Gordon Johnson of GLJ Research LLC argues competition, low gas prices, and slow growth will drive Tesla stock down.
Gordon Johnson of GLJ Research LLC argues competition, low gas prices, and slow growth will drive Tesla stock down.
Shares of online betting platform DraftKings (DKNG) were down nearly 7% at market close on Friday. But DraftKings CEO and co-founder Jason Robins struck an optimistic tone when speaking to Yahoo Finance Live on Friday,
(Bloomberg) -- China’s exports rose more than expected in April, suggesting its trade out-performance could last longer than expected this year, fueled by global fiscal stimulus.Exports grew 32.3% in dollar terms in April from a year earlier, the customs administration said Friday, exceeding the 24.1% median estimate in a Bloomberg survey of economists. Imports climbed 43.1%, a sign of strong domestic demand and soaring commodity prices, resulting in a bigger-than-expected trade surplus of $42.85 billion for the month.Global appetite for Chinese goods remained strong in the month, thanks to stimulus packages introduced by developed economies that’s helped to fuel demand for household goods, furniture and electronic devices. With vaccine rollouts accelerating and more economies opening up, China’s export growth was widely expected to moderate this year as consumers start to spend more on services. But April’s data shows that hasn’t happened yet.“The export figure clearly reflects a recovering and expanding global economy,” said Hao Zhou, an economist at Commerzbank AG in Singapore. “Robust imports and exports also mean that China’s manufacturing industry is still outperforming the services sector to lead the economic rebound.”The low base from a year ago also helped to underpin the strong results, but even on a two-year average growth basis which strips out those effects, April’s export growth was 16.8%, much stronger than pre-pandemic levels, according to analysis by Bloomberg Economics.What Bloomberg Economics Says...“Imports were lifted mainly by higher commodity prices, but also due to a recovery in domestic demand. These factors that supported China trade look set to continue in the near term.”-- David Qu, China economistFor the full note click hereThe U.S. was the biggest export market last month, accounting for 15.9% of Chinese goods sold abroad. Southeast Asian nations bought 15.6% of exports while the European Union purchased 15.1%.“We expect China’s export growth will stay strong into the second half of this year,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd, citing strong growth in U.S. demand and continued coronavirus outbreaks in developing countries such as India causing production to shift to China. Those trends are likely to support China’s currency, he added.Exports were also likely boosted because of a resurgence in coronavirus cases in several developing countries, including India and in Southeast Asia, Lu Ting, chief China economist at Nomura Holdings Inc., wrote in a note. That new wave of infections had a two-fold effect: reducing the competitiveness of these countries and forcing them to buy more medical goods like personal protective equipment. Exports to India surged 144% in April from a year earlier with the monthly value hitting a record $7.8 billion. Liu Peiqian, an economist at Natwest Group Plc, cited increased global demand for microchips, where Chinese companies are a key part of the supply chain, as another reason why “exports outperformance will likely remain a key theme” in China’s recovery. In volume terms, imports of industrial metals and energy products softened slightly in April, she added, suggesting that the domestic demand recovery could still be relatively weak.At the Communist Party’s Politburo meeting last week, China’s top leaders pledged to accelerate the recovery in domestic demand and reiterated there would be “no sharp turn” on economic policy. But the government is focused on raising consumer spending on goods and services, while taking a cautious stance on property and infrastructure investment, which tends to be more import-intensive.Read More: Chinese Copper Imports Drop With Scorching Rally Taking TollA strengthening recovery in Chinese consumer spending was indicated by the April services purchasing managers’ index compiled by Caixin Media and IHS Markit, which rose to 56.3 from 54.3 the previous month, well above the 50 reading that marks an expansion from the previous month. However, data from a recent five-day public holiday in China showed spending below pre-pandemic levels, suggesting China will remain dependent on overseas demand for much of its growth this year.Other details:For a breakdown of commodity imports, click here. While the volume of iron ore imports rose 6.7% in January-April compared with the same period in 2020, the value of shipments surged 82.1%Imports were also boosted by the delivery of 24 aircraft in April; on a year-to-date basis, the value of aircraft imports surged 247% from the same period in 2020In yuan terms, exports rose 22.2% in April from a year earlier, higher than the 12.5% forecast by economists in a Bloomberg survey; imports grew 32.2%, below the 33.6% predicted(Updates with record exports to India.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Global central banks are starting to wind down the trillion-dollar money printing machines set in motion to rescue their economies in 2020. Getting ahead of them is becoming this year’s biggest currency trade.Early changes to bond-buying programs from Canada and Britain have been rewarding for foreign-exchange players. Meanwhile, Norway, which hasn’t needed to deploy more unconventional policy such as asset purchases, is already talking about raising rates. The trio’s currencies are leading the Group of 10 this year, posting gains of more than 4%.Yet that acceleration may already be losing momentum now that those policy makers have shown their hands. That has left traders on a mission to identify economies that are heating up too fast for comfort -- and those where tightening is a far-flung prospect -- in order to pick the next winners and losers.One strategy is to follow the commodity boom and bet on exporters such as Australia and New Zealand, where growth is roaring back. Another playbook involves buying the currency of a country likely to hike rates, while selling that of a country committed to ultra-low rates.“Some central banks outside the Fed like the Reserve Bank of Australia and the Reserve Bank of New Zealand may find themselves in a position similar to the Bank of Canada, where they could be tightening much sooner than what they’ve initially indicated,” said Mazen Issa, senior FX strategist at TD Securities. Canada’s move “may give a little bit more confidence to the policy community to begin making little tweaks to their own policy outlooks as well,” he added.Balancing ActLife in developed nations is returning to normal thanks to vaccines that have arrested the spread of coronavirus. But for central bankers, extricating themselves from the programs that staved off economic collapse last year is a delicate balancing act.The Federal Reserve, often called the central bank of the world, is taking a softly-softly approach toward policy normalization designed to avoid market chaos reminiscent of 2013’s taper tantrum. Ditto the European Central Bank, whose chief Christine Lagarde recently said talk of tapering is “premature.” But waiting as growth roars back runs the risk of falling so far out of step with economic reality as to provoke a policy overshoot.“The challenge for the Fed is that it should not wait too long because they may have to move faster, and that may shock the market,” said Athanasios Vamvakidis, head of G-10 FX strategy at Bank of America Corp. “It all depends on data.”The latest data may justify the Fed’s steady hand: April’s disappointing jobs report Friday recast inflation and rate-hike expectations.Tapering BeckonsWhether or not central bank chiefs are ready to talk about it now, tapering is drawing closer. Asset purchases from the Fed, the ECB, the Bank of Japan and BOE will likely slide to around $3.4 trillion this year from almost $9 trillion in 2020, before falling to just $400 billion in 2022, according to Bank of America.Traders are going all-in at signs of forthcoming policy tweaks: the euro gained Friday after ECB Governing Council member Martins Kazaks said the institution could decide to scale back its emergency bond-buying program as early as next month.“Growth is clearly accelerating in the G-10 countries, with vaccination campaigns picking up momentum. said Philippe Jauer, global head of FX at Amundi Asset Management. “This means policy could accelerate more than anticipated by the market.”North Meets SouthWhile those debates roll on, FX investors may get more joy betting that central banks Down Under take the lead of their northern Commonwealth peer.At Robeco Institutional Asset Management, fund manager Bob Stoutjesdijk cashed out of the Canadian dollar after the BOC’s taper last month. He’s got Australia and New Zealand on his radar, though he’s wary of lingering border controls that will sap tourism revenues and mixed signals from their central banks.Speculative investors, including hedge funds, held bullish bets on the New Zealand dollar for a sixth consecutive week through May 4, according to the latest data from the Commodity Futures Trading Commission. They increased net longs on the Aussie dollar for the first time in three weeks. Meanwhile, net shorts on the yen held near the most in two years. The divide between currencies backed by central banks taking steps toward pulling back support and those that are further off is also palpable in the options market.Sentiment on the Australian and New Zealand dollars versus their Japanese peer has turned less pessimistic this year, as seen in risk reversals. The premium on options betting on declines in the Aussie and kiwi against the yen has narrowed across the curve from end-2020 levels, for tenors starting at one-week all the way up to a year.There’s room for upside in the Canadian dollar versus the yen, and in the Norwegian krone against the Swiss franc and euro, given the contrast in their policy paths, according to Audrey Childe-Freeman, Bloomberg Intelligence chief G-10 FX strategist.The Aussie and kiwi dollars are likely to outperform based on higher yields alone, she said, even if their central banks have resisted adjusting to more hawkish policy language so far.While the RBA has been adamant that it will keep pumping monetary support into the economy until it is fully repaired, its most recent outlook showed upbeat trajectories for growth and jobs, showing it’s on track to drive faster pay gains and inflation back toward its target. Rising inflationary pressures and house prices have also been highlighted by the RBNZ.“No central banks want to shock the market, but they will have to watch data. If the data is strong, we would expect the Fed to normalize the policy. We expect the same for RBA and RBNZ,” said Vamvakidis at Bank of America. “They will be the ones to watch because of their potential to surprise to the upside.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Cars are back in vogue courtesy of the pandemic. They’re also getting more expensive, thanks in part to surging commodity prices.Many of the essential ingredients for automakers, such as copper, steel and aluminum, are hitting or approaching record highs this year as the lagging supply can’t keep up with stimulus-driven demand. The Bloomberg Commodity Spot Index jumped to its highest since 2011, with metals up 21% so far this year.Should the current rally morph into a supercycle, rising car prices could forebode inflation across the board. Analysts at JPMorgan Chase & Co. estimate the price of an auto’s raw materials have climbed 83% in the year through March. Those pieces typically make up about 10% of the cost of building a vehicle, meaning the price tag for a $40,000 car would have to increase 8.3% to offset the rally, analysts for the bank wrote.“We’re definitely feeling the commodity headwind,” Jim Farley, chief executive officer of Ford Motor Co., said last week. “We’re seeing inflation in a variety of parts of our industry, kind of in ways we haven’t seen for many years.”Carmakers usually struggle to pass on higher costs, but demand is booming as major economies reopen and many consumers continue avoiding public transportation. The global semiconductor shortage also is inhibiting production, keeping inventory tight and driving up vehicle prices.In the U.S., car supply is so limited that rental companies are resorting to buying used vehicles at auction rather than new ones.The main contributor to higher commodity costs hitting the industry is the steel needed for chassis, engines and wheels. The metal’s recent rally has smashed records as China -- by far the biggest producer -- took measures to curb output.The boom in copper prices adds to the costs of electric vehicles just as the industry implements an energy transformation to meet tighter emissions standards. EVs use nearly 3 1/2 times more copper than gas guzzlers because of the larger amount of wiring inside, according to consultancy Wood Mackenzie Ltd.The increases may hurt automakers like Tesla Inc. and Volkswagen AG that are trying to make EVs more price-competitive with traditional cars.They also may encourage automakers to explore alternative chemistries for their EV batteries. The majority of cells use some combination of lithium, cobalt and nickel, which have jumped a minimum of 47% each in the past 12 months.Ford and BMW AG were among those investing $130 million this month in battery startup Solid Power Inc., which is working on cells that would remove the need for those metals, leading to a 10-fold decline in power pack costs.“They are looking to spread that risk,” said Caspar Rawles, head of price and data assessments at Benchmark Mineral Intelligence. “There is no hedging for lithium or cobalt.”BMW expects headwinds from rising commodity prices of as much as 1 billion euros ($1.2 billion) for the year, Chief Financial Officer Nicolas Peter said Friday during an earnings briefing. The luxury-car maker singled out rhodium, steel and palladium as particular worries in the coming months.Longer term, BMW is working to be less exposed to price squeezes in key raw materials. From 2025, the automaker plans to produce vehicles on a new architecture that will allow recycling of materials such as steel, aluminum and plastics to make new cars.“We’re seeking partnerships” to refine the necessary technologies, BMW CEO Oliver Zipse said.Jeep maker Stellantis NV -- formed from the merger of Fiat Chrysler and PSA Group –- said it needed to recover some of its higher costs, and the marketplace is supportive, so far.“It’s hard to imagine a better environment with which to pass through the impact of supply shock and price inflation to consumers who are effectively lining up to take delivery of their new car off the car carrier,” analysts at Morgan Stanley wrote in a note. “It’s a seller’s market in autos.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Discover what’s driving the global economy and what it means for policy makers, businesses, investors and you with The New Economy Daily. Sign up here.U.S. job growth significantly undershot forecasts in April, suggesting that difficulty attracting workers is slowing momentum in the labor market and challenging the economic recovery.Payrolls rose 266,000 from a month earlier, according to a Labor Department report Friday that represented one of the largest downside misses on record. Economists in a Bloomberg survey projected a 1 million hiring surge in April.The unemployment rate edged up to 6.1%, though the labor-force participation rate also increased.The report stunned investors as Treasury yields plunged and the dollar turned sharply lower. U.S. stocks rose on expectations that monetary policy will remain conducive to economic growth for a sustained period. The eurodollar market pushed back its pricing for a Federal Reserve rate increase to mid-2023.Follow reaction in real-time here on Bloomberg’s TOPLive blogThe disappointing payrolls print leaves overall employment more than 8 million short of its pre-pandemic level and is consistent with recent comments from company officials highlighting challenges in filling open positions.“It’s a lot faster to lay off workers than it is to hire them back,” said Sarah House, senior economist at Wells Fargo & Co. “While we are seeing some workers come back into the labor force it just isn’t fast enough.”While job gains accelerated in leisure and hospitality, employment at temporary-help agencies and transportation and warehousing declined sharply.Fed Chair Jerome Powell said last week the dichotomy between a large number of unfilled positions and millions of unemployed likely reflects a combination of a skills gap, child care obligations and lingering virus fears.What Bloomberg Economics Says...“April payrolls fell dramatically short of expectations, as a clumsy reopening of the economy appears rife with frictions, such as skills-mismatches, parents unable to return to the workforce amid a significant share of schools not yet open, and far from complete vaccination efforts.”-- Carl Riccadonna, Yelena Shulyatyeva, Andrew Husby and Eliza Winger, economistsFor the full note, click hereMassive fiscal stimulus including the latest $1.9 trillion package passed by President Joe Biden in March may also be impacting the pace of job growth. Some firms indicate enhanced unemployment benefits and the latest round of pandemic-relief checks are discouraging a return to work even as job openings approach a record.A sustained period of tepid job gains could support calls for further government spending.In an interview with Bloomberg Television, Minneapolis Fed President Neel Kashkari said the data justified why the Fed is continuing to deliver its own stimulus. “Today’s jobs report is just an example of we have a long way to go and let’s not prematurely declare victory,” he said.On an unadjusted basis, payrolls rose by more than 1 million last month. Seasonal adjustments usually call for a large hiring gain in April, which may in part explain why the headline number fell short of forecasts.Another reason for the more moderate employment gain is problems in the nation’s supply chains. For instance, motor vehicle production has been severely hampered by shortages of semiconductors. The jobs report showed manufacturing payrolls declined 18,000 in April, driven by a sharp fall in jobs at automakers.Average hourly earnings rose 0.7% in April from a month earlier, to $30.17, the jobs report showed. The wage data for April suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages, the Labor Department said in a statement.A separate measure of compensation that isn’t subjected to shifts in industry employment -- the employment cost index -- rose 0.9% in the first quarter. That was the largest quarterly gain since 2007, according to the Labor Department’s data last week.“While the jobs numbers themselves were certainly disappointing, I think there are a few nuggets in here that are positive development,” House said.Participation RateLabor force participation, a measure of the percentage of Americans either working or looking for work, rose to 61.7% in April from 61.5%, likely supported by increased vaccinations that helped fuel the reopenings of many retail establishments, restaurants and leisure-facing businesses.Average weekly hours increased to match the highest in records dating back to 2006. The gain in the workweek, increased pay and the improvement in hiring helped boost aggregate weekly payrolls 1.2% in April after a 1.3% gain a month earlier.Workforce participation for men age 25 to 54 increased last month, while edging lower for women.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- Copper soared this week to an all-time high, continuing a sizzling rally that’s seen prices double in the past year.The previous copper record was set in 2011, around the peak of the commodities supercycle sparked by China’s rise to economic heavyweight status — fueled by massive amounts of raw materials. This time, investors are betting that copper’s vital role in the world’s shift to green energy will mean surging demand and even higher prices. Copper futures rose as high as $10,440 a ton in London on Friday. What’s the big deal about copper?Through human history, copper has played a critical role in many of civilization’s greatest advances: from early monetary systems to municipal plumbing, from the rise of trains, planes and cars to the devices and networks that underpin the information age.The reddish brown metal is mostly unrivaled as an electrical and thermal conductor, while also being durable and easy to work with. Today, a vast array of uses in all corners of heavy industry, construction and manufacturing mean it’s a famously reliable indicator for trends in the global economy.The copper market was one of the first to react as the Covid-19 coronavirus emerged in Wuhan, with prices slumping by more than a quarter between January and March last year. Then as China’s unprecedented steps to control the domestic spread of the virus started to yield results, copper rapidly rebounded -- and it hasn’t looked back since.But it’s not just China driving the rally. While the country accounts for half of the world’s copper consumption and has played an integral part in copper’s surge, demand there has actually softened this year. Yet prices continue to drive higher.Why is copper surging now?It’s partly due to evidence of recoveries in other major industrial economies, with manufacturing output surging in places like the U.S., Germany and Japan. But investors have also been piling into copper on a bet that global efforts to cut carbon emissions are going to mean the world needs a lot more of the metal, putting a strain on supply. New mine production may be slow to arrive, as mines are hard to find and expensive to develop.Electric vehicles contain about four times as much copper as a conventional car, and vast amounts of copper wiring will be needed in roadside chargers to keep them running. Bringing electricity from offshore wind farms to national power grids is also a copper-intensive exercise.Governments around the world have announced ambitious infrastructure investment plans, much of which involves construction, green energy, or both.Are things that use copper getting more expensive?Increasingly, yes. Major manufacturers have been hiking prices for air-conditioning units and fridges over the past few months, and they’re warning there may be more to come.Still, copper is often used in small quantities in complex consumer goods, and so the doubling in prices over the past year won’t be nearly as painful for consumers as an equivalent jump in food or fuel prices would be. Similarly, governments rolling out big spending programs might not be too worried about a rise in copper alone.But with other raw materials rising too, there are growing signs that they’ll get less bang for their buck as the cost of big-ticket items like wind turbines rise.What does it mean for the economy?There are mounting concerns that the broad rally in everything from lumber to steel will force central bankers to step in to stop inflation in raw-materials markets spiralling out of control.In turn, the stellar economic rebound that’s driving the commodities rally may start to stall as businesses are hit by higher interest rates, compressed margins, and waning demand from consumers. The key question for policymakers at the Federal Reserve — and traders on Wall Street — is whether the broad spike in commodities prices will be temporary.Could the rally fizzle out?In the case of copper, there are some signs that spot demand is starting to cool, particularly in China, and some analysts and traders say the record prices aren’t justified by today’s fundamentals.The view among policymakers is that the rise in commodities prices will prove short-lived, as consumers will focus their spending on services and experiences as economies open up, easing the strain on demand for commodities-intensive items such as second homes, electronics and appliances seen during lockdown.For copper though, it’s not just about strong demand today. In fact, a lot of expected spending on renewables and electric-vehicle infrastructure is yet to really materialize. When it does, it could transform the outlook for copper usage in countries such as Germany and the U.S.How high could copper go?Trafigura Group, the world’s top copper trader, and Goldman Sachs Group Inc. both say prices could hit $15,000 a ton in the coming years, on the back of a global surge in demand due to the shift to green energy. Bank of America says $20,000 could even be possible if drastic issues arise on the supply side.The copper market itself may also be facing a big shift. Trafigura predicts that demand growth in China will be eclipsed by rising consumption in the rest of the world over the coming decade, in a dramatic reversal of the recent trend. That could help underpin a new “supercycle” in the copper market, driving prices higher for years on the back of a step-change in global demand.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- It’s all very simple. The economy isn’t strong enough for the Federal Reserve to taper stimulus, therefore stay-at-home tech shares will rally. And any efforts to heal the economy are likely to drive up inflation, meaning banks and airlines will benefit.Such is the can’t-lose logic underpinning American stocks in May 2021, almost 14 months since the pandemic crashed the market and left an 8 million-job hole in the U.S. labor market. To strategists at JPMorgan Chase, now is no time to doubt equities -- as long as Fed Chair Jerome Powell and President Joe Biden are in charge of the recovery.Anyone looking for confirmation need only recall Friday’s reaction to one of the largest downside misses on record for a U.S. employment report. Small caps surged, buoyed after President Biden used Friday’s numbers as justification for his multi-trillion fiscal aid package. The Nasdaq 100 also jumped as investors took April’s jobs whiff to mean that the Fed won’t be turning off the taps anytime soon, keeping rates low and helping to sustain sky-high tech valuations.“It doesn’t hurt equities to know the Fed is still the backdrop with lower rates for longer,” Ryan Detrick, chief market strategist at LPL Financial. “The stay-at-home and the tech names are going to get a little bit of a bid here on worries about the reopening but I think it’s more of a near-term blip and the bigger cyclical names will still take the baton over the coming months.”Federal Reserve Bank of Minneapolis President Neel Kashkari said as much, telling Bloomberg Television that Friday’s print validates the central bank’s new outcome-based approach -- the idea that policy makers won’t change anything based on economic forecasts, but actual data.Every sector in the S&P 500 rallied in the aftermath, with tech vying with cyclical energy and industrial shares for the top spot. The Russell 1000 Value Index and its growth counterpart both ended Friday 0.8% higher, after value outperformed every day this week.Meanwhile, JPMorgan strategists led by Marko Kolanovic are doubling down on the reflation trade. Just days after warning that many money managers need to quickly switch gears from their deflationary playbook or risk an “inflation shock,” Kolanovic recommended clients increase their tilt toward cyclical and value assets. He advised investors to cut holdings in cash and credit, using the money to buy commodities and stocks.“We expect a strong pickup in inflation this year, which the market will likely be slow to recognize and is poorly positioned for,” Kolanovic and his colleagues wrote in a note Friday. “A combination of boomy global growth and significant bottleneck price pressures should keep inflation on an upward trajectory while most central banks remain committed to their very accommodative stances and are looking through the inflation pickups.”And even for all the hand-wringing over inflation, the latest batch of quarterly reports suggests it’s already here and helping corporate America. Faced with rising prices for everything from lumber to oil to labor and computer chips, chief executive officers have cut costs and boosted prices for their products.As a result, first-quarter income from S&P 500 companies is jumping five times as fast as sales, data compiled by Bloomberg Intelligence show. Based on actual results and analyst estimates for those yet to report, profits probably surged to an all-time high of $48.21 a share. That’s 13% above the record set in 2018 of $42.79.The next test for the equity market’s cheer comes in Wednesday’s inflation data, which is expected to show that price pressures jumped by the most on an annual basis since 2011. But given that Fed chief Powell has said that the central bank will need to see a “string” of strong data before shifting their stance, it’s likely that April’s payroll miss was a big enough blow to keep them on the sidelines.“It justifies the Fed, it keeps them from having their tapering discussion or thinking about raising rates,” said Ross Mayfield, investment strategy analyst at Robert W. Baird & Co.. “That by and large is supportive for equity markets.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- The prospect of a rebound to 2% yields on the world’s benchmark bond is alive and well.Treasury-market bears found a deeper message within Friday’s weak employment report that’s emboldened a view that inflationary pressures are on the rise, and could boost rates to levels not seen since 2019. For Mark Holman at TwentyFour Asset Management, the sub-par April labor reading indicated companies will need to lift wages to entice people back into the labor force; he’s expecting a break of 2% on the 10-year this year.That level has come to symbolize a return to pre-pandemic normalcy in both markets and the economy. The wild ride in markets on Friday suggests Holman likely has company in his views. Ten-year yields initially plunged to a more than two-month low of 1.46%, then reversed to end the day at 1.58%. Meanwhile, a key market proxy of inflation expectations surged to a level last seen in 2013.“When you put all of this together, it confirms my slightly nervous view around inflation,” said Holman, TwentyFour Asset’s chief executive officer. “From a bondholder’s perspective, from my perspective, inflation is the bigger risk. We’ll see more bear steepening of the Treasury yield curve,” with long-term rates rising further.Steepening was evident Friday, with 10- and 30-year yields rising more than their shorter-maturity counterparts. Part of that underperformance may be a result of investors looking to next week, when they’ll need to digest a record-matching $126 billion slate of 3-, 10- and 30-year Treasury auctions. There’s also a robust serving of corporate issuance next week, with dealers calling for $40 billion to $45 billion of sales.The week ahead also brings consumer-price data, with a sharp annual acceleration forecast, although traders may dismiss the figure as resulting from a comparison to depressed levels of a year earlier, the so-called base effect.Pressure PercolatingThere were signs in the jobs report that rising demand could already be putting upward pressure on wages. Average hourly earnings rose in April from a year earlier, while a drop was forecast. A separate compensation measure released last week -- the employment cost index -- had its largest quarterly gain since 2007.Ten-year breakeven rates, a proxy for where investors see the annual consumer price inflation rate for the next decade, initially swooned on Friday before going on to surge to the highest since April 2013, at about 2.5%.Overall, the turbulence Friday made clear that the debate over the outlook for the bond market is still raging. Signs of big changes in positioning also seemed to add to the volatility and indicated a diversity of opinions on just how high yields can go.Dimitrios Delis, a managing director at Piper Sandler & Co., points to 30 years of data showing the 10-year yield has continued to drift lower with each passing decade to support his view that yields won’t unmoor.“The bull market for bonds remains intact,” he said. “We can get to 2%, but it won’t be sustainable.”Buying OpportunityEven if next week’s consumer-price report spurs a knee-jerk leap in rates, the move is likely to be brief -- presenting a buying opportunity for investors, he says. Bursts of demand emerged in other recent episodes to cap yields, like when the 10-year rate surged to 1.77% in late March, still its highest level of the past year.Matt Nest, portfolio manager and global head of active fixed income for State Street Global Advisors, agrees with Holman that labor “supply constraints” crimped hiring last month but says he’s purchasing Treasuries on price dips.He’s wary the U.S. is near “peak macro momentum” for the post-pandemic economic recovery and that long-term structural forces including demographics will keep rates low. He’s been “buying Treasuries to increase duration in portfolios.”What to WatchEconomic calendar:May 11: NFIB small business optimism; JOLTS job openingsMay 12: MBA mortgage applications; CPI; real average hourly earnings; monthly budget statementMay 13: PPI; jobless claims; Langer consumer comfortMay 14: Retail sales; import/export prices; Bloomberg May U.S. economic survey; industrial production; business inventories; University of Michigan gaugesFed calendar:May 10: Chicago Fed’s Charles EvansMay 11: New York Fed’s John Williams; Governor Lael Brainard; San Francisco Fed’s Mary Daly; Atlanta Fed’s Raphael Bostic; Philadelphia Fed’s Patrick Harker; Minneapolis Fed’s Neel KashkariMay 12: Vice Chair Richard Clarida; Harker; BosticMay 13: Barkin; Governor Chris Waller; St. Louis Fed’s James BullardMay 14: Dallas Fed’s Robert KaplanAuction schedule:May 10: 13-, 26-week billsMay 11: 42-day cash-management bills; three-year notesMay 12: 10-year notesMay 13: 4-, 8-week bills; 30-year bondsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
(Bloomberg) -- A cyber-attack has never taken down a U.S. fuel pipeline quite as big as the Colonial Pipeline. It’s the nation’s largest gasoline, diesel and jet fuel system and a critical source of fuel supply for the U.S. Northeast.But this isn’t the first time hackers have hit energy assets in America and beyond in recent years, at times disrupting services and upending operations.Two-Day Gas OutageIn February 2020, the U.S. Department of Homeland Security issued an alert about a ransomware attack that brought down a U.S. natural gas compressor facility for two days.The agency didn’t say which facility was targeted, when the attack occurred or who was behind it. But it did offer some details: Hackers sent emails with a malicious link, known as a phishing attack, to gain control of the facility’s information technology system.It appeared likely that the attacker explored the facility’s network to “identify critical assets” before executing the ransomware attack, Nathan Brubaker, a senior manager at the cybersecurity firm FireEye Inc., said at the time. This tactic, which has become increasingly popular among hackers, makes it “possible for the attacker to disable security processes that would normally be enough to detect known ransomware indicators,” he said.Pemex Systems DownMexico’s oil giant Petroleos Mexicanos reported a cyber-attack in November 2019 that crippled its computer systems. The company’s communication systems were affected for weeks afterwards.For some employees, Internet access was limited, some computer files weren’t accessible and they had difficulty receiving external emails, people in Pemex’s finance, legal and refining departments said at the time. The hacker behind the attack tried to squeeze almost $5 million out of the company. Pemex at the time refused to pay the ransom.Gas Communications TargetedIn April 2018, several U.S. natural gas pipeline operators including Energy Transfer Partners LP and TransCanada Corp. reported that a third-party electronic communications system had been hit with a cyber-attack. Five of the companies confirmed service disruptions from the hacking.Though the cyber-attack didn’t disrupt the supply of gas to U.S. homes and businesses, it showed how even a minor attack can have ripple effects. The attack forced utilities to warn of widespread billing delays and made it difficult for analysts and traders to predict a key government report on gas stockpiles.Ukraine GridIn December 2016, hackers took down almost a quarter of Ukraine’s power grid. Officials blamed Russians at the time for tampering with the utilities’ software and then jamming the power companies’ phone lines to keep customers from alerting anyone.The hack knocked out at least 30 of the country’s 135 power substations for about six hours. Cybersecurity firms working to trace its origins say the attack occurred in two stages. First, hackers used malware to direct utilities’ industrial control computers to disconnect the substations. Then they inserted a wiper virus that made the computers inoperable.Saudi AramcoIn 2012, Saudi Arabia blamed unidentified people based outside the kingdom for a cyber-attack against state-owned Saudi Arabian Oil Co. that aimed to disrupt production from the world’s largest exporter of crude.More than 30,000 computers were compromised or affected by a so-called “spear-phishing” attack, raising concerns about the threat hackers may pose to output at the company also known as Saudi Aramco. A spokesman for the Interior Ministry, declined at the time to identify any of the “several foreign countries” from which the attack originated.Energy companies from electric utilities, to power-grid operators to oil and gas pipeline operators have warned that cyberattacks are becoming more and more prevalent. The largest U.S. power grid operator, PJM Interconnection LLC, has warned regulators that it’s facing increasing attacks. Last May, the U.K.’s grid data system was hacked, although electricity supplies weren’t affected. And in March, an attack against Europe’s association of grid operators, ENTSO-E, affected its internal office systems.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
Stocks traded mixed Friday as investors digested a disappointing April jobs report, which showed the U.S. economy added back far fewer jobs than expected last month despite easing stay-in-place restrictions.
Families can get up to $50 off their bill to stay connected during the pandemic.
The stage is set for an explosion in the amount of stock buybacks, says Goldman Sachs.
Survey says 53% of workers have, or are considering, earning a second income in 2021.
The Dow and S&P 500 hit record closing highs on Friday while registering gains for the week, and the Nasdaq recovered after U.S. jobs data eased concerns over prospects for rising rates. "Growth names that were taken to the woodshed are getting another chance, because they will be perceived to be less risky in an environment where there is a slower recovery, and that's really what the jobs data is indicating", said Tom Martin, senior portfolio manager at Globalt Investments. Heavily-weighted growth stocks such as Microsoft Corp and Apple Inc rose by 1.1% and 0.5%, respectively, giving the S&P 500 and Nasdaq their biggest boosts.
Barry Silbert, a power player in the digital-asset sector, said he's betting against dogecoin and is urging investors in one of the hottest trades in 2021 to convert their doge holdings into bitcoin.
How you can take your health insurance into your own hands.
There was a slight pullback in oil prices following Wednesday’s highs, but the rally is still very much on and bullish sentiment is palpable as summer driving season nears
It takes every cent I earn to get by and pay debt service. If I were to retire today, I would draw $1,200 a month in Social Security, or $1,400 a month if drawing against my ex-husband’s account (we were married 23 years). See: Confused about Social Security — including spousal benefits, claiming strategies and how death and divorce affect your monthly income?
U.S. stock funds now are riding a river of new cash from investors — and that is not a bullish sign. In fact, fund flows are a contrarian indicator: the U.S. stock market in the past has performed better when there is a net outflow of cash. The evidence is summarized in the chart below, which plots net inflows of cash to U.S. stock funds (both open-end and exchange-traded funds) by year over the past decade.
(Bloomberg) -- Peloton Interactive Inc. eased the concerns of investors, saying the financial impact of its treadmill recall would be “short term” and the company had overcome supply issues that had slowed deliveries of its popular stationary bicycles.Fiscal-year revenue will be $4 billion, compared with an earlier forecast of $4.075 billion, the New York-based company said Thursday on a conference call after reporting earnings. The halt to sales of the Tread+ and Tread and the costs of the recall will reduce revenue by about $165 million, Chief Executive Office John Foley said.Investors had been preparing for a larger blow after Peloton, in conjunction with the U.S. Consumer Product and Safety Commission, announced Wednesday the recall of the products. The $4,295 Tread+ was connected to the death of a child and more than 70 incident reports, including adults, children, pets and objects being pulled under the rear of the treadmill. The less-expensive Tread was pulled because the touchscreen was at risk of falling off.Peloton had planned May 27 for an expanded U.S. rollout of the Tread, but Foley said the widespread launch will be delayed while safety improvements are put in place. Among the fixes are hardware changes that must be approved by regulators and a software update for the Tread+, including a passcode requirement, he said.Peloton originally rebuffed safety warnings from regulators, but Foley apologized on Wednesday when the recall was announced. On Thursday, he said the company was working to regain whatever trust had been lost by the incidents involving the treadmills.“We feel like we have some work to do to get back on the right side of trust, safety and to let people know what we stand for,” Folley said on the call. “We are taking some financial pain to keep our brand pristine for the coming decades. This is something we are committed to.The treadmills account for a small percentage of the company’s hardware revenue, which is primarily generated by stationary bicycles, but are seen as key future growth drivers.Peloton sales have soared in the past year as the pandemic shut gyms and forced people to work out from home. However, the company has struggled to keep up with demand for months, leading to long wait times and frustrated customers. Those supply issues droves shares down about 45% so far this year.In a letter Thursday to shareholders, Peloton said average shipping times for its original bike are back to pre-pandemic levels. “While progress has been made, additional work remains to reduce delivery times across the remainder of our product portfolio and regions,” the company said. Bike sales are expected to return to normal seasonality as lockdowns ease, but the company projected it will sell three times as many bikes in the current quarter as it did in the same period in 2019.Peloton said it completed the acquisition of fitness equipment maker Precor on April 1 and integration is “well underway.” The company plans to make a limited number of products at Precor’s North Carolina facility by the end of 2021.Apart from the recall, Peloton’s results showed continued popularity for its products and classes. Sales gained 141% to $1.26 billion in the fiscal third quarter, which ended March 31.Connected fitness subscriptions -- users who pay for classes on Peloton equipment -- jumped 135% to 2.08 million. Paid digital subscriptions, made up of people who take classes on smartphones, tablets and other devices, increased to 891,000. Both numbers topped analysts’ average estimates.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.