On Thursday, analysts spotlighted the news that the White House and congressional Democrats were moving toward dropping corporate tax increases they had wanted to include in the bill, as they hoped to forge a deal that could clear the Senate. A spending deal without corporate tax increases would be a potential boon to profits and share prices.

“A stay of execution on higher corporate tax rates would seem a potentially noteworthy development,” Daragh Maher, a currency analyst with HSBC Securities, wrote in a note to clients on Thursday.

An agreement among Democrats on what’s expected to be a roughly $2 trillion spending plan would also open the door to a separate $1 trillion bipartisan infrastructure plan moving through Congress. Progressives in the House are blocking the infrastructure bill until agreement is reached on the larger bill.

But the prospects for an agreement have helped to lift shares of major engineering and construction materials companies. Terex, which makes equipment used for handling construction materials like stone and asphalt, has jumped more than 5 percent this week. The asphalt maker Vulcan Materials has risen more than 4 percent. Dycom, which specializes in construction and engineering of telecommunication networking systems, was up more than 9 percent.

The renewed confidence remains fragile, with good reason. The coronavirus continues to affect business operations around the world, and the Delta variant demonstrated just how disruptive a new iteration of the virus can be.

Another lingering concern involves the higher costs companies face for everything from raw materials to shipping to labor. If they are unable to pass those higher costs on to consumers, it will cut into their profits.

“That would be big,” Mr. McKnight said. “That would be a material impact to the markets.”

But going into the final months of the year — traditionally a good time for stocks — the market also has plenty of reasons to push higher.

The recent weeks of bumpy trading may have chased shareholders with low confidence — sometimes known as “weak hands” on Wall Street — out of the market, offering potential bargains to long-term buyers.

“Interest rates are relatively stable. Earnings are booming. Covid cases, thankfully, are dropping precipitously in the U.S.,” Mr. Zemsky said. “The weak hands have left the markets and there’s plenty of jobs. So why shouldn’t we have new highs?”

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Global Markets Swoon as Worries Mount Over Superpowers’ Plans

Investors on three continents dumped stocks on Monday, fretting that the governments of the world’s two largest economies — China and the United States — would act in ways that could undercut the nascent global economic recovery.

The Chinese government’s reluctance to step in and save a highly indebted property developer just days before a big interest payment is due signaled to investors that Beijing might break with its longstanding policy of bailing out its homegrown stars.

And in the United States, the globe’s No. 1 economy, investors worried that the Federal Reserve would soon begin cutting back its huge purchases of government bonds, which had helped drive stocks to a series of record highs since the coronavirus pandemic hit.

The sell-off started in Asia and spread to Europe — where exporters to China were slammed — before landing in the United States, where stocks appeared to be heading for their worst performance of the year before a rally at the end of the trading day. The S&P 500 closed down 1.7 percent, its worst daily performance since mid-May, after being down as much as 2.9 percent in the afternoon.

to ignore a variety of issues complicating the recovery — including the emergence of the Delta variant and the supply chain snarls that have bedeviled consumers and manufacturers alike.

But beginning this month, as Evergrande began to teeter and the likelihood of the Fed’s scaling back — or tapering — its bond-buying programs grew, the market’s protective bubble began to deflate. Some U.S. investors are also concerned that tax increases are in the offing — including on share buybacks and corporate profits — to help pay for a spending push by the federal government, the signature piece of which is President Biden’s proposed $3.5 trillion budget bill. Separately, Congress also must act to raise the government’s borrowing limit, a politically charged process that has at times thrown markets for a loop.

On Monday, those currents combined, reflecting the interconnectedness of the global markets as investors everywhere sold their holdings.

the rancorous debate about increasing the debt limit was accompanied by a sharp market slump, as representatives in Washington appeared to flirt with the idea of not raising the constraint on borrowing, which would effectively amount to a default on Treasury bonds.

“It’s going to be drama for the sake of politics,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. “People don’t like that.”

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Stocks Rally but End the Week With a Loss

Wall Street ended Friday higher at the close of a broad rally, an upbeat conclusion to whipsaw week of buying and selling as signs of a rebounding economy did battle with mounting inflation jitters.

All three major U.S. indexes built on Thursday’s gains, when the S&P 500 notched its biggest one-day percentage bump in over a month.

“It’s a ‘buy everything’ day,” said Chuck Carlson, senior vice president at Wealthspire Advisors in New York.

Still, the indexes suffered their biggest weekly declines since late February.

Big swings this week were stoked by economic data, which fanned concerns that near-term price spikes could translate into long-term inflation, despite assurances to the contrary from the Federal Reserve.

Economic data released on Friday showed retail sales growth stalling and consumer sentiment dipping as prices continue to rise, suggesting that while the demand boom might be taking a breather, inflation has not.

But in an indication that economic activity could return to normal, revised guidance this week from the Centers for Disease Control and Prevention said fully vaccinated people no longer needed to wear masks outdoors and could avoid wearing them indoors in most places.

The S&P 500 gained 1.5 percent on Friday, but ended the week 1.4 percent below last week’s close. The Nasdaq composite jumped 2.3 percent on Friday.

All 11 major S&P sectors ended the session green, with energy, boosted by rebounding crude oil prices, enjoying the largest percentage gain.

Walt Disney Company shares dropped after the subscriber additions to its Disney+ streaming service fell short of expectations.

Airbnb reported a 52 percent jump in bookings, driving its stock higher.

View Source

7 Steps to Take Now to Catch Up on Retirement Savings

Another option is applying for coverage through the Affordable Care Act, which offers a range of plans, including for those still unemployed.

Make catch-up contributions. If you’re 50 or older, the Internal Revenue Service gives you a little savings plum: You can save as much as an extra $6,500 annually in your defined contribution plans (which include 401(k)s, 403(b)s and 457s). If you have a SIMPLE (Savings Incentive Match Plan for Employees) individual retirement account or SIMPLE 401(k), the catch-up contribution is $3,000 annually; it’s $1,000 for a Roth I.R.A.

Automate your savings. If you’re working and offered a 401(k) with automatic payroll withdrawals, you can simply increase your contribution. Want to save even more? Many plans allow you to boost your 401(k) savings when you get a raise. Let’s say you’re 50 or older and save the maximum annual amount — $26,000. That’s $19,500 plus a $6,500 catch-up contribution. Also take your employer’s matching contribution, if it’s offered. This is the low-hanging fruit of retirement savings that most financial planners recommend — again, if you have access to it.

Adjust your portfolio. Just socking more money into a bank money-market account won’t help you catch up much at all. After all, the S&P 500 index is up a stunning amount: more than 40 percent this year. Yields on money markets are awful — the top rate nationally was 0.60 percent, according to Bankrate.com. The best way to achieve your goals is to invest in no-load mutual or exchange-traded funds, preferably with an annual expense ratio below 0.30 percent.

Most mutual fund companies offer dividend growth and income mutual and exchange-traded funds. Also avoid the trap in thinking that money in the bank is safe money. If it’s not beating inflation, which is currently running at an annual rate of just under 3 percent, you’re losing purchasing power. “Don’t keep too much money in a bank account,” Ms. Price warned. “You’re getting paid very little to keep it there.”

Retire later. If you’re able, one simple strategy is to retire after the “normal” age for Social Security benefits, which is 66 for most Americans. That will give you more time to save. Social Security will even pay you more each month if you wait until 70 to collect benefits. A “delayed retirement credit” will raise your retirement payments 8 percent annually every year you wait from age 66 until taking benefits at age 70 for those born in 1943 and later.

Set up your own plan. Small-business owners or those who are self-employed can set up their own plans, from Simplified Employee Pension I.R.A.s to 401(k)s. Ms. Price suggests those over 50 consider a Roth 401(k), if your employer offers it. While contributions are taxed, withdrawals are not. “You’re taxed on money going in, not on gains,” she said. “If you can’t afford to pay taxes on withdrawals later, this is a good idea.”

View Source

Why Biden’s Plan to Raise Taxes for Rich Investors Isn’t Hurting Stocks

“Most Democrats seem to be on board with narrowing the differential between the tax rate on capital gains and ordinary income, but there’s opposition for treating the rates as the same,” wrote analysts with Beacon Policy Advisors, a political consultancy. “This means there’s probably a middle ground for raising the capital gains rate on top earners to, say, 28 percent.”

If stocks continued their climb, it would largely be in keeping with previous periods when capital gains taxes were raised.

In 2013, when the tax rose to the current 23.8 percent, from 15 percent, on Americans with the highest incomes, the S&P 500 climbed nearly 30 percent. It was the best year for stocks in the last two decades. And after the top rate rose to 28 percent, from 20 percent, at the end of 1986, the market continued to roar higher, by nearly 40 percent through most of 1987.

Stocks eventually suffered their worst single-day collapse ever on Black Monday in October 1987, but that crash had little to do with tax policy, and the markets ended the year slightly higher. In 1991, a small increase to 28.9 percent in the capital gains rate for those with the largest incomes coincided with a 26 percent rise in the S&P 500. The major driver for that gain had nothing to do with taxes; it was the emergence from a recession.

Similarly, investors appear to be focusing on evidence that the economy is on the brink of breakneck growth. That surge is being fueled by a river of federal government spending, rock-bottom interest rates and more Covid-19 vaccinations. In the first three months of the year, the economy grew at an annualized clip of 6.4 percent. At that pace, 2021 would be the best year for growth since 1984.

Economic growth and corporate profits tend to rise together. And signs of additional oomph in the economy are already showing up in earnings reports from publicly traded companies.

Tech giants such as Tesla, Microsoft, Amazon, Apple and Google’s parent company, Alphabet, all reported first-quarter profits that trounced analyst expectations.

View Source

California Is Awash in Cash, Thanks to a Booming Market

In the early days of the pandemic, no one would have looked to the stock market for salvation. From February to late March last year, the S&P 500 suffered one of its sharpest crashes ever, falling nearly 34 percent. But once the federal government began pumping money into the markets and the economy through bond-buying programs and stimulus, the market began rebounding.

And professional money managers kept buying stocks. Amateur investors, stuck at home, piled into the market and drove up stock prices further. After hitting a bottom in March 2020, the S&P 500 is up nearly 90 percent, creating close to $17 trillion in paper gains.

Much of that value was created by California companies. The market value of Apple, based in Cupertino, Calif., has risen by over $1 trillion in the past year. The gains for Alphabet and Facebook, combined, have created another $1 trillion in value. Tesla, based in Palo Alto, Calif., added over $500 billion.

The surge in market value created a significant amount of wealth for executives and workers, including in the technology sector. Executives at major companies typically have pre-established stock sale programs that are constantly converting some of their shares into cash. As they’ve sold into a rising market over the last year, those gains have been especially large; in August, Apple’s chief executive, Tim Cook, sold more than $130 million worth of his stock.

“When the stock market does well, they do very well,” said David Hitchcock, the primary analyst on California for the bond-rating firm S&P Global, of the state’s wealthy residents. “And in fact, it’s not just the stock market but initial public offerings. Because with Silicon Valley, when entrepreneurs get stock grants that they exercise, or stock options, California makes out very well.”

View Source

Now That Everyone Is Bullish, Be Cautious

As businesses shuttered and workers stayed home, the gross domestic product, a broad measure of goods and services, plummeted in the United States. G.D.P. dropped 5 percent in the first quarter of 2020 and more than 31 percent in the second, according to the federal Bureau of Economic Analysis. The unemployment rate surged more than 10 percentage points from March to April last year, nearly reaching 15 percent. That was the highest level and the biggest increase since the Bureau of Labor Statistics began collecting data in January 1948.

In March 2020, the Federal Reserve stepped in. On its own, it couldn’t do much to combat the coronavirus itself — the last presidential administration’s efforts were dilatory at best, historians say. But the Fed and the federal government were able to prop up the markets, provide emergency aid for millions of people, help keep at least some small businesses afloat and put most major corporations in a position to reap big profits as the economy rebounded.

By now, the federal government has committed more than $5 trillion in a variety of coronavirus-related aid packages, and the Fed has made trillions more available in loans, intervened in financial markets, purchased vast quantities of bonds and held short-term interest rates near zero.

All of this is contributing to what looks like a “Biden boom economy,” as the Princeton economist Alan S. Blinder called it in The Wall Street Journal. Economic growth may exceed 7 percent for the first quarter, and will almost certainly be spectacular for the year as a whole, when compared with 2020.

But there’s the rub. These annual economic and financial numbers are comparisons with the depths of the pandemic. The statistics are warped, inevitably, by “base effects,” which is to say, in economic jargon, that the coronavirus-induced recession of last year is making many current numbers look unnaturally high. They don’t provide much insight about where we are heading in 2022 and later.

As Neil Irwin explained in The New York Times, the current uptick in inflation may not be as worrisome as it would otherwise seem because its comparisons are based on the depressed prices of a year ago, when so many people were huddled indoors.

What’s more, Alberto Cavallo, a Harvard economist who has studied inflation deeply, told me that by altering consumption and supply patterns radically, the pandemic has had many subtle effects. Lower-income people, for example, who pay a higher proportion of their income for food, have experienced greater inflation than those for whom food is a relatively minor expense.

View Source

Dogecoin Traders Push ‘Doge Day’ in Effort to Raise Its Price

Dogecoin, a cryptocurrency started as a joke, now has a market value that can’t be laughed at: more than $50 billion. On Tuesday, traders of Dogecoin were trying to push up the price to coincide with 4/20, or April 20, a date associated with smoking cannabis.

On Twitter, the hashtags #DogeDay and #Doge420 were trending. Dogecoin’s price, which has surged lately, fluctuated between gains and losses on Tuesday, trading at about 40 cents, according to Coindesk. A month ago, it was about 5 cents.

The ripple effects of the boom in crypto markets are being felt far and wide. Coinbase, the cryptocurrencies exchange that went public last week and is helping force the industry into the mainstream, has a market value of $66 billion. Central banks have ramped up plans to explore digital currencies to offer people an secure alternative to cryptocurrencies, which are out of their control. On Monday, the Bank of England was the latest to announce it was looking into a central bank digital currency.

On Tuesday morning, prices of cryptocurrencies and related stocks slipped lower. Bitcoin’s fell 1 percent, trading just above $55,000. Shares in Coinbase and Riot Blockchain were slightly lower in premarket trading.

View Source

Betting on Small Companies Yielded Big Returns

Small-cap value stocks rank among the market’s riskiest fare.

But higher risk can bring bigger rewards, and in the first quarter, it did for three of the better-performing mutual funds. Each returned more than 20 percent by betting on small-cap value.

Value investors are betting on stocks that they think are trading below their fundamental worth. Often, companies end up classified this way because they operate in out-of-favor industries or have had setbacks.

Here are some of the choices that enabled three funds to prosper.

The Kinetics Small-Cap Opportunities Fund toted up a first quarter return that would have been whopping for an entire year — 60.5 percent. In contrast, the S&P 500 index gave a total return of 6.2 percent for the quarter.

Peter Doyle, one of the fund’s co-managers, said his fund achieved its result thanks to an unusual holding: the Texas Pacific Land Corporation.

Permian Basin, one of the United States’ leading oil-and-gas-producing locales. The company earns royalties from others’ drilling on its land, and its stock shot up in the first quarter, returning nearly 120 percent.

Until this year, some mutual funds wouldn’t hold Texas Pacific because it was a publicly traded trust, not a corporation. It converted its legal structure in January, though Kinetics has owned it since about 2013.

Texas Pacific recently accounted for 43.9 percent of the fund’s assets. It was one of 36 holdings.

Kinetics’s enormous bet is “an outgrowth of our long time horizon and low turnover strategy,” Mr. Doyle said. “Maybe five of our names will be great investments. If you don’t turn over frequently, those five will become a bigger and bigger percentage of the portfolio.”

Mr. Doyle said patience is essential to how he and his co-managers run their fund. He said they view it as an advantage in a business characterized by shorter-term thinking.

Fund managers’ bonuses are often based on annual returns, so they focus on those, he said. “If you can get away from that, you can buy great companies at a discount.”

Hartford Small Cap Value Fund, sleuths for values, too. But unlike Mr. Doyle, he shies from the energy sector.

He said that’s an outgrowth of his approach, which focuses on companies’ ability to produce free cash flow — that is, cash left over after a company funds its operations and maintains its assets. (Small-cap energy businesses can be speculative and require substantial investment before producing free cash.)

To spot cash spigots, Mr. Kammann ranks the 900 stocks in his investment universe and digs deeper into the better-ranking ones to understand why they’re cheap.

Poly, formerly known as Plantronics, a maker of headsets and other communications equipment.

The company had seen a planned merger collapse and a competitor, Jabro, swipe market share. The stock sank in the early days of the pandemic.

Mr. Kammann sensed a buying opportunity. “We thought the stay-at-home environment would be positive for headsets and that, post-Covid, there was going to continue to be some form of hybrid work. So we redoubled the position.”

The Hartford fund, whose A shares have a net expense ratio of 1.3 percent, returned 23.8 percent in the first quarter.

American Century Small-Cap Value Fund.

It’s one of several measures he considers as he’s screening companies. Others include balance-sheet strength and quality of management.

“We generate a score for each company, and that lets us compare it to other companies in its sector and across the portfolio,” he said. “We want to use data to remove some of the inherent biases we all have.”

Like Mr. Kammann’s approach, Mr. John’s has led him away from such traditional value-centric industries as energy and utilities.

Instead, he has lately found promise in Compass Diversified, which he calls a mini-conglomerate.

Compass, a publicly traded partnership, owns such diverse companies as the Sterno Group, producer of the canned fuel, and 5.11, a maker of clothing and gear for law enforcement and for the outdoors.

Compass’s managers are “incredible allocators of capital,” Mr. John said. “They invest in these businesses and help them grow, and if there’s an opportunity to sell them, they’ll do that.”

In 2019, for example, Compass sold off Clean Earth, an environmental remediation company, and Manitoba Harvest, a producer of hemp foods .

Penske Automotive, calling it “one of our core holdings for quite some time.”

Penske is known for its network of car dealerships, but its business is burlier than that, he said. Commercial trucks, via sales and leasing, have recently powered the company’s growth.

“Within the commercial truck space, 70 percent of gross profit comes from the servicing,” he said. “A sale is really just an entree to providing service over time.”

The company’s chairman, Roger S. Penske, makes shareholder interests a priority because he’s a substantial one himself, Mr. John said. “Penske owns 40-percent-plus of the company.”

The American Century Fund, whose investor shares have an expense ratio of 1.25 percent, returned 24.7 percent in the first quarter.


View Source

The Week in Business: Jobs Surge Back

Good morning and happy Easter. Here are the top stories in business and tech to know for the week ahead. — Charlotte Cowles

Credit…Giacomo Bagnara

Employers added a whopping 916,000 jobs in March, more than doubling February’s employment growth. Many hires were in hospitality and construction, spurred on by the surging pace of vaccinations and a new round of federal aid. (The spring weather didn’t hurt, either.) In other good news, Wall Street hit a record high last week, with the S&P 500 index closing above 4,000 for the first time.

President Biden pitched his proposal for a giant infrastructure package, which he called “the largest American jobs investment since World War II.” It also has a large price tag, costing about $2 trillion over eight years. The plan aims to repair thousands of old bridges, roads and plumbing systems, improving commute times and drinking water. It also includes $100 billion to deliver broadband internet to rural areas that struggle with spotty Wi-Fi. And it will invest heavily in green initiatives like electric cars and more efficient energy grids. But the proposal faces a tricky path through Congress, as Republicans oppose the corporate tax increases that Mr. Biden says would pay for it.

will temporarily stop collecting payments on roughly six million loans that were made through the Federal Family Education Loan program and are now privately held. There’s a catch: Only borrowers who have defaulted will get a reprieve. The move will also temporarily prevent those in default from having their wages garnished or tax refunds seized by collectors, and will return any seized refunds or wages that had been taken since March 2020.

Credit…Giacomo Bagnara

The airline industry showed some promising signs of life last week. After a year of near-dormancy, domestic vacation bookings are bouncing back. United Airlines is hiring pilots again, starting with those who had conditional job offers before the pandemic or whose start dates were pushed off once travel restrictions set in. Delta Air Lines, the last major holdout in blocking middle seats to ensure space between passengers, will resume middle-seat bookings in May. And finally, the budget carrier Frontier Airlines went public, a sign that it’s anticipating a rebound.

After six days of digging and tugging, plus a boost from a full moon, the huge container ship that was lodged in the Suez Canal has been freed, and the waterway is open for business again. But the ripple effect of its blockage will be felt for weeks. The stuck boat prevented as much as $10 billion of cargo a day from moving through the canal, and cost the Egyptian government up to $90 million in lost toll revenue. Who will pay for the damage? A fleet of insurers, government authorities and lawyers are all sorting out who’s financially responsible (probably the stuck ship’s Japanese owner) and how much they’re on the hook for.

As the global economy shudders back into gear, demand for fuel is rising. And there was some question of whether oil producers would increase their supply to meet it. If they chose not to, gas could be up to $4 a gallon by this summer — not exactly welcome news for anyone trying to drive to work. But OPEC and its allies put those fears to rest last week when they agreed to gradually increase production over the next three months, which should keep prices steady.

speaking out against the state’s new law that restricts voting access. New York prosecutors have subpoenaed the personal bank records of the Trump Organization’s chief financial officer, Allen H. Weisselberg, as part of their investigation into the business practices of former President Donald J. Trump and his family company. And a group of doctors has sued the insurance giant UnitedHealthcare and accused it of stifling competition and hurting their business.

View Source