T Stock – The Stock Market Selloff Has Hit Everything. Why It’s Not Time to Panic.
When stocks sell off, investors are supposed to be able to offset some of the losses with other assets that rise when equities fall. Not this time. Following Wednesday’s strong inflation numbers, nothing worked.
The picture is a little rosier on Thursday. Gold is still falling, but the
Vanguard Total Stock Market ETF
has ticked up 0.2%, while the S&P 500 has ticked up 0.1%. It’s still hard to find uncorrelated assets.
Cryptocurrencies certainly haven’t been. They are crashing after Elon Musk said on Twitter that Tesla would stop accepting Bitcoin as a form of payment for its vehicles. The digital currency was down 9% in early trading Thursday. Ethereum was down 8.9%. Dogecoin, another Musk favorite, was down 20%.
Investors can take some solace in the idea that a little correction isn’t a bad thing. In fact, the pullback comes right on schedule, according to Leuthold Group’s Jim Paulsen, who noted that there’s usually “a period of hesitancy, a pause, or a correction” within the first 12 to 24 months of the start of a new bull market.
This is the period of hesitancy. The good news is the economy is still improving and earnings growth is still accelerating.
This too shall pass.
*** The Barron’s future index tracks the modern and evolving U.S. economy. It is designed to reflect business growth over the coming three to five years and has outperformed broad market indexes. Follow it here.
Americans 12 and Older Can Get Vaccinated Starting Thursday
Nearly 17 million Americans ages 12 to 15 can get vaccinated against Covid-19 at pharmacies and clinics starting Thursday, President Joe Biden announced. The Centers for Disease Control and Prevention recommendedthe Pfizer-BioNTech vaccine for that age group. “We’re ready,” Biden said.
- A 15-member advisory panel of pediatricians, infectious-disease doctors and other medical experts voted to recommend the vaccine after evaluating clinical trial data that found the vaccine 100% effective at preventing Covid-19 in this age group. The CDC recommended it after that.
- Side effects of the vaccine are similar to those found in older vaccine recipients: fever, muscle aches and chills, although seven children developed swollen lymph nodes, the CDC and Pfizer said. More than 3 million children under 17 have been diagnosed with Covid 19 since the pandemic began.
- Children can now get their first vaccine dose in one location and their second dose three weeks later in another. They can also check Vaccines.gov or text their ZIP Code to “438829” (GETVAX) to find nearby doses. “It’s safe, effective, easy, fast and free,” Biden said Wednesday.
What’s Next: Some have questioned the decision to vaccinate healthy children in the U.S. and Canada while less affluent countries cope with rising infections amid widespread vaccine shortages. Global infections surpassed 738,000 on Tuesday, including more than 348,000 in India and 72,000 in Brazil, per Johns Hopkins University data.
—Janet H. Cho
U.S. Gasoline Pipeline Restarts After Cyberattack
Colonial Pipeline said it restarted pipeline operations late Wednesday afternoon after last week’s cyberattack, but it could be several days before its supply chain is back to normal.
- The company said some markets served by the pipeline could experience intermittent service interruptions over the next few days. “Colonial will move as much gasoline, diesel, and jet fuel as is safely possible and will continue to do so until markets return to normal,” it added.
- Colonial Pipeline said it temporarily shut down all pipeline operations on Friday after it became aware that it was the target of a ransomware cyberattack. The Federal Bureau of Investigations said a Russian hacker group called DarkSide was responsible.
- Motorists along the East Coast rushed to fill up their tanks, leading to long lines at the pump. Stations in 14 states experienced some shortages, according to GasBuddy.
- According to a report from Washington Post citing people familiar with the matter, Colonial will not pay a ransom and will work with a division of cybersecurity firm FireEye to restore and rebuild systems.
What’s Next: President Joe Biden signed an executive order on Wednesday that the White House said is aimed at improving the U.S.’s cybersecurity and protecting federal government networks following the attack.
Musk Says Tesla Won’t Take Bitcoin for Cars
CEO Elon Musk said on Twitter Wednesday night that Tesla would suspend accepting Bitcoin as payment for its cars due to environmental concerns. The price of the cryptocurrency slumped 17% after the tweet before recovering some losses.
- “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emission of any fuel,” Musk said.
- The billionaire founder of Tesla called cryptocurrency “a good idea on many levels” with a “promising future,” but said digital currencies shouldn’t “come at a great cost to the environment.”
- Bitcoin prices quickly dropped after the tweet, from nearly $55,000 to more than $45,700, the lowest since early March. Prices edged back to more than $49,000 in Asian trading Thursday.
- Tesla had announced on Feb. 8 that it had bought $1.5 billion of Bitcoin and would accept it as payment.
What’s Next: Whether Tesla did sell any cars for Bitcoin remains unclear as the company won’t say. The episode shows again that “if one person can dramatically alter its spending power, the ‘stable store of value’ criteria of a currency is not met,” as noted by UBS chief economist Paul Donovan.
Biden Seeks Path Forward for Infrastructure Bills After Inflation Numbers
President Joe Biden and Vice President Kamala Harris met with the top four congressional leaders on Wednesday to seek ways to enlist Republican support for infrastructure bills amid rising inflation and concerns about more federal spending.
- Biden proposed increasing taxes on companies and wealthy Americans. Senate Minority Leader Mitch McConnell (R., Ky.) said after Wednesday’s meeting there is a bipartisan desire to pass infrastructure, but not if it means undoing the 2017 tax cuts.
- House Minority Leader Kevin McCarthy (R., Calif.) said on Twitter that with rising prices for gas, food, housing, lumber and cars, “raising taxes would be the biggest mistake President Biden could make right now, and he won’t find Republican support for such a terrible idea.”
- Soaring consumer prices drove inflation to its highest rate in almost 13 years. The consumer-price index jumped 4.2% for the year ending in April, far higher than the 3.6% economists expected. Amherst Pierpont Chief Economist Stephen Stanley said “price hikes may have additional room to run.”
- Biden will meet Thursday with six Senate Republicans, including Sen. Shelley Capito (R., W.Va.), the lead author of the GOP’s $568 billion infrastructure counterproposal. He has also huddled separately with Sen. Joe Manchin (D., W.Va.), Sen. Tom Carper (D., Del.) and Sen. Kyrsten Sinema (D., Ariz.).
What’s Next: House Speaker Nancy Pelosi (D., Calif.), who wants the infrastructure bill through the House by July 4, said Wednesday that she is “more optimistic now” about getting things done in a bipartisan way. “But we’ll see.”
—Janet H. Cho
Hertz Bankruptcy Saga Ends With Surprising Shareholder Payout
The pandemic bankruptcy saga of Hertz Global Holdings ends with shareholders getting something rarely obtained in a bankruptcy proceeding: a payout. Knighthead Capital Management LLC and Certares Management LLC emerged as winners in the bankruptcy auction, The Wall Street Journal reported.
- The winning bid provides a distribution of nearly $8 a share to current stockholders, the report said, citing people familiar with the matter. Tuesday’s closing price was $3.69, and they rose another 55% on Wednesday. Some of the $8 would be paid in cash.
- The investment funds Knighthead and Certares will take control of Hertz along with Apollo Global Management and a group of existing shareholders. A restructuring deal requires approval from a Delaware bankruptcy court judge.
- Shareholders have been on a rollercoaster since last summer. After Hertz’s bankruptcy filing, the stock sank to 40 cents intraday last May only to be bid up over $6 as the original meme stock. Hertz tried to sell $500 million of new shares, but the SEC stopped it.
- “The winners outbid another group of investment funds including Centerbridge Partners, Warburg Pincus, and Dundon Capital Partners, the Journal reported, in an auction that began Monday.
What’s Next: The rental car giant was one of the pandemic’s biggest bankruptcies, saddled with debt and travel restrictions. It hopes to emerge from the proceedings in June, with travel on the rise after widespread vaccinations and a revival of tourism and away-from-home leisure activities.
As Americans get ready for a jam-packed, post-Covid summer, how can they save money on summer travel?
Even in a normal year, it’s not always the cheapest to travel during the warmer months. “Summer is always the most expensive time of year to travel because you’ve got nice weather and you’ve got students, teachers and parents with kids in school who can only travel during these times,” said Scott Keyes, founder of travel website Scott’s Cheap Flights.
This isn’t a normal year though. Many people were forced to cancel trips over the past year because of the pandemic, and plenty of them are sitting on travel credits they are itching to use. Airlines and other travel operators are working to ramp up operations in response to the higher demand, but that takes time. And air carriers will be cautious to bring more planes back into service to offer more flights, just in case the pandemic takes another turn for the worse and travel demand subsides again.
As a result, experts have warned that it could quickly become expensive to travel this summer. The most recent report on consumer prices from the U.S. government showed a record increase in the price of airfare, for instance.
That long-awaited summer vacation doesn’t need to break the bank, though. Here are tips from financial and travel experts on how to save money on your post-pandemic getaways.
Read more here.
—Newsletter edited by Liz Moyer, Stacy Ozol, Mary Romano, Matt Bemer, Ben Levisohn
T Stock – The Stock Market Selloff Has Hit Everything. Why It’s Not Time to Panic.
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