Friday, April 2, 2021
by Doug Noland
My highly edited ans easy to read version follows:
For the week ending April 2, 2021:
S&P500 gained 1.1% (up 7.0% y-t-d)
the Dow added 0.2% (up 8.3%)
Utilities increased 0.9% (up 1.7%)
Transports rose 1.0% (up 17.9%)
S&P 400 Midcaps gained 0.8% (up 14.8%)
Small cap Russell 2000 recovered 1.5% (up 14.1%)
Nasdaq100 advanced 2.7% (up 3.4%)
Semiconductors surged 4.3% (up 15.9%)
Biotechs rallied 1.8% (down 2.9%).
Though gold bullion slipped $4,
the HUI gold stock index jumped 3.1% (down 7.8%).
Ten-year US Treasury bond yields
rose five bps to 1.72%
(up 81bps year over year).
Japan's Nikkei rallied 2.3% (up 8.8% y-t-d)
German DAX jumped 2.4% (up 10.1%).
China's Shanghai Exchange rose 1.9% (up 0.3%).
Federal Reserve Credit last week declined $43.2bn to $7.6 TN. Over the past 81 weeks, Fed Credit expanded $3.9 TN, or 105%.
Freddie Mac 30-year fixed mortgage rates
added a basis point to a nine-month high 3.18%
(down 15bps y-o-y).
Fifteen-year rates
were unchanged at 2.45%
(down 37bps).
Five-year hybrid ARM rates
were unchanged at 2.84%
(down 56bps)
Jumbo mortgage
30-year fixed rates
up four bps to 3.29%
(down 68bps)
Commodities Watch:
Bloomberg Commodities Index
declined 0.4% (up 7.4% y-t-d).
Spot Gold slipped 0.2% to $1,729 (down 8.9%).
Silver dipped 0.2% to $25.01 (down 5.3%).
WTI crude rallied 48 cents to $61.45 (up 27%).
Gasoline jumped 2.8% (up 43%)
Natural Gas roses 3.2% (up 4%).
Copper fell 1.9% (up 13%).
Wheat declined 0.4% (down 5%).
Corn gained 1.3% (up 16%).
Bitcoin surged $4,872, or 9.0%,
this week to $58,875 (up 103%).
Coronavirus Watch:
March 31 – CNBC (Berkeley Lovelace Jr.):
“The highly contagious coronavirus variant first identified in the U.K. is starting to become the predominant strain in many regions of the U.S., the head of the Centers for Disease Control and Prevention said… The variant, known as B.1.1.7, now accounts for 26% of Covid-19 cases circulating across the nation, CDC Director Dr. Rochelle Walensky told reporters… It is the predominant strain in at least five regions, she added.”
March 30 – CNBC (Emily DeCiccio):
“Brazil just reached a grim Covid-19 milestone, and a reporter based in Sao Paulo doesn’t see the situation improving in the near future. ‘We have people dying because of lack of oxygen, people are literally suffocating,’ Patricia Campos Mello, a reporter for Folha de Sao Paulo, told CNBC… ‘There are no medications for intubation, there are no ICU beds. It’s a combination of lack of planning and just denialism of the seriousness of the disease.’ ‘The situation is completely out of control,’ Campos Mello added. Campos Mello comments came after Brazil registered… a daily record…”
Market Mania Watch:
Pulling from my Q4 Z.1 analysis from a few weeks back:
“Broker/Dealer Loans expanded a record $100 billion,
or 84% annualized, during Q4 to a record $574 billion.
For 2020, Broker/Dealer Loans
surged a record $164 billion, or +40%.
This compares to previous cycle
peak growth of $79 billion in 2006
and $75 billion in Bubble year 1999.
This is the Fed’s own data.
March 31 – Wall Street Journal (Akane Otani):
“Financial markets went into overdrive in the first quarter of the year. Meme stocks such as GameStop Corp. surged. Celebrities dived into blank-check companies. Christie’s auctioned off a nonfungible token attached to a digital image for $69 million. And just before the quarter’s end, a fire sale of stocks that Archegos Capital Management had bet on caused well-known companies like ViacomCBS Inc. and Discovery Inc. to tumble. If there is a unifying theme to all this, it is that investors big and small showed no fear of risk-taking to start 2021. In fact, they embraced it.”
March 27 – Bloomberg (Matthew Leising):
“A swathe of shadow banks in the $1.6 trillion cryptocurrency market have figured out how to generate returns of 12% with minimal risk: Lend U.S. dollars to hedge funds so they can buy Bitcoin. Some of the largest non-bank firms in cryptocurrency including BitGo, BlockFi, Galaxy Digital and Genesis are stepping up to meet investor demand for dollars amid a long-standing weariness by banks to lend to individuals or companies associated with Bitcoin and other digital assets. In this case, they’re lending to hedge funds that need cash to buy Bitcoin for a trade that is almost guaranteed to pay out at annualized returns that have recently hit 20% to 40%.”
March 31 – Bloomberg (Heather Perlberg, Crystal Tse, Ben Bain and Gillian Tan):
“Anxiety is growing that the wellspring of special-purpose acquisition companies, a 2020s echo of the dot-com mania of the 1990s, is bumping up against the limits of both Wall Street and Washington. The pipeline of SPACs rushing to market is getting so clogged that bankers, lawyers and auditors are turning away business as they struggle to keep pace… As founders of blank-check companies wait in line, the deep-pocketed investors needed to take them public have grown squeamish. About 300 SPACs launched this quarter on U.S. exchanges, raising almost $100 billion -- more than all of last year. Yet since the start of last week, four deals have been postponed, and roughly half the SPACs that proceeded are trading below their offering prices.”
Inflation Watch:
March 31 – Bloomberg (Anjani Trivedi):
“There’s an underappreciated side effect of all the disruptions across global supply chains: the cost of producing and distributing everything from furniture and foam to cars and machinery is rising. While that has thrown off the plans of companies, the effect on consumer wallets is much more subtle and uneven — for now. In the U.S., 3M Co. has pointed to rising freight costs to ship its goods while Mattel Inc. has said plastic is more expensive. In China, the cost of products like furniture are going up because chemicals and metals for foam are rising. Some toy wholesalers in the country have raised prices by as much as 15%. Factory gate prices have been edging up there too.”
March 31 – Wall Street Journal (Kara Dapena and Dylan Moriarty):
“ ... in Southern California. On Monday morning, 24 container ships—with a combined maximum carrying capacity nearly 10 times that of the newly freed ship—were anchored off the coast waiting for space at the ports of Los Angeles and Long Beach… The ships are carrying tens of thousands of boxes holding millions of dollars’ worth of washing machines, medical equipment, consumer electronics and other of the goods that make up global ocean trade, all of it idling in the waters in sight of docks that are jammed with still more containers. One was on its 12th day of waiting in the seemingly unending queue. And the vessels keep coming.”
March 30 – Financial Times (Kathrin Hille):
“The global shortage of electronics components is worsening and is expected to last until next year, Apple supplier Foxconn has said, suggesting the shortfall squeezing global carmakers is starting to be felt by leading technology brands. ‘In the first two months of the first quarter, the impact [of the shortage] was not so palpable, but we are gradually seeing that change,’ Young Liu, Foxconn chair, told investors… He added that the shortage would persist until 2022…”
Biden Administration Watch:
April 1 – The Hill (Jonathan Easley, Brett Samuels and Amie Parnes): “The White House is pushing an infrastructure bill that could reshape the discussion around capitalism as it seems to reestablish the federal government as a primary driver of how the economy should grow and function. In addition to traditional infrastructure projects, Biden’s $2.25 trillion American Jobs Plan would make government investments in broadband, electric vehicles, climate change, elderly care, child benefits, housing and developing future technologies. It would redefine classic infrastructure projects to include investments in workers and families paid for by tax hikes on corporations. The ambitious proposal effectively transforms the relationship between the government and the private sector, making radical changes to key sectors of the economy that could be felt for years down the road.”
March 31 – Bloomberg (Laura Davison):
“The corporate tax-cut party President Donald Trump kicked off will soon be over if his successor proves able to enact proposals to roll back half of the 2017 domestic income-tax reduction and to radically revamp levies on profits earned abroad. President Joe Biden’s $2.25 trillion infrastructure-centered plan… relies on higher corporate levies to pay for it. The proposals would change tax benefits that were at the center of the 2017 Tax Cuts and Jobs Act passed solely with Republican votes. Along with boosting the corporate income tax rate to 28% from 21%, businesses would pay significantly more on their global earnings than they did before Trump took office, experts said. ‘They’re not just rolling back the tax cuts from 2017,’ said David Noren, a former legislative counsel to the congressional Joint Committee on Taxation… ‘They are putting companies in a much much tougher spot than even before TCJA.’ The administration is also proposing to eliminate all fossil-fuel tax breaks and repealing incentives to move assets and jobs offshore.”
U.S. Bubble Watch:
April 2 – Bloomberg (Reade Pickert):
“U.S. employers added the most jobs in seven months with improvement across most industries in March, as more vaccinations and fewer business restrictions supercharged the labor market recovery. Nonfarm payrolls increased by 916,000 last month and February employment was revised up to a 468,000 gain… The unemployment rate fell to 6%... The payroll figures showed broad-based gains across industries, led by a 280,000 surge in leisure and hospitality. Construction payrolls jumped 110,000 after dipping in February amid severe winter weather. Education employment also climbed as more schools reopened. Manufacturing employment increased by 53,000 last month, the biggest advance since September… Even with the sharp advance in March, payrolls remained 8.4 million below the pre-pandemic peak of about 152.5 million.”
March 31 – Yahoo Finance (Alexis Christoforous):
“Home prices are rising at a historic rate, putting the dream of owning a home out of reach for millions of Americans. According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices rose at the fastest pace in 15 years. The index rose 11.2% in January, the highest annual gain since February 2006. The price growth is being fueled by a record low number of available homes for sale on the market. ‘It’s a real crisis,’ Moody’s Analytics Chief Economist Mark Zandi told Yahoo Finance. ‘We have a very severe shortage of homes, particularly affordable homes.’ The median price of an existing home sold during February was $313,000, up 15.8% from the same month a year ago…”
March 30 – CNN (Anna Bahney):
“Ellen Coleman had never received so many offers on a house in her 15 years of selling real estate. She listed a fixer-upper in suburban Washington, DC for $275,000 on a Thursday. By Sunday evening, she had 88 offers. ‘The offers just kept coming,’ she said. ‘I felt like Lucy with the chocolates. I’m thinking, ‘This is just out of control.’’ Of those 88 offers, 76 were all-cash, said Coleman… There wasn't even enough time for all of the bidders to visit the property. She said 15 offers were sight unseen.”
March 31 – Wall Street Journal (Christina Rogers):
“Ford Motor Co. is scheduling more downtime at several U.S. factories, including its two major truck plants, as a global shortage of semiconductors upends vehicle manufacturing… The company said… it would halt production for two weeks in April at its truck plant in Dearborn, Mich., and take a week of downtime on the truck side of its Kansas City, Mo., assembly plant, starting Monday. It also plans to suspend work temporarily and cancel planned overtime at several other factories in North America, attributing the work stoppages to tight chip supplies.”
Fixed Income Watch:
March 29 – Bloomberg (Greg Ritchie, Jill Ward, Saijel Kishan and Alice Gledhill):
“In a booming global bond market, there are few segments that are growing quite like the money-minting machine for green bonds. So eager are investors to buy up these notes that they’re willing to pay a premium -- and accept lower interest payments -- for the privilege. The risk is that in this mad rush they’re letting a feel-good label obscure the reality of their investments. At the forefront of concerns among a small but growing contingent of bond buyers is greenwashing: the possibility that governments and companies are exaggerating or misrepresenting their environmental credentials or sustainability bona fides to tap feverish demand, lower borrowing costs and boost their reputation.”
Global Bubble Watch:
March 28 – Bloomberg (Ian King, Debby Wu and Demetrios Pogkas):
“A six-decade-old invention, the lowly chip, has gone from little-understood workhorse in powerful computers to the most crucial and expensive component under the hood of modern-day gadgets. That explosion in demand—unexpectedly goosed during the Covid-19 pandemic for certain industries like smartphones and PCs—has caused a near-term supply shock triggering an unprecedented global shortage. In February, lead times… stretched to 15 weeks on average for the first time since data collection started in 2017… Lead times for Broadcom Inc.—a barometer for the industry because of its involvement across the supply chain—extended to 22.2 weeks, up from 12.2 weeks in February 2020.”
March 28 – Wall Street Journal (Mike Cherney and Patricia Kowsmann):
“As the U.S. housing market booms, a parallel rise in residential real-estate prices across the world from Amsterdam to Auckland is raising fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating. Policy makers were already worried about high property prices in parts of Europe, Asia and Canada before the pandemic… But now the trillions of dollars of stimulus deployed world-wide to fight the effects of Covid-19… are turbocharging markets further. That is putting policy makers in a bind. Many want to keep interest rates low to sustain the post-pandemic recovery, but they worry about people taking on too much debt to buy houses…”
Japan Watch:
March 30 – Reuters (Daniel Leussink):
“Japan’s factory output fell in February as an earthquake and semiconductor shortage led to declines in the production of cars and electrical machinery, adding to worries for an economy struggling to recover from the coronavirus pandemic… Official data… showed factory output shrank 2.1% from the previous month in February…”
Social, Political, Environmental, Cybersecurity Instability Watch:
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