Thought bubble: The consensus among economists is that the stimulus will boost the economy and supercharge the recovery. A forecast from Moody's says the plan can add up to 7M American jobs - which is important given the levels of unemployment - while the OECD said Tuesday that the program highly enhances the economic outlook even outside the U.S. But there are also those that have raised concerns that the sheer scale of the spending could lead to a spike in inflation, as well as deficit hawks who have expressed worries about additional borrowing and what that might mean for the national debt.
That conversation is also playing out in the political sphere, where Democrats have dubbed it the "largest anti-poverty measure in a generation" or what White House Press Secretary Jen Psaki called the "most progressive piece of legislation in history." On the other side of the fence, GOP members have said the package goes too far in its expansion of public assistance, pointing to the only $75B (7% of the $1.9T price tag) which is directed at COVID testing, contact tracing and vaccine distribution.
Statistics: A Pew Research Center poll released yesterday found that 70% of U.S. adults favor the $1.9T coronavirus relief bill, including 41% of Republicans and Republican-leaning independents and 94% of Democrats and Democratic leaners. In assessing the proposed spending in the aid package, 41% of Americans view it as about right, while another 25% say it spends too little, and only a third of Americans say the legislation spends too much money.
Back in January, we reported on the usages of stimulus checks, which have provided a financial lifeline to millions of Americans, though for others, they represented an opportunity to boost their savings. That was thanks to the $2.3T CARES Act enacted in March 2020 and the $908B stimulus bill passed in December, which provided $1200 and $600 to all Americans making under $75,000 - regardless of their employment and financial situation.
Backdrop: Securities trading was among the most common uses - across nearly every income bracket - for the checks issued in April, according to software and data aggregation company Envestnet Yodlee. For many consumers, trading was the second or third most common use for the funds, behind only increasing savings and cash withdrawals. In fact, Americans that earned between $35,000 and $75,000 annually traded stocks about 90% more than the week prior to receiving their stimulus check.
Things aren't likely to change this time around. "I do think that you will find a lot of that stimulus money will end up in the market, and I think if anything it's a bullish catalyst," said Randy Frederick, vice president of trading and derivatives for Charles Schwab. A Deutsche Bank survey of 430 retail investors last month also found that on average they plan to put 37% of any stimulus checks directly into equities.
Go deeper: Goldman Sachs even recently raised its 2021 net equity demand estimate from households from $100B to $350B, reflecting "faster economic growth and higher interest rates than we had assumed previously, additional stimulus payments to individuals, and increased retail activity in early 2021." "We expect households will be the largest source of equity demand this year," wrote strategists from the firm. JJ Kinahan, chief market strategist at TD Ameritrade, has a similar forecast. "You have really started to see an interest from the individual investor in a way that we have never seen before," he added.
Tech made a huge comeback on Tuesday, reversing a recent downtrend over the past few weeks as U.S. 10-year Treasury yields appeared to stabilize. The Nasdaq ended the day up 3.7%, notching its best day since November, with big gains seen for Tesla (+20%), Nvidia (+8%) and Twitter (+6.4%), as well as popular names Riot Blockchain (+34%), GameStop (+27%) and FuelCell Energy (+21%). A day earlier, the index slid into correction territory, leading investors to bargain-hunt for some beaten-down shares.
The Dow also ended in the green, while the index's futures climbed 0.3% overnight, though contracts tied to the S&P 500 flatlined and the Nasdaq slipped 0.3%. That could suggest the broader "reflation" trend - favoring higher rates and cyclical industries - likely remains intact, though volatility could remain. Concerns center around whether additional stimulus from Congress will lead to greater inflation or if high-growth stocks remain expensive. Investors will be watching today's 10-year auction for clues as to where yields may be headed, as well as the latest Consumer Price Index data.
Value bulls: "I think the outperformers are going to be basically non-tech over the next six to 12 months," Wharton School finance professor Jeremy Siegel declared. "The so-called value stocks are going to be sought out for their yield because I think interest rates are still going to be headed much higher here on the long bond. I don't think we're done with this rise in these long-term interest rates."
Growth bulls: "We see the rollover in the Nasdaq to be actually an opportunity to add to positions," said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. "We think going forward the ubiquitous nature of technology, and the fact that it is deeply embedded in lives of consumers and business with the reopening of the economy, stands in the path of opportunity."
Roblox (RBLX) is set to begin trading today on the NYSE via a direct listing process, rather than a traditional route to an initial public offering. Yesterday evening, the exchange set a reference price of $45/share, which is in line with a recent Series H funding round that resulted in a valuation of $29.5B (up 7x its last round in February 2020). The company previously delayed a traditional IPO planned for December and also postponed a direct listing it sought in February.
Backdrop: Roblox is a social gaming platform that allows users to play, create games and hang out with their friends - all in one place. More than half of the kids in America currently play on the platform, which has been a huge beneficiary of the COVID-19 pandemic. Daily active users jumped 85% in 2020 to 32.6M, while the number of hours that players spent on the app more than doubled to 30.6B. CEO Dave Baszucki's ultimate vision for the company is an online world where users can work, play and entertain themselves (a.k.a. the "Metaverse").
In its latest update to its prospectus, Roblux said it paid developers $328.7M in 2020, up almost 200% from 2019. That heavily surpassed the company's sales growth of 82% last year, when it booked $923.9M in total revenue. In addition, more than 1,250 developers earned at least $10K in the digital currency Robux, which can be exchanged for real money. Over 300 earned $100K or more, while the company plans to spend additional cash on incentivizing higher-quality content and funding bigger teams of engineers and designers.
Outlook: Atlantic Equities expects great things, rating it Overweight with a price target of $60. The firm points to plans for international expansion and attempts to "age up" the demographics, along with diversified platform use cases and solid monetization. Seeking Alpha contributor Donovan Jones also notes that the company has seen sales and marketing expenses decline as a percentage of total revenue, even as sales have risen.
Disney Plus (DIS) has crested the 100M subscriber mark just 16 months after its launch, becoming the most successful emerging streamer trying to chip away at Netflix's (NFLX) dominance. The service is still on track to meet the company’s projection of 260M subscribers by 2024, powered by fan favorites like The Mandalorian and WandaVision. Contrast that with the 203.7M subscribers of Netflix, which topped 100M subs in 2017, a decade after it introduced streaming and upended the industry.
Quote: "The enormous success has inspired us to be even more ambitious, and to significantly increase our investment in the development of high-quality content," CEO Bob Chapek said at the company's virtual annual meeting. "In fact, we set a target of 100+ new titles per year, and this includes Disney Animation, Disney Live Action, Marvel, Star Wars, and National Geographic. Our direct-to-consumer business is the company's top priority, and our robust pipeline of content will continue to fuel its growth."
Comments from the competition: "It's super impressive what Disney has done," Netflix co-founder Reed Hastings said during an earnings call in January. "It's incredible execution for an incumbent to pivot to take on the insurgent. It shows members are willing and interested to pay for more content because they're hungry for great stories. And Disney does have great stories."
Disney even temporarily halted its dividend last year following calls from Dan Loeb to permanently end the $3B annual shareholder payment. While the activist investor urged Disney to plunge that cash into original content, as it centers its operations around streaming, it also hasn't forgotten about theme parks. The company is opening Disneyland in late April, while its Florida parks are operating at 35% capacity.
What else is happening...
Cathie Wood's ARK Innovation (ARKK) surges on record performance.
Biden expected to name Big Tech critic Lina Khan to FTC.
Hackers breach Verkada surveillance cameras at Tesla (TSLA).
Russia throttles Twitter (TWTR) over failure to remove banned content.
Aerojet Rocketdyne (AJRD) shareholders clear Lockheed (LMT) takeover deal.
U.S. crude supply rose 12.8M barrels last week - API.
Curaleaf (OTCPK:CURLF) announces EMMAC acquisition as revenue growth slows.
Conagra (CAG) in talks to sell Hebrew National brand to JBS.
Pfizer (PFE) could have capacity for 3B COVID-19 vaccines in 2022.
In Asia, Japan flat. Hong Kong +0.5%. China -0.1%. India +0.5%.
In Europe, at midday, London -0.3%. Paris +0.4%. Frankfurt +0.2%.
Futures at 6:20, Dow +0.3%. S&P flat. Nasdaq -0.3%. Crude +0.2% to $64.11. Gold -0.6% at $1706.70. Bitcoin +1.2% to $54972.
Ten-year Treasury Yield +2 bps to 1.6%
Today's Economic Calendar
MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $38B, 10-Year Note Auction
2:00 PM Treasury Budget
Companies reporting earnings today »
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