- Global stocks bounce back; UK and US factories suffer supply-chain woes – as it happened
- Billionaire hedge fund boss pays himself UK record of £343m
- A third of top UK firms' CO2 emissions not in line with global climate goals
- US factories hit by rising prices
- Dow slides late in session, stocks book 2-day losing streak despite oil price rebound
- Which stocks were in focus?
- How did other assets trade?
- March 2021 Stock Market Outlook
- Things Are Returning to Normal, for Some
- Expectations for a Stimulus Deal Are Baked In
- Making Sense of a ‘Funny’ Market
Global stocks bounce back; UK and US factories suffer supply-chain woes – as it happened
Britain’s manufacturers suffered from mounting supply chain disruption in February as Brexit and the third Covid lockdown weighed down growth in factory production, according to a survey.
In a reflection of continuing border disruption since leaving the EU, the latest snapshot from IHS Markit and the Chartered Institute of Procurement & Supply revealed the third biggest increase in supplier delivery times on records dating back to 1992.
Industrial output rose at the weakest pace in nine consecutive months of growth, as the manufacturing sector’s rebound from the pandemic was held back by worsening supply-chain disruption and rising cost pressures.
According to the survey of 600 manufacturing firms, which is closely watched by the government and the Bank of England for early warning signals from the UK economy, business optimism rose to a 77-month high in February amid expectations for a sharp recovery as Covid restrictions are relaxed.
The reading on the IHS Markit/CIPs purchasing managers’ index (PMI) rose to 55.1 in February, up from 54.1 a month earlier, on a scale where anything above 50 separates economic growth from contraction.
However, analysts said the index was being artificially boosted by Brexit and Covid border disruption. Un normal, when longer production lead times would reflect strong economic growth as firms battle to meet demand, pushing up the index, the cause this time around is negative for companies….
5.08pm GMT 17:08
Joe Connolly (@JoeConnollybiz)
Stock market banking on a booming recovery again – Dow + 675 Nasdaq + 331 S & P + 89. All up 2 – 2 1/2 % at Noon.
March 1, 2021
5.06pm GMT 17:06
Billionaire hedge fund boss pays himself UK record of £343m
The billionaire hedge fund manager Sir Chris Hohn paid himself $479m last year after his Children’s Investment (TCI) fund, recorded a 66% jump in pre-tax profits to $695m.
It is believed to be the highest annual amount ever paid to one person in Britain and equates to £940,000 a day. It is 9,000 times the average UK salary and 1,700 times the amount paid to the prime minister, Boris Johnson.
Hohn’s huge $479m (£343m) payday is significantly higher than the previous record of £323m paid to Denise Coates, the majority shareholder of the betting company Bet365, in 2018…
3.56pm GMT 15:56
A third of top UK firms' CO2 emissions not in line with global climate goals
Three 10 of the UK’s biggest public companies emit carbon dioxide at a rate that would contribute significantly to the climate crisis, according to analysis that shows the scale of the challenge for corporate Britain to cut emissions to zero.
Thirty-one members of the FTSE 100, the index of Britain’s largest listed companies, are emitting carbon dioxide at a rate consistent with global temperature increases of 2.7C or more by 2050, according to analysis by Arabesque, a company that provides climate data to investors.
Highlighting the mounting risks to the planet, the rise would be above the target set under the 2015 Paris climate accords to limit global heating to below 2C and pursue efforts to limit it to 1.5C. A temperature rise of 2.7C is thought to be ly to lead to severe damage to the environment and to human life.
Oil companies including BP and Royal Dutch Shell are among those that produce carbon dioxide emissions consistent with temperature rises of more than 2.7C, even without taking into account the emissions related to the fossil fuels they dig up and sell, known as scope 3 emissions.
The mining sector also performed poorly, with Anglo American, Antofagasta, BHP, Evraz, Fresnillo and Polymetal all among the companies scored at above 2.7C…..
3.39pm GMT 15:39
3.13pm GMT 15:13
US factories hit by rising prices
Just in: American manufacturers have also been hit by supply chain problems, which have driven up their costs and led them to charge higher prices.
Data firm IHS Markit’s latest survey of purchasing managers shows that US factories saw their costs rise at the steepest rate since April 2011, amid record supplier shortages.
In response, selling prices increased at sharpest pace since July 2008 — which highlights the concerns about inflation rising as economies rebound from the pandemic.
US factories also reported a steep expansions in output and new orders in February, leading to a boost in business confidence, and hiring.
The PMI report says:
The rate of production growth was among the fastest in six years while new order growth was among the fastest seen over the past three years. New export orders also rose solidly, registering the second-steepest gain since September 2014.
As a result, the US manufacturing PMI has come in at 58.6 in February, down from 59.2 in January, but still close to a 10-year high.
US manufacturing PMI Photograph: IHS Markit
February PMI data from IHS Markit indicated a marked upturn in the health of the U.S. manufacturing sector. Although the rate of overall growth eased, it was the second-fastest since April 2010 and was supported by sharp increases in output and new orders.
Unprecedented supply chain disruption remained apparent, however, with supplier shortages and transportation delays leading to a substantial rise in input costs.
Firms were, however, able to partially pass on input prices to clients through the fastest increase in charges since July 2008.
At the same time, employment grew at the steepest rate since September 2014, as business confidence also improved.
IHS Markit PMI™ (@IHSMarkitPMI)
Dow slides late in session, stocks book 2-day losing streak despite oil price rebound
U.S. stocks closed lower Wednesday, giving up earlier gains, even as investors focused on rebounding oil prices, some slippage in benchmark Treasury yields, and a brighter outlook for the economy.
Investors also tuned into a second day of testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen in which they reiterated expectations for a rebounding economy, but with lasting labor market challenges.
On Tuesday, the Dow fell 308.05 points, or 0.9%, to close at 32,423.15, to mark its worst daily loss since March 4, according to FactSet data. The S&P 500 declined 30.07 points, or 0.8%, finishing at 3,910.52, while the Nasdaq Composite Index fell 149.85 points, or 1.1%, to end at 13,227.70.
U.S. stock gains faded in afternoon trade, leaving the Dow in negative territory in the session’s final moments as it joined the S&P 500 and Nasdaq Composite in a second straight day of losses.
“The market has been a little stalled out for the past week or so,” Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research, told MarketWatch.
“We are kind of directionless,” he said, but added that the closely watch Cboe Volatility Index VIX VIX, -4.29%, or “fear gauge,” rose around noon and closed 4.4% higher.
Earlier in trade, equities were mostly higher as oil prices rebounded from a sharp rout in the prior session and the climb in benchmark Treasury yields took a breather after recently reaching one-year highs.
“I think the overall market is being helped by the stabilization of interest rates and the rebound in oil and, frankly, by no surprises coming from Powell or Yellen,” Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, told MarketWatch.
Federal Reserve Chair Powell and Treasury Secretary Yellen on Wednesday reiterated key points to the Senate from Tuesday’s House testimony, namely that the economy should be poised for a strong rebound as more of the U.S. population gets vaccinated, but that the labor market’s return to health will take longer.
Read: Powell and Yellen’s game plan is evocative of the World War II playbook. Here’s what happened then.
Investors remained concerned about Europe’s recent struggles with limiting the spread of coronavirus. Germany on Wednesday reversed plans for a stricter lockdowns over the Easter holiday, but worries remain about a potentially slower economic recovery for the region, even as fresh economic data have provided a bright spot.
Business activity in the eurozone unexpectedly grew in March, a preliminary survey showed. IHS Markit’s “flash” composite purchasing managers index, bounced to 52.5 this month, compared with 48.8 in February, rising above the 50 mark, which is seen as the dividing line between contraction and growth.
A flare up in the pandemic in the European Union is expected to compel the EU to draft emergency legislation that would allow it to control exports of COVID-19 vaccines.
In the U.S., Grohowski said he still expects a more challenging period for financial markets this year because the region could be forced to “grapple with potentially too much of a good thing,” in terms of trillions worth of fiscal and monetary stimulus designed to aid the U.S. economic recovery, which could also spark higher inflation and increase borrowing costs from recent lows.
“We have been warning investors that returns this year are ly going to be more of a challenge,” Grohowski said.
Even so, some equity bulls see a retreat in yields of benchmark U.S. Treasurys as paving a way for stocks to see fresh gains. Worries about the rise in yields have receded recently, with the 10-year Treasury note TMUBMUSD10Y, 1.662% at 1.613%, compared with 1.729% last Friday.
“I think under the hood at the Fed there’s more concern about inflation than they’re letting on, and I think the bond market is picking up on that,” said Donald Calcagni, chief investment officer with Mercer Advisors. “The bond market doesn’t need the Fed’s permission to raise rates, as we’ve seen.”
Calcagni thinks there’s a “tug-of-war” in the market between growth and value sectors. “We’re seeing rockiness now because we’re in the early stages of rotation,” he told MarketWatch. “Momentum takes time to shift and there’s friction as you rotate. Still, as the economy starts to open, value names should be the clear winners.”
In U.S. economic reports, durable-goods orders slid 1.1% in February, marking the first decline in 10 months. Economists surveyed by MarketWatch had forecast a 0.4% increase.
However, overall the U.S. economy grew faster in early March as the weather improved, governments loosened coronavirus restrictions and massive federal stimulus was injected into the economy, a new survey showed.
Service-oriented businesses such as restaurants, resorts, airlines and hotels posted the steepest increase in business in almost three years, according to economic research firm IHS Markit.
The firm’s “flash” service index climbed to an 80-month high of 60 from 59.8 in February.
Which stocks were in focus?
- Intel shares INTC, +2.26% slumped 2.3%, after newly installed Chief Executive Pat Gelsinger laid out an ambitious road map to bounce back from manufacturing problems that surfaced last year.
- Winnebago Industries Inc. WGO, -0.02% shares tumbled 7.4% Wednesday, after the company reported fiscal second-quarter profit and revenue that trounced expectations, and pointed to “strong retail momentum” heading into spring.
- Shares of General Mills Inc. GIS, -0.84% lost 4.2% Wednesday after the food company reported fiscal third-quarter earnings that missed expectations.
- GameStop Corp. stock GME, +11.89% skid 33.8% after the videogame retailer at the center of the so-called meme-stock phenomenon said it had laid the groundwork for its “transformation,” but disappointed on its recent earnings.
- Shares of Second Sight Medical Products Inc. EYES, +1.35% slid 20% after the implantable visual prosthetics company announced a large private placement of common stock.
- Bank of New York Mellon Corp. BK, +1.33% shares rose 2% as a Bank of America analyst upgraded his view of the stock to a buy with a higher price target.
- ViacomCBS Inc. VIAC, -11.92% shares tumbled 23.2% Wednesday, after the media and entertainment giant priced a roughly $3 billion offering of equity securities to raise the funds to invest in its new streaming service.
How did other assets trade?
- The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, 1.662% was about 2.4 basis points lower at 1.613%, down most days this week. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, +0.25%, a measure of the currency against a basket of six major rivals, rose 0.2%.
- Oil futures gained nearly 6%, in part thanks to the cargo ship mishap in the Suez Canal, with the U.S. benchmark CL.1, +4.01% adding $3.42 to settle at $61.18 a barrel on the New York Mercantile Exchange.
- Gold futures notched its first gain in 3 sessions. The April contract GCJ21, +0.16% rose 0.5%, settling at $1,733.20 an ounce.
- In Europe, the Stoxx 600 index SXXP, +0.95% closed fractionally higher, while London’s FTSE 100 UKX, +0.94% added 0.2%.
- In Asia, the Shanghai Composite SHCOMP, +1.63% fell 1.3%, Hong Kong’s Hang Seng Index HSI, +1.57% tumbled 2% and Japan’s Nikkei 225 NIK, +1.56% dropped 2%.
Read next: Value stocks are so in favor they’ve become momentum stocks
March 2021 Stock Market Outlook
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The shortest month of the year was not short on stock market surprises. February started with the S&P 500 notching a 5.4% gain in a six-day winning streak—its longest since August—only to end the month with investors dumping stocks amid a surge in bond yields.
Two dynamics help to explain the recent moves in stock and bond markets. Interest rates are rising amid optimism about the pace of U.S. economic growth, accompanied by some nervousness about higher inflation. In February, the yield on the benchmark 10-year Treasury jumped from 1.08% to 1.52%, its highest level in a year.
Rising interest rates can be interpreted as a sign of optimism.
The yield increases are coming because markets have glimpsed an end to the pandemic, says Jamie Cox, managing partner and a financial advisor with Harris Financial Group in Richmond, Va.
The markets aren’t alone in this; Americans in general are more hopeful about economic recovery and the end of the pandemic, according to the Forbes Advisor-Ipsos U.S. Consumer Confidence Weekly Tracker.
So what drove the late February stock sell-off? In part, it’s the speed with which yields have jumped higher. What’s more, rising interest rates make stocks somewhat less attractive because bonds now are paying more than the dividend yield for the S&P 500.
Meanwhile, there’s been a broader shift underway within the stock market.
Investors have started betting on those stocks that should benefit most from the economy reopening, restaurants or travel-related companies, and they’re ditching some of the pandemic favorites, tech stocks.
While the S&P 500 ended February up 2.6%, the tech-heavy Nasdaq 100 fell 2.4%—and former market darlings Tesla (TSLA) tumbled more than 15%.
March offers opportunities for reflection and for optimism. March 23 marks the one-year anniversary of the S&P 500’s low of the short-lived bear market and the start of the current bull market.
In the month ahead, the Covid-19 vaccine rollout, already well underway, could pick up speed, and Congress may pass another stimulus bill to help those Americans still struggling from the economic toll of the pandemic.
Things Are Returning to Normal, for Some
The Covid-19 pandemic continues to be a major theme, but the focus has largely shifted from the number of cases (and deaths) to the number of people who have been vaccinated. As of late February, 14% of the U.S. population has received at least one dose of a vaccine, according to figures from the Center for Disease Control.
A one-shot vaccine developed by Johnson & Johnson has also been added to the mix, bringing the total number of available options in the U.S. to three. The vaccine rollout could give investors some reason to be optimistic, notes Ross Mayfield, an investment strategy analyst with Baird based in Louisville, Ky.
“It certainly started out rocky but it’s picking up speed,” Mayfield says. “We’re still well on our way to our goal of getting a majority of people with the opportunity to get vaccinated by mid-2021, though slip-ups and bumps and bruises along the way were bound to happen.”
Cox anticipates there could be a reckoning of sorts that may be positive for stocks.
“Markets are going to come to realize that herd immunity could happen faster than what had been previously predicted,” he says, adding that Americans may pull forward demand for things travel that had been pushed to the back half of the year. “A return to normal work for parts of the economy that have been sidelined could be a lot closer than we thought.”
To gauge how consumers are feeling, Cox says he’ll monitor the retail sales report for February, which is scheduled for release by the Census Bureau on March 16. Consumer spending jumped 5.3% in January, more than economists had expected. “Retail sales are starting to accelerate some because people have so much cash and they’re looking to spend it on anything,”
Cox will also watch for a drop in the number of Americans filing for unemployment claims, as reported each Thursday by the Department of Labor. “If you start to see that number decline, then you know the recovery is for real, and people are being asked back to work,” he says.
Expectations for a Stimulus Deal Are Baked In
There may be optimism among investors about the economy improving, but the reality is that many Americans continue to struggle.
More than 10 million people were unemployed as of January, and thousands of businesses have been forced to shutter.
For example, more than 110,000 restaurants nationwide were closed either temporarily or permanently as of December, and the industry finished 2020 with 2.5 million fewer jobs, according to estimates by the National Restaurant Association.
The disparities of the so-called K-shaped recovery, in which some people are doing well while others are struggling, may be increasingly difficult to ignore. There’s an eviction crisis brewing, as renters owe $57 billion in unpaid rent, according to Moody’s Analytics. Even though the housing market has otherwise been “crazy strong,” the pandemic-era problems are still here, Cox notes.
“A lot of the problems—particularly financial—have been pushed off by heavy Fed intervention and government spending on stimulus,” Cox says.
Looking ahead, it’s plausible that “very, very good news” will be tempered by a more sober reality, such as how to deal with this mountain of unpaid rent, he adds.
“And there are going to be similar things that are going to happen that we have not even thought of yet.”
A risk to the stock market is that politicians ease up on assistance too early, Cox notes. For now, that doesn’t appear ly. President Joe Biden proposed a $1.
9 trillion stimulus bill before taking office in January, and now the clock is ticking on getting something passed by Congress because both expanded unemployment benefits and an expanded eviction moratorium are set to expire in mid-March.
“March is going to be a huge month for whatever the next stimulus bill looks ,” Mayfield says. In 2020, Congress approved about $4 trillion in Covid relief measures. Current proposals include stimulus checks of $1,400, a proposal to raise the minimum wage to $15 an hour and extra federal unemployment benefits.
With Democrats in charge of both houses of Congress and the White House, Mayfield says passage of the next stimulus bill is already baked into the stock market. Any debate among politicians, then, will be about whether the amount of aid is too much, so it’s possible the total price tag for the bill will be reduced, he says.
“It’s a massive amount of spending by any measure,” Mayfield says. The targeted stimulus checks sent directly to Americans and expanded unemployment benefits have been a “super, super powerful tool to fight any recession, and especially this one,” though.
Still, there’s the risk that a stimulus bill doesn’t get passed by Congress by mid-March, which could create some “drama” around the expiration of benefits, Cox says. “That will cause a little consternation in the market as the deadline approaches and could be a small blip on the radar of what could otherwise be a pretty good month,” he says.
Making Sense of a ‘Funny’ Market
As the end of February shows, even by dynamics that might seem positive for the economy can rattle investors. The approaching one-year anniversary of the end of the Covid crash and subsequent recovery in stock prices, is yet another reminder that the market and the economy don’t always move in sync.
The comparisons to what was happening in March of 2020 will be mixed. While the one-year returns for the market are going to look “incredible,” year-over-year comparisons for some economic data will “get weird” this March, Mayfield says. That includes inflation, which investors are worried about right now, he adds.
A rotation that’s been underway in the market for months, with investors favoring cyclical and value stocks, is ly to continue, Mayfield says. And sectors financials, energy, industrials and materials could outperform the broader market, he adds. “We believe the cyclical rotation continues in the near term, and any hiccups along the way are transitory,” he says.
As a result of that rotation, other sectors have fallen favor, especially the high flyers of the early months of the bull market. “I think it’s going to be tough sledding for some tech companies,” Cox says.
Still, what matters most to Mayfield in the month ahead is the same list of things he’s been focused on for months: vaccines, stimulus and how corporations are faring. “It’s a funny market,” he says. “There’s a ton going on, but it really boils down to a few specific things.”