US stocks finished mixed on Wednesday but the Dow managed to eke out a fresh all-time high thanks to a few strong gainers. Walgreens (WBA), which will soon offer the Covid-19 vaccine, was the best performer in the index.
The Dow finished up 0.2%, or 62 points, putting it at a new record high.
The S&P 500 ended flat.
The Nasdaq Composite slipped 0.3%.
Washington is spending trillions to get the nation through the pandemic – and get the economy back on track. Deficit hawks are really worried about what this could mean for America’s debt pile.
They’re right to worry, but this just isn’t the time for those concerns, said Federal Reserve Chairman Jerome Powell during a virtual event with the Economic Club of New York.
“The US deficit is not on a sustainable path,” Powell said, but that’s not new and has been the case for a while now.
Still, this is not a time to be stingy with government spending, the central banker said:
Interest rates are at ultra-low levels, which makes incurring new debt very cheap for the United States. Some worry that this will change when interest rates go up. But again, Powell tried to soothe these worries.
“We’re a long way from a situation where we would have to take into account how the federal government should finance itself,” he said.
Fed Chair Jerome Powell wants more government stimulus. That’s not secret. But what does he make of the discussions in Washington about President Joe Biden’s proposed stimulus plan?
“The question how much to spend and what to spend it on is a question for Congress,” Powell said, sticking with his a-political line. The Fed is an independent institution, so his reticence makes sense.
But what about monetary stimulus?
Some Fed watchers are getting worried that the current, ultra-loose monetary policy will lead to a spike in inflation, but Powell is less worried about that.
Inflation trends have been pretty low for years in the United States. In fact, only a few years ago, central bankers around the world were scratching their heads about why inflation remains so low.
So even if consumers suddenly spend all their saved up money when the economy reopens fully, which could push prices higher, “my expectation would be that that would be neither large nor sustained,” Powell said.
We’re a long road away from a labor market that delivers substantial economic and social benefits, such as higher employment and income levels, Federal Reserve Chairman Jerome Powell said during a virtual speech at the Economic Club of New York.
To get the labor market back on its feet, it will take “continued support from both near-term policy and longer-run investments,” Powell said, reiterating his call for further government support of the economy.
Government initiatives such as the Paycheck Protection Program can be credited for limiting permanent job losses, which as of January were considerably lower than during the Great Recession, Powell said.
Right before the pandemic hit, the US unemployment rate was at near a 50-year low of 3.5% and even though wages were growing slowly, they were growing faster for workers on the lower end of the income spectrum. But all that is lost now.
Making matters worse, economic disparities that were “already too wide” have widened further, Powell said in his speech, citing that employment for earners in the top quartile of wages has been only 4%, while the decline for the bottom quartile has been a staggering 17%.
The pandemic has made stay-at-home stocks like Zoom (ZM), Amazon (AMZN) and Netflix (NFLX) into fan favorites. But what paid off in 2020 might not be the right mix in 2021.
“What worked last year was really the virtual world,” said Gabriela Santos, global market strategist at JPMorgan (JPM) Asset Management on the CNN Business digital live show Markets Now. Investors should think about how to balance their portfolios with cyclical stocks in 2021.
“This year it will be important to pivot a bit to the real world,” she added. This could include adding stocks from the industrial sector to portfolios, she said.
The pandemic isn’t over and showing your loved ones you are thinking of them has changed. For example, people are sending more presents and flowers.
That’s good news for companies like Farmgirl Flowers, which finished 2020 with 100% revenue growth as it adapted to the pandemic way of life. With Valentine’s Day coming up this weekend, flower orders are still pouring in for the company.
But a year ago, it wasn’t clear that would be the case. “It was actually the most challenging year of my life personally and professionally,” Christina Stembel, founder and CEO of Farmgirl Flowers, told Alison Kosik on the CNN Business digital live show Markets Now. “Our sales went down about 85% in the first week after shelter in place went into effect,” adding that sales skyrocketed back came back up within weeks.
“We moved our location from San Francisco to a more agricultural community” after the pandemic hit, she said, and the company opened distribution centers to meet its demand for Mother’s Day last May.
Once vaccines are widely distributed, Stembel said her business will likely change again. “People will be spending more time with the people they love,” she said, and she expects some lower revenue months. But, she added, “we’re creating products lines at all product price points.”
US stock indexes are in the red today, but on the whole the market is still near record highs. The Nasdaq Composite last set an all-time high yesterday, and bubble talk is getting louder.
“I think we’re a little bit in a bubble. I think valuations are stretched,” said Kenny Polcari, managing partner at Kace Capital Advisors, on the CNN Business digital live show Markets Now.
Polcari has expected a pullback in stocks since the start of the year, but the market keeps escaping a correction because investors have a fear-of-missing-out on the stocks rally.
An event that the market isn’t necessarily expecting could finally knock the market off its highs, Polcari said, perhaps even by a smaller-than-expected stimulus package.
Even so, the investor doesn’t predict a huge selloff, but rather a 5-7% correction that “takes some of the fluff out of the market,” Polcari said.
It’s nearly midday and US stocks aren’t looking so good.
The major three stock indexes have pulled back from their initial gains and now are in the red. The Nasdaq Composite, which was on track for yet another record high earlier in the day, is leading losses, falling 0.4%.
The S&P 500, the broadest measure of Wall Street, is down 0.2%, and the Dow is down a modest 0.1%, or 19 points.
Consumer and tech stocks are among the biggest losers around midday.
Claims for unemployment benefits just won’t budge. Sure, they have come down from their initial highs at the start of the pandemic crisis, but they still hover around levels four-times as high as before Covid-19. America’s jobs recovery doesn’t look so hot.
For tomorrow’s release, economists predict another 757,000 claims for first-time jobless benefits. And that doesn’t include people filing for Pandemic Unemployment Assistance, which is available for gig workers and the self-employed. It would be a slight improvement from last week’s report, which cited 779,000 claimants.
Continued claims, which count people who filed for at least two weeks of benefits in a row, are expected to tick down to 4.5 million, compared with 4.6 million before. Any improvement is good news, but the pace here is really like trickle.
The Department of Labor will publish the weekly jobless claims report tomorrow morning at 8:30 am ET.
General Motors (GM) posted stronger-than-expected fourth-quarter earnings, which helped its full-year 2020 profit to beat 2019’s earnings – despite the pandemic.
Shares of GM fell 4% in early trading on the report. Shares are up 10% since January 29, when the company announced it hopes to sell only emission-free vehicles by 2035.
The nation’s largest automaker earned $2.8 billion in the quarter, excluding special items. That topped Wall Street’s forecasts of $2.6 billion. Quarterly revenue rose 22% to $37.5 billion, also beating expectations.
US stocks opened in the green Wednesday. The January inflation report was mostly in line with expectations, soothing worries that the Federal Reserve’s low-rate policy could lead to a spike in prices.
Investors continue to watch earnings, with Coca-Cola (KO) and GM (GM) both beating estimates earlier today.
Meanwhile in Washington, the second impeachment trial of former President Donald Trump is under way.
Prices rose 0.3% in January on a seasonally adjusted basis, just as economists predicted. Higher gas prices accounted for most of the increase, according to the Bureau of Labor Statistics.
Core inflation, which strips out more volatile components, such as food and energy, was flat in January.
This all sounds a bit boring, but that’s not a bad thing. With interest rates ultra low as the Federal Reserve is doing all it can to support markets and the economy, some market watchers are concerned that the low rates could lead to spikes in inflation. But, so far, there’s no sign of that and that bodes well for the Fed’s decision to leave rates lower for longer.
For the 12 months leading up to January, overall inflation, as well as core inflation, stood at 1.4%, slightly below expectations.
Salesforce (CRM) said that after the pandemic, most of its workers will have the option to work remotely part- or full-time, in a move to integrate flexibility more permanently into the company’s operations.
Only “the smallest population of our workforce” will be working from an office 4 to 5 days a week, the company said in a blog post.
The announcement is another sign of how the tech industry is leading changes in the future of work. The shift will be reflected in office layouts, too, Salesforce said.
Much of the permanent shift to remote work is also driven by other trends, Salesforce said, including the ability to hire talent globally rather than in specific geographic regions and employee satisfaction.
Under Armour (UA) shares rose 4% in premarket trading after reporting a surprise profit for the holiday shopping season.
The apparel maker posted net income of $184.5 million for the fourth quarter, a sharp reversal from the $15.3 million loss for the same period a year ago. Cost-cutting and a boost in digital sales helped turn around Under Armour’s fortunes.
The company’s stock will be up 20% for the year if premarket gains hold.
Heineken (HEINY) is cutting 8,000 jobs and trying to “move beyond beer” after the pandemic hammered sales.
The brewer of Moretti and Amstel said in an earnings statement on Wednesday that it will slash almost 10% of its global workforce and seek savings of €2 billion ($2.4 billion) over two years as part of an overhaul designed to improve efficiency.
The restructuring will cost about €420 million ($509 million) and reduce head office staff costs by 20%. Regional offices and local operations will also be impacted.
Beachbody Company, which is recognizable for its fitness classes that can be done at home, is going public through a SPAC deal.
Forest Road Acquisition Corp., a special purpose acquisition company aligned with former TikTok CEO Kevin Mayer, announced Wednesday it’s merging Beachbody and Peloton-rival Myx Fitness valuing the new company at about $3 billion.
Myx makes at-home fitness bikes and streams classes, similar to Peloton. It’s trying to take advantage of Peloton’s delivery crunch, with the company promising buyers delivery time of just two weeks.
The company will operate under the Beachbody name and trade under the Nasdaq symbol “BODY,” likely in the second quarter.
US stock futures are back on track to return to record territory after falling for the first time in six sessions Tuesday. Investors will be looking closely at January’s inflation report, due at 8:30 am ET, which will indicate whether the Fed is correct in its assumption that inflation will remain comfortably low for quite some time as the government spends through the nose to rescue the economy
Earnings from Coca-Cola, General Motors, Uber and Zillow Group are expected today.
Meanwhile in Washington, the second impeachment trial of former President Donald Trump is under way.
GameStop (GME), the struggling video game retailer at the center of a Wall Street frenzy last month, is losing stream.
The stock was down nearly 20% to $48.79 a share on Tuesday, a sign that the party was winding down for retail investors who drove GameStop to record highs last month. Last week, the stock tumbled more than 80%.
Shares are down another 4% in premarket trading. Read more here.
Twitter (TWTR) said that its efforts to tackle misleading content around the US elections cost the platform some users.
The company reported having 192 million monetizable daily active users – or users who can be served ads on the platform – during the quarter ending in December, up 27% from the year prior but lower than what Wall Street analysts were expecting.
In a letter to shareholders, Twitter said product changes around the election dented its user numbers for the quarter.
Shares rose 5% in premarket trading. Read more here.
Lyft (LYFT) is making some progress on the long road to recovery from what the coronavirus pandemic’s done to its business.
The ride-hail company reported Tuesday that its revenue fell 44% compared to a year ago in the fourth quarter, to $570 million. Active riders fell 45% over the same period, to 12.5 million riders – a slight increase compared to the third quarter.
Lyft’s fourth quarter earnings report gives a fuller picture of the ongoing negative impact of the pandemic on its business.
The company said that, while the earlier part of the quarter benefited from some recovery, the latter part was “negatively affected by the surge in Covid-19 cases and the reintroduction of restrictive measures intended to curb the spread.”
Lyft’s shares soared 13% in premarket trading. Read more here.
