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Happy Friday, Bull Sheeters.
Yesterday we saw an almost mini flash crash after a dud auction for 7-year Treasuries sent yields spiking and stocks nose-diving. Retail investors were bullish; just about everybody else was selling.
This morning, yields have settled down, and are even falling. And that’s drawing some buyers back into stocks. U.S. futures are off their lows, but point to a mixed open.
Let’s see what’s moving markets.
Markets update
Asia
- The major Asia indexes are a blur of red in afternoon trading, with the Hang Seng off 3%.
- Asian investors are looking at the worst day for stocks since last March’s markets crash, with tech stocks leading the field lower.
- Shares in carmaker Hyundai were down 3.3% as investors try to make sense of the longterm damage of a recall that will cost it $900 million.
Europe
- The European bourses were sharply lower with the Stoxx Europe 600 off 1.3% at the start, before recovering some. Utilities and health care were among the few winners, so far.
- Shares in IAG were up nearly 0.9% in the first half-hour of trade after the parent of British Airways, Iberia, Aer Lingus and Vueling reported its worst full-year loss since its formation a decade ago.
- No vaccination, no travel? Europe is moving closer to such an arrangement as the EU’s leaders yesterday discussed the idea of creating a kind of “vaccine passport” as Europe’s tourist hotspots get ready to reopen their doors to international travelers. Even if there’s no central coordination, look for country-by-country accords as Greece, Israel, Spain, Italy and the Gulf states are all warming to the idea.
U.S.
- The U.S. futures have been trading a touch higher throughout the morning. That’s after all three major exchanges bombed lower yesterday, with the Nasdaq suffering its worst session since October.
- One of the few winners yesterday was GameStop as diamond 💎 hand retail investors pushed the retail stock up 18.6% on Thursday, adding to its head-scratching 142% two-day rally. Watch out, though: There’s real animus on Reddit, where these rallies are nurtured, towards CNBC’s Jim Cramer, Berkshire Hathaway’s Charlie Munger and any other Wall Street veteran who dares to question the fundamentals of the latest surge.
- All eyes are on the 10-year Treasury yield again, and the benchmark long bond yield is actually down below 1.5% this morning. Alas, that movement isn’t totally calming investors’ jangled nerves.
Elsewhere
- Gold is down, trading around $1,750.
- I found something that’s gaining—the safe-haven dollar.
- Crude is lower, with Brent trading just above $65/barrel.
- Bitcoin bulls, where are you? The crypto currency is down nearly 10% at 10 a.m. Rome time. It’s on pace to suffer its worst week in nearly a year.
***
By the numbers
24 bucks
On January 25, Apple hit an intra-day of $145.09, an all-time high. Fast-forward a month, and the iPhone maker closed yesterday at $120.99, a drop of $24.01, or 16.6%. That’s uncomfortably close to bear market territory. The Nasdaq, meanwhile, is off 7.4% since an all-time high reached just ten days ago—last week. We know what the bears have to say: it’s a good time to take the chips off the table while we’re ahead. But the bull argument is a compelling one, too. Households are sitting on massive savings. There’s a lot of dry powder for a spending boom in the quarters to come. The markets may be in for a bruiser, but the consumer is getting stronger. And that bodes well for companies that sell stuff. Stuff like whizzy mobile phones and computers.
-22.8%
Bitcoin has had an even worse fate. It’s been in and out of bear market territory much of the week. At one point this morning, it was down $13,000 (-22.8%) from its Feb. 21 all-time high. I can alway tell when volatility sends crypto prices lower; my email in-box goes suddenly quiet. It’s not totally quiet, mind you. Consider what we’ve heard on Bitcoin in the past 24 hours—that it has trillions in market cap potential, and that, JP Morgan, for one, is recommending investors consider adding “up to 1% of their allocation to cryptocurrencies in order to achieve any efficiency gain in the overall risk-adjusted returns of the portfolio.” What JPM is saying here is that if you’re looking for a return that could hedge against a sell-off in, say, tech stocks, then you might as well dabble in crypto. Up to 1% is safe bet territory.
10%
In the past week, the yield on 10-year Treasuries is up 13 basis points, or a hike of 10%. When it topped 1.5% yesterday, it set off all kinds of alarm bells for investors. (The long-bonds yield is creeping lower this morning and you can see stock-losses easing, and even some gains across the board.) It’s important to keep in mind that the yields are rising based solidly on legit good news. We’ve had a bevy of better-than-expected macro data showing a growing economy. GDP forecasts are pushing higher on the belief the vaccines will do the job, and that businesses and schools can fully reopen. The backdrop today is far different from where we were one year ago when the pandemic plunged the markets into an epic crash. For a year, there were all kinds of grumbles that the soaring stock market had completely decoupled from the wider, tanking economy. Well, now the economic looks stronger than the markets outlook.
***
Postscript
A few readers have emailed me to get my thoughts on the great “Searching for Italy” CNN series starring Stanley Tucci. He’s the food guide taking the viewer on a culinary tour de force through the bel paese. Italians have a real love for Tucci, and the 1996 classic “Big Night.” (That spaghetti and meatballs scene is still painful for me to watch, but Italians howl at it as comic genius.)
In “Search for Italy,” Tucci has no problem barging into the kitchen of some of the country’s top restaurants to pry recipe pointers from the chef. And what you pick up in those moments is juicy insider information. A dash of shredded pecorino on the pizza Margherita? Genio! A 70-30 mix of pecorino and Parmigiano Reggiano on the pasta amatriciana? Ottimo! It’s even been a bit of an education for my wife.
I have a few quick thoughts on what I’ve seen so far. Tucci is right. If you get to the island of Ischia, you have to head high into the hills for a dish of coniglio all’ischitana (local rabbit). It’s a messy, sumptuous affair. And, when in Rome, eat like the Romans. That means offal (and plenty of pasta). My favorite culinary term comes from the tradition of eating the quinto quarto, or fifth quarter of the animal. My advice: don’t ask what you’ve just eaten. Just savor the funky taste and texture. The foodie giant Katie Parla, who takes Tucci to one of her favorite Roman offal joints, is an authority on all things offal. It ain’t awful.
And there’s good news, Italophiles. CNN has just signed on to a season 2 with Tucci.
***
Have a nice weekend, everyone. I’ll see you back here on Monday… But first, there’s more news below.
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 reads
Going public. Last year's volume of IPOs was the biggest in a generation. Since June, there have been 120 IPOs valued at $1 billion and higher, the Wall Street Journal reports, helped by the investor mania in SPACs and the wider markets rally. Alas, the parallels with the late 1990s Dotcom boom has some investors uttering the B-word.
About those stimulus checks. It's tax prep season, and this year's returns will be about as complicated as they get. But there's good news: No, you do not have to declare the stimulus checks you got from Uncle Sam (if you'd, in fact, qualified). The checks are technically considered a refundable tax credit by the IRS, tax prep experts tell Fortune's Anne Sraders and Lance Lambert. Here's what else you need to know about taxes.
Shot in the arm. Businesses are handing out gift cards to customers who can prove they've been vaccinated. Restaurants are discounting meals. Meanwhile, Israel and Europe's top tourist destinations are seriously discussing a "vaccine passport"—no vaccine, no entry. Get ready for the carrot-vs-stick approach to motivate the public to roll up its collective sleeves to get the COVID jab. Why all the fuss? "The motivation is simple," explains Carolyn Barber, an emergency room physician, in Fortune. "Successful mass vaccination equals a small step toward normalcy. And normalcy, for business, is everything." Barber comes at the issue from both the medical and business sides; she is the cofounder of the homeless work program Wheels of Change.
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Market candy
Quote of the day
There’s an inescapable David and Goliath underpinning to the GameStop story that seems to have caught the public imagination.
That Mark Degasperi, veteran script writer commenting on Hollywood's sudden interest in all things GameStop. The resurgent meme-stonk, and its many unlikely rallies, is the talk of Movieland. "There are at least nine documentaries and dramatizations in the works about the GameStop stock short squeeze that consumed the nation in January and February," Ben Lindbergh writes in The Ringer.
