Yields go up, stocks go down. Again. Is this the new normal?

Good morning. There’s plenty of good news on the vaccine rollout front (as long as you don’t live in the EU). But the markets again are focused squarely on Treasury yields, rates and inflation/reflation. Last week’s big story—bonds and credit spreads—is once again putting equities investors in a risk-off mood.

Alas, not everything is sinking. Bitcoin hit a new high this weekend in what’s increasingly looking like a market with serious liquidity issues. Even Elon Musk thinks its trillion-dollar-plus valuation “seem[s] high.” Translation: Buyer beware. In the world of tangible assets, copper is surging, a further sign of economic recovery ahead.

Let’s see what else is moving markets.

Markets update

Asia

• The major Asia indexes are mixed in afternoon trading, with the Hang Seng down 1.1%.
• Japan has ordered the grounding of 32 Boeing 777 planes after an incident of engine failure on a United Airlines jet this weekend that rained debris over a Denver suburb. Shares in Boeing were flat in pre-market this morning.
• Lucid Motors, a luxury EV maker backed by the  Saudi Arabia’s sovereign wealth fund, is heading to IPO via a planned SPAC merger. (I dig into the SPAC phenomenon in today’s essay below.)

Europe

• The European bourses were a blur of red with the Stoxx Europe 600 down 0.7% at the open, before falling further.
• Shares in HSBC in London were up 0.4% in early going ahead of tomorrow’s annual results in which the banking giant is expected to disclose it’s moving top execs to Hong Kong, part of its “pivot to Asia.”
• Copper prices in London this morning hit a near ten-year high, another bullish sign for global economic recovery, and a boost for mining stocks.

U.S.

• U.S. futures point to a weak open. That’s after investors snapped a two-week winning streak on the Nasdaq and S&P 500 last week.
• So far in February, the yield on 10-year Treasury has climbed 29 points. The sudden steepening of the yield curve has been good news for bank stocks and bad news for tech stocks (which makes it bad news for the tech-heavy S&P). In short, it’s called the “reflation trade.”
• On the calendar this week, we have full-year results from: Berkshire Hathaway (today); Home Depot (tomorrow), Lowe’s Companies and Nvidia (both Wednesday), plus Salesforce and Airbnb (Thursday).

Elsewhere

• Gold is up, trading near $1,800/ounce.
• The dollar is up.
• Crude is down with Brent trading below $63/barrel. Goldman Sachs thinks oil will top $75 in the coming months.
• At 11 a.m. Rome time, Bitcoin was down to $54,150 after hitting fresh all-time highs over the weekend.

***

SPAC-a-mole!

Yes, I’m shamelessly going back to the well to recycle that little headline.

When market observers talk about bubbles, they sometimes cite as Exhibit A the explosion in blank-check SPAC IPOs we’ve seen over the past year.

What the heck is a SPAC? It’s a “Special Purpose Acquisition Company.” They are publicly-listed companies, but otherwise have no operations. They’re not making anything, selling anything or earning anything. They’re just a blank check. You might call a SPAC a host. They exist solely to find a mate—in this case, a private company, one with actual operations, that will reverse-merge with the blank check SPAC and, together, will flower into a publicly listed stock.

We’re averaging roughly five new SPAC listings per day. A bull would say that’s a sign of a healthy market, one in which vital capital is flowing freely from investors to startups. A bear would frown at the looser scrutiny associated with the typical SPAC IPO—see the saga of Clover Health—and gasp at the sheer volume of these SPACs, which are far outnumbering the traditional IPO.

Last year, there were 248 SPAC IPOs, a four-fold increase on 2019. This year, we’re on place to see another four-fold y-o-y increase, as this chart from BofA Securities shows.

With so many SPACs in the pipeline, it’s not easy to get investor attention for, say, the 155th one to come out this year. That’s why SPAC creators bring in celebrities, former bankers and athletes—Shaq has a SPAC—to give the vehicle a bit of star power.

Investing in a blank check company, by definition, is a risky bet. But in a bull market, where investors are chasing risk, SPACs may seem like a perfectly sound investment strategy for anybody who wants to get in early on a potentially hot new IPO.

It’s no wonder then that retail investors are far and away the biggest buyers of SPACs, as a cohort. This won’t surprise anybody who patrols the WallStreetBets forum on Reddit.

With so many SPAC IPOs going to market, the verdict is still out on whether or not this is a good deal for investors. The early data suggests it’s a pretty lousy deal, but that was before the latest explosion in new blank-check listings.

But make no mistake: SPACs make up perhaps the frothiest segment of a frothy market.

***

Postscript

To all you futurists, happy belated anniversary.

It was 112 years ago this month that Filippo Tomasso Marinetti published his “Futurist Manifesto” in Le Figaro. The Italian poet, technophile and lover of the arts was ahead of his time in promoting a vision for a world of mechanized transport and high-tech industry propelling society forward in a blur of innovation. We must also give him props for giving us (or at least, popularizing) the modern definition of “futurist” as a far-sighted visionary, a term that’s been coopted by corporate consultants, life coaches, and Wall Street and Silicon Valley influencers alike in recent years.

In today’s market parlance, Marinetti would have been a bull. Just look at that fabulous mustache!

Alas, Marinetti also had a dark side. He was a bit of an anarchist who glorified war as “the world’s only hygiene.” He also made an early bet that Benito Mussolini and Italy’s National Fascist Party would be the political force capable of bringing such sweeping change to society.

Ah, but that’s all in the past.

Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com

As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.

Today's read

Sprechen Sie Stonks? Inspired by America's Reddit brigade, a new generation of stay-at-home investors in Europe are hoping to get rich quick on the next GameStop—one that's closer to home. Alas, it's not going all that well over there, Eric J. Lyman reports in a story for Fortune.

Hear him roar. Keith "Roaring Kitty" Gill, the trader who helped send GameStop shares on a rally for the ages last month, is piling back into the beaten-down stock, the Wall Street Journal reports. A day after he testified at a House Financial Services Committee hearing, he doubled his holdings in GME.

Sixty-shmorty. Last week was a momentous one for the bond market. The sudden precipitous rise in bond yields could be felt well beyond the staid and secure world of fixed income. The appreciation in yields (remember: when yields go up, bond prices go down) sent waves through the equities market as well, hitting tech stocks particularly hard. The WSJ explains why you should be keeping an eye on the Treasuries market even if you've long ago abandoned the traditional 60-40 stocks/bonds split.

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Market candy

Quiz time

Energy stocks on the S&P 500 are the big winner so far in 2021. Any idea what's in second place?

• A. Tech stocks
• B. Health care
• C. Real estate
• D. Bank stocks

The answer is D. The S&P 500 Financials sector is up 18.6% YTD as real interest rates climb. It was up an impressive 4.7% over the past five trading sessions, even as the benchmark index was down.