

7:01 a.m. ET Monday: Stock futures edge lower 

Here's where markets were trading ahead of the opening bell:

  • S&P 500 futures (ES=F): 4,166.5, down 5 points or 0.12%

  • Dow futures (YM=F): 33,947.00, up 6 points or 0.02%

  • Nasdaq futures (NQ=F): 13,885.50, down 41.5 points or 0.3%

  • Crude (CL=F): -$1.03 (-1.66%) to $61.11 a barrel

  • Gold (GC=F): +$1.60 (+0.09%) to $1,779.40 per ounce

  • 10-year Treasury (^TNX): +2.1 bps to yield 1.588%

A trader makes a phone call outside the New York Stock Exchange (NYSE) on July 20, 2020 at Wall Street in New York City. - Wall Street stocks were mixed early July, 20, 2020 as markets awaited congressional debate on another round of stimulus spending and major earnings releases later in the week. (Photo by Johannes EISELE / AFP) (Photo by JOHANNES EISELE/AFP via Getty Images)
A trader makes a phone call outside the New York Stock Exchange (NYSE) on July 20, 2020 at Wall Street in New York City. - Wall Street stocks were mixed early July, 20, 2020 as markets awaited congressional debate on another round of stimulus spending and major earnings releases later in the week. (Photo by Johannes EISELE / AFP) (Photo by JOHANNES EISELE/AFP via Getty Images)
JOHANNES EISELE via Getty Images

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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What stock market history tells us about corporate tax hikes

2021-04-26 09:57:34 by Sam Ro from Yahoo Finance


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Monday, April 26, 2021

Stocks usually go up

The prospect for higher taxes continues to be a concern for investors, and it'll continue to be a source of uncertainty until some form of tax reform is passed.

While a higher corporate tax rate would likely be a hindrance for most companies, it's far from certain that the implementation of a higher rate would be enough for stocks to sell-off, as discussed in the Morning Brief last week.

But what does history suggest will happen to stocks should higher taxes come to pass?

BMO Capital Markets equity strategist Brian Belski looked into it. And the answer isn't all bad.

"Tax increases have been far from detrimental to U.S. stock market performance," Belski wrote in a recent note to clients. 

"President Biden’s proposal to raise the U.S. corporate tax rate to 28%, from 21%, would mark the first increase since 1993 and sixth tax hike since 1945," he continued. 

"During the five prior corporate tax rate increases in 1950, 1951, 1952, 1968, and 1993, the S&P 500 index posted an average calendar year gain of 12.9% with positive price returns in each instance. This gain was well above the 4.6% average return registered during the nine annual periods when the tax rate was reduced and also higher than 9% price return for all calendar years going back to 1945." (Emphasis added.)

Corporate tax hikes historically come with higher stock prices. (BMO)
Corporate tax hikes historically come with higher stock prices. (BMO)
Yahoo Finance

Belski also observed that those periods came with above-average real GDP growth of 5.7%.

But that's just the period around the tax hikes. 

What, then, about the overall level taxation — are returns lower during higher tax regimes?

"Despite common perceptions to the contrary, our work shows that there is little evidence to suggest that corporate tax rates have any type of meaningful impact on U.S. equity market returns," Belski observed. "For instance, going back to 1945, the S&P 500 has averaged a 10% gain during years in which the U.S. corporate tax rate was below 35% compared to the 10.3% gain posted during years when the tax rate was 50% or higher. Keep in mind that the proposed 28% corporate tax rate would still rank among the lowest in U.S. history after those seen in 2018-20." (Emphasis added.)

Importantly, Belski notes: "A similar story exists on the earnings front. Over past decades, U.S. companies have been able to generate substantial earnings growth in different tax environments, including periods of high corporate tax rates."

This is critical because earnings growth is the most important driver of stock prices.

Higher tax rates don't necessarily mean lower earnings growth rates. (BMO)
Higher tax rates don't necessarily mean lower earnings growth rates. (BMO)
Yahoo Finance

The Biden administration also isn't out to simply rein in big businesses with their proposed tax policies; they're also looking to power demand.

"It is important to keep in mind that any increase in taxes and reduction to EPS for U.S. companies could also be offset to some degree by resulting positive factors of higher taxes, such as infrastructure spending and economic stimulus," Belski said.

By Sam Ro, managing editor. Follow him at @SamRo

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Stock market news live updates: Stocks rise, shaking off capital gains tax increase concerns

2021-04-23 20:01:56 by Emily McCormick from Yahoo Finance


Stocks rose Friday, steadying after selling off sharply on Thursday following a report that President Joe Biden was eyeing a proposal to increase the capital gains tax rate on wealthy individuals. 

The S&P 500 added more than 1% to reach a record intraday high, after the index dropped 0.9% during the regular trading day for its worst session in five weeks. The blue-chip index ended just short of its record closing high. The Dow and Nasdaq also rose to reverse Thursday's losses following the report, which suggested Biden was considering increasing the capital gains tax rate on those earning more than $1 million to 39.6%. The current base capital gains tax rate is 20%. 

"I think the immediate reaction was probably a bit overdone. These proposals come out and you never know, especially with tax proposals, where we'll end up. So it looks like an opening bid. I'm sure there will be intense lobbying from the investment community to adjust those numbers," Kathy Jones, Charles Schwab chief fixed income strategist, told Yahoo Finance on Thursday. "But I think at the moment, when you have very high valuations in the market, anything that is bad news can spark a bit of a sell-off."

Shares of Dow-component Intel (INTC) dropped after the chip-maker posted first-quarter data center revenues that missed expectations. Mattel (MAT) shares jumped after quarterly net sales surged far more than expected and the toy-maker raised its full-year outlook. Snap (SNAP) shares rose as quarterly revenue and daily active users extended 2020's momentum and each sharply exceeded estimates. 

Overall this week, stocks have hovered just below record levels as investors sought new equity drivers and more data on corporate earnings results and economic activity. 

In another report that appeared to corroborate the pick-up in economic activity, Thursday's initial unemployment claims report showed just 547,000 individuals filed for first-time unemployment benefits last week, marking an unexpected improvement to a new pandemic-era low. Next week's advanced print on first-quarter gross domestic product and quarterly results from mega-cap companies including Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) and Facebook (FB), are expected to further underscore the latest pick-up in economic activity and corporate profits during the recovery from the pandemic. 

"We've spent kind of the entire month of April struggling for direction in the markets. We've had 13 out of the 14 slowest days of the year in April. We're just looking for new catalysts. I think the market has already priced in a lot of the surge in economic growth, in earnings growth," Gabriela Santos, global market strategist for JPMorgan Asset Management, told Yahoo Finance. "And it just feels like we should consolidate, maybe even have a pullback before we continue that trend higher over 6 months and 12 months. So I think this is just part of the market struggling to find direction in the short term."

"Specifically related to capital gains, this should not be a surprise," sh added. "It was a part of President Biden's agenda during the election and it was anticipated as part of the American Families Plan which should be presented next week and will be a discussion for the rest of the year. So [stocks are] just struggling to find direction in what otherwise we still consider to be a favorable backdrop for equities."

4:02 p.m. ET: Stocks end higher, S&P 500 posts fresh intraday high

Here's where the three major indexes ended Friday's session:

  • S&P 500 (^GSPC): +45.22 points (+1.09%) to 4,180.2

  • Dow (^DJI): +227.92 points (+0.67%) to 34,043.82 

  • Nasdaq (^IXIC): +198.39 points (+1.44%) to 14,016.81

3:06 p.m. ET: 'We're going to have our own form of Roaring Twenties': Analyst

With economic activity already showing strong signs of picking up, the U.S. is on track for a resurgence akin to the Roaring Twenties after the Spanish Flu, according to Morgan Stanley managing director Kathy Entwistle.

“What we’re looking at is, the economy is opening up, we’re starting to see people put money to work again. We’ve all been locked down for a year, and we’re going to start seeing different things happening in the economy that are very positive. And it’s going to have a big impact on not only our investments but also the spending, which is going to grow investments into companies even further in a different way, whether it’s, you’re buying a stock or you’re buying a product or you’re out spending money on retail – it’s all going to make an impact," Kathy Entwistle, Morgan Stanley managing director, told Yahoo Finance on Friday. 

"We talked about what happened after the Spanish Flu, and it was the Roaring Twenties. I think we’re going to have our own form of Roaring Twenties coming up," she added. "It will be a little bit different than 100 years ago, but it will still be something that is very energized, and we’re going to see money being spent.”

2:04 p.m. ET: Stocks extend gains, S&P 500 and Nasdaq add more than 1% 

Here's where markets were trading as of 2:04 p.m. ET: 

  • S&P 500 (^GSPC): +47.6 points (+1.15%) to 4,182.58

  • Dow (^DJI): +225.84 points (+0.67%) to 34,041.74

  • Nasdaq (^IXIC): +217.21 points (+1.57%) to 14,035.11

  • Crude (CL=F): +$0.53 (+0.86%) to $61.96 a barrel

  • Gold (GC=F): -$5.10 (-0.29%) to $1,776.90 per ounce

  • 10-year Treasury (^TNX): +0.5 bps to yield 1.561%

10:00 a.m. ET: New home sales surge to the highest level since 2006 in March

New home sales jumped far more than expected in March to hit the highest level in 15 years, with housing demand still holding up even as mortgage rates began to creep higher this year.

New home sales surged 20.7% in March over February, the Commerce Department said Friday. A monthly rise of 14.2% was expected. The jump brought the seasonally adjusted annualized rate of new home sales to 1.021 million, or the highest level since 2006. A 40.2% monthly jump in new home sales in the South led advances, and sales also increased in the Northeast and Midwest on a month-over-month basis. New home sales in the West dropped by 30% in March over February, however. 

In February, new home sales dropped by an upwardly revised 16.2% month-over-month, with harsh winter weather weighing on housing market activity during the period.

9:49 a.m. ET: Output in U.S. manufacturing, service sectors reach record highs in April: IHS Markit 

Activity in both the private U.S. services and manufacturing sectors jumped to a record high in April, with the vaccine-enabled broad-based reopening helping fuel growth across the economy.  

The U.S. manufacturing sector's preliminary purchasing managers' index for April rose to 60.6, from 59.1 in March, IHS Markit reported Friday. This marked the highest level since the firm began tracking the metric. 

The U.S. services sector saw even faster growth, with the PMI rising to 63.1 from 60.4 in March. This was faster than the 61.5 expected, according to Bloomberg data, and also marked a series high. 

"The upturn is broad-based: the service sector is growing at the fastest rate recorded in almost 12 years of survey history, and manufacturers reported one of the strongest expansions seen over the past seven years," Chris Williamson, chief business economist for IHS Markit, said in a statement. "The latter was all the more impressive, as factories continued to be throttled by unprecedented supply chain delays, a consequence of which was a further steep rise in prices."

“The worsening supply situation is a concern for the outlook, especially in relation to prices. Supply needs to improve to come into line with demand," he added. "But with record supply chain delays driving a rise in backlogs of uncompleted work of a magnitude not surpassed for over seven years, firms appear to be struggling to boost operating capacity in the near-term.”

9:36 a.m. ET: Bitcoin, other cryptocurrency prices plunge amid capital gains tax jitters

Bitcoin (BTC-USD) prices plunged 11% to below $49,000 on Friday, extending the selloff in other risk assets seen Thursday as concerns over higher capital gains taxes weighed on assets that have experienced rapid price gains. 

The largest cryptocurrency by market cap was on track to post its worst weekly performance in nearly two months amid the drawdown, according to data from Bloomberg. Ethereum (ETH-USD), the second largest cryptocurrency, also sank by 14%. Meme-based dogecoin (DOGE-USD), which saw a renascence this week that sent prices up sharply, dropped 19%. 

9:30 a.m. ET: Stocks open mixed, Intel drags down Dow while S&P 500 and Nasdaq rise 

The three major indexes opened mixed Friday morning, with a drop in shares of Intel pulling the Dow down by 70 points, or 0.2%. The S&P 500 and Nasdaq rose, however, to shake off steep losses from the prior session, sparked by concerns over an increase in the capital gains tax rate for wealthy individuals. 

7:05 a.m. ET Friday: Stock futures rise, shaking off Thursday's declines

Here's where markets were trading ahead of the opening bell:

  • S&P 500 futures (ES=F): 4,138.25, up 10.5 points or 0.25%

  • Dow futures (YM=F): 33,777.00, up 69 points or 0.2%

  • Nasdaq futures (NQ=F): 13,780.25, up 30.00 points or 0.22%

  • Crude (CL=F): +$0.35 (+0.57%) to $61.78 a barrel

  • Gold (GC=F): +$5.70 (+0.32%) to $1,787.70 per ounce

  • 10-year Treasury (^TNX): -0.5 bps to yield 1.551%

6:02 p.m. ET Thursday: Stock futures edge lower 

Here's where markets were trading as the overnight session began.

  • S&P 500 futures (ES=F): 4,129.75, up 2 points or 0.05%

  • Dow futures (YM=F): 33,720.00, up 11 points or 0.03%

  • Nasdaq futures (NQ=F): 13,759.75, up 9.5 points or 0.07%

Health care workers walk with protective face masks on past the New York Stock Exchange, amid the coronavirus disease (COVID-19) pandemic, in the lower section of Manhattan in New York City, U.S., September 9, 2020.   REUTERS/Shannon Stapleton
Health care workers walk with protective face masks on past the New York Stock Exchange, amid the coronavirus disease (COVID-19) pandemic, in the lower section of Manhattan in New York City, U.S., September 9, 2020. REUTERS/Shannon Stapleton
Shannon Stapleton / reuters

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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