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Wall Street Breakfast: What Moved Markets

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Wall Street Breakfast

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Stocks powered higher after a slow start Friday as U.S. Treasury yields fell back from early highs. All major groups in the S&P 500 finished on the plus side, led by energy as crude oil futures rose to the highest in nearly two years. The 10-year Treasury yield, which had popped to 1.62% after U.S. jobs data came in stronger than expected, gave back six basis points to finish at 1.56%. The recent spike in yields has unsettled markets around the world, with high-flying tech companies bearing the brunt of the stock market rout as the Nasdaq continues to lag the major averages. For the week, the Dow Jones gained 1.8% thanks to the Friday rally and the S&P added 0.8%, but the Nasdaq still fell 2.1% despite Friday's bounce.

Vaccine overdrive

The U.S. will be able to vaccinate its entire adult population by the end of May, according to President Biden, bringing the target forward by two months. That's largely thanks to a deal his administration engineered between two of the country's biggest drugmakers. The U.S. government has agreed to provide Merck (MRK) with nearly $270M to help produce a vaccine from Johnson & Johnson (JNJ), which received FDA emergency use approval this past weekend.

Bigger picture: Merck is already one of the world's largest vaccine makers, but it has fallen behind in the race to develop a jab for COVID-19. It's instead going to be using the fresh federal funding to produce raw materials, scale up manufacturing capacity and complete the fill-and-finish process. The funding is in addition to Merck's continued investment in its global vaccines manufacturing network as part of its planned capital investments of more than $20B from 2020 through the end of 2024.

"This is the type of collaboration between companies we saw in World War II," Biden declared. "I want to thank Johnson & Johnson and Merck for stepping up and being good corporate citizens during this national crisis." The White House is also boosting the number of vaccine doses being sent to states each week from 14.5M-15.2M, up from 8.6M when Biden took office in January. He also called on states to give priority to teachers, school staff and child care workers.

What else is happening? The remarks came shortly after Texas became the largest state to end its mask mandate and authorized all businesses to reopen "100 percent." Texas was followed shortly thereafter by Mississippi, where Gov. Tate Reeves said he would end a statewide mask mandate effective Wednesday, adding "It is time!" On the other side of the fence, CDC Director Dr. Rochelle Walensky said she is "really worried about more states rolling back public health measures... At this level of cases, with variants spreading, we stand to completely lose the hard-earned ground we have gained." (223 comments)

Gensler grilling

The SEC has been operating under temporary leadership since the end of December, when Chairman Jay Clayton left the agency after 3.5 years in the role. Since taking office, President Biden has been looking to appoint Gary Gensler to lead Wall Street's chief regulator, prompting the latter to testify before the Senate Banking Committee on Tuesday. He was mainly grilled on tactics used by some online brokerages, given the recent GameStop (GME) trading frenzy and its fallout.

Who is Gary Gensler? He's a former Goldman Sachs partner and ex-chief of the Commodity Futures Trading Commission (under the Obama administration). Gensler also spent time at the U.S. Treasury in the 1990s and served as the CFO for Hillary Clinton's 2016 presidential campaign. On the academia front, he's a professor at MIT's Sloan School of Management, where he teaches classes on digital currencies and blockchain.

At the hearing, the SEC nominee pledged to analyze the rise of stock trading "gamification" and intervene if necessary. He'll also "look at market structure in the equity markets around payment for order flow when frankly just a couple - a handful - of financial firms are buying most of the retail flow in America." Gensler further indicated the agency could soon move to force companies to disclose more about their political spending, climate risks and board diversity.

On cryptos: "To the extent that somebody is offering an investment contract or security that's under the SEC's remit, and they have exchanges that operate there, then we have to make sure there's investor protection. If it's not that, and it's a commodity, as Bitcoin (BTC-USD) has been deemed to be, then it's either a question for Congress or it's possibly a question for the Commodity Futures Trading Commission." (28 comments)

Oil market rebalancing

WTI crude oil prices jumped above $65 a barrel after OPEC+ decided not to unleash millions of barrels on to the market. The main debate at the meeting was whether to go forward with a collective production increase and if the Saudis would return the 1M bbl/day they voluntarily took offline. Analysts had expected there would be some level of increase prior to the gathering - given the extraordinary level of cuts made since the outbreak of the pandemic - before reports surfaced that the group would stand down.

Thought bubble: OPEC+ is not behaving as it did in the past, where members would meet once or twice a year. The group is now holding monthly get-togethers, giving it more immediate power to meet current market conditions, as well as room to maneuver. It's also a signal that OPEC+ producers are wary about how things might play out in the months to come.

Outlook: Much of the current surge in prices was due to Saudi Arabia's unilateral action to cut Q1 production. One key question is how long the Kingdom is prepared to pay to preserve the peace within OPEC+ given the oil price war that erupted between Riyadh and Moscow last year, while tensions could also return on the way out of the COVID-19 pandemic. "The longer prices stay up, the greater the likelihood we will eventually see a supply response from the U.S. But, it's not going to be as immediate as it would have been in the past," added Bill O'Grady of Confluence Investment Management. (38 comments)

Warming to plans on carbon pricing

After hitting a pandemic low in April, global emissions rebounded strongly and were 2%, or 60M tons, higher in December 2020 than they were in the same month a year earlier, according to the latest data from the International Energy Agency. This should serve a "stark warning" that not enough is being done to accelerate clean energy transitions worldwide, added Dr. Fatih Birol, the IEA Executive Director. Major economies led the resurgence as a pick-up in economic activity pushed energy demand higher, while significant measures to boost clean energy were lacking.

"If governments don't move quickly with the right energy policies, this could put at risk the world’s historic opportunity to make 2019 the definitive peak in global emissions," Birol continued. "In March 2020, the IEA urged governments to put clean energy at the heart of their economic stimulus plans to ensure a sustainable recovery. But our numbers show we are returning to carbon-intensive business-as-usual."

It's easier said than done. The latest report card from the United Nations showed that 75 signatories to the Paris climate accord - responsible for a third of global emissions - "fell far short" of what is needed to meet the deal's goals. If those targets were implemented, their combined emissions would fall just 0.5% by 2030 (compared to 2010 levels), which is far lower than the 45% fall in global emissions needed to limit warming to 1.5C. No new commitments have yet been put forward by China, India and the U.S., though the latter is expected to do so before the Biden administration hosts a climate summit on April 22.

New economy? The American Petroleum Institute, one of the most powerful trade associations in Washington, is preparing to endorse setting a price on carbon emissions in what would "lead to the most economic paths to achieve the ambitions of the Paris Agreement." "API supports economy-wide carbon pricing as the primary government climate policy instrument to reduce CO2 emissions while helping keep energy affordable, instead of mandates or prescriptive regulatory action," according to a draft statement. A decade ago, API was one of the strongest opponents to a Congressional plan on carbon pricing, though it is now the latest of several to support a "market-based" approach following an announcement from the U.S. Chamber of Commerce in January. (35 comments)
Go Deeper: California city becomes first in U.S. to ban new gas stations.

Powell fails to reassure investors

Fed Chair Jay Powell vowed to keep monetary policy steady on Thursday even as the economy improves from the pandemic and inflation begins to rise. The remarks echoed comments he made on Capitol Hill last month, as well as a similar stance he's taken during much of the coronavirus crisis. A selloff in equities still ensued as benchmark 10-year Treasury yields jumped another 7 basis points to 1.55%, the highest since mid-February last year.

What happened? While Powell didn't say anything different, markets focused on what he didn't say, as the backdrop for financial markets has changed quite drastically since he last made a public appearance. Treasury yields have spiked, along with a broader rise in borrowing costs, and the big concern is that these moves could be destabilizing. Powell did say that if things get disorderly, the Fed has the tools to deal with them, but investors were likely looking for something that was more specific.

Others flagged comments he made about pressure on prices. Even if the economy sees "transitory increases in inflation... I expect that we will be patient," Powell added, but that had many investors getting nervous. "The market's translation of 'patient' is that patient doesn't mean 'never,' and that Powell is indicating that easy money will at a certain point come to an end," said Mike Loewengart, managing director of investment strategy at E-Trade Financial.

Fiscal side: The Senate is also moving forward with President Biden's mega stimulus proposal. Investors have been pricing in this package for some time - and more clearly since Democrats won both Senate seats in the Georgia Senate runoff elections - which gave the party full control of government spending powers. The $1.7T price tag for the bill, along with the trillions in stimulus released in 2020, is really what's behind the surge in inflation expectations, as well as the backup in Treasury yields. How long will the selloff continue without specific measures from the Fed? (53 comments)

U.S. Indices
Dow +1.8% to 31,496. S&P 500 +0.8% to 3,842. Nasdaq -2.1% to 12,920. Russell 2000 -0.4% to 2,192. CBOE Volatility Index -11.8% to 24.66.

S&P 500 Sectors
Consumer Staples +1.9%. Utilities +2.1%. Financials +4.3%. Telecom +2.4%. Healthcare +0.3%. Industrials +3.1%. Information Technology -1.4%. Materials +2.3%. Energy +10.1%. Consumer Discretionary -2.8%.

World Indices
London +2.3% to 6,631. France +1.4% to 5,783. Germany +1.% to 13,921. Japan -0.4% to 28,864. China -0.2% to 3,502. Hong Kong +0.4% to 29,098. India +2.7% to 50,405.

Commodities and Bonds
Crude Oil WTI +7.7% to $66.26/bbl. Gold -1.8% to $1,698./oz. Natural Gas -2.6% to 2.698. Ten-Year Treasury Yield -1.2% to 132.23.

Forex and Cryptos
EUR/USD -1.29%. USD/JPY +1.69%. GBP/USD -0.64%. Bitcoin +5.4%. Litecoin +4.9%. Ethereum +5.1%. Ripple +5.%.

Top Stock Gainers
Second Sight Medical Products (EYES) +232%. Morphic Holding (MORF) +94%. Super League Gaming (SLGG) +89%. Five Prime Therapeutics (FPRX) +70%. Veritiv Corp (VRTV) +69%.

Top Stock Losers
Athenex (ATNX) -64%. Ontrak (OTRK) -56%. BioVie (BIVI) -54%. CorMedix (CRMD) -51%. The Dixie Group (DXYN) -46%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

This article was written by

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Comments (17)

Who is EYES and why are they up 223%
I am not surprised at all with the rise in long term rates as the debt accelerates to infinity and beyond and commodity prices show big inflation overall as the US/global economy reopens. Hard to be short Treasuries though, the FED could pull an operation twist at any time selling short term and buying long term stuff. Plus a flight to safety could also occur at any time. But I won't bother with buying even short term Treasuries until they hit 2% or more, otherwise cash give me more flexibility to take advantage of opportunities quickly without having to wait for stuff to mature. Those who have 60/40 better watch out if both go down.
Catman69 profile picture
Helping the poor, the homeless and the hungry , is for I am
Fear and greed, moved both people, and markets.
shacking profile picture
British authors say "jab"
$CCIV - Lucid will be a big player in EV and has potential to rival TESLA in coming years. This is going to be huge.

$SM $CDEV $AMPY $ICD $GTE $BORR $TELL - Everyone should be vaccinated 2 month ahead of schedule which means quicker economic recovery = $$$

$FCEL - May have a deal cooking with Exxon (XOM) but either way, nothing's going to hold this stock down for long!

Also looking for strong performances from: $IEA $SIRC $OEG $ENG $PLUG $BIOVF $ILIKF

$ASTI - NASA 🚀 enough said!

Some other stocks I expect to have massive returns are: $KMPH $NLST $OZSC $UAVS $BLSP $CHEK $PUGE $SSNT

I am not a financial advisor, I just really like these stocks!
06 Mar. 2021
Biden’s admin had nothing to do with the Merck deal. It was already in place when Trump left. The most he can say is that his team didn’t get in the middle and screw it up. Trump’s plan was always to have everyone vaccinated before summer. Didn’t Biden say their was no plan? We know that wasn’t true. Also, the energy prices have been on the rise since shutting down the pipeline build. Seems that you left out some of the story. The recovery will continue inspite of this and other ignorant moves. You think someone in government this long would understand basic economics but they just keep making the same mistakes.
06 Mar. 2021
@jj5478 I doubt if the Merck/J&J deal was in place when Trump was still in, because Merck didn't announce cancellation of their own vaccine until Jan.25. But Biden has repeatedly said Trump didn't order enough vaccines and did not mobilize an effort to administer the vaccines. Trump ordered 200 million doses from Moderna, 200 million from Pfizer (with an option for 400 million more), 100 million from J&J, 100 million from Novavax, and 300 million from AstraZeneca. He did this as part of Operation Warp Speed to ensure the US would have an adequate supply, even if some didn't receive approval. Trump organized CVS and Walgreen to go to every nursing home and assisted living facility to administer the vaccines to the most vulnerable population, and before Biden was inaugurated, all nursing homes and many of the assisted living facility residents had received at least the first dose. Trump organized 60% of all pharmacies to administer shots to the general population when enough vaccines became available. All Biden has done is to follow Trump's plan, even though Biden claimed Trump didn't have a plan. The increase in vaccine availability is due in small part to the Merck/J&J deal, but more importantly to debottlenecking the facilities as the restrictions became known, and also to BioNTech's Marburg, Germany facility (which they started converting to Covid vaccine production in September) coming online on February 10.
@jj5478 Trump called it a "hoax, it'll go away" etc. He was only interested in himself.
thebellsareringing profile picture
@jhon3338 You left out all his achievements. Best President ever.
Buy NVDA and Salesforce. The two 5 Billion + per quarter cash cows that are booming with orders. Huge growth ahead for both leaders
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