Wednesday Morning Reads

Tuesday Morning Reads









Back in March, we reported on the Nasdaq's (NASDAQ:NDAQboard diversity plan, which created tensions between those advocating for greater corporate diversity and those seeing it as an industry quota system. The same argument played out this week in other areas of Corporate America, which is increasingly becoming a dominant political force. Once upon a time, the business world sought to maximize profits of shareholders in the political sphere via lobbying or marketing efforts, but their newfound power is developing into a kind of governance system, while many investors are buying into the vision.

One doesn't have to look far to the permanent suspension of President Trump on Twitter (NYSE:TWTR), whose stock is up 30% since the ban in January, as well as Parler's removal from the Apple (AAPL) and Google (GOOG) app stores and web hosting by Amazon (AMZN). The corporate world has also brought in activists to their success, like Colin Kaepernick, who has been a prominent endorser for Nike (NYSE:NKE) - the stock of the sneaker giant is up 175% since the partnership first began in late 2018. Kaepernick has also gone on to work with global brands like Netflix (NASDAQ:NFLX), Beats by Dre, Medium, Electronic Arts (NASDAQ:EA), Audible and Ben & Jerry's (NYSE:UL).

Down to Georgia... The state made changes to its voting laws this week, including new ID requirements for absentee voters, shortened absentee voting, guaranteed (but limited) drop boxes, expanded early voting and bans on handouts for people waiting in line to vote. GOP lawmakers said the bill was necessary to restore election confidence, though Democrats feel the measure will restrict voting rights, and some have even called it "Jim Crow 2.0." Soon after the decision, the MLB announced it would no longer hold the 2021 All-Star Game in Atlanta, and other corporations were quick to jump on board. Dozens of executives have come out to blast the new law, including leaders at Apple, American Express (NYSE:AXP), Coca-Cola (NYSE:KO), Delta (NYSE:DAL), Merck (NYSE:MRK) and Microsoft (NASDAQ:MSFT).

Thought bubble: While companies have long sought to influence policies that directly impact their business, recent trends suggest CEOs are now injecting themselves into political debates or activism that could indirectly affect their bottom line. In an age of cancel culture, and where ideas are carried on social media within minutes, they may have to, though others warn of potential risks and consequences of picking sides. On that note, JPMorgan (NYSE:JPM) CEO Jamie Dimon will release his annual shareholder letter today, which is expected to outline ideas for tax and social policies, a day after Amazon (NASDAQ:AMZN) CEO Jeff Bezos came out in support of President Biden's corporate tax hike and infrastructure plan. (121 comments)

Hovering near records

U.S. stock index futures wavered between slight gains and losses overnight, with the Dow Jones and S&P 500 drifting near record highs, and the Nasdaq not far behind. Wall Street took a breather on Tuesday, and could be in for some more restful days, according to DataTrek Research co-founder Nick Colas.

Quote: "We've had such a strong start to the second quarter that it's totally reasonable to think that we're going to basically hang out here as markets digest what has happened. Earnings season is coming, which has to be strong and forecasts need to get bumped up. We're also going to see GDP number for Q1 later this month. All those things are going to factor into whether or not this latest rally is really sustainable."

Bullish economic news wasn't enough to energize the market on Tuesday despite some great figures. Job openings rose by more than expected in February, hitting a two-year high at 7.4M. The IMF also raised its global growth forecast to 6% this year from 5.5%, a rate not seen since the 1970s.

On tap: Minutes will be released from the Fed's last meeting in March, when the central bank upwardly revised its economic projections and telegraphed that interest rates would likely remain at near-zero levels through 2023. The minutes could provide some clarity as to how committed the FOMC is to keeping rates low or how members might change their policy rate views if their upbeat forecasts for growth, jobs and inflation come to fruition. While the meeting will be of particular note to investors, remarks from Jay Powell tomorrow may offer a more timely view of the central bank's policy thinking.

Biggest deal ever

Southeast Asia's most valuable startup is ready to go public, making its debut in the SPACsphere. Grab (GRAB) was founded as a ride-hailing company in 2012, before expanding into payments in 2016 and food delivery in 2018. It also offers loans, insurance and has been granted a digital banking license in Singapore.

Reports previously suggested the company was in talks to list in New York via one of Altimeter Capital's special purpose acquisition companies, and the FT says that will happen as soon as this week. The investment firm has raised a total of $850M for Altimeter Growth (NASDAQ:AGC) and Altimeter Growth 2 (NYSE:AGCB), which are up 20% and 12% premarket, respectively. The merger would be the largest between a private business and a blank check company, in a deal that will value SoftBank-backed (OTCPK:SFTBF) Grab at about $35B.

By the numbers: According to a business update in January, Grab's revenue grew 70% in 2020 compared with 2019, though the company is still not profitable. However, Grab did add that its ride-hailing business was breaking even in all of its operating markets. "We've continued to be disciplined with spending and prudent in stewarding our shareholder capital, with monthly EBITDA spend being reduced by approximately 80% over the last 12 months," said Grab President Ming Maa.

Go deeper: A public debut from Grab will offer investors access to a regional consumer market of more than 655M people across countries including Indonesia, Thailand and Vietnam. It's especially noteworthy because the "deal is coming from Asia and furthermore, from Southeast Asia, a region totally underrepresented on U.S. stock markets," a banker told the FT. It'll also be a key test for other Southeast Asian unicorns that are preparing to go public this year. (10 comments)

Vaccine eligibility

President Biden announced Tuesday that all U.S. adults will qualify for coronavirus vaccines by April 19, moving up his eligibility timeline for the general population by about two weeks. In addition, there will be vaccination sites within five miles of where people live, while the number of pharmacies contributing to the federal pharmacy vaccination program would increase from the current 17,000 locations to 40,000. So far, COVID-19 has killed more than 555,000 people in the U.S. - the world's highest recorded coronavirus death toll.

"There is a lot of good news. But there’s also some bad news," he said during a visit to vaccination site at Virginia Theological Seminary in Alexandria, Virginia. "The virus is spreading because we have too many people who’ve seen the end in sight, think we’re at the finish line already. Let me be deadly earnest with you…We’re still in a life and death race against this virus."

Bigger picture: The U.S. has been outpacing most of the world in its vaccine rollout, especially given the size of its population, placing itself in the best position for a reopening of the economy. The pace of vaccinations has even increased to an average of 3.1M doses a day administered over the past week, from about 1M doses a day when Biden took office. At that rate, it will take an additional three months to cover 75% of the population, also known as the herd immunity number.

Outlook: Pricing in the vaccine rollout, along with market stimulus, investors are adjusting their portfolios for Q2 and beyond. The consistent theme echoed in the investment community has been the transition to cyclical names, while value has been consistently outperforming growth names YTD. With rates set to rise and a back-to-normal economy looking more optimistic, UBS, Russell Investments and BlackRock are among institutions that favor value looking into the future. (133 comments)

New pandemic shortage item

Forget about toilet paper, hand sanitizer and semiconductors, restaurants are having trouble securing enough ketchup. With the COVID-19 pandemic turning many sit-down restaurants into takeout businesses, packet prices have risen 13% since January 2020, according to restaurant platform Plate IQ. Some stores can't even get their hands on enough of the condiment, WSJ reports, with managers using generic versions, dishing out bulk ketchup into single-serve cups or seeking secondary suppliers due to the demand.

Backdrop: Ketchup is the most used table sauce in the U.S., logging over $1B in U.S. retail sales during 2020, about 15% higher than 2019. Around 300K tons of the tomato condiment were sold to restaurants last year, and recent CDC directives could be exacerbating the situation. "As restaurants and bars resume and continue operations, avoid using or sharing items that are reusable, such as menus, condiments, and any other food containers," reads the guidelines. "Instead, use disposable or digital menus (menus viewed on cellphones), single serving condiments, and no-touch trash cans and doors."

How is the ketchup king handling the situation? Kraft Heinz (NASDAQ:KHC) holds nearly 70% of the U.S. retail market for the condiment, but it was caught off guard by the pandemic. "Restaurants need patience" while the company ramps up supply, said Steve Cornell, President of Enhancers, Specialty and Away from Home Business Unit. "We're busy doing everything we can."

Go deeper: To deal with the shortage, Heinz is planning new manufacturing lines, including two this month and more after that. The goal is increasing production by 25% to bring the total of ketchup packets produced per year to 12B. The firm is already running extra shifts at plants, and cut back on some sauce varieties to focus on single-serve packets. Heinz also came up with a no-touch ketchup dispenser to help meet demand for alternatives to shared bottles. (31 comments)

What else is happening...

Cold War flashbacks... U.S. weighs boycott of Beijing Olympics.

Morgan Stanley (NYSE:MS) dumped $5B in Archegos stocks before fire sales.

GM (NYSE:GM) confirms all-electric Chevy Silverado is in the works.

Oxford pauses AstraZeneca (NASDAQ:AZN) vaccine study on children.

Coinbase (COIN) provides some financials ahead of direct listing.

How's the cruise industry? Carnival (NYSE:CCL) to provide business update.

PG&E (NYSE:PCG) hit with criminal charges over 2019 Kincade fire.

Samsung (OTC:SSNLF) forecasts operating profit rose 44% in Q1.

Toshiba (OTCPK:TOSBF) gets buyout deal that could be worth $18B.

Today's Markets

In Asia, Japan +0.1%. Hong Kong -1.2%. China -0.1%. India +0.9%.
In Europe, at midday, London +0.8%. Paris +0.2%. Frankfurt +0.1%.
Futures at 6:20, flat. S&P +0.1%. Nasdaq +0.1%. Crude +0.7% to $59.77. Gold -0.3% at $1737.60. Bitcoin -2.4% to $57300.
Ten-year Treasury Yield flat at 1.65%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 International Trade
9:00 Fed's Evans Speech
10:30 EIA Petroleum Inventories
11:00 Fed's Kaplan Speech
12:00 PM Fed's Barkin: Economic Outlook and Monetary Policy
1:00 PM Fed's Daly Speech
2:00 PM FOMC Minutes
3:00 PM Consumer Credit

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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