Etsy CEO Chad Dickerson and others celebrate their IPO at the Nasdaq exchange, April 16, 2015. Getty Images Check out the companies making headlines in midday trading.  Etsy — Shares of the e-commerce company popped nearly 13% on Friday after beating on the top and bottom lines of its quarterly results. Etsy earned $1.08 per share for its latest quarter, well above the 59 cent consensus estimate, while the online crafts marketplace also saw revenue beat Wall Street forecasts. "2020 was an inflection point in history for e-commerce and for Etsy," the company said in a statement. Beyond Meat — Shares of the alternative meat producer jumped more than 2% after the company struck a three-year deal to be the preferred supplier for the McDonald's "McPlant" plant-based burger. Beyond Meat also reach an exclusive supply deal with Taco Bell parent Yum Brands. Apple, Facebook, Microsoft – Big Tech stocks lifted the broader market higher as they rebounded from sharp losses in the previous session amid soaring bond yields. Shares of Apple and Microsoft gained more than 2% each, while Facebook jumped 3.7%. Amazon and Alphabet also climbed more than 1%. Virgin Galactic — Shares of the commercial spaceflight company dropped 11% after announcing its next spaceflight test is delayed to May and pushing the beginning of flying passengers to early 2022. Virgin Galactic was targeting as early as Feb. 13 for the spaceflight test but delayed it to May due to further corrective work needed. The space tourism company reported an adjusted EBITDA loss of $59.5 million, down slightly from a loss of $66 million in the previous quarter. Rocket Companies — The parent of Quicken Loans saw its stock rally about 13% in midday trading after it posted fourth-quarter profit of $1.09 per share, compared to a consensus estimate of 87 cents a share. Revenue also topped forecasts. Rocket completed a year of record mortgage volume, and announced it would pay a special dividend of $1.11 per share. DraftKings — Shares of the online sports gambling company rose nearly 7% around noon after it both reported stronger-than-expected quarterly sales and hiked its full-year revenue forecast. DraftKings said users are more frequently access its platforms thanks to marketing campaigns and continued legalization of sports gambling. Airbnb — Shares of the home rental company jumped more than 14% after Airbnb posted its first quarterly update as a publicly traded company. Airbnb reported a $3.89 billion loss, although revenue did beat expectations. Sales came in at $859 million compared to the $748 million expected by Wall Street, according to estimates from Refinitiv. DoorDash — Shares of the food delivery service slid more than 1% following the company's quarterly results. DoorDash generated $970 million in revenue, which was ahead of the Street consensus estimate for $938 million, according to a Refinitiv survey of analysts. The quarterly report was the company's first after DoorDash went public in December. Foot Locker — Shares of the shoe retailer fell more than 6% on Friday after revenue for the company's fiscal fourth-quarter came in below expectations. Foot Locker's comparable store sales were down more than 2% compared with the year ago period. The company's earnings per share did beat expectations, according to estimates compiled by Refinitiv. Salesforce — The software giant saw its stock dip more than 4% despite beating expectations on the top and bottom lines for its fourth quarter. The company reported $1.04 in adjusted earnings per share on $5.82 billion in revenue. Analysts surveyed by Refinitiv had penciled in 75 cents per share and $5.68 billion in revenue. The company said its adjusted operating margin for the quarter was 17.5%, down slightly from the full-year average. – CNBC's Pippa Stevens, Jesse Pound, Maggie Fitzgerald and Yun Li contributed reporting. Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
0 Comments
The Federal Reserve’s response to the COVID-19 pandemic has pushed interest rates to historic lows over the past year. Changes to the Fed funds target rate and an extensive bond-buying program have driven down rates both at the short and long end of the yield curve. The 10-year Treasury, with a yield that had hovered around 1%, has led to the lowest mortgage rates in memory. A return of the Fed funds overnight rate to a target range of 0 to 25 basis points — a level not seen since the financial crisis — has caused most banks and brokerage firms to cut the rate they pay on cash to as little as 0.01%. With the Fed targeting an inflation rate of 2%, and with Chairman Jerome Powell’s stated willingness to let inflation exceed that level for a while to make up for past misses, this effectively means that clients sitting on cash are earning a negative real return. And with the average high net worth household keeping 22.1% of its assets in cash, underearning on this asset class can lead to a material drag on overall real returns. Where are we now?Historically, financial advisors relied on money market funds to manage idle cash that remains in client portfolios. In the current rate environment, this is no longer a good option for clients. The average government MMF is yielding just 0.02%, so financial advisors who are still using MMFs as a tool for client cash may be relying on outdated advice. Similarly, most brokerage sweeps pay just 0.01%, also not an attractive option. Even the average bank savings accounts offer a paltry 0.05%, according to the FDIC. Simply put, MMFs and regular savings accounts are no longer delivering a compelling yield. A better solution is needed to keep clients on track. Broker-dealers aren’t faring much better. Historically, broker-dealers have made the majority of their profit by putting clients in cash sweep accounts that tend to pay almost nothing, lending out the funds at higher rates, and pocketing the spread for themselves. This little-known fact makes stocks and bonds the red herring of the securities industry — most people assume that brokerages make their money from trading commissions, but, in fact, the majority of their profit is earned from knowingly paying clients too little on their cash. With yields lower and spreads on cash depressed, they’re still profiting from this practice, but not by nearly as much. It’s possible that a prolonged low-rate environment, coupled with recent penalties from the Securities and Exchange Commission for wealth management firms who haven’t put their clients’ interests first, could lead broker-dealers to re-evaluate whether they ought to make available to their clients better, fiduciary-focused options for cash. After all, cash is the beginning of every wealth management relationship as it is the asset that is safe and liquid — and it is often the case that investment relationships begin when clients determine that they have excess cash that could be better invested for the long-term. Both monetary and fiscal policy must also be considered. With the pace at which the U.S. government is printing money, inflation seems all but inevitable. Our national debt has risen by more than 40% in the past four years, and as we begin to recover from the pandemic, inflation could become more apparent in consumer prices. It is also essential to keep in mind that those who have been fortunate enough to save during the last 12 months are sitting on cash and will be looking to spend or invest it once lockdown protocols ease up. Against that backdrop, cash that’s earning 1 or 2 basis points in a brokerage sweep or MMF is actually losing value each year. Where do we go from here?Now would seem to be an opportune time for financial advisors to reconsider how they are talking to their clients about cash. Many registered investment advisors, who are bound by a fiduciary standard, are beginning to treat cash like any other asset class and are looking to maximize returns for clients. One of the simplest ways to do this is to turn to more innovative solutions to manage client cash that put clients’ interests first. Run-of-the-mill savings accounts at online banks yield up to 0.50%, while one new innovative approach leverages technology to deliver preferential yields of up to 0.75% on same-day liquid, FDIC-insured deposits, held directly in the clients’ own name. It’s no wonder that leading advisor tools such as Orion, Envestnet | MoneyGuide, Morningstar, and Redtail are integrating with better cash solutions that can help clients earn more on cash in their own FDIC-insured accounts. As advisors seek to find yield for their clients, it may also be appropriate to look at less conventional yield-producing assets that may be less correlated with the market, such as produce anticipation loans, to help clients pick up extra yield. A barbell strategy of cash plus longer-dated higher-risk assets can help clients pick up yield without sacrificing liquidity. Many investors have also been seeking yield from dividends on the S&P 500, a trade that worked well in recent years since it offers a 2% yield with plenty of liquidity and a built-in inflation hedge. However, anything other than cash in a client’s bank account adds risk. Looking at the risk-reward continuum across fixed-income instruments, you’d have to go nearly 10 years out on the Treasury curve before you could match the yield available in FDIC-insured savings accounts. Now is an opportune time for advisors to engage with their clients on the topic of cash and deliver better returns. You just need to know where to look.
0 Comments
Longtime trader Art Cashin told CNBC on Friday that investors should brace themselves for a period of stock market volatility as Wall Street digests rising bond yields. "You have to be very careful. There is a fine line. If the market begins to believe that the Fed has somehow lost control of where the bond market is going, all that idea of a 'taper tantrum' will show up," the director of floor operations for UBS said on "Squawk on the Street." Cashin's comments Friday came early during a volatile session, with the 10-year Treasury yield above and below 1.5% and the Nasdaq Composite swinging between gains and losses. The Dow Jones Industrial Average was down over 275 points, or 0.88%, but off its session lows. "If the market begins to believe that the Fed lost control and the Fed senses that, there's a chance that the Fed will overreact," explained Cashin, whose Wall Street career spans roughly six decades. "We're in very a potentially volatile period, maybe for some of the wrong reasons." On Thursday, markets sold off sharply, led by the Nasdaq's 3.5% dive in its worst day since Oct. 28. The yield on the 10-year briefly eclipsed 1.6% on Thursday, its highest in just over a year and about 0.5% higher than levels at the end of January. As rates ticked higher earlier in February, Cashin said he thought that based on historical standards, it was a reasonable move related to investors believing in a strong economic rebound from the coronavirus pandemic. However, he lent credence to those who see inflation fears also contributing to the move higher in yields. "You know, the housing boom is evident. We've got lumber at an all-time high and copper used in the plumbing and whatever moving up very sharply, so we're beginning to see some inflationary pressure just on the whole reopening aspect," Cashin said. Growth stocks, particularly those in the technology sector, are seen as most vulnerable to a move higher in bond yields because low borrowing costs have been helpful in their business expansion. Yields move inversely to prices. Cashin said investors should watch the tech-heavy Nasdaq as they try to navigate the volatility. The index was trading around 13,200 intraday Friday. He said 13,000 is a key near-term resistance level. "That was the intraday low on Tuesday. You stayed above it in the wash-out selling yesterday. That helped bring about some of the late buying," Cashin said. "If you were to go down and punch through that, I would hold onto my seatbelt."
0 Comments
Nurses display a 'Stay Home' sign on their vehicle during a car caravan of nurses calling for people to remain home amid a surge of COVID-19 cases in El Paso on November 16, 2020 in El Paso, Texas. Mario Tama | Getty Images A federal judge in Texas ruled on Thursday evening that the national ban on evictions that's been in place since September is unconstitutional. "Although the Covid-19 pandemic persists, so does the Constitution," U.S. District Judge John Barker wrote, siding with a group of property managers who argued that the ban exceeds the power of the federal government. The Centers for Disease Control and Prevention's national eviction moratorium was first announced under former President Donald Trump in September 2020. It prohibited evicting renters who were financially struggling because of the coronavirus pandemic. President Joe Biden has since extended the moratorium through March, and the latest stimulus package in the works would keep it in effect through September 2021. More from Personal Finance:Lawmakers question whether new child tax credit is too much or too littleStill no stimulus check? What that means for your tax return this yearSmall business owners confused by PPP rules as priority window opens The CDC did not immediately respond to a request for comment. Landlords have criticized the CDC's moratorium, saying the government was overstepping its authority and that they can't afford to house non-paying tenants. There have also been court challenges to the moratorium in Georgia, Louisiana and Tennessee, though they were all unsuccessful. Advocates of the ban quickly slammed the ruling, and feared it would trigger a flood of eviction filings. The winter storms that have led to massive power outages across Texas will only worsen the situation, they say. "This decision is a major deviation from all other district court decisions that upheld the CDC moratorium as constitutional," said Emily Benfer, a visiting professor of law at Wake Forest University. "The CDC moratorium is a critical pandemic mitigation measure that protects health and safety by preventing the community spread of COVID-19 due to eviction," she said. Indeed, research has found that evictions lead to significantly more coronavirus cases and deaths in an area. By one estimate, there were worries about paying rent in more than 1.7 million households in Texas during the pandemic. "This is a time where it's not an overstatement to say that for many people, eviction can lead to death," said Helen Matthews, communications manager at City Life Vita Urbana, a nonprofit in Boston.
0 Comments
Take a look at some of the biggest movers in the premarket: Foot Locker (FL) – Foot Locker shares tanked 12.1% in premarket trading after quarterly revenue came in below Street forecasts and comparable-store sales unexpectedly declined. The athletic apparel and footwear retailer also reported quarterly profit of $1.55 per share, beating consensus by 20 cents a share. DraftKings (DKNG) – Shares of the online sports gambling company rose 3.2% in the premarket after DraftKings reported better-than-expected quarterly revenue and raised its full-year revenue forecast. The company said it is seeing a substantial increase in user activation due to marketing expenditures and further legalization of sports gambling. Cinemark (CNK) – The movie theater operator's stock dropped 2.6% in premarket action after it reported a wider-than-expected loss for its latest quarter. Cinemark was impacted by pandemic-related theater closures, although quarterly revenue did top Wall Street forecasts. Salesforce.com (CRM) – Salesforce earned $1.04 per share for its latest quarter, beating the consensus estimate of 75 cents a share. Revenue beat forecasts as well, however the business software giant gave a weaker-than-expected full-year profit forecast. Analysts are also expressing concern about the impact of the company's acquisition of messaging platform Slack (WORK). Salesforce shares fell 4.4% in the premarket. Rocket Companies (RKT) – The parent of Quicken Loans and other financial service offerings reported quarterly earnings of $1.09 per share, compared to a consensus estimate of 87 cents a share. Revenue also topped forecasts. Rocket completed a year of record mortgage volume, and announced it would pay a special dividend of $1.11 per share. Rocket stock rose 9.1% in premarket trading. AT&T (T) – AT&T is spinning off its DirecTV and other pay-TV services into a separate company, with private-equity firm TPG Capital as a 30% owner of the new entity. The deal will provide AT&T with $8 billion in cash, which it will use to pay down debt. The deal values the pay-tv services at a combined $16.25 billion, compared to the $66 billion that AT&T paid for DirecTV alone in 2015. Beyond Meat (BYND) – Beyond Meat struck a three-year deal to be the preferred supplier for the McDonald's (MCD) "McPlant" plant-based burger, and also struck an exclusive supply deal with Taco Bell parent Yum Brands (YUM). Investor enthusiasm over the deals helped erase losses that the stock had seen earlier after Beyond Meat reported a larger than expected quarterly loss. Beyond Meat shares jumped 6.2% in premarket trading. Airbnb (ABNB) – Airbnb reported a loss in its first quarter as a public company, but the company did see better than expected revenue as the pandemic prompted consumers to embrace local travel. Etsy (ETSY) – Etsy earned $1.08 per share for its latest quarter, well above the 59 cents a share consensus estimate. The online crafts marketplace also saw revenue beat Wall Street forecasts. Etsy also issued an upbeat current-quarter forecast, and its shares rose 6% in premarket action. DoorDash (DASH) – DoorDash reported better-than-expected sales during the fourth quarter, tripling year-ago levels as the pandemic prompted a surge in restaurant delivery orders. DoorDash is predicting a slowdown in orders, however, as Covid-19 vaccines roll out. Its shares tanked 11.4% in premarket trading. Nikola (NKLA) – Nikola shares fell 2.1% in the premarket after the electric vehicle maker said in a Securities and Exchange Commission filing that founder Trevor Milton had made several inaccurate statements about its technology. Nikola had previously denied issuing misleading communications to the public. WW International (WW) – WW earned 18 cents per share for its latest quarter, short of the 32 cents a share consensus estimate. The Weight Watchers parent's revenue beat estimates. WW is seeing strong growth in digital subscriptions but a decline when its virtual workshops are included. Shares sank 9.7% in the premarket. Workday (WDAY) – Workday reported quarterly earnings of 73 cents per share, beating the 55 cents a share consensus estimate. The human resources software company's revenue came in slightly above forecasts. Workday issued a weaker-than-expected forecast for subscription sales during this fiscal year, sending its shares down 7.2% in premarket trading. Groupon (GRPN) – The daily deals company nearly doubled the 26 cents a share consensus estimate with quarterly earnings of 51 cents per share. Revenue also topped Wall Street forecasts. Its shares jumped 13.1% in the premarket.
0 Comments
A staff member displays a burger with a Beyond Meat plant-based patty at VeggieWorld fair in Beijing, China November 8, 2019. Jason Lee | Reuters Check out the companies making headlines after the bell on Thursday: Beyond Meat – Beyond Meat shares rose as much as 14.7% in volatile trading on news that the plant-based company struck deals with food giants McDonalds and Yum Brands. Under the deal, Beyond Meat will supply both companies with plant-based products. However, the company also posted quarterly numbers that missed analyst expectations. Beyond Meat lost 34 cents per share on revenue of $101.9 million. Analysts expected a loss per share of 13 cents on revenue of $103.2 million, according to Refinitiv. Etsy – Etsy shares popped 7.3% after the company's latest quarterly figures easily beat analyst expectations. The online retailer posted earnings per share of $1.08 on revenue of $617 million. Analysts polled by Refinitiv expected earnings per share of 59 cents on revenue of $516 million. Salesforce – The software company's stock slid 4.4% even after the release of better-than-expected fiscal fourth-quarter results. Salesforce logged a profit of $1.04 per share on revenue of $5.82 billion. Analysts had forecast earnings per share of 75 cents on revenue of $5.68 billion, according to Refinitiv. However, the company also issued disappointing earnings guidance for the full year. Virgin Galactic – Shares of the space travel company pulled back by 11% after Virgin Galactic said its next spaceflight test will be delayed until May. Virgin Galactic also reported a fourth-quarter loss that was in line with analyst expectations. Earlier in the day, the company announced CFO Jon Campagna was stepping down, effective Monday. DoorDash – Shares of the food courier company dropped 11% after DoorDash posted its first quarterly results since going public. The company posted a revenue of $970 million, while analysts at Refinitiv estimated a revenue of $938 million. DoorDash also told shareholders it expects some of the tailwinds experienced during the pandemic to ease as lockdowns are lifted. Airbnb – The vacation rental company's shares ticked up by 0.2% after the company released its first quarterly report since going public in December. Airbnb reported revenue of $859 million. Wall Street analysts polled by Refinitiv had forecast revenue of $748 million. The company also reported a loss of $11.24 per share. CNBC does not compare reported earnings to analyst estimates for a company's first report after going public. Nikola – The electric vehicle maker's stock slipped 1.9% even after the company posted a smaller-than-expected quarterly loss. Nikola lost 17 cents per share after analysts at Refinitiv had forecast a loss of 24 cents per share.
0 Comments
Mentions of GameStop increased on Reddit days before shares of the video-game retailer took off again, according to Justin Zhen, co-founder of Thinknum, a tech firm that compiles alternative data sets for investors. "In the last 24 hours, we saw the number of occurrences of mentions for GameStop spike. It actually started spiking about four days ago," Zhen said in an interview Thursday on CNBC's "The Exchange." "The volume today has been insane, but we see a huge spike in advance of the run-up of the stock yesterday," he said. Zhen was referencing Wednesday's major late-day gain in GameStop shares, which ultimately closed higher by more than 100%. The stock rallied further during Thursday's volatile session and was halted multiple times. It ended up closing Thursday at $108.73 per share, up 18.6%. It had reached as high as $184.68 intraday. The sudden surge followed news Tuesday that the company's chief financial officer, Jim Bell, plans to resign in late March. Media reports suggested the departure could be linked to board member Ryan Cohen's desire to see GameStop accelerate its digital transformation. The stock's big two-day move puzzled some on Wall Street, and CNBC's Jim Cramer contended earlier Thursday that a CFO shakeup is unlikely to be a catalyst for such a significant rally. Whatever the cause, the GameStop resurgence calls to mind the Reddit-sparked trading mania that first engulfed the stock in January, when it soared to $483 per share. "What happened with GameStop when it went to $480 was one of the dumbest, most nonsensical things that I've seen in quite some time. This is the second dumbest," Loop Capital Markets analyst Anthony Chukumba said Thursday on CNBC's "Power Lunch." He recently dropped his GameStop coverage, citing its disconnection from fundamentals. "I'm gobsmacked now, just as I was a few weeks ago," Chukumba added. The late January surge in GameStop put financial pressure on hedge funds and other investors who shorted the stock, which is essentially a bet that it will decrease in price. The saga has in some ways served as a wake-up call for the hedge fund industry, according to Gabe Plotkin, founder of Melvin Capital. Plotkin's fund got caught on the wrong end of the GameStop trade January. Going forward, Plotkin told Congress earlier this month that he expects funds, including his own, to more closely monitor social media sites now that the power of forums like Reddit's WallStreetBets have been demonstrated. "I think they saw an opportunity to drive the price of a stock higher and today with social media and other memes, there's the ability to collectively do so," he said. "That was a risk factor that, up until recently, we had never seen." Zhen co-founded Thinknum in 2014, according to his LinkedIn, but the company's Reddit-specific dataset went live in late January as the GameStop frenzy was unfolding. According to a blog post on Thinknum's website, the dataset "tracks the number of times NYSE and NASDAQ tickers are mentioned in the top 100 posts on r/WallStreetBets and r/Stocks in real time." In Thursday's CNBC interview, Zhen stressed that Thinknum does not claim for its online datasets to be predictive of stocks poised to rally. What happened with GameStop when it went to $480 was one of the dumbest, most nonsensical things that I've seen in quite some time. This is the second dumbest. Anthony Chukumba analyst, Loop Capital Markets "We provide a service where investors can track when the number of mentions on Reddit for any particular stock is increasing. We don't interpret or analyze the data. We don't claim the stock will go up," said Zhen, who used to work at a hedge fund. "But what we are saying is that there's a lot of chatter around the stock today ... and if you're an investor, you need to pay attention," he said. In addition to the recently launched Reddit offering, Zhen said Thinknum has about 30 other datasets, such as those focused on product pricing and where companies are opening stores. "Reddit is one oversized sample recently but there are many other data trails that good investors pay attention to," Zhen said. The Securities and Exchange Commission said in January that it was reviewing the GameStop saga. When asked by CNBC's Andrew Ross Sorkin asked whether Thinknum has been contacted by the SEC, Zhen said: "We have gotten many inquiries from government bodies, which I can't comment on specifically." Thinknum also has seen increased interest from investors and corporations, Zhen said. "The interest has been substantial. It's the most I've seen in six years doing this."
0 Comments
Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee hearing on "The Quarterly CARES Act Report to Congress" on Capitol Hill in Washington, December 1, 2020. Susan Walsh | Pool | Reuters Stock investors are trying desperately to interpret what a rise in bond yields means for the stock market. Since February 10th, 10-year Treasury yields — which are not inflation adjusted — have moved from 1.13% to as high as 1.61%, a rise of 48 basis points, the highest level in a year. (One basis point equals 0.01%) Fear of inflation is causing investors to speculate the Federal Reserve may have to shift policy sooner than expected, by either reducing bond purchases or even raising rates at some point. That would be a negative for stocks. The Dow was down 559 points on Thursday. Peter Tchir from Academy Securities says the recent rise in 10-year bond yields represents a perception about inflation, but not necessarily the reality:  "The rise in 10-year bond yields does not reflect an actual rise in inflation, it reflects that investors anticipate there will be a rise in inflation," he told me. Tchir notes that Federal Reserve Chairman Jerome Powell has been pushing back against the idea that over-the-top inflation is coming, noting in his testimony that broad signs of inflation have not been present in the real world, and that if they do occur any such rises would be "transitory." Who's right on inflation? Bond investors are getting worried about the potential for inflation.  Powell says to stop worrying about it.  Who's right? It depends on who you ask, and what you are looking at. Do we see inflation in the real world?  We do in commodities: Oil is approaching the highest since 2018, for example, and copper is at an almost 10-year high. But signs of consumer inflation, for example, have been muted, with inflation at or below 2% for many years. Bulls like Tchir insist that, in this case, the rise in bond yields is not a negative for stocks: "This time the rise in yields is coming from economic growth, stimulus, and infrastructure.  All of that is good for stocks.  That's why this rise doesn't scare me too much." He says the rise in commodity prices can be easily absorbed, and believes that much of that rise is just a temporary condition reflecting the reopening, and that prices will revert back to "normal" levels over time. Hans Mikkelsen, credit strategist at Bank of America, is not so sure.  He agrees with Tchir on economic growth, but thinks it will be much stronger than anticipated and that will push inflation up:  "Since the summer of 2020 economists have consistently underestimated economic growth to an extent never seen before. There appears a real risk the Fed is not going to be able to sound dovish much longer and that transition could see wider credit spreads." Stocks on edge The key to the game, Tchir insists, is whether Powell can stick to his guns:  "If the Fed remains committed to keeping short-term yields low, that will give people comfort we will not get a 'taper tantrum,' where rates suddenly skyrocket.   Powell has told us he is comfortable with inflation and he is not going to react to short-term movements.  I believe he is going to stick to his guns." There's another issue:  Because stock prices are so high there is no room for error.  Small shifts in yields could cause tech investors in particular to take profits, under the assumption that this is as good as it gets. Veteran stock commentator Michael Farr from Farr, Miller & Washington has already told clients that even this relatively modest rise in rates is a signal:  "The days of simply piling into the market leaders regardless of valuation may be drawing to a close.  Investors must now recognize that there are alternative opportunities out there, including both heretofore underperforming stocks as well as incrementally more attractive bonds.  A powerful economic rebound combined with rising interest rates and higher inflation, if that indeed transpires, will change the investment backdrop in a meaningful way."
0 Comments
People walk past the New York Stock Exchange in the Manhattan borough of New York, November 10, 2020. Carlo Allegri | Reuters Growing inflation concerns, optimism the economy could surge and some technical factors are combining to drive interest rates higher at a rapid clip. But on Thursday, for the first time, the market has begun to question how long the Fed can stay on hold when the economy could come thundering back. Interest rates on the long end, meaning 10-year and 30-year yields, have been rising, but they were joined Thursday by 2-year and 5-year yields, an area impacted more directly by the Fed. Yields rise when prices fall. Bond yields have been rising with each positive development on the vaccine front and decline in Covid spread rates. Couple that with more powerful fiscal stimulus, and the recovering economy could take off like a shot. The House of Representatives is moving to approve the $1.9 trillion Covid relief bill by Friday, which would send funding to states, boost businesses and put $1,400 in cash in the hands of millions of people. "I think this whole market is sort of a work in progress, trying to feel out where the economy is actually going and what will the Fed actually do," said Ralph Axel, Bank of America U.S. rates strategist. "We're starting with a Fed that's not supposed to hike [interest rates] until March 2023.That's a good two years out." Axel said the Fed is still expected to remove policy very slowly, and it would first taper back on its bond buying program before it raises rates. Bank of America expects Fed officials to discuss paring back the $120 billion a month bond purchases later this year but begin to taper down buying sometime next year. "I think the heart of the matter is the the two levers the Fed has to pull is the taper schedule, or the QE schedule and the hike cycle," he said. "Those levers are very much at play with the changing expectation for the growth outlook." Fed rate hikes are still expected way in the future but those expectations changed slightly in the past day, since Fed Chairman Jerome Powell's testimony before Congress Tuesday and Wednesday. Arrows pointing outwards The fed funds futures market is now pricing in the first full rate hike for the first quarter of 2023 or March. Axel said it had been priced in to the second quarter of 2023, in the month of May. Futures also price a partial hike into October, 2022. Axel expects the market to begin to discuss rate hikes later this year, as the economic data improves. "Our GDP forecasts are off the chart," said Axel. Bank of America expects 8% growth in the second quarter, 11% in the third quarter and 5% for the fourth quarter. "We're also not yet including any kind of infrastructure bill into Q4." Axel said even if the time frame moves up on the Fed's tightening of policy, it will still be in the distant future and the Fed will take it slow. "Powell gave the green light for yields to go up. He said rising yields were the result of the strength in the economy," said Michael Schumacher, director of rates at Wells Fargo. Schumacher said the bond market was catching up to the optimism already seen in the stock market, as stocks traded to new highs. "We're getting no hint from the Fed that it wants to dampen this down," he said. "The Fed will have to come out and say something." The jump in Treasury yields is clearly spooking the stock market, but it's reflecting forecasts for 6% growth this year and a strong 2022. According to the CNBC/Moody's Analytics survey, economists expect the economy to grow by a median 6% this year. The S&P fell 1.6%, and Nasdaq fell 2.2%, as technology shares were particularly hard hit. The 10-year Treasury yield, the U.S. benchmark was at 1.50% in afternoon trading. It had taken a wild ride to 1.61% just as the government's 1 p.m. ET auction of $62 billion 7-year notes saw historically low demand. The low of the day was 1.37%. Jim Caron, head of global macro rate strategy at Morgan Stanley Investment Management, said it's the speed of the rise in yield that's unnerving the market, since the consensus view was that the 10-year would reach 1.5% by year end. "So far, this sharp move higher in UST 10y yields has only had marginal impact on equities and virtually no impact on credit spreads, as they are generally tighter today than where they were when we started the year. In addition, the US dollar has not strengthened on this move in yields either. All of which are components of financial conditions that are still easy, not tight, despite the rise in UST yields," Caron wrote.  "Perhaps it could then be concluded that rising UST 10y yields reflect the recent upgrade in fundamental economic growth expectations and there is nothing nefarious at work," Caron added. Yields move opposite price, and the swift rise in the 10-year yield of more than 30 basis points (0.25) in 10 sessions has already impacted the lending market. Mortgage applications fell 11.4% this past week as rates rose. The bond market has been sensitive to the fact that a strengthening economy could also lead to some inflation. As yields go higher, the bond market's inflation expectations have also been rising and one market metric is pricing in average inflation at 2.32% over the next five years. Inflation has barely been able to crack the Fed's 2% target for years, and while volatile, economists do not expect it to become runaway. Still, it is making markets nervous and yields have been rising all around the world, as commodities prices surge. Oil is up about 18% just in the past month, and copper is up 17%. Powell, in his comments this week, played down inflation as an issue and said the Fed expects to see bigger numbers this spring due to the base effects of the sharp drop off in prices last March and April when the economy was shut down. But he does not see inflation running hot, even with strong economic growth, and he said it could be three years before inflation hits the Fed's target consistently. "It will be high in the near term because of the base effect but once you get past that, it's probably around 2%, higher than it has been , but not enormously high," said Michael Schumacher, director rates at Wells Fargo. The rise in rates has been a steady creep but on Thursday, the 10-year yield ran higher quickly and snapped suddenly higher temporarily around the auction. One side effect of higher Treasury yields is that mortgage activity slows down. That results in the mortgage market changing its tact in hedging and traders sell Treasurys, compounding the sell off.
0 Comments
CALVERTON, N.Y. – The homebuilding industry is on the edge of a revolution. At least that's the way Kirk Andersen sees it. He just used 3D-printing technology to build a 900-square-foot model home on Long Island. He is about to build another one, too – the first 3D-printed home in the United States to be marketed to the public. The new home will be slightly larger at 1,500 square feet and will feature three bedrooms, two bathrooms and a garage. It is listed at just under $299,000, about half the price of a comparable newly built home in the area. Demand is off the charts. "By the time I walk out of this house I'll have 20 emails, 20 voicemails, and 20 texts, and by the time I get to respond to them I will have another 20 emails, 20 texts and 20 voicemails, so it's non-stop," said Stephen King, the real estate agent for the property. Andersen is director of operations at SQ4D, a New York-based company with barely a dozen employees. While other companies have 3D-printed small structures that are being used to house the homeless, Andersen's firm is the first company using the technology specifically for the for-sale market. "We started making small, desktop 3D printers and came up wit the idea that we needed to disrupt the housing market and the construction industry," said Andersen. So they scaled up their printer, a so-called Autonomous Robotic Construction System. After a lot of testing, they printed the foundation, interior and exterior walls and utility conduits for the model home in just two days. 3D printed home exterior Diane Olick | CNBC It looks like a massive spout squeezing out concrete toothpaste in long lines, but the result is an incredibly solid, resistant structure. The raw walls look a bit like concrete corduroy, but they can be smoothed depending on the buyer's tastes. It requires little labor to build, and the price is low – two potentially attractive points as the industry contends with a severe labor shortage and high material costs.   The recent spike in the price of lumber is hitting builders hard. It added about $26,000 to the cost of construction of the average home, according to a new estimate by the National Association of Home Builders. Concrete is far cheaper. Homebuyers, too, are grappling with challenges in the market. Supply is tight for entry level buyers, while most of the growth these days is happening on the high end. "We're trying to build homes and houses in half the time for half the price," said Andersen. "Our profits will be higher and we will be able to show that with more projects that we do." It wasn't easy getting the permits to build the for-sale home, which is down the road from the model. Andersen said he had to work with local officials, teaching them about the process and the potential. He said the area's zoning regulations are notoriously difficult. But, Andersen adds, that's why he chose the location, so he would be ready for anything on ensuing projects. Some people are just looking out of curiosity, but others are serious buyers. The Johnsons of Kansas City are hoping to move closer to where their son lives in New York. "We've been looking since September of last year at a lot of homes in the two counties, and it's just impossible to find anything at this price," said Mitch Johnson. "And this quality," Patty Johnson chimed in. There are already multiple offers on the house, some from regular buyers, others from investors. Andersen said he has also gotten a lot of interest from developers who want him to build 3D housing developments. "We're going to build this house, get the right family in it, and start history," said Andersen. His firm, he added, is focusing on staying local for now and scaling up the company a bit –while looking ahead, too. "But we look to move to other states, like Florida and California, and prove that this can be done anywhere," he said. "There is no limit."
0 Comments
Kathy Kraninger, former president Donald Trump's appointee to head the Consumer Financial Protection Bureau. Andrew Harrer/Bloomberg via Getty Images The Biden administration hinted it may dismantle mortgage rules inked during the waning days of Donald Trump's presidency. Those Trump-era rules erase protections for borrowers and may open the door to risky loans that led the housing bubble to burst in the 2008 financial crisis, according to some consumer advocates. The Consumer Financial Protection Bureau said Tuesday it is considering whether to "revisit" the rules, issued in December when Trump appointee Kathy Kraninger led the agency. (She stepped down last month at the request of President Joe Biden.) More from Personal Finance:$400 unemployment boost: Republicans revive anxiety over effect on jobsFailure to report cryptocurrency on your tax return can lead to troubleSelf-employed and gig workers could get bigger PPP loans The bureau is charged with protecting consumers from abuse and predatory practices in credit cards, loans and other common financial services. It was created in 2011. The new Trump-era measures — the Seasoned QM and General QM rules — relate to certain residential loans for homeowners. They rewrite protections codified in the Dodd-Frank financial reform law after the Great Recession. "Big deal" Both are a type of qualified mortgage, a category that carries legal protections for lenders from consumer lawsuits. That may happen, for example, if borrowers can't make monthly payments and lose their homes to foreclosure. The new rules are scheduled to phase in starting March 1. "It's a big deal," Patricia McCoy, a professor at Boston College Law School, said of the CFPB's notice to possibly tweak the Trump-era measures. "The Seasoned QM rule is a really, really dangerous rule for consumers." If undertaken, the rulemaking process may ultimately change or rescind the rules, the CFPB said. Given its public statement on Tuesday, it's likely the agency will act, said McCoy, who oversaw mortgage policy at the CFPB during the Obama administration. "If they're signaling it, they don't say that lightly," she said. But some groups believe the Trump-era rules should remain in place. They will help banks and other lenders innovate and extend more mortgages to underserved groups, like Black and Hispanic homebuyers, according to Robert Broeksmit, president and CEO of the Mortgage Bankers Association. "We encourage the bureau to permit them to take effect as scheduled," Broeksmit said. Mortgage rules Consumer advocates are especially concerned by the Seasoned QM rule. It creates a new standard for a mortgage to be deemed "qualified." Qualified status is important for both homebuyers and lenders. It's essentially a government stamp of approval that a lender reasonably determined a borrower could afford their loan — the so-called "ability to repay." Lenders get legal protection in court and consumers have peace of mind they have a sustainable loan. Around 95% of mortgages are qualified, according to the Center for Responsible Lending. Prior to the Trump-era rewrite, a loan was generally deemed "qualified" if a borrower's debt load wasn't too high (more than 43% of their monthly income). Government-sponsored entities Fannie Mae and Freddie Mac make exceptions in some cases based on other financial factors. We don't want to encourage high-failure lending. Mike Calhoun president, Center for Responsible Lending A borrower's ability to repay helps set the demarcation line between prime (high-quality) and sub-prime loans. "This is one of the foundational rules of reform coming out of the Great Recession," said Mike Calhoun, president of the Center for Responsible Lending. "It goes right to the heart of what caused the financial crash." The Seasoned QM rule also grants qualified status to a loan if borrowers make timely monthly payments on their mortgage over a three-year period. Loans that weren't deemed "qualified" at the time of origination could eventually get that label. Consumer groups fear this may grant legal protection to risky mortgages and makes it more economical for lenders to make loans wither higher default rates. These risky loans could then be sold into the secondary market, where they're bundled together with other mortgages and bought by investors. "We think it's too loose and creates some bad incentives to do some of the unsustainable ending we saw in the crisis," Calhoun said. "We don't want to encourage high-failure lending." But many protections remain in place to prevent banks from making ultra-risky mortgages, Broeksmit said. For example, adjustable-rate mortgages and those with terms longer than 30 years can't get qualified status. At the same time, banks may take a bit more risk and lend more to underserved communities, he said. The Trump-era rules would also get rid of the 43% debt-to-income ratio and replace it with a different General QM standard. Loans would instead be qualified if their interest rate is below a threshold pegged to the average prime offer rate, or APOR. This change doesn't seem onerous, Calhoun said. Community banks have used the same standard for years and have been making loans responsibly with that test, he said.
0 Comments
A pedestrian walks by the closed GAP flagship store on August 18, 2020 in San Francisco, California. Justin Sullivan | Getty Images Gap said Wednesday it will invest $140 million to construct a distribution center in Longview, Texas, as part of its effort to double its online business over the next two years. Upon completion, Gap said the 850,000-square-foot facility will be able to process 1 million packages per day. Initially, it will be used for Old Navy's burgeoning e-commerce business, then expand to other parts of Gap's business. Gap expects the facility will create more than 500 full-time jobs by the end of 2023, and more than 1,000 over the next five years. It also should bring more than 1,000 part-time and seasonal jobs to the area by 2026. Construction will begin in April. Gap expects it to be fully operational by August 2022. The Covid health crisis has accelerated the shift to e-commerce and has forced many retailers to rethink their investments, and pour more money into supply chains and logistics. The e-commerce giant Amazon has announced several investments in its warehouses, including building new ones, as its retail business has boomed over the past year. Big-box chains Walmart and Target have found ways to utilize their stores as mini fulfillment centers, while Macy's took two of its department stores late last year and converted them into pint-sized distribution centers. While Gap's sales have slumped from 2019 levels during the health crisis, with fewer Americans visiting malls and shopping for apparel, the company has seen rampant growth online. And it expects that to stick around. Gap has said it plans to derive half of its sales from the internet by fiscal 2023 as it closes underperforming stores and invests more in its growing Old Navy and Athleta apparel brands. The company is in the process of shutting roughly 30% of its namesake Gap and Banana Republic stores in North America, which will leave it with a larger presence online and away from malls. For the quarter ended Oct. 31, Gap's digital business grew 61% and accounted for 40% of total sales. The company said it added more than 3.4 million customers online during the period. Overall, revenue was about flat year over year during the quarter, at $3.99 billion. Gap shares are up about 44% over the past 12 months. The retailer is expected to report fourth-quarter earnings after market close on March 4.
0 Comments
A 'Sold' sign stands outside of a home in Seattle, Washington. David Ryder | Bloomberg | Getty Images The early days of Guadalupe Mora's search for a new home were exhausting. A health-care technician at a Department of Veterans Affairs hospital, Mora slowly saved up more than $15,000 to move out of her two-bedroom mobile home and into a new place she picked out with her real estate agent. But the lender she had first contacted started to hound her day and night, pressing her with demands for even more cash and other proof she would be able to pay off a loan. A single mother to a 12-year-old who "thinks he knows it all," Mora said the lender's agents would harass her with messages even when she made it clear she could not return texts while at work. "It was, seriously, so stressful. It was horrible," she told CNBC last week during her lunch break. "I work 12-hour shifts. I cannot — especially when I'm working in the Covid unit — it's impossible for me to be on my phone constantly." The lender "just did not understand that I knew I needed the house — and I wanted the house. But I needed to keep my job in order to buy the house," she added. So, when Mora finally applied for a mortgage through Chase Bank, the 45-year-old learned she qualified for its $2,500 Homebuyer Grant, one of the bank's programs designed to help customers finance the purchase of a home. The grant is just one of several assistance options U.S. banks have deployed in recent years to foster homeownership among Black and Latino communities that have historically faced higher hurdles when applying for a mortgage. To further advance that goal, Chase Bank announced on Tuesday that it will double its Chase Homebuyer Grant. Chase, the U.S. consumer and commercial banking business of JPMorgan Chase, said qualified homebuyers in predominantly Black neighborhoods across the country can now receive a $5,000 grant when purchasing a home through the bank. While that sum may represent a fraction of the price of a home, it can help cover a substantial portion of an applicant's down payment or closing costs, often the largest hurdles for new homebuyers. 'Part of the solution' Chase's move to boost the Homebuyer Grant comes just over four months after the bank pledged $30 billion to help address U.S. wealth inequality, especially in historically underserved Black and Latino communities. The bank pledged to use the $30 billion to finance an additional 100,000 affordable housing units and write 40,000 new home-purchase loans for Black and Latino households. Still, housing advocates say the bank programs are overdue after decades of redlining, the subprime mortgage crisis and risky high-interest loans to Americans with a short or tarnished credit history. Many banks announced their new mortgage assistance programs in the months after the May 25 death of George Floyd at the hands of a police officer and weeks of Black Lives Matter protests across the country. Black homeownership levels are especially low and have consistently trailed those of other minority groups and White households. In the first quarter of 2020, 44% of Black families owned their home, compared with 73.7% of non-Hispanic White families, according to data from the Census Bureau. By the fourth quarter, that difference had widened slightly to 44.1% for Black families and 74.5% for White families. Arrows pointing outwards Black households saw homeownership rates slump to 40.6% in 2019, the lowest level for the demographic going back through Census data dated 1994. Though Black homeownership has recovered somewhat since then, the impact of Covid-19 and the subsequent recession kept downward pressure on the rate of Black homeownership throughout 2020. Cerita Battles, head of the Chase community and affordable lending team, told CNBC she believes lenders need to play a proactive role in working to reduce those disparities. "Absolutely yes. We should be a part of the solution," Battles said Thursday. "I think about myself, being someone that is Black," she continued. "There were times when I bought my first home — I couldn't go to my parents and ask them for dollars to support me in my down payment. And I didn't have a whole lot of wealth to begin with because of the different jobs that I had, and how I had to come up." Battles said she and her husband, who is a veteran, received a significant portion of the funds to purchase their first home through a loan backed by the Department of Veterans Affairs. Banks often offer more favorable lending terms to applicants who qualify for a VA loan since the department guarantees a portion of the mortgage. Similar initiatives are underway at Bank of America, which announced on Feb. 3 that it would invest $15 billion in affordable housing programs over the next five years, tripling its prior commitment. Steve Boland, president of BofA's retail business, told CNBC at the time that demand for its initial $5 billion pledge was so robust that applicants had quickly exhausted the allotment. "We see the need. We got great response from our clients. And so we thought it was appropriate to try to triple that and get that done to 60,000 homeowners by 2025," he said. Rebuilding trust Though the industry has received praise for its attempts to prioritize homeownership among minority communities, the programs come after years of criticism from advocacy groups that say big banks for decades worsened racial discrimination in the U.S. housing market. Codified racial bias in the U.S. housing market dates back nearly a century, when government officials openly engaged in a practice known as redlining. Starting around the 1930s, surveyors would outline and grade neighborhoods in hundreds of U.S. cities to determine which were safe enough to finance. Communities that included more people of color were more often deemed credit risks and, by extension, denied a variety of financial services, including mortgages. Though Congress outlawed redlining in the 1960s, recent housing research shows that the uneasy relationship between the Black community and the lending industry was fraught well into the 21st century. In the early 2000s, Black households were disproportionately targeted with dicey subprime loans, leading to the foreclosure of more than 240,000 homes owned by Black people and a foreclosure rate nearly double that of White people. A for sale sign is seen in front of a home as the National Association of Realtors released a report showing that home sales dropped in December of 2017 on January 24, 2018 in Miami, Florida. Joe Raedle | Getty Images In a 2016 complaint, the U.S. Consumer Financial Protection Bureau alleged that BancorpSouth unlawfully denied Memphis-area Black applicants certain mortgage loans and overcharged some of its Black customers. The complaint asserted that the bank required its employees to review applications from minorities more quickly than others, and not to provide them the opportunity to receive credit assistance that might have improved their chances of getting a loan. A more recent study from the University of California at Berkeley found that Black and Latino applicants continue to face higher borrowing costs. The 2019 study, which reviewed 7 million, 30-year mortgages, found that Latino and Black borrowers "pay 0.079% and 0.036% percentage points more in interest for home-purchase and refinance mortgages, respectively, because of discrimination." Lenders contend that these differences reflect the fact that minorities generally have less cash on hand and lower credit scores. Critics argue the disparities represent historical and structural problems that banks ought to help solve. Acknowledging that turbulent history, Battles said a key first step in correcting the homeownership statistics is to try to guarantee that Black and Latino communities are aware of the new financial services available to them. "There are a lot of different things, I would say, that lenders can do to support this effort," Battles said. And that, she said, starts with building trust in each community. Getty Images "We have to make sure that we're hiring people that mirror the markets we're seeking to serve," she added. "It is important for us to make sure that we have folks that are out there that can cultivate relationships and win the trust and consideration of these customers and these communities." Marcia Hernandez, just married in August, says her years of history as a Chase customer was key when she and her partner, Vivian, started looking for a new home in a quieter neighborhood in the Miami area. "For years I have had Chase and I first started with my lending," she said. "I educated myself a little more online and I ended up submitting a prequalification and I got a call within the same day." The 31-year-old says she worked with a home lending advisor at Chase to determine a reasonable budget and the resources available to her. Though Hernandez wasn't eligible for a grant initially, a representative for the bank said it recently told her she had been awarded its new $5,000 grant. "I daydreamed," she said when asked about the grant. "It secured me from worrying in the future. I was shocked. I couldn't believe it." "It opened room for other projects," she added. Hernandez, scheduled to close on her house on Tuesday, said she's eager to repaint the walls and add plants to her new home.
0 Comments
We discuss why bitcoin has been soaring and whether we will see a bitcoin ETF soon. iShares Gold Trust: https://www.zacks.com/funds/etf/IAU/profile?cid=CS-YOUTUBE-FT-VID SPDR Gold Shares: https://www.zacks.com/funds/etf/GLD/profile?cid=CS-YOUTUBE-FT-VID Ark Innovation ETF: https://www.zacks.com/funds/etf/ARKK/profile?cid=CS-YOUTUBE-FT-VID Ark Web ETF: https://www.zacks.com/funds/etf/ARKW/profile?cid=CS-YOUTUBE-FT-VID Follow us on StockTwits: stocktwits.com/ZacksResearch Follow us on Twitter: twitter.com/ZacksResearch Like us on Facebook: www.facebook.com/ZacksInvestmentResearch
0 Comments
Cathy Wood Crystal Mercedes | CNBC Some called it the "Cathie Wood sell-off."   At the open Tuesday, the top names owned by Ark Investment Management were the biggest decliners in the market.  Shares of Palantir, Tesla, Roku, Square, Paypal, Teladoc, Baidu, Zillow, Shopify and Spotify were all down big, in many cases by double-digits.  All were major holdings in funds like her flagship Ark Innovation ETF (ARKK) and Next Generation Internet ETF (ARKW). Shortly after the open, her flagship Ark Innovation Fund was down 11%. By 10 a.m. ET, a half-hour after opening, it had already traded more than 8 million shares, a full day's volume.  By midday, it had traded 30 million shares. And then, a half hour after opening, the selling let up. The fund closed down by 3.3% and was down about 10% for the week. Arrows pointing outwards "It was like a mini-panic," Alec Young from Tactical Alpha told me.  "The market is getting concerned that the Fed is risking getting behind the curve on inflation.  The market is pricing in more inflation, which means lower prices for tech stocks." The market stopped dropping as Federal Reserve Chair Jay Powell's congressional testimony was released.  Powell repeatedly emphasized he does not expect inflation to rise to troublesome levels:  "Monetary policy is accommodative and needs to continue to be accommodative," he said. Too many people on the boat? Still, the damage had already been done.  Fear of higher rates may have been an initial catalyst, but now, as Peter Tchir from Academy Securities told me, "People are very aware they are long a lot of stocks at very high valuations." "The frothiness is now the catalyst, not rates," he told me. As for the current mania with everything Cathie Wood and Ark Investments, Tchir on Tuesday penned a piece called "Noah's Arkk?" for clients, telling me, "Too many people are on that boat.  A lot of people, I think, have bet more than their risk appetite is comfortable with." Ark Innovation is off about 13% from its recent high. "I don't think this is over, I think this may be the start of an unwind.  Everyone assumed these are super-safe companies.  Her management style has been to double-down on her bets, and a lot of this is starting to feel a little evangelical.  People now view those funds as can't lose, and that's where you get into trouble," said Tchir. Most of the ten top holdings in Ark Innovation were underperforming the Nasdaq on Tuesday, before they rebounded. ARKK's top 10 holdings Wood did not respond to a request for comments on Tuesday's trading, but in an interview on CNBC last week, she made it clear that on days or weeks when her favorite stocks were down notably, she was often a buyer: "We are considered a liquidity  provider, which means when people are selling, we will be buying and when people are buying, and these are investors in retail and institutional, we are likely to be taking profits," she said. As for the worries about interest rates, she also made it clear that a sharp upturn would undoubtedly hurt her portfolio: "I do believe that if the rate were to take a sharp turn up that we would, we would see a valuation reset, and our portfolios would be prime candidates for that valuation reset."
0 Comments
A look at two more stocks for your aggressive growth stock radar screen. Synaptics: https://www.zacks.com/stock/quote/SYNA?cid=CS-YOUTUBE-FT-VID NeoPhotonics: https://www.zacks.com/stock/quote/NPTN?cid=CS-YOUTUBE-FT-VID Follow us on StockTwits: http://stocktwits.com/ZacksResearch Follow us on Twitter: https://twitter.com/ZacksResearch Like us on Facebook: https://www.facebook.com/ZacksInvestmentResearch
0 Comments
With attention focused on Robinhood, GameStop and retail traders at Thursday's congressional hearings, trading volumes are very much in focus, as is the practice of "payment for order flow." Talk about a comeback story. A year ago, retail traders were a declining part of the trading world. Then Covid hit. Millions stayed home and got stimulus checks. They went online. With sports largely shuttered, many looked at retail stock trading for the first time.  In December 2019, retail trades averaged 13% of total trading share volume, according to data from Piper Sandler. By the end of December 2020, that figured had almost doubled, to 22.8%.  And those retail traders engaged in more than their fair share of trading.  "Not only did the retail share of trading go up, but they drove volumes much higher," said Rich Repetto, who tracks trading at Piper Sandler. Overall trading in 2020 was up 55% from 2019, Repetto noted, much of it driven by retail traders. And the trend is continuing into 2021. Average daily share volumes year to date are 42% higher than 2020, though Repetto noted that first-quarter volumes are usually higher than the rest of the year. How payment for order flow works That increase in retail trading has come with increased scrutiny for a practice known as "payment for order flow" whereby some brokers receive payments from market makers (dealers) for routing trades to them. The majority of retail trading is not done on exchanges, it is done by market makers that "internalize" the trades. Here's how it works. Let's say you want to buy 100 shares of Tesla. When you push the button on a trade, you have given your broker an order to buy 100 shares of Tesla at the market price. Your broker will usually have a prearranged agreement with market makers who will compete for the order flow. The bigger market makers include Virtu, Citadel Securities, Susquehanna, Jane Street, Two Sigma and UBS. Virtu CEO Doug Cifu said his firm competes fiercely for that order flow:  "Most of the brokers have a 'routing wheel,' and within that wheel, they will send client orders to the market makers based on the amount of price improvement they have provided," he said. The rate of payment for order flow varies from broker to broker, Cifu noted, but is usually fixed within the broker. A broker may charge 10 cents per 100 shares, for example. Others may charge more, some nothing. The key point, Cifu says, is that Virtu and the other firms must meet best execution obligations, which will usually include price improvement. Let's go back to that Tesla trade, to buy 100 shares. Suppose the bid (what a buyer was willing to pay) was $792.80, the ask (what a seller was willing to sell for) was $793.20. The midpoint is $793. Cifu said it would be typical to offer some kind of price improvement, perhaps $792.90. "It's a riskless trade," Cifu insisted. "As soon as the price hits us, we guarantee the broker they are getting the best price." Cifu also noted that in the last several decades bid-ask spreads have declined, execution speed has improved, and fees have declined, all as a result of technological innovation. Is payment for order flow a good deal for the retail trader? Still, many market observers have been critical of payment for order flow, among them Better Markets, a nonprofit organization that seeks to promote public interest in the financial markets. In a paper distributed prior to the Robinhood-GameStop hearings, Better Markets claimed payment for order flow "is widespread and causes an inevitable conflict-of-interest between the retail broker-dealer's duties to seek best execution for its customers and its duties to shareholders and others to maximize revenues. … These execution costs can outweigh the benefits to retail investors associated with so-called 'commission-free trading.'" Cifu says there is no data to support those assertions. "At a minimum, you are getting the same price you would get if you went to an exchange," he said.  "Every single broker is routing based on price improvement and a best execution obligation." A recent study by Bloomberg Intelligence's Larry Tabb and Jackson Gutenplan casts doubt on the idea that retail investors are being disadvantaged by payment for order flow: "Retail brokers' controversial practice of selling client orders to market makers (payment for order flow) benefits equity investors by enhancing execution quality, with our analysis showing that Citadel Securities and its peers returned $3.7 billion in 2020 to investors in the form of price improvement," the study concluded. "That's nearly 3x what they paid for that equity flow." Still, the idea persists that if market makers are making money, they must be taking it from retail investors. UBS' Art Cashin, the dean of floor traders at the NYSE, also is a skeptic on payment for order flow: "If you're paying for my order flow, is it to get me the best price? What is the advantage? Is it because the dealer is going to trade against it? It's the public meets a dealer, it's not like the public meets the public with an exchange."  Cashin offers a simple formula for determining if the transaction is worth it: "Is the payment you are making for order flow enough to offset the free commission, and give you price improvement? If you believe that is true, you should be comfortable with doing it commission free." Cifu agrees with Cashin's sentiment and again insisted that his firm competes fiercely to provide best execution. "This is a very competitive business," he said. NYSE worries about 'degradation' of price discovery The exchanges have a different concern: retail trader orders that are routed to relatively "dark" venues like broker-dealers without interacting with public orders from the exchanges. "Growing retail investor interest is a welcome development," said Michael Blaugrund, COO of the NYSE.   "But all of this trading in private dark venues means liquidity is becoming less accessible for institutional investors and the price discovery process is becoming degraded." Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
0 Comments
This is how you can take a leap from a 9-to-5 job to a full-time trader. It doesn’t have to be a painful experience. However, you need to know some things and apply techniques that will help you make that transition as smooth as possible. #9to5 #boringjob #trading #fulltimetrader #professionaltrader #tradestocks #learntrading Posted at: https://tradersfly.com/blog/ep-144-taking-a-leap-from-a-job-to-full-time-trader/
0 Comments
MU and ZAGG are profiled as aggressive growth stock picks. Micron: https://www.zacks.com/stock/quote/MU?cid=CS-YOUTUBE-FT-VID Zagg: https://www.zacks.com/stock/quote/ZAGG?cid=CS-YOUTUBE-FT-VID Follow us on StockTwits: stocktwits.com/ZacksResearch Follow us on Twitter: twitter.com/ZacksResearch Like us on Facebook: www.facebook.com/ZacksInvestmentResearch
0 Comments