Heading Into Jobs Report, It’s Back to a Bad News Is Good News Market
They received it Wednesday in the form of a report from ADP that showed private-sector payrolls missing expectations. Far from selling off in response, major U.S. stock indexes traded mixed, with the tech-heavy Nasdaq Composite climbing to its 33rd record finish of 2021.
There is a logic to that, given how the growth-oriented tech sector is sensitive to interest rates. The coronavirus pandemic also has shown that tech giants can thrive when the rest of the economy suffers.
An alternative explanation would be that the ADP report, of late, has lost its predictive power. While the standard deviation between the jobs reports from ADP and the U.S. government has never been worse than over the last 18 months, according to Bespoke Investment Group, other economic reports also are showing a topping out. Vehicle sales slumped and the two major manufacturing reports were mixed. That is not to say the economy isn’t recovering, it’s just that the pace of the rebound is slowing.
Powell’s speech left plenty of openings for the central bank to wiggle out a promise to reduce bond purchases this year. It looks like markets would be more than happy for the Labor Department to report Friday that in August far fewer than the 720,000 new jobs economists expect were created.
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Big Employers Hiring Tens of Thousands of Workers as August Jobs Disappointed
Payroll provider ADP said the Delta variant hurt hiring in August, explaining why private companies added only 374,000 jobs, well short of the 600,000 expected after significant growth in the first half of 2021. Still, employers are hiring with Walmart, Amazon, and Fidelity seeking around 70,000 jobs.
- ADP comes before the government’s broader report on August jobs, including nonfarm payrolls and the unemployment rate. Markets want a solid report, but strong employment figures could raise concerns about the end of stimulus from the Federal Reserve.
is hiring 20,000 full- and part-time workers for its supply-chain operations, where wages average $20.37 an hour, plus it is paying workers a $150 cash bonus for getting coronavirus vaccinations.
is hiring thousands of hourly workers in its operations network, on top of more than 40,000 U.S. corporate and technology roles. The company said earlier this year it would raise hourly worker pay by 50 cents to $3 an hour. Amazon’s warehouse workers start at $15 an hour.
- Fidelity Investments will hire another 9,000 workers this year amid a surge in stock trading and investing services, its third hiring spree in a year that has boosted its workforce 22% to nearly 60,000.
What’s Next: This weekend, enhanced unemployment insurance payments expire for about 11 million people in states that kept them in place until Sept. 6. States that ended the payments early have seen the same job growth as those that didn’t, The Wall Street Journal reported.
—Janet H. Cho and Liz Moyer
WHO Designates Mu from Colombia Its Newest Covid ‘Variant of Interest’
The World Health Organization has designated Mu, a coronavirus variant first documented in Colombia in January 2021, as its newest “variant of interest.” It has now been detected in 39 countries.
- The WHO said early data on Mu indicate that the immunity provided by vaccines or through previous infections “may not be as strong against this variant.” There have been Mu outbreaks in South America and Europe.
- Mu’s global prevalence is low, and falling, but in recent weeks it has risen sharply in Colombia, where it makes up 39% of sequenced cases, and in Ecuador, where it is 13% of sequenced cases.
both announced they were starting trials to test their oral Covid-19 medicines. Merck’s study is in people who live in the same household as someone who tested positive, and Pfizer’s is for symptomatic adults who aren’t hospitalized.
- A wave of Covid-19 therapy trials is taking place amid a realization that the virus isn’t going away, and the disease will need treatments. Last month Jefferies predicted that an effective and convenient Covid-19 therapeutic could hit peak sales of more than $10 billion a year.
late Wednesday said it is submitting documents to the Food and Drug Administration to evaluate a booster dose of its Covid-19 vaccine and expects to submit data to European authorities and others around the world in the coming days.
—Janet H. Cho and Barron’s staff
Bonds Are “Trash,” Says Former Bond King Bill Gross
Bond yields have “nowhere to go but up,” and the intermediate- to long-term bond funds that invest in them are “new contenders for the investment garbage can,” the former PIMCO head and founder Bill Gross wrote on his blog this week.
- 10-year Treasury yields rising to 2% in the next year from their current 1.3% level would hand investors negative total returns of 2.5% to 3%, Gross calculates. Ballooning public debt burdens, and the probability that “the $120.
- Ballooning public debt burdens, and the probability that “the $120. billion-a-month Federal Reserve deluge will probably end sometime in mid-2022” mean that governments will find it hard to sell their bonds at the current low yields, he explains.
- “Cash has been trash for a long time but there are now new contenders for the investment garbage can. Intermediate to long-term bond funds are in that trash receptacle for sure,” Gross writes.
- Gross also wonders whether stocks will follow. “Earnings growth had better be double-digit-plus or else they could join the garbage truck,” he adds.
What’s Next: Behind the lively tone of his missive, Gross is stating what market investors are considering obvious: the certainty that the world central banks’ massive quantitative easing programs are coming to an end. As he notes himself, the main question is how quickly this will happen.
Apple’s Smartwatch Could One Day Monitor Blood Pressure, Sleep Apnea, Fertility
is developing several health-related features for its smartwatch, including tools to notify wearers about rising blood pressure and high blood sugar and help track fertility, The Wall Street Journal reported, citing people familiar with the plans and internal company documents.
- The fertility feature as well as potential improvements to its monitors that track irregular heartbeats and sleep patterns could be available as early as next year. Apple is also exploring ways its smartwatch could track sleep apnea, measure low blood-oxygen levels, and detect diabetes.
- Apple wanted to release its high blood pressure feature next year, because reliably tracking a condition that affects 108 million adults and contributes to half a million deaths a year could help save lives. Apple is working on ways its devices can track heartbeat waves.
- Samsung Electonics’ smartwatches already offer a feature that monitors blood pressure trends, while FitBit’s wearables detect advanced sleep patterns at night. And startups including Natural Cycles USA Corp., a birth-control app, already help track ovulation.
- Apple sold nearly $13 billion in smartwatches last year, 65% of the global market by revenue, research firm Strategy Analytics estimates.
What’s Next: Apple is expected to release its seventh version of the Apple Watch in the coming weeks. CEO Tim Cook has said Apple’s health features will be its “greatest contribution to mankind,” as the company aims to transform health the way the iPhone replaced portable cameras and flashlights.
—Janet H. Cho
SEC Investigating Electric Truck Maker Workhorse Group
The Securities and Exchange Commission is investigating Workhorse Group, a maker of electric delivery trucks that was an early investor in Lordstown Motors, which is also under investigation by the SEC and the Justice Department.
The Wall Street Journal reported the SEC’s enforcement division is investigating
according to a June 30 letter that doesn’t go into details.
It is the fourth known investigation into an EV maker in the past year, the Journal reported, and the second involving a company started by Steve Burns, an entrepreneur who also founded
- A lawyer for Burns told the Journal he hadn’t been contacted by the government regarding either investigation. Workhorse hasn’t disclosed the matter in its securities filings. A Workhorse spokesman didn’t comment to the Journal.
- In June, Lordstown disclosed the SEC had subpoenaed materials and information related to its deal to go public last fall and preorders for Endurance, its forthcoming electric pickup truck. In July the company confirmed a Justice Department investigation.
What’s Next: Workhorse went public in 2010 and listed on Nasdaq in 2016 with Burns as CEO as part of a wave of upstart EV makers. Investors have flocked to the stocks trying to repeat the gains of Elon Musk’s electric car maker
the Journal reported.
Current and future tax rates are obviously important, but what else can affect the taxes I pay on my mutual fund investments, especially in a year when markets are performing so well?
In last week’s Tax Guy column, I pointed out that one big negative about equity mutual funds is that you don’t have much control over taxes. The fund decides which investments to sell and when. If the fund sells investments that have gone up in value since they were acquired, the resulting gains will be passed out to you in the form of dividend distributions.
If you hold your fund shares in a taxable brokerage firm account, those distributions will be taxable. The tax rate you will pay depends on your income level, whether the gains were short-term or long-term, and whether proposed tax rate increases become reality.
Starting in 2022, the proposed Biden tax plan would raise the top federal income-tax rate on net short-term capital gains recognized by individuals, including those from mutual fund distributions, back to 39.6%, the top rate that was in effect before the Tax Cuts and Jobs Act lowered it to the current 37%.
Read more here.
—Newsletter edited by Liz Moyer, Mary Romano, and Rupert Steiner