Stocks closed higher on Wednesday, boosted by Congress passing President Joe Biden’s $1.9 trillion stimulus package.
Another Thursday, another batch of devastating jobless claims.
For nearly a year, the weekly first-time claims for unemployment benefits have been higher than they were even during the peak of the Great Recession. Tomorrow’s report will be no exception.
Economists expect another 725,000 initial claims, a slight improvement from 745,000 in the week prior. Continued claims, which count those submitted for at least two weeks in a row, are forecast at 4.2 million, down from 4.3 million.
Neither of these numbers include benefit applications filed under the government’s pandemic programs, including the Pandemic Unemployment Assistance program for those who can’t get regular jobless aid, such as the self-employed.
With inflation concerns eased for now, investors are turning their focus to positive news for the economic recovery.
The Dow was up more than 520 points and on track for a record close after the House of Representatives approved the $1.9 trillion coronavirus relief plan — paving the way for President Joe Biden to sign his top legislative priority into law later this week and deliver aid to most American households.
Key features of the plan include:
The stock market is a mixed bag today.
At the opening bell, the Nasdaq Composite rallied the most, but that moment has come and gone. The tech-heavy index is down 0.1% in the early afternoon.
Meanwhile, the Dow has rallied some 450 points, or 1.4%, putting it on track to reach a new all-time high.
The S&P 500 is up 0.6%.
Going electric is all the rage in the car manufacturing world. Subaru is no exception.
“If the market clearly goes that way, we certainly do,” said Tom Doll, CEO and President of Subaru of America. “Clearly, the [Biden] Administration is signaling that they would like us to go more towards electric vehicles and infrastructure will help to do that.”
“By 2030 at least 40% of our business is going to be electric or hybrid,” Doll said.
The car maker is off to “a fantastic start” in 2021, Doll said on the CNN Business digital live show Markets Now, even after its production was briefly shut down during the height of the pandemic last year.
“[The pandemic] didn’t affect our long-term planning but it affected our short-term production,” Doll said.
Subaru expects to sell more than 16 million vehicles this year.
Inflation is the bogeyman of Wall Street at the moment.
Investors worry that a sudden jump in consumer prices is going to force the Federal Reserve to raise interest rates out of nowhere. This would be bad news for stocks and good news for bond yields. But maybe this worry is a bit overdone…
“People have to remember to apply some perspective when they look at interest rates,” said Brian Belski, chief investment strategist at BMO Capital Markets.
With the Fed’s benchmark rates still near zero and the 10-year US Treasury bond yielding 1.52%, calling rates ‘high’ isn’t really accurate.
“When interest rates rise from an exceedingly low level the economy is improving. And if the economy is improving, [company] earnings improve,” Belski said. So maybe higher inflation could actually be good for stocks.
“I think people jump to conclusions when they hear a scary word,” Belski added. “We’re nowhere close to any kind of inflation pressures. The Fed will continue on what it’s doing well into 2023 until we see massive, massive gains in employment. And again we’re several quarters away from that.”
The Senate has passed President Joe Biden’s $1.9 trillion stimulus package and the House is due to vote on it shortly.
Greg Valliere, chief US policy strategist at AGF Investment calls the stimulus package “lavish,” but also thinks there will be attempts to have some of pandemic benefits last longer.
“I feel confident in saying not since [President] Lyndon Johnson have we seen such a dramatic increase in spending,” Valliere said on the CNN Business digital live show Markets Now.
“The problem is the Lyndon Johnson Great Society spending ended with stagflation,” which is defined as rising inflation but stagnating economic growth, he said.
Even though Valliere believes that Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen will know the warnings signs, there is a real risk that inflation will spike, Valliere said.
As for raising interest rates, Valliere said that “I have to take [Powell] at his word. I think the rest of this year the Fed will continue with asset purchases…I think it’s 2023 before they seriously begin considering hiking rates.”
Remember GameStop? From last month’s madness? If you thought we were done with that chapter of trading, you’re not alone.
But little did we know.
As the market is rallying, GameStop (GME) and other “meme stocks” haven’t been left behind. Shares soared enough — more than 41% — that the New York Stock Exchange had to briefly halt their trading.
GameStop’s peak today was $348.50, just above its record closing high from late January. And then it fell again, down nearly 20% midday. Phew.
Why’s the market up today? This morning’s consumer price report soothed investors’ worries about a sudden inflation spike. Instead the market has time to focus on good news, like the stimulus package passed over the weekend.
The Business Roundtable, an alliance of US CEOs, warned Wednesday it will fight the Democrats’ push to unwind the Trump tax cuts.
“The Roundtable will be actively opposing efforts to raise corporate taxes,” Josh Bolten, the group’s CEO, said in response to a question from CNN Business during a press briefing.
During the campaign, President Joe Biden proposed raising the corporate tax rate to 28%. That would be up from 21% currently but below the 35% it stood at prior to the GOP tax overhaul.
Biden officials have indicated they will look at the corporate tax rate as a way to raise revenue for an infrastructure package.
“After decades of decades of having an uncompetitive tax rate, we have finally arrived at a competitive US tax rate,” said Bolten, who served as a chief of staff to former President George W. Bush, as well as his director of the Office of Management & Budget.
Bolten pointed to the “good fruits” of the Trump tax cuts, including a strong stock market, historically low unemployment and strong investment.
The Trump tax law failed to live up to the hype, however, with many businesses sharing the windfall with shareholders via large stock buybacks.
The debate over a fair corporate tax rate will heat up later this year, pitting Democrats against the business community.
Today’s consumer prices report was in line with expectations and soothed worries among investors that inflation will spike and force the Federal Reserve to raise interest rates sooner than anticipated.
But economists still believe that the spring, and the full reopening of the economy, will bring an increase in prices.
There are three reasons for the expected price jump, according to Daco: First, comparisons to the prior year will make the relative increase bigger. Energy prices, which already accounted for the much of the price increase in February, will likely stay elevated. On top of that, spending and investing will pick up as the economy reopens. That’s a potent mix to boost prices.
Another aspect is the way the inflation index is calculated, said Nancy Davis, founder of Quadratic Capital Management.
Shelter, which is mainly accounted for through urban rents, is distorted because “people have scorned city life for suburbs,” according to Davis.
“Right now, some housing markets are booming, but some aren’t and that is keeping the CPI down,” she said.
Corporate America is growing more confident about the economic recovery as vaccinations continue to accelerate.
The Business Roundtable said Wednesday that its CEO Economic Outlook Index jumped by 21 points during the first quarter to the highest level since early 2018 after the Trump tax cuts were enacted.
Business leaders signaled plans to accelerate hiring and capital spending, and they expressed optimism about the outlook for revenue.
Nearly three-quarters (72%) of CEOs say conditions for their companies have already recovered or will have recovered by the end of 2021. That’s up from 67% of CEOs who said that at the end of last year.
CEOs also upgraded their economic outlook, though not to the degree that Wall Street economists have.
The CEOs surveyed by the Business Roundtable project 3.7% GDP growth for 2021, up from 1.8% previously. However, Goldman Sachs is calling for 6.9% GDP growth, which would be the fastest pace since 1984.
Business leaders are calling for Washington to take further steps to enhance the economic rebound: CEOs expressed support for recovery legislation that prioritizes investment in traditional infrastructure, broadband and steps to encourage business investment and R&D.
President Joe Biden’s $1.9 trillion rescue plan is getting high marks from business leaders.
Seventy-three percent of the CEOs and business leaders polled during Wednesday’s virtual Yale CEO Caucus support Biden’s American Rescue Plan. That includes 37% who indicated “strong” support for the package.
This suggests the C-Suite is even more supportive of the plan than Americans at large, as a CNN poll released Wednesday showed 61% of the public supports the legislation.
“This is a big day and we’re very thankful for what the administration is getting done and what Congress is getting done with this bill,” American Airlines CEO Doug Parker said during the Yale event.
But business leaders are also concerned the Biden plan may be too expensive: Of the leaders polled by Yale, 61% say the $1.9 trillion package goes too far, while just 27% say it is just right.
“But they still like it. There’s a paradox,” said Jeffrey Sonnenfeld, founder of Yale’s Chief Executive Leadership Institute.
Parker, the American Airlines CEO, said there will always be those who think something can be done for less.
“That’s not the bigger point,” he said. “The bigger point is there is broad public support for this bill. And that’s certainly true among those of us that are running airlines.”
Not even an hour into the trading day, two of the three major stock indexes are sharply higher.
The Dow rose 1%, or some 320 points, building on the strong open.
The Nasdaq Composite, meanwhile, pulled back a bit, but is still up 1%.
The broadest market indicator, the S&P 500is the sole laggard so far, “only” up 0.7%.
The House is about to vote on the final version of a $1.9 trillion stimulus bill that aims to juice the American economy.
Some critics have said the giant spending bill poses a dual threat to the US economy: overheating and inflation. White House Council of Economic Advisers member Jared Bernstein told CNN’s Poppy Harlow today that he shares those concerns — but the risk of not doing anything outweighed the risk of spending too much.
White House senior adviser Cedric Richmond defended the size of President Joe Biden’s $1.9 trillion rescue plan Wednesday as the appropriate response given the scale of the health crisis.
“It’s a humongous package. No one is pretending $1.9 trillion is not a lot,” Richmond said during the Yale CEO Caucus.
But Richmond, the former chairman of the Congressional Black Caucus, pointed to the enormous challenge in vaccinating 300 million Americans. “It’s a logistical nightmare,” he said.
Of CEOs and other business leaders polled during the Yale event, 61% said they think the American Rescue Plan goes too far.
But Richmond compared the pandemic to the devastation in New Orleans after Hurricane Katrina.
“Sometimes in this country people get knocked down to a point where it’s beyond their capacity to get up,” he said. “If it’s beyond their capacity, no matter how hard they work or what they do, at some point the government has to be there to help you.”
Stocks opened higher on Wednesday, continuing their rally from the day before.
Inflation, the bogeyman of Wall Street, increased in line with economists expectations in February, keeping the good mood going for the market. The 10-year US Treasury bond yield was modestly weaker at 1.54% around the time of the opening bell.
Consumer prices are getting higher — especially for gas.
Overall, US consumer prices climbed by 0.4% on a seasonally adjusted basis in February, just as economists predicted, the Bureau of Labor Statistics said today. That’s slightly higher than January’s 0.3% rise.
Year-over-year, prices rose 1.7%, also in line with expectations and up from 1.4% in January.
The main culprit: gas prices. The gasoline price index jumped 6.4% in February, accounting for more than half of the overall jump.
Investors have grown nervous about a potential spike in inflation when the economy fully reopens this summer. The worry is that this dynamic could force the Federal Reserve to raise interest rates sooner than anticipated, and that’s sparked a recent rally in government bond yields.
The 10-year US Treasury yield inched up 0.01% to 1.56% following the release this morning.
But stocks, which don’t like the idea of higher interest rates, aren’t fussing. Futures for all three major stock indexes were in the green ahead of the opening bell.
Clorox (CLX) will partner with airline United (UAL), ridesharing leader Uber (UBER), rental car company Enterprise and movie theater chain AMC (AMC) as part of a new program to use only Clorox wipes and other of the company’s cleaning products, 13 of which are branded on its website with the tagline “kills Covid-19 Virus.”
“We’re focusing on best practices as people go back out in the world,” said Tony Matt, the company’s chief growth officer, in an interview with CNN Business.
Clorox has ramped up production of its wipes to avoid running out of products – a problem it faced last year due to unprecedented demand.
Matt said Clorox has added significant capacity and now can ship 1.5 million packages of wipes per day, up from 1 million a year ago. The company is planning to increase production further to meet a goal of 2 million daily packages over the next few months.
Investors worry that demand may have peaked, however. Shares of Clorox are down 7% this year and are nearly 25% below the all-time high they reached last year during the worst of the pandemic.
The topsy-turvy stock market continues to search for direction. After a stunning tech stock boom Tuesday – the Nasdaq’s best day since November – stocks are more muted ahead of a potentially market-moving inflation report at 8:30 am ET.
Investors have been fearful that all that stimulus from Uncle Sam could boost prices, eating into corporate profits. With stocks already historically expensive, a little inflation could send Wall Street running for the exits.
Here’s where things stand as of 6:15 am ET:
