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Wall Street Breakfast: Correcting The Correction?

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Wall Street Breakfast

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Correcting the correction?

The Nasdaq is leading the charge on Wall Street this morning, with futures tied to the index ahead by 2.5%, followed by a 1.2% advance for the S&P 500 and 0.6% gain for the Dow. It marks some renewed momentum for tech shares, which have been beaten down in recent weeks as investors rotated into value sectors like energy, financials and industrials. In fact, the Nasdaq closed in correction territory on Monday, down 11% from an all-time high in February.

Bigger picture: "The Nasdaq is quite sensitive to yield changes at the moment," said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg Bank. Overnight, the 10-year Treasury yield halted its recent rally, dropping 6 bps to 1.53%. "Even though we got somewhat of a respite from the rising-rate reaction, we do think that's really important to keep an eye on," added Lisa Erickson, head of traditional investments at U.S. Bank Wealth Management. "Certainly the trajectory for rates is up as the economy reopens, so a lot of it just depends on the speed and the pace of how quickly rates go up."

Yesterday, U.S. Treasury Secretary Janet Yellen also echoed comments made by Jerome Powell on inflation. She dismissed fears that the $1.9T coronavirus relief bill is so big that it will cause price problems, or that it is excessive given the economy's signs of a recovery. Yellen additionally called the impact on women and minorities from COVID-19 "absolutely tragic," but said the U.S. would return to pre-pandemic levels of employment in 2022.

Latest on the aid package? According to Democratic aides and lawmakers, the bill will return to the House from the Senate today. Changes were made to appease moderates and comply with parliamentary rules (i.e., dropping a proposed minimum wage increase), though the modifications were likely mild enough to have progressive Democrats climb aboard. The final House vote could potentially slip to Wednesday due to logistics, though if passed, some Americans might start receiving direct payments as soon as this week. (25 comments)

Coinbase listing

Shares of prominent crypto exchange Coinbase (COIN) changed hands at a roughly $90B value last week, according to a fresh report from Bloomberg. It's an astounding valuation given that the company was appraised at $8B in October 2018. The valuation is based on $350 a share, the price the stock was trading on the Nasdaq Private Market on Thursday. The auction was the last before Coinbase goes public in late March, though private trading is usually more restrictive and volumes are smaller, so it's not a perfect picture of a company's value.

Backdrop: Coinbase started operations in 2012 and operates one of the largest digital currency exchanges. The bulk of its revenue comes from trading fees, though it also launched the Coinbase Index Fund in 2018, which is available only to accredited investors (defined as those with an annual income of $200K or a net worth of $1M or more). Going public can help push cryptos like Bitcoin (BTC-USD) and Ethereum (ETH-USD) towards mainstream adoption and may give investors more optimism for digital finance. Bitcoin is up 8% this morning to $54,153.

By the numbers: Coinbase boasts 43M retail users and 7,000 institutional clients. There are also 115K partners based in over 100 countries worldwide. Last year, the crypto exchange swung from a prior loss to a profit of $322M, while net revenue more than doubled to $1.14B.

Bigger picture: The offering will be the first major direct listing (where a company floats existing private shares) to take place on the Nasdaq. All the previous ones happened on the New York Stock Exchange - like Spotify (SPOT), Slack (WORK), Asana (ASAN) and Palantir (PLTR). Direct listings, along with SPACs, have grown in popularity over the past year as companies sideline the traditional IPO process via cheaper and less complicated ways to go public. (5 comments)

Corporate Covid response

Looking to speed up vaccinations of their employees, many corporations are getting clearance from public health officials to administer COVID-19 jabs. Among them: AbbVie (NYSE:ABBV), Abbott Laboratories (NYSE:ABT), American Airlines (NASDAQ:AAL), Caterpillar (NYSE:CAT), Deere (NYSE:DE), Exxon Mobil (NYSE:XOM), Tyson Foods (NYSE:TSN) and United Airlines (NASDAQ:UAL). In many cases, the companies are giving priority to those over 65 years old or who work in operations/manufacturing, while some of the events are "closed," meaning only their staff are eligible and not the public.

Other corporations are offering incentives to encourage their workers to get a shot. Dollar General (NYSE:DG) and McDonald's (NYSE:MCD) are providing four hours of paid time to employees who receive the vaccine, while Trader Joe's and Aldi are giving two hours' worth of pay. Target (NYSE:TGT) is also offering compensation for the time its workers may have to take off, as well as $15 each way for staff who use Lyft (NASDAQ:LYFT) to get to their appointments.

Thought bubble: Can your boss fire you if you refuse to get a COVID vaccine? Yes, but most companies are leaving that decision up to their employees. If it were to be mandated, only a few exceptions would be permitted under law, such as medical reasons, the workforce is unionized, or if taking it is against a "sincerely held" religious belief.

Note: Corporations are also weighing in on mask policies as states update their COVID restrictions. An example can be seen in Texas, where Gov. Greg Abbott recently announced plans to open businesses to full capacity and repeal the state's mask mandate. While grocer Albertsons (NYSE:ACI) has dropped the requirements, others like Hyatt (NYSE:H), Starbucks (NASDAQ:SBUX), CVS (NYSE:CVS) and Target are keeping mask restrictions in place. (13 comments)

Next tech frontier

With recent data from Gartner showing smartphone sales dropping for the last two years, Big Tech is looking around for the next big thing. Some are pointing to the wide world of mixed reality, which brings together real-world and digital elements. It also allows users to interact with and manipulate both physical and virtual items and environments, using next-generation sensing and imaging technologies.

Flashback: Back in 2007, Apple's (NASDAQ:AAPL) Steve Jobs unveiled the iPhone. While it was not the first smartphone to hit the market (remember BlackBerries?), it created a whole new way to interact with the devices via touch screens, "pinching" to zoom in or out, as well as an App Store. It eventually revolutionized the entire industry, replacing everything from digital cameras to GPS systems, and building entire app ecosystems.

Notable Apple analyst Ming-Chi Kuo is now saying the tech giant will release a mixed reality headset in the middle of next year. It would be priced at around $1,000 and weigh as little as 100-200 grams (if Apple can solve some technical problems). Augmented reality glasses would follow by 2025, while the TF International Securities analyst thinks a "contact lens type" wearable will arrive between 2030 and 2040.

Go deeper: Facebook (NASDAQ:FB) CEO Mark Zuckerberg said on Monday that by 2030, people could use advanced smart glasses to "teleport" to locations like other people's homes, or allow workers to "basically teleport to work." The company plans to release a pair of smart glasses in partnership with Ray-Ban later this year, although they won't be "full AR." Meanwhile, Microsoft's (NASDAQ:MSFT) augmented reality headset, Hololens, is still a niche device at a cost of $3,500, while Alphabet (GOOG, GOOGL) started re-selling Google Glass last year for $999 through some of its hardware resellers. (9 comments)

What else is happening...

Another hearing on GameStop (GME), Robinhood (RBNHD) and retail investing.

Zoom (ZM) CEO Eric Yuan transfers stock worth over $6B.

Cathie Wood says underlying bull market is strengthening.

Tesla (TSLA) aims to plug in gigantic battery to Texas grid.

House Democrats to push electric vehicle legislation.

Apollo (APO) reabsorbs Athene (ATH) in $11B all-stock deal.

Disney (DIS) rises to new record as California begins to ease park restrictions.

Pfizer-BioNTech (PFE, BNTX) COVID-19 jab neutralizes Brazilian strain.

MoneyGram (MGI) falls after partnership with Ripple breaks up.

Today's Markets

In Asia, Japan +1%. Hong Kong +0.8%. China -1.8%. India +1.2%.
In Europe, at midday, London +0.7%. Paris +0.3%. Frankfurt +0.3%.
Futures at 6:20, Dow +0.6%. S&P +1.2%. Nasdaq +2.5%. Crude +1.2% to $65.81. Gold +1.7% at $1706.80. Bitcoin +8% to $54158.
Ten-year Treasury Yield -6 bps to 1.53%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $58B, 3-Year Note Auction
6:05 PM Fed's Kaplan Speech

Companies reporting earnings today »

This article was written by

Wall Street Breakfast profile picture
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Comments (70)

Finding Infrastructure company's category moving forward. Concrete Steel Nickel Copper
Diesel profile picture
In this bull market, if you blink, you miss the correction.
Yield changes, aid package, blah blah, I doubt the real cause had much to do with any of that.

I'm betting that I know what ACTUALLY happened, which is:

En masse, a lot of "smart" money *AND* "dumb" money players, who have been vigilantly watching the QQQ and ARKK YTD charts, noticed that they dipped below the this-past-Jan-7 level, which they took as some sort of technical signal that HTHG stonks are now undervalued, so they jumped in. Stonks in some other categories got caught up in the excitement.

As we all will soon find out, the number at the start of a YTD chart is not a good indication of the actual value of any stonk.

I think this is a classic dead cat bounce in the making; I'm waiting for a better entry point.

Maybe the number from this past July 1st on the stonk charts?
Diesel profile picture
<<< I think this is a classic dead cat bounce in the making; I'm waiting for a better entry point. >>>

Every time someone says they are waiting for a better entry point, they always buy 10-15% higher than the current price.
@Diesel it could happen; we shall see. Personally I'll pay a premium in exchange for more certainty that a trend is in place. Let's see if this "trend" lasts into next week
...so far things are pretty flat since March 8th/9th. I don't think this correction has run its course, not by a Country mile.

Did y'all know that 43% percent of Retail "Investors" are using margin, or options, or both? That's a HUGE percent of Retail "Investors" who 1) Think they can time this market, and 2) Will collectively suffer HUGE financial consequences if their prediction about the SHORT TERM movement of their stonks is wrong, or at least wrong enough to merit a margin call, or their options expiring worthless, or whatnot.

If things head South just enough to trigger all that, we'll see the correction this market really needs pretty qujick. If not, it'll have to be later. In the meantime I'm 66% in cash.
Diesel profile picture
The correction has run its course. Now time to head to new highs.
@Diesel that’s what I thought earlier today, but studying the charts AH I’m starting to wonder if today was just a dead cat bounce. I see some conflict and don’t have strong conviction, but a bias to the downside.
Chance888 profile picture
Being as SJWs keep getting a simple and factual comment deleted - I'll go ahead and state the facts again:


Why are women and minorities disproportionally infected by the virus? It's simple - most medical workers are female and most minorities are extremely suspicious about government orders (and rightfully so). When this keeps getting mentioned in the public political realm, it must mean it's a problem that needs a solution, right? Okay, so what do we do about it? Force minorities to do things against their freewill and force women out of nursing and replace them with men so that we can have an "equal" amount of suffering?
@Chance888 .. please.... just stop, kid. For starters, more men than women have died of Covid. Research. And minorities "rightfully suspicious of government." Yeah right. Suspicious of a government that's given them affirmative action, desegregated schools, MLK holiday and monuments, preference in immigration since 1965, LBJ's Great Society programs, EEO laws, minority-only scholarships and small business loans, etc., etc., etc.
Chance888 profile picture
@User 52721580 - Do you disagree with anything? If so, what's your take?
@Chance888 ... I just told you my "take." And your minority-centric and woman-centric views bore me, but will surely resonate well with your liberal friends.
All corrections are opportunities to buy cheap.

Enjoy the sales.
@Entreri best advice ever...lest we forget our basic fundementals
Invader from Earth profile picture
The Treasury 10 year bond auction last week did NOT bump up interest rates. Yet, that is what the press has been saying. Is there money to be made by this misrepresentation? Last week’s auction garnered $75 billion in bids, the Treasury decided accept $25 billion of the bids. If they had borrowed more, the mean interest rates would have been higher. If they borrowed more the median interest rate would have been lower. This was an auction after all.
Invader from Earth profile picture
Glad to see $TSLA recovering its price today. We must stop the use of the high frequency trading devices. They cheat and create volatility where there should be none. How do we do this? Anyone...
VoiceofSanitySometimes profile picture
@Invader from Earth

Volatility is the small investor's best friend. Don't fear it, embrace it. Taking advantage of volatility is the only advantage small investors have over the big guys -- small investors can trade their few 100 shares and the market doesn't care, but when the big guys start buying or selling it moves the stock price.
High frequency trading
Allows mega large dealers to front run all our trades
Making profits billions of times a day as you or
Pension funds purchase stocks.
Meters away from trading floors using massively fast computers the HF traders steal.
@Invader from Earth yeah when it went up 10x that was completely natural and people who earned that should be rewarded. But when there is volatility to the downside, That's somebody's fault And nobody should have to take that risk! They were promised that money! Manipulate the currency system and financial system in any way possible to get that money back in my pocket at the expense of everyone else!
Concise. I would appreciate analysis on some of the companies mentioned.
So corporations can get the vaccine for their under 65 employees while older people cannot get it at all? Brilliant. No wonder the deployment pace is pathetic.
@dstb - if you are over 65 and need a shot, you haven't been looking. Many slots going unfilled. need to open this open this up to next tier of people from 55-65.
@New Adams
I am not over 65 but many of them are having trouble getting it quickly, including my parents who are well over 65. The point is corporations should not get preference for younger employees unless designated in certain higher risk jobs. Flipping burgers or running a cash register are not one of those.
VoiceofSanitySometimes profile picture

It varies a lot by state, and even by region within states. Each state has different prioritization rules, and each state has had different effectiveness in getting the vaccine distributed.

We live in upstate NY and my wife recently became eligible. She has to wait 3 weeks for her appointment and will have to drive 2 1/2 hours to get to the closest available option (there are dozens of closer sites but they have no availability).
Like this podcast just left me feeling well informed but all the information I really need to know aftermarket today thank you
VoiceofSanitySometimes profile picture
The sports collectibles market was way down (with the exception of the "super-premium" items) after a rash of scandals involving fake products, fake claims (e.g., "game used"), etc.

But this whole NFT thing seems to be reviving it.

I'm old and I don't deal in collectibles (unless you count some very valuable 10 year old shares of VGT), so I don't get this whole NFT thing at all. But best of luck to those selling and buying "virtual collectibles". Caveat emptor.
Crayfishkaliari profile picture
@VoiceofSanitySometimes lol sure does seem insane to for instance buy dorseys tweet when users don't own their content anyway... seems like many many lawsuits waiting to happen... but good twitter is a horrible place
Someone should sell insurance on NFT things just like Micheal Burry created insurance on CDO's
Cant wait to teleport.....
Can America survive Half-Mask, Half-Free?
Ben Gee profile picture
@Seekingbetaguy We are hoping that will mass vaccination, we will not need masks anymore.
WE just hope that new variants will not make existing vaccines ineffective.
blueline profile picture
Most of the people that will get the pork payments will spend it the same way they would if they found $1,400 cash laying on the ground.

The "high" both figuratively and literally will last two of three weeks tops.
@blueline they’ve been arguing about this stimulus for 3 months. You’d think they could have figured out who actually needed it. Guess not.
VoiceofSanitySometimes profile picture

They did figure out who "needs it".

NY needs it, California needs it, the teachers' union needs it, pension funds all over the country need it, etc.

That wouldn't have been my priorities, but that is who they decided "needs it" most. Just look at where the money goes.
Ben Gee profile picture
@blueline Give people money never help them in the long run, give people jobs will help people much, much more.
Chris Lau profile picture
A correction is defined as a 10% drop. Nasdaq corrected. Today's technical rebound is not rocket science. The charts, which algos read, already suggested some attempt of a bounce.

Pick your five strong (share them if you want, I'll in turn share it to followers):
@Chris Lau EQIX got obliterated. A buy opportunity like that in that REIT doesn’t come around often.
VoiceofSanitySometimes profile picture

Thumbs up. Both the data center and cell infrastructure REIT sectors got hammered, so I added a bit to SRVR
@Chris Lau have 2 of the 5 both up strong today
blueline profile picture
"Americans might start receiving direct payments as soon as this week"

The payments are based on your tax returns. If you filed your 2020 return it will be based on that otherwise it will be based on your 2019 return. If you haven't filed yet and your 2020 return will put you over the income ceiling you might want to wait to file.
VoiceofSanitySometimes profile picture

Conversely, if your 2020 income is lower than 2019 and makes you eligible, e-file it ASAP.
@blueline - so? Everybody knows that.
Not really sure I want to trust the premarket bounce. Short term: QQQ held support at the 6 month 130ema 3 days in a row. And QQQ above 310ish will break the daily short term down trend. A year ago we saw the same ripping rallies several times only to break lower a day or so later. Not until the Medium Term turned up around 3/25/20 did a solid bottom appear. We will just have to see if the lows yesterday hold or if the surreal continues. All a great day!
@SB Pirate So as we roll into the noon hour and the indexes are up epic amounts I would think they would be accompanied by epic volume, but so far looking just average.
@SB Pirate
Guess the sellers took the day off
Buyandhold 2012 profile picture
Corrections are a natural part of the economic cycle.

Just like winter, spring, summer, and fall.
Ben Gee profile picture
@Buyandhold 2012 Tell that to Japan, it had economic winter for more than 30 years, 12 months a year.
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