Wednesday Morning Reads
- Federal Reserve’s New Policy Plan
- Inflation vs Jobs Hole
- SEC Chief Warns ‘Clock Is Ticking’
- Banks Are Bingeing on Bonds
- Biden’s Cybersecurity Summit
- Desperate U.S. Cities
- Higher U.S. Food Benefits
- Sock Surge in a Rally for Meme Stocks
- ‘Made in Afghanistan’
- Few Women Ascend
- Corporate America’s $50 Billion Promise
- Takata’s Ticking Time Bomb Is Still On The Road
Following a year that was marred by some high-profile cyberattacks, including the SolarWinds (SWI) and Kaseya breach, Colonial Pipeline hack, and supply disruption at meatpacker JBS (OTCQX:JBSAY), President Biden is calling in the big boys. The CEOs from Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) are heading to the White House this afternoon to discuss efforts in beefing up cybersecurity. Bloomberg reports that other top industry players were also invited to the meeting, including the heads of Alphabet (GOOGL), IBM (IBM), Southern Co. (SO) and JPMorgan Chase (JPM).
Backdrop: Last month, the White House issued a National Security Memorandum that was meant to help the private sector establish new standards in beefing up their cybersecurity strongholds. Given the order's primary objective of defending U.S. critical infrastructure, it makes sense that "infrastructure" will be high up on the list of today's conversation. Reports also suggest that the executives are likely to discuss how software can drive better security in the supply chain.
"What I think is more likely, if we're going to end up in a war - a real shooting war with a major power - is going to be the consequence of a cyber breach of great consequence, which is increasing exponentially in terms of capabilities," Biden warned back in July. Cyber stocks are also in focus ahead of today's security summit.
Statistics: According to Check Point Software's (CHKP) Mid-Year Security Report, there were 93% more ransomware attacks in the first half of 2021 than in the same period last year. In addition, the attacks were marked by the rise of "Triple Extortion" ransomware, whereby hackers steal data and threaten to release it unless a payment is made, as well as going after the target's customers or vendors in the same way. IBM estimates data breaches now cost companies $4.24M per incident on average, with costs rising 10% compared to 2020. (5 comments)
The major averages rose again Tuesday following a broad-based stock rally powered by full approval for Pfizer-BioNTech's (PFE, BNTX) COVID-19 vaccine. The S&P 500 notched its 50th record close of 2021, while the Nasdaq hit the 15,000 milestone. "Round numbers are always important because it brings the story of the market to the people who don't watch it everyday," said Art Hogan, chief market strategist at National Securities Corp., pointing out that the records could add to investing sentiment.
Next up: U.S. equity futures were marginally higher in the overnight session, with traders all pointing to the Fed's annual economic symposium in Jackson Hole, Wyo, as the next catalyst for the markets. The event will be watched to see whether central bankers will detail their plans for tapering monetary stimulus, with bonds currently being scooped up to the tune of $120B per month.
Analyst commentary... "It is wait-and-see because we're getting to the point where we think we'll get some definitive information on tapering," declared Daniel Morris, chief market strategist at BNP Paribas Asset Management. "On one hand, we've had the signaling on tapering, but on the flip side, you see people looking at a deceleration in activity."
"The Fed may make a taper announcement in September or November, but it will probably be a slow taper with no commitment over interest rate hikes," added Edward Moya, senior market analyst at OANDA.
"Taper talk is the worry, but if inflation continues to run hot and economic data continues to be mixed the timing of tapering could get pushed," noted Lindsey Bell, chief investment strategist at Ally Invest. "It's unlikely that the Fed will force a taper on an economy that isn't ready, and the outlook is becoming less certain with the rise of the Delta variant." (3 comments)
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It's been 90 days since President Biden ordered a systematic review into the origins of COVID-19. The effort was intended to bring the world "closer to a definitive conclusion" as to what caused the pandemic, which has so far killed at least 4M people across the globe and 630K Americans. Many scientists believe the virus jumped from bats to humans, though a lab leak theory has gained ground in recent months after initially being dismissed by many as a conspiracy.
Flashback: Early on in the pandemic, the Chinese government refused to share much of its data and placed restrictions on an international probe organized by the World Health Organization. Since then, a handful of nations including the U.S. have called for more transparency, like accessing complete original data and samples. Meanwhile, some Chinese officials have even gone as far as to suggest the virus may have originated at a military laboratory called Fort Detrick in Maryland or was imported into the country through frozen food. The whole case smells funny and the U.S. ordered a second-phase investigation after suspecting a cover-up.
One of the biggest challenges facing the investigation into the virus' origins has been China's unwillingness to share more data. Without cooperation from Beijing, the probe can only rely on an analysis of early cases exported from China or genetic sequences posted by the Wuhan Institute of Virology on open-source platforms. The campaign is also being run by U.S. intelligence agencies, not a community of scientists.
The results: Reports suggest the classified intelligence record sent to President Biden failed to conclusively determine if the outbreak spilled over from animals or was an accidental lab leak. However, parts of the probe could be declassified in the coming days after members of Congress are briefed on the outcome. "We may never know the true origin of COVID-19," said Jon Andrus, a professor of global health at George Washington University. "A retrospective analysis is like using the scientific method with one hand tied behind your back." (14 comments)
Breaking a stalemate within the party, Democrats in the House of Representatives are advancing President Biden's economic agenda. The chamber passed a $3.5T budget resolution and moved forward a $1T bipartisan infrastructure bill, along with sweeping voting rights legislation. The step will allow Democrats to write and approve a huge "human" infrastructure package without GOP support and puts the Senate-approved "physical" infrastructure plan on track for final passage in the House.
Bigger picture: The 220-212 party-line vote included a non-binding commitment to decide on the infrastructure bill by Sept. 27, which aims to quell nine centrist Democrats who had urged the House to consider the bipartisan bill before taking up the larger budget resolution. House Speaker Nancy Pelosi has meanwhile pushed to pass the bipartisan and Democratic plans at the same time in order to ensure centrists and progressives back both measures.
"The bottom line is, in my view, we are a step closer to truly investing in the American people, positioning our economy for long-term growth and building an America that outcompetes the rest of the world," President Biden commented after the vote. "My goal is to build an economy from the bottom up and middle out, not just the top down."
Outlook: Among the priorities Democrats hope to include in the $3.5T legislation are expanding Medicare, universal prekindergarten and two years of paid tuition at public universities. Climate measures are also involved, like pushing utilities to generate 80% of the nation's electricity from clean sources by the end of the decade. While Republicans have supported the smaller "physical" infrastructure bill, they are not backing the "human" measure, pointing to the price tag - among other things - that could hike taxes, increase inflation and add to the federal deficit. (63 comments)
In Asia, Japan flat. Hong Kong -0.1%. China +0.7%. India -0.1%.
In Europe, at midday, London +0.2%. Paris +0.2%. Frankfurt -0.2%.
Futures at 6:20, Dow flat. S&P +0.1%. Nasdaq +0.1%. Crude -0.4% at $67.28. Gold -0.7% at $1795.80. Bitcoin -4.7% at $47300.
Ten-year Treasury Yield unchanged at 1.29%
Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Durable Goods
10:00 State Street Investor Confidence Index
10:30 EIA Petroleum Inventories
11:00 Survey of Business Uncertainty
11:30 Results of $26B, 2-Year FRN Auction
1:00 PM Fed's Daly Speech
1:00 PM Results of $61B, 5-Year Note Auction
What else is happening...
Warby Parker surprises by filing for direct listing not IPO.
Unvaccinated 29X more likely to get hospitalized with COVID-19 - CDC.