Tech stocks are back, for now.
Things haven’t been looking good for richly valued growth stocks. Monday’s 2.4% tech wreck pushed the Nasdaq Composite into correction territory, with the benchmark tech index down more than 11% from its high set in February.
But it doesn’t take long to go from euphoria to outright panic back to euphoria these days.
Euphoria is today’s mood. Nasdaq futures were up 2.1% Tuesday morning. That’s about twice the gain of S&P 500 futures and five times the gain of the Dow Jones Industrial Average. All the usual suspects are rising. Apple, Alphabet, Amazon.com, and Facebook shares were up around 2% in premarket trading. Tesla stock was up around 5%.
Still, the tech snapback doesn’t mean the rotation into value is dead. The Dow was up 0.4% this morning. Value has outperformed growth by about 13 percentage points so far in 2021. After being trounced by growth investors by about 10 percentage points a year on average for the past five years, that must feel good for value investors.
For growth to truly come back, interest rates will have to calm down. That makes Wednesday’s inflation data more important than usual. Economists expect prices—excluding food and energy—to be 0.2% higher in February compared with January. Economists focus on inflation ex-food and energy to avoid the impact of large commodity price swings. Besides, who eats and drives anyway.
Higher than that and the new tech rally might be short-lived.
—Al Root
*** Join Beverly Goodman, Barron’s editorial director of Investing & Asset Management, reporter Shaina Mishkin, and Mark Zandi, chief economist of Moody’s Analytics, today at noon for a discussion on the outlook for home sales, mortgage rates, what have we learned from the past year and more. Sign up here.
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Vaccinated Americans Can Socialize Without Masks, CDC Says
A year after some of the most restrictive coronavirus lockdowns began sweeping the country, the Centers for Disease Control and Prevention is loosening its guidance on social contact for adults who have been vaccinated.
- People who have been fully vaccinated against Covid-19 can socialize in small groups without wearing masks or social distancing, the CDC said Monday. They can also visit unvaccinated people from a single household who are at low risk for the disease without masking.
- Vaccinated adults should still keep their distance, wear masks and take other precautions in public, however, since less than 10% of Americans have been fully vaccinated to date.
- Even as health officials are promising a dramatic increase in vaccine availability this spring, a quarter of people surveyed by Monmouth University said they will “likely never get the vaccine” if they could avoid it, according to a poll released Monday.
- The accelerating pace of vaccinations has dovetailed with a 70% decline in coronavirus hospitalizations, from 132,000 in early January to just over 40,000 on Sunday, according to data from the Covid Tracking Project.
What’s Next: With new infections falling more slowly over the past few weeks and more dangerous variants taking hold, worries are rising over a resurgence just as young, mostly unvaccinated people are set to head to spring break hot spots in places like Florida, which has never had a statewide mask mandate.
—Janet H. Cho
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Bigger Stimulus Checks + Reopenings = A Likely Consumer Spending Boom
With the third round of stimulus checks all but certain to start arriving this month, Americans can start thinking about how they’ll use the much-needed cash. While some will simply stash it in savings, there’s a case to be made that more dollars will get spent this time around.
- The third round of stimulus more directly targets lower earners, who are also more likely to spend their checks than others. Considering that consumer spending rose 2.4% in January after checks were issued, the larger, $1,400 checks could increase spending even more.
- A rise in personal income, paired with more reopenings, could “unleash substantial pent-up demand” in service sector consumption, Jefferies chief economist Aneta Markowska said. She expects personal consumption spending to rise 7% in 2021 and 4.1% in 2022.
- Big box retailers like Walmart and Costco benefited from earlier stimulus spending during shutdowns, but reopenings will likely help ride-share companies like Lyft, restaurant and travel companies including Southwest Airlines, Airbnb, and Outback Steakhouse, along with leisure brands Caesars and Six Flags, Jefferies analysts added
What’s Next: It’s hard to predict consumer behavior, of course. In a survey conducted by Morning Consult for Bloomberg in February, a third of respondents said they planned to save more of their third stimulus check, with just 5% saying they planned to use it for a vacation or trip.
—Anita Hamilton
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Walt Disney Stock Pops on New California Reopening Guidance
Walt Disney stock soared 6% to a record close on Monday on updated guidance from California that would allow some theme parks to reopen earlier than expected.
- The California Department of Public Health said late Friday that amusement parks in “red tier” counties can reopen at 15% capacity starting on April 1. Counties in the “orange tier” can bring capacity to 25%.
- A California county enters the red tier when the average seven-day daily new cases per 100,000 people fall between four and seven, with positive tests falling between 5% and 8%. The orange tier is between one and 3.9 daily new cases per 100,000, with positive tests between 2% and 4.9%.
- Orange County, where Disneyland is located, currently sees 10.2 new cases per day per 100,000 people, meaning it would not be able to reopen until things improve. But the update is much less restrictive than previously, when large theme parks in red or orange tiers couldn’t reopen.
- “With case rates and hospitalizations significantly lower, the arrival of three highly effective vaccines and targeted efforts aimed at vaccinating the most vulnerable communities, California can begin gradually and safely bringing back more activities, especially those that occur outdoors and where consistent masking is possible,” says Dr. Mark Ghaly, secretary of the California Health and Human Services Agency.
What’s Next: Though Disneyland has not announced a reopening date, Disneyland Resort President Ken Potrock said in an emailed statement to Barron’s that “we are encouraged that theme parks now have a path toward reopening this spring.”
—Connor Smith
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Biden Stimulus to Give Major Boost to Global Recovery: OECD
The world economy is on track to be back to its pre-pandemic level by the middle of the year thanks to the $1.9 trillion fiscal stimulus package that will add 3 percentage points to U.S. growth this year, the Organization for Economic Cooperation and Development said Tuesday.
- Global GDP growth is now expected at 5.6% this year, more than 1 percentage point above the OECD’s December forecast, thanks to the vaccine rollouts in many countries and the U.S. stimulus, it said. The world economy is seen expanding by 4% in 2022.
- The U.S. economy would grow by 6.5% this year, China by 7.8% and the eurozone by 3.9%, according to the forecast.
- But “faster and more effective vaccination deployment across the world is critical,” the OECD warns. “More jabs, more jobs,” it adds.
- The organization also notes that there “are increasing signs of divergence across countries and sectors,” and that “resources required to provide vaccines to lower-income countries are small compared with the gains from a stronger and faster global economic recovery.”
What’s Next: The OECD report illustrates the magnitude of the “welcome demand spillovers” the U.S.’s trade partners will benefit from after the Biden stimulus. It also underscores by contrast Europe’s need to both accelerate its vaccination campaigns and do more to stimulate its economy.
—Pierre Briançon
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GameStop’s Transformation to Tech Business Begins
The GameStop stock saga has been colored by enthusiasm from retail traders in online forums. Now, another major player is making moves to turn things around for the retailer.
- GameStop said Ryan Cohen, Chewy co-founder and GameStop director, is chairing a new committee geared toward transforming the retailer into a technology business. The committee includes Cohen, former Chewy executive Alan Attal, and Kurt Wolf, chief investment officer of activist investor Hestia Capital Management.
- GameStop said the committee will home in on ways to transform the retailer by looking into operational objectives, capital structure, and allocation priorities.
- Since the committee’s formation earlier this year, the company appointed a chief technology officer, hired executives to lead customer care and e-commerce fulfillment, respectively, and announced the planned departure of Chief Financial Officer Jim Bell.
What’s Next: The Senate Banking Committee today will host a hearing titled “Who Wins on Wall Street? GameStop, Robinhood, and the State of Retail Investing.” Witnesses weighing in include professors and experts in the areas of law, financial markets, and economics.
—Connor Smith
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Congrats to the winners of the February virtual stock exchange game! Be sure to join this month’s Barron’s Daily virtual stock exchange challenge and show us your stuff.
Each month, we’ll start a new challenge and invite newsletter readers—you!—to build a portfolio using virtual money and compete against the Barron’s and MarketWatch community.
Everyone will start with the same amount and can trade as often or as little as they choose. We’ll track the leaders and, at the end of the challenge, the winner whose portfolio has the most value will be announced in The Barron’s Daily newsletter.
Are you ready to compete? Join the challenge and pick your stocks here.
***
—Newsletter edited by Anita Hamilton, Stacy Ozol, Mary Romano, Matt Bemer
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