Welcome to the first tech wreck of the new year.
Stock futures are down again Tuesday and tech, in particular, is taking it on the chin. The tech-darling FAANG stocks are all down between 1% and 2% in premarket trading. Microsoft shares are off 1.7% and Tesla stock is down almost 5%.
Futures on the Nasdaq Composite, home to many of those tech titans, are down about 1.5% after the index fell 2.5% Monday.
Growth hopes—and inflation fears—are the catalyst for the selloff. Investors are worried all the stimulus governments are pumping into the pandemic-moribund economy will result in a much stronger economy, higher prices, and, ultimately, higher interest rates.
It’s a bad mix for the highfliers. Why pay sky-high prices for growth, when you can get it for cheap elsewhere? Why invest in something that will generate cash flow far down the road when there are improving options for generating investment income right now?
Including Tuesday’s drop, the Nasdaq is down about 6% from its mid-February high. That’s 4% away from correction territory.
Corrections, typically defined in the market as a drop of 10% from highs, happen. They can even be healthy.
Just remember that if the selloff continues.
—Al Root
*** The chief scientist at Pfizer, a top pharma analyst and an innovative health-care investor will join a Barron’s Roundtable event Wednesday at noon to examine Covid and what comes next for medicine. Sign up to join.
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Democrats Aim to Push Stimulus Through House This Week
Democrats are entering the final stages of passing President Joe Biden’s $1.9 trillion relief package without Republican support. The House could pass the aid as soon as Friday, sending it to the Senate Democrats who will race to provide Americans with much-needed relief before federal benefits expire in mid-March.
- The House Budget Committee approved the relief package by a vote of 19-to-16 Monday, one of the last—but largely symbolic—steps in the reconciliation process for that chamber. The bill heads next to the House Rules Committee before the full House votes on the package later this week.
- If the package passes the Democratically-controlled House, as expected, it will then go to the Senate where it could meet resistance from both Republicans and Democrats.
- In addition to concerns about the bill’s size, $15 federal minimum wage, and state and local aid, Republicans object to the reconciliation process that largely excludes them from the decision-making process. Democrats Joe Manchin of West Virginia and Kyrsten Sinema of Arizona also say they oppose the minimum wage increase.
- Hashing out those differences will take time, and if changes happen—as they are likely to—the House will need to pass the revised bill. Federal unemployment benefits expire on March 14, and millions of Americans are counting on the $1,400 direct payments.
- Federal Reserve Chairman Jerome Powell is likely to make another case for more fiscal stimulus in testimony before Congress Tuesday at 10 a.m. Eastern time.
What’s Next: Biden has his eyes on even more stimulus. On Monday, the administration announced changes to the Paycheck Protection Program that would provide more assistance to small businesses. He has also begun work on another stimulus package that could include infrastructure spending among other measures, The Wall Street Journal reported.
—Barron’s Staff
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Travel, Entertainment See Positive Signs for Reopenings
Few businesses have been hit as hard by the pandemic as cruising and movie theaters. But with vaccines rolling out across the world, investors are looking ahead to a return to normalcy.
- AMC Entertainment stock jumped 15% on Monday after New York Gov. Andrew Cuomo said theaters in New York City can reopen on March 5 at 25% capacity, capped at 50 people per screen.
- Royal Caribbean Group helped trigger a cruise stock rally on Monday despite reporting a $1.1 billion net loss in the fourth quarter. The company didn’t provide a 2021 earnings outlook, but said it expects a net loss for the year. Royal Caribbean CEO Richard Fain told CNBC that it has seen optimistic signs in its early booking data.
- Royal Caribbean, Carnival and Norwegian Cruise Line Holdings shares jumped on Monday. While those stocks are still down from their levels 12 months ago, shares of AMC and Royal Caribbean are getting closer to rebounding to year-ago prices.
- Shares of European airline and travel stocks such as easyJet, International Airlines Group and tour operator TUI surged after U.K. Prime Minister Boris Johnson said he would issue a report on how international travel can safely restart.
What’s Next: After the close, Carnival announced plans to sell $1 billion in stock. Meanwhile, Norwegian is set to report fourth-quarter results on Thursday.
—Connor Smith
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Facebook Befriends Australia Again
Facebook said Tuesday that it would restore Australian news on its platform after striking a deal with the Canberra government on a new law that will force big tech companies to pay for news.
- The social media company last week had blocked Australian users from sharing and using news on its site, in protest against the government’s bill.
- Mark Zuckerberg, the company’s CEO, and Australian Treasurer Josh Frydenberg have since then negotiated a compromise on what Facebook called “ a number of changes and guarantees” addressing the group’s concerns.
- The changes notably involve the arbitration scheme that will be used if the tech groups do not reach a deal with news publishers. The mandatory mechanism will now only be triggered after a two-month mediation period.
- Google has already signed a number of deals to pay for news on its own platform, including a landmark global agreement with News Corp that includes the company’s Australian newspapers.
- Facebook “has refriended Australia,” and it and Google have sought a “workable” code because “they know that the eyes of the world” are on the country, Frydenberg said Tuesday.
What’s Next: The agreement with the Australian government provides Facebook with a way out of a tricky public relations situation, after the backlash triggered last week by its Australian boycott. The question now is whether the Australian law will serve as a model for other countries or regions of the world.
—Pierre Briançon
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Two of Biden’s Most Controversial Cabinet Picks Start Confirmation Hearings Today
President Joe Biden’s picks for interior and health secretaries will begin Senate confirmation hearings today. While both are expected to be confirmed, they will face tough questioning from lawmakers opposed to their nominations.
- New Mexico Congresswoman Deb Haaland, who would become the first Native American cabinet member if confirmed as interior secretary, has called fracking “a danger to the air we breathe,” stood with protesters blocking construction of the Dakota Access Pipeline in 2016, and pledged to “fight for 100% clean energy.”
- Such views have alarmed Republicans like Sen. Steve Daines of Montana, who wrote on Twitter, “Rep. Haaland has called for the elimination of oil, natural gas AND coal. America can not afford this radical transition away from reliable energy.”
- Meanwhile Xavier Becerra, the California attorney general who would become the first Latino health secretary as coronavirus is disproportionately affecting Blacks and Latinos, is likely to be challenged on his lack of direct experience in a health role.
- Becerra, the son of a Mexican immigrant, will also face questions on his past support for Medicare for All and abortion rights.
What’s Next: While Becerra and Haaland don’t have enough detractors to block their confirmation, Neera Tanden, Biden’s pick to lead the White House budget office, faces tougher odds. Sen. Susan Collins (R., Maine) and Sen. Mitt Romney (R., Utah), considered two key swing Republicans, said Monday that they would vote against her.
—Janet H. Cho
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Vaccines for Variants Could Come Quickly, But We May Still Need Masks in 2022
Drugmakers may be able to forego monthslong clinical trials when updating their vaccines for use on variants, the Food and Drug Administration said Monday. But concerns about those variants and how they might prolong the pandemic mean Americans may still need to wear masks into next year.
- Acknowledging the “urgent need to initiate development and evaluation of vaccines against these SARSCoV-2 variants,” the FDA said Monday that companies would need only to submit data showing that the modified vaccines lead to a similar immune response and that they are safe.
- Modified vaccines won’t eliminate the need to wear masks soon, however. Dr. Anthony Fauci told CNN that it’s “possible” that Americans might need to keep wearing them through 2022. Less than 6% of Americans have been fully vaccinated, and it will take until July at the earliest to reach herd immunity.
- Even as the U.S. accelerates vaccine distribution, India’s Serum Institute, which makes the AstraZeneca vaccine recently approved by the World Health Organization for emergency use, said it would prioritize its own residents before shipping doses elsewhere.
What’s Next: The Serum Institute’s decision means that poorer nations that were relying on the AstraZeneca vaccine will have to wait longer to get it. Without vaccinations to slow new infections, the virus has more opportunity to mutate and create even more dangerous variants across the globe.
—Janet H. Cho
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Think you’re a master stock picker? It’s not too late 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.
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—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Stacy Ozol, Mary Romano
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February 23, 2021 at 08:16PM
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