Markets

Daily Markets: Powell Speaks; A Closer Look at Biden's EV Infrastructure Plan

Electric car
Credit: iStock photo

Today’s Big Picture

Equity markets in Asia finished today’s trading mostly in the green led by the 1.5% move higher in Hong Kong’s Hang Seng and modest gains in India’s Sensex and South Korea’s Kospi. Japan’s Nikkei finished the day slightly lower. By mid-day trading in Europe, equity indices were mostly higher and U.S. futures point to a mixed open.

Before the day’s trading kicks off, investors will chew through the latest weekly jobless claims while afternoon trading will likely reflect comments made by Fed Chair Jay Powell’s appearance at an International Monetary Fund at which he will likely share his views on the global recovery and monetary policy outlook. Following yesterday’s release of the latest Fed’s Federal Open Market Committee meeting minutes, odds are rather high Powell sticks to the current Fed script that sees it not removing the monetary policy punch bowl for some time, and describing inflation as transitory. In between, investors and economists will likely digest more details of President Biden’s infrastructure plan, including its proposal for electric vehicles as well as growing concerns about the current chip shortage that is plaguing the auto industry - see Stocks to Watch for more on both.

Data Download

Coronavirus

While the pace of vaccinations in the U.S. is well above expectations, daily new cases continue to be problematic around the world.

  • The U.S. has administered at least one shot to 76% of those over the age of 65 and a total of 150 million shots have been given in just 75 days. Nearly 80% of U.S. primary and secondary school teachers, staff, and childcare workers have received at least their first shot by the end of March.

Elsewhere things are less rosy.

  • India just reported a new record high of 126,265 new cases yesterday, the highest count around the world as its death toll rises to nearly 167,000.
  • Ontario, Canada, the nation’s most populous province declared a state of emergency yesterday, ordering residents to stay at home for a month due to the strains on the healthcare system from surging coronavirus infections.
  • Turkey reported a record high for new daily cases Wednesday.

The Director of the Centers for Disease Control, Rochelle Walensky, announced that the more contagious variant of the coronavirus originally found in the UK is now the most common strain in the U.S., with hospitals now seeing more patients in their 30s and 40s with the severe form of the disease.

Both Spain and Italy are limiting the usage of the Oxford-AstraZeneca (AZN) vaccine to people over 60 after the European Medicines Agency reported finding a link between very rare blood clots in the brain and the AZN shot. France and Germany have already limited their use to those over 55 and 60, respectively while Sweden and Finland only allow it for those over 65. The UK immediately switched its guidance yesterday for the vaccine, recommending that those between 18 and 29 are offered alternatives. Denmark and Norway have suspended their use entirely. Australia is recommending against its use for those under 50. The Philippines has suspended its use for those under 60.

According to the Office for National Statistics in the UK, 53% of those who had “strong positive” test results for the coronavirus were asymptomatic, explaining how it is so good at getting around.

The U.S. FDA just approved the Symbiotica finger-prick test that allows users to collect samples of their blood at home, which are then sent to a Symbiotica laboratory to detect Covid-19 antibodies.

International Economy

Consumer Confidence in Japan rose to 36.1 in March up from 33.8 in February and reaching the highest level since February 2020 with all the main sub-indices improving.

Factory Orders in Germany rose 1.2% MoM in February after rising a downwardly revised 0.8% MoM in January. Orders were up 5.6% compared to February 2020, just before the lockdowns began. The nation’s Construction PMI rose to 47.5 in March from 41 in February.

Construction in the UK expanded at the fastest pace in over six-year in March with the IHS Markit/CIPS UK construction index reaching 61.7 from 53.3 in February.

Shipping companies ordered a record volume of container ships last month, signally confidence in rising global trade volumes. In 2020 the ratio of order books to fleet size had reached a 30-year low.

Domestic Economy

The minutes released yesterday from the last FOMC meeting offered little new information. The FOMC mentioned the possibility of altering the interest rate on excess reserves (IOER) between meetings to ensure that the Fed Funds rate remains within the target range. The notes revealed that participants believe it will be “some time until substantial further progress toward… the committee’s goals” was made. The risk of inflation was described as "broadly balanced," which means not a big worry at the moment.

Yesterday’s Balance of Trade for February showed record nominal trade deficits, but when adjusted for the size of the economy, the overall deficit, including goods and services, was less than 4% of GDP. Real goods exports, which fell much more than goods imports during the initial shocks from the pandemic, have mostly recovered but imports are much higher than pre-Covid as American spending habits have shifted towards goods and away from services. The biggest beneficiaries of the increase in goods imports have been China, Hong Kong, and the Eurozone.

The Federal Reserve also released consumer credit data yesterday which showed the second-largest ever nominal increase in borrowing balances. Only one month in 2017 saw a bigger increase in consumer credit balances across both revolving and non-revolving. One interesting tidbit to note is that with the decrease in interest rates and longer loans, car payments are at near-record lows as a percentage of average earnings for production and non-supervisory workers (roughly 80% of the population).

Today will bring the usual weekly jobless claims reports, which are expected to see claims for the week ending April 3 drop from the prior week’s 719k to 650k. We will also hear from Federal Reserve Chairman Jay Powell at noon EST.

Markets

While the S&P 500 managed to squeak out a new record high yesterday rising 0.15%, the intraday range was the smallest since last August with a record low volume for 2021 of just 9.3 billion shares. The daily average this year has been around 14 billion. The Dow rose a whopping 0.05%, Nasdaq fell 0.07%, but the Russell 2000 lost 1.6%. The VIX fell below 17 and just 5 of the 11 S&P industry sectors closed in the green. The 10-year and 30-year yields rose to 1.67% and 2.36% respectively as gold dropped to $1,738 an ounce.

Stocks to Watch

The Biden administration’s $174 billion proposal to boost electric vehicles calls for $100 billion in new consumer rebates and $15 billion to build 500,000 new electric vehicle charging stations. Shares of companies to watch range from Tesla (TSLA) and General Motors (GM) to Blink Charging (BLNK). Separately, General Motors shared it is testing a variety of battery chemistries, technologies, and manufacturing processes aimed at slashing the cost of future electric vehicle batteries and reducing its dependence on such price-sensitive metals as cobalt.

Toyota Motor (TM) unveiled new Lexus and Mirai models in Japan, equipped with its new driving assist technology, Advanced Drive, which features a level 2 autonomous system that helps to limit the car in its lane, maintaining the distance from other vehicles and changing lanes under the driver’s supervision on expressways or other motor-vehicle only roads.

Buckle (BKE) reported its net sales for the 5-week fiscal month ended April 3, jumped 240.2% YoY to $139.4 million. Compared to the same 5-week period in fiscal 2019, net sales increased 69.5%.

Shares of cloud-based platform Box (BOX) are under pressure in pre-market trading following reports KKR & Co. (KKR) is in discussions to make a $500 million investment in the company.

The Nikkei is reporting that the production of some of Apple’s (AAPL) MacBooks and iPads has been postponed due to a global component shortage. According to the report, Apple’s production plans for iPhones have not been affected by the supply shortage; however, the supply of some components for the devices is "quite tight."

Shares of Snap (SNAP) have gained over 21% since their interim March 30 lows in response to the company’s push into eCommerce.

Mexico-based airline Volaris (VLRS) reported March revenue passenger miles of 1.49 billion, down 2% YoY.

Volvo Group (VLVLY) and SSAB have signed a collaboration agreement on research, development, serial production, and commercialization of the world's first vehicles to be made of fossil-free steel.

Raven Industries (RAVN) has purchased all of the intellectual property and patents of Jaybridge Robotics, an early developer of automated agriculture technology.

AppHarvest (APPH) acquired Root AI, an artificial intelligence farming startup that creates intelligent robots to help manage high-tech indoor farms. The acquisition of Root AI and its robotic universal harvester, Virgo, is expected to provide AppHarvest with a baseline of harvesting support working alongside crop care specialists focused on more complex tasks.

Costco Wholesale (COST) reported March net sales of $18.21 billion, up 17.6% YoY. Total comparable sales, excluding the impacts from changes in gasoline prices and foreign exchange, were +11.1% YoY with US comp sales up +11.3%, Canada +13.0%, and e-commerce +54.5%.

Twitter (TWTR) reportedly discussed a $4 billion deal to buy the audio chat app Clubhouse.

After today’s market close, Levi Strauss, PriceSmart, and WD-40 are expected to report their latest quarterly results. Investors looking to get the details on those reports as well as others slated to be had this week should visit Nasdaq’s earnings calendar page.

On the Horizon

  • April 9: PPI, Wholesale Inventories
  • April 12: Monthly Budget Statement for March
  • April 13: Inflation, API Crude Oil Stock report
  • April 14: Import/Export prices, EIA energy stock reports
  • April 15: Retail Sales, NY Empire State Manufacturing, Philadelphia Fed Manufacturing, weekly Jobless Claims, Industrial Production, Business Inventories, NAHB Housing Market Index, Net Capital, and TIC flows, Foreign Bond Investment
  • April 16: Housing Starts, Building Permits, Michigan Consumer Sentiment

Thought for the Day

“The point is that the pleasures of spring are available to everybody, and cost nothing.” ― George Orwell

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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