The world's a nicer place in my beautiful balloon. It wears a nicer face in my beautiful balloon. We can sing a song and sail along the silver sky. For we can fly, we can fly.
Let me see your smile from my beautiful balloon. Let's just sit a while in this beautiful balloon. Maybe I'll hear you laugh if you'll give me half a chance. It has been so long. Since they've played our song. So, don't ask why? We may just cry.
-- Respectfully adapted (liberties taken) from "Up, Up and Away" (Jimmy Webb) 1967
Word Has It...
... That President Biden on Tuesday, will announce that the U.S. Centers for Disease Control and Prevention, aka the CDC, has /is updating its guidance for wearing masks outdoors, according to sources. I don't know who broke the story. I saw it reported first on CNN's website. Dr. Anthony Fauci was visible in the media on Sunday and hinted on CNN specifically that he did not want to get ahead of his sister agency but that some changes in guidelines were coming.
Now, I know that in some parts of the country, you laugh at us in New York for being so vigilant, and always having a mask at the ready in case someone gets too close. Fact is that New York and New Jersey were hit the hardest early in this pandemic and here it's not a case of having heard of so and so's cousin who knows a guy who died of COVID. Here, it is more trying to forget how many folks you lost or went through absolute long-term heck in your circle. Why do you think so many folks moved out of New York? Partly due to the stringent rules that impacted the economy. Of course. Also just to get away. From the pain.
That said, I am absolutely stunned that New York only lost one seat in Congress. I heard a few folks complain that New York lost that seat. I think we should thank our lucky stars that many folks must have answered the census prior to moving away, or maybe never changed their primary address. There are still large swaths of New York City that appear eerily quiet even in the middle of the day... on weekdays. My opinion? New York got off very easy in terms of forward-looking representation.
Enough on politics. Fact is that one small step, such as not freaking out about rushing to wear a mask because someone is coming the other way on the sidewalk, or a bicycle rider catching you unaware from behind, will be a huge morale boost. So, let's see that smile. Let's learn to heal. Together.
Monday was an undeniably strong day for equities. I think. Wink. Smile.
Winners beat losers at the NYSE by a rough 5 to 3, while the margin of victory for the winners up at the Nasdaq was greater than 2 to 1. Advancing volume just clobbered declining volume at both exchanges, by nearly 3 to 1 downtown and by more than 7 to 1 up by the statue of the late great Father Duffy. God bless the "fightin' chaplain." Sure the Dow Jones Industrial Average gave up a smidge for the day, but nobody has made any market decisions based on "the Dow" since well before the last Palm Pilot was placed inside a drawer and forgotten about forever.
The Dow Transports also gave up some ground, which is far more important. Delivery services as well as those who move freight via air, land or sea were all asked for their pound of flesh on Monday. Not the airlines, though. The airlines responded well to the EU having considered making allowances for tourism based on vaccination. Elsewhere, defensive-type sectors (especially Consumer Staples) were left behind, taking the bottom three spots and four of the bottom five slots out of the 11 sectors on our daily performance table. Cyclicals and growth shared the six top spots as leadership came largely from Energy, Materials, Tech, and though not represented on our S&P sector performance table, small-cap stocks.
The surprise here? There was no robbing Peter to pay Paul. The re-opening trade, at least in part (away from those Transports), and the work from anywhere trade rallied for the most part side by side. All while there was little movement in markets for either Treasury securities or currency exchange rates.
The S&P 500 closed at an all-time high despite gaining just 0.2%. The Nasdaq Composite also closed at an all-time high, it's 13th such close of 2021, but did not make an all-time intraday high on Monday. Like it matters. It does matter. Why? Because the trading volume was finally there. Huzzah.
Four Things You May Have Missed
1) WTI Crude rallied overnight, and is now trading well above $62 a barrel. As OPEC and pals meet on Tuesday (today), an OPEC+ technical committee increased its demand forecast for 2021 by roughly 6 million barrels per day, driven by both the U.S. and China, but still cautioned that the ongoing viral spread on the Indian sub-continent could dampen this outlook. Could?
2) Danish shipping giant Maersk AS, on Tuesday reported preliminary first-quarter earnings and increased full-year guidance, acknowledging a surge in demand and rising rates around moving freight. Though Maersk will not publish its first-quarter numbers until May 5, the firm has increased its outlook for global demand growth from 3% to 5% up to 5% to 7%. The driver here? Demand for Chinese exports. This is where "transitory" begins.
3) Both the French and German Ministers of Finance have expressed support for the Biden administration's proposal of a 21% global business tax on foreign earnings. This is fairly huge. While I honestly never expected much of the planet to agree on a global minimum tax, and the rate may still be subject to negotiation, getting the EU's two largest economies on board is no small feat. This idea is on its way to reality. Get used to it.
4) Bitcoin traded up 12% on Monday, back above the $54,000 level, where it is right now after Coinbase (COIN) reported that JPMorgan Chase (JPM) was preparing to offer an actively managed bitcoin-based fund to wealthy clients. I know JPM is not the first to go this route, and I am long both JPM and COIN, but I really don't think I like this idea. It's as if no one can see the onset of regulatory risk that I see so clearly. Maybe I'm wrong, but I think central banks and national treasury departments are coming for crypto. That's my opinion, this is my risk... and it's enough to at least make me think about taking my profits (51%) in JPM. And while I am still down in COIN, I am only down 1.9% at this point. Lunch money. I may just wash my hands of this whole ball of wax and find something else to do with the cash.
Earnings have been awesome. The macro, despite Monday's not as hot as expected March Durable Goods report, has been awesome. The Atlanta Fed is now looking for first-quarter GDP growth of 8.2%. That all said, markets, or should I say algorithms, will react probably to the FOMC policy statement, Fed Chair Jerome Powell's press conference and President Biden's individual tax plan all on the same day. Whoooo Doggy !!
Just beware that more and more economists are turning more hawkish in their expectations for monetary policy with the idea of tapering the $120 billion in monthly asset purchases at least coming up officially at some point later this year, perhaps during the third quarter. Let's be frank. With the economy apparently growing robustly, the Fed has to watch how the president's plans for infrastructure and the social structure play out in terms of the size and scope of deficit spending. There may be no choice, or time to wait to determine just how transitory consumer-level inflation might become without putting a halt to increasing the size of the monetary base so that the next step after that -- increasing short-term interest rates -- becomes a one-step move instead of a two-step move once it becomes apparent that such a move is necessary. Got that?
That table will not be set, at least not intentionally, Wednesday. That said, the media will key on this (If they are on top of their game; we all know that some of them are not), and how well the Fed Chair is prepared to answer these probes may determine what financial markets do from here. Powell will not be able to say, "This has not come up" or "We haven't thought about that" and remain credible. He is going to have to give us a detailed one hand or the other economist-type (though he technically is not one) answer. Yes, we will mock him for that, but we also would not provide a better answer in his shoes.
Economics (All Times Eastern)
08:55 - Redbook (Weekly): Last 13.5% y/y.
09:00 - Case-Shiller HPI (Feb): Expecting 11.7% y/y, Last 11.1% y/y.
09:00 - FHFA HPI (Feb): Expecting 0.9% m/m, Last 1.0% m/m.
10:00 - Consumer Confidence (Apr): Expecting 112.1, Last 109.7.
10:00 - Richmond Fed Manufacturing Index (Apr): Expecting 21, Last 17.
16:30 - API Oil Inventories (Weekly): Last +436K.
The Fed (All Times Eastern)
Fed Blackout Period.