Category: Stock Market

(Bloomberg Opinion) — Federal Reserve Chair Jerome Powell made two things clear during much-anticipated remarks on Wednesday. First, fiscal policy might need to do more to combat the lasting economic damage from the coronavirus pandemic. Second — in what markets were most eager to hear — he’s not about to steer the central bank down the path to negative interest rates.“The evidence on the effectiveness of negative rates is very mixed,” Powell said Wednesday in a webinar hosted by the Peterson Institute for International Economics. To hammer home the point: “This is not something that we’re looking at.”“It’s an unsettled area, I would call it,” he said. “I know that there are fans of the policy, but for now it’s not something that we’re considering. We think we have a good toolkit, and that’s the one we’ll be using.”What was left unsaid, of course, is that one such fan is President Donald Trump, who tweeted on Tuesday that “as long as other countries are receiving the benefits of Negative Rates, the USA should also accept the ‘GIFT’. Big numbers!” Given his background in real estate (and racking up debt), it’s hardly a surprise that he’s enamored by the concept of being paid to borrow. This wasn’t the first time he endorsed the policy, and it certainly won’t be the last. Still, markets have largely become accustomed to tuning out the president’s off-the-cuff musings on monetary policy.  Recently, however, the interests of bond traders and Trump have aligned. For days, fed funds futures have been pricing in a policy rate that’s below zero as soon as next year, even though current officials have widely indicated such a move is not in the cards. Here’s what that looked like before Powell spoke:The hedges gained traction on May 7, the day after DoubleLine Capital Chief Investment Officer Jeffrey Gundlach said on Twitter that pressure will build to take the fed funds rate negative because the Treasury was borrowing so much with short-term bills (some of those rates have already fallen below zero in secondary trading). Then, Atlanta Fed President Raphael Bostic vowed the central bank would deploy its full arsenal to aid the economy and would err on providing too much support, not too little. “It is really a whatever-it-takes scenario,” he said, echoing the famous phrase from Mario Draghi when he was president of the European Central Bank.The impulse makes some sense logically. If a trader had to bet on the direction of the fed funds rate in the coming year, it would have to be down. As Powell made clear after last month’s Federal Open Market Committee meeting, the central bank will be in no hurry to tighten monetary policy. He hinted during his remarks Wednesday that it could be a “few years” before the economy has truly recovered. More immediately, U.S. unemployment is at levels not seen since the Great Depression. It all would seem to add up to Fed officials pressured to do “more.”In a somewhat unusual stance for a Fed leader, Powell is imploring lawmakers to take further action, rather than the central bank. “This is the time to use the great fiscal power of the United States to do what we can do to support the economy and try to get through this with as little damage to the longer-run productive capacity of the economy as possible,” he said after the April FOMC meeting. The federal stimulus law has allocated some $454 billion in equity funding already for the Fed’s various lending facilities.He reiterated that view on Wednesday. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery,” Powell said at the end of his prepared remarks. “This trade-off is one for our elected representatives, who wield powers of taxation and spending.” He added later that the goal should be boosting the economy such that it’s growing at a faster pace than the national debt. Powell didn’t entirely erase the negative fed funds pricing in futures markets — “for now” implies there’s a chance down the road. But he slammed the door as forcefully as he could on the policy while still preserving the central bank’s coveted “optionality.” It’s not that he wants to eradicate negative-rate bets, per se, he just doesn’t want to get boxed in by the markets.His comments should be put in the context of those from other Fed officials this week, who seemed committed to playing down the appeal of a negative fed funds rate. “I am not a big fan of going into the negative rate territory,” Bostic said on Monday. As if to clarify his point from last week: “Negative rates is one of the weaker tools in the tool kit. I am not anticipating supporting that anytime soon.” Just for good measure, Chicago Fed President Charles Evans added: “At best, we’d have to study it more, but I don’t anticipate that being a tool that we would be using in the U.S.” Minneapolis Fed President Neel Kashkari insisted “there are other tools we would go to first.”In truth, this is not a new stance. Powell said during congressional testimony in February that negative interest rates can damage bank profitability, which worsens overall credit expansion. He brought up that issue again on Wednesday. Back in November, Fed Governor Lael Brainard made it clear that the central bank would first opt for enhanced forward guidance and some form of yield-curve control at the zero lower bound. Importantly, as I pointed out last month in a column arguing against negative interest rates, rather than stimulate economic activity, the policy might actually be disinflationary. That’s a scary proposition for Fed officials given that a report Tuesday showed the core U.S. consumer price index fell 0.4% in April from a month earlier, the biggest drop on record.There’s a long road to a full economic recovery, and missteps will be costly. The Fed has already pledged to support the credit markets to avoid turning “liquidity problems into solvency problems.” It still has to get lending facilities up and running to support municipalities and Main Street, which will have tangible and obvious economic benefits. Powell is no gambler, which is why negative interest rates will remain buried deep in the central bank’s toolkit.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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Shares in home-fitness cycling company Peloton Interactive (PTON) have surged 10% in trading on May 12, bringing the stock’s year-to-date gain to over 65%. That’s after the company informed investors that it surpassed 1 million aggregate Connected Fitness subscribers.And now Andrew Left of Citron Research argues that enough is enough and investors should put Peloton into perspective: “This is retail mania – you can love the product, but stock has peddled its way to stupidity” tweeted the well-known activist short seller on May 12.As Left points out Peloton’s market cap has surged $5B this year; and with 300K connected subscribers that translates to $17K per subscriber.In contrast, the 2020 market cap for Teladoc (TDOC\- the telemedicine and virtual healthcare company) is up $8B vs. paid members up 6.2 million or $1300 per subscribers, Left tweeted.Nonetheless, five-star Stifel Nicolaus analyst Scott Devitt at Stifel Nicolaus has just raised his price target to $50 from $42, indicating 6% upside potential lies ahead. He also reiterated his Peloton buy rating.“Elevated demand for the company’s products has continued thus far into F4Q, with demand outpacing supply in most geographies,” Devitt explained, describing Peloton as “an unstoppable juggernaut to be stopped only by way of self-inflicted wound from here”.Indeed Wall Street analysts have an uniformly bullish outlook on Peloton stock. The Strong Buy consensus is due to 18 Buys ratings, vs just 1 Hold and 1 Sell.However, due to the recent rally, the $46.65 average price target now indicates that shares could pull back 1% from current levels- suggesting that, in this case, Left could be right. (See Peloton stock analysis on TipRanks).Related News: Peloton Shares Increase on 1 Million Fitness Subscriber Milestone Tesla’s Elon Musk to Reopen California Plant Despite Coronavirus Restrictions Microsoft to Splash $1.5 Billion on Italy’s Cloud Business Transformation More recent articles from Smarter Analyst: * CyberArk Software Shares Sink 6% on Weak Sales Outlook * Uber Announces $750M Notes Offering, As GrubHub Takeover Reports Swirl * Twitter Won’t Reopen Offices Before Sept., Allows Permanent Work From Home * Waymo Raises $3 Billion In Extended Financing Round

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On Wednesday, Jerome Powell shared prepared remarks regarding the future outlook for the U.S. economy, but admits there are ‘longer-term concerns.’ Andrew Slimmon, Morgan Stanley Investment Management Managing Director and Sr. Portfolio Manager, joins Yahoo Finance to discuss.

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Last week saw the newest first-quarter earnings release from UnitedHealth Group Incorporated (NYSE:UNH), an important…

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(Bloomberg Opinion) — As panic-ridden consumers stock up on essentials, kitchen pantries are looking like a blast from the processed-food past: boxes of Kraft macaroni and cheese, cans of Bumble Bee tuna, Kellogg’s Frosted Flakes, Shake ‘N Bake, etc. Brands of yesteryear that had been struggling to find their place in a new health-conscious society are suddenly having a moment once again. But a moment is probably all it will be, not a new normal, which is why packaged-food companies shouldn’t get too comfortable about their comfort food.The Covid-19 pandemic and shelter-in-place orders have led consumers to revert to old ways of shopping in search of ready-made meals and foods with long shelf lives. Parents who are working from home during this time are multitasking like never before, taking on the role of cook, housekeeper, teacher, disciplinary and full-time employee all at once in a Groundhog Day-like loop. As such, traditional meal times have blurred, and in some cases snacks are replacing them, according to research by Euromonitor International. This explains the resurgence of companies such as General Mills Inc., whose brands include Annie’s, Betty Crocker, Cheerios, Pillsbury and Totino’s pizza rolls. Its U.S. retail sales surged 45% in March and 32% in April. To put that into context, the company’s average annual growth rate was just 1.5% over the last decade.In the U.S., the food category that saw the biggest uptick in demand during the week ended April 25 was bread crumbs and other mixes for coating foods, followed by dough and batter products, according to Nielsen tracking. That bodes well for brands such as Shake ‘N Bake, whose parent company, Kraft Heinz Co., just reported its first quarterly sales boost in more than a year.In recent years leading up to this crisis, Campbell Soup Co. was perhaps the hardest hit by changing consumer tastes and demand for fresher foods. The company lost $8.6 billion of shareholder value between mid-2016 and mid-2018, a performance that saw its last CEO out. But amid the shutdowns, Campbell’s stock has been staging a recovery and is trading near its highest price in three years. Kellogg Co. has called this a “reappraisal opportunity” for cereal — a chance to persuade shoppers to give its sugary products another try. Speaking during Kellogg’s recent earnings call, CEO Steve Cahillane said: “Consumers rediscovering these benefits could be very positive for this category, and we plan to seize this opportunity.”But careful, Kellogg. The fact of the matter is, even if the coronavirus leaves a lasting impression on certain aspects of consumer behavior, the dislocation taking place at supermarkets is shaping up to be more of a temporary phenomenon driven in part by food shortages and fear. Consider the absurdity that about 20% of store-bought noodles have been out of stock in the U.S. since mid-March, when the earliest lockdowns began, according to Euromonitor. That’s on the same level as toilet paper shortages. Even baker’s yeast, of all things, is still sold out in many places. But just like we’re not all going to turn our YouTube-taught hair-cutting skills into new careers, most of us won’t keep up such rigorous home training for “The Great British Bake Off,” either.Consumers generally still want fresh, less-processed and healthier-sounding foods. Nielsen is already seeing this in surveys of other countries: In France, shoppers continue to seek out organic items, while Asian consumers say healthy eating has become more of a priority after the virus. And if the post-virus rise of virtual fitness classes is any indication, health and wellness is still top of mind for lots of people.It’s true, families need convenience right now and many are looking to save money as the U.S. dips deeper into a recession and the unemployment rate soars above 14%. That’s partly why seemingly dated grocery products are coming back into favor. They also provide a sense of nostalgia and familiarity at a time when life has been thrown off course.Another significant factor is all the bulk-buying: Wholesale stores such as Costco and BJ’s offer a much more limited variety that tends to be dominated by big-name food brands (although new trendier products are increasingly making their way in). Buying fresh and organic also usually costs more and sells in smaller packages. Over the next few months, Euromonitor analysts expect a greater shift toward more affordable items, private-label brands and bulk purchases.That does create an opportunity for the food giants. A downside to stocking up is all the packaging and cardboard that accumulates, taking up space. It’s an annoyance that companies could try to resolve if sheltering at home is to become a more regular part of life over the next couple of years rather than a distant memory. As U.S. states reopen, though, consumers will probably start to go back to their old routines — or at least some version of them. A bit of the doomsday-prepper mentality may remain, leading more households to keep their cupboards stocked with nonperishables, just in case. But it’s fair to say that the future of the supermarket isn’t Kraft mac and cheese or Campbell’s canned soup. It would be short-sighted to interpret this moment as a rebuke of their innovation efforts. If anything, it’s a time to step it up. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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Yahoo Finance’s Brian Cheung breaks down the details from Jerome Powell’s prepared remarks on Wednesday morning.

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Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down the market action with Alicia Levine, BNY Mellon Chief Strategist.

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The Brink's Company (NYSE:BCO) is about to trade ex-dividend in the next 3 days. This means that investors who…

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COVID-19 has left the U.S. economy reeling, yet Wall Street is pushing forward. Unemployment has reached alarming levels, with the loss of 20.5 million jobs in April bringing the U.S. unemployment rate to 14.7%, but the S&P 500 has staged somewhat of a recovery. While the index dipped Tuesday as investors weighed reopening efforts against fears of a second wave of infections, it has gained about 30% since hitting lows in March.So, what’s driving this stock market disconnect? Mike Wilson, Morgan Stanley's chief U.S. equity strategist, argues that investors are betting on a future recovery, with these bets being primarily fueled by concrete actions rather than the unknown. Additionally, he points out that market watchers believe the rebound will be “V-shaped”, the most ambitious form of an economic recovery.“Our client conversations have changed dramatically over the past month, shifting from whether we will have a re-test of the March lows to what does the shape of a recovery look like. Our view is that we will see a sustainable V-shaped recovery,” Wilson commented. He added, “… primarily because history tells us this is the way it always looks and feels in a recession — a highly uncertain recovery path, pessimistic investors, and volatile asset markets reacting to daily updates about the exogenous shock that got us here in the first place.”Taking Wilson’s statements to heart, we used TipRanks’ database to take a closer look at two stocks that have received Morgan Stanley's stamp of approval. TipRanks revealed that both Buy-rated names have amassed support from other analysts and boast over 25% upside potential. Zentalis Pharmaceuticals (ZNTL)Focused on the creation of differentiated small molecule treatments that target biological pathways of cancer, Zentalis believes it has developed an integrated approach that will allow it to overcome the limitations of current cancer therapeutics. Morgan Stanley highlights the speed of its pipeline advancement and the quality of its technology as making this company a standout in a crowded space.Representing the firm, five-star analyst Matthew Harrison cites ZNTL’s four INDs in a short period of time as proof of its development capabilities. “Small molecule targeted oncology is an attractive area for investment as initial results on efficacy and safety can quickly de-risk an asset and lead to fast approvals. Management has built a top-notch, differentiated chemistry group which has allowed Zentalis to quickly build a large pipeline against key targets,” he explained.Looking specifically at its lead asset, ZN-c5, a small molecule selective estrogen receptor degrader (SERD) designed for use in breast cancer, Harrison points out that it has already demonstrated clinically and preclinically low levels of major side effects as well as robust efficacy. This is important because while oral SERDs could be used across multiple stages of breast cancer and are more convenient than injectables, other oral SERDs in development have caused side effects like rash, diarrhea and vomiting. Based on all of this, the analyst thinks the opportunity for ZN-c5 could land in the billions.The good news doesn’t stop there. Harrison stated, “Importantly, the rest of the pipeline is robust, offering additional compelling targets.” In particular, he estimates that its Wee1 (ZN-c3) candidate could see peak sales hit $1 billion. When it comes to Bcl-2 (ZN-d5), Harrison argues that this therapy is a de-risked target with only one key competitor, with it possibly allowing ZNTL to differentiate itself. It should also be noted that the company has a third generation EGFR inhibitor that could be used alongside its SERD.It should come as no surprise, then, that Harrison joined the bulls. To kick off his coverage, he put an Overweight call and $45 price target on the stock. Should this target be met, a twelve-month gain of 26% could be in store. (To watch Harrison’s track record, click here) Does the rest of the Street agree with Harrison? With 100% Street support, or 4 Buy ratings to be exact, the consensus is unanimous: ZNTL is a Strong Buy. In addition, the $43.67 average price target implies 23% upside potential. (See Zentalis stock analysis on TipRanks)Quest Diagnostics Inc. (DGX)When it comes to laboratory diagnostic information services company Quest Diagnostics, Morgan Stanley has had a change of heart. Back in March, the firm downgraded the stock due to the overwhelming headwinds it thought couldn’t be offset by COVID-19 testing, but now it’s singing a different tune.Weighing in on DGX for the firm, five-star analyst Ricky Goldwasser argues that expanded testing guidelines as well as new market opportunities bode well for the company. Even though Wall Street has been laser-focused on the opportunity related to serology testing recently, based on Goldwasser’s analysis, the COVID-19 diagnostic testing opportunity could be two times larger if testing is added as part of a pre-elective procedure routine. She also points out that since March, supply shortages have limited COVID-19 testing, which in turn has spurred restrictive testing guidelines in an effort to save supplies.Expounding on this, Goldwasser stated, “Over time, as supplies become more available, testing guidelines are starting to expand. We expect Quest Diagnostics to meaningfully benefit from the market evolution to phase II of the testing paradigm and out of the four walls of the hospital. Our analysis suggests COVID-19 diagnostics could translate to ~689 million revenue opportunity and $372 million in EBIT through 2021.”That’s not to say serology testing isn’t important for DGX, with Goldwasser noting it’s a “critical component in reopening business.” She added, “Employers who are developing their return to work programs are working with the national labs to create testing programs. While the opportunity is going to be split among other supply chain participants (drug retail chains included), we estimate this as a $335 million revenue opportunity for Quest through the fall of 2020 helping to offset some of the declines in core testing.”All of the above prompted Goldwasser to upgrade her rating from Equal-weight to Overweight. On top of this, she bumped up the price target from $95 to $139. This new target suggests shares could surge 29% in the next twelve months. (To watch Goldwasser’s track record, click here) Looking at the consensus breakdown, DGX has been assigned 5 Buys, 8 Holds and 1 Sell in the last three months. As a result, it earns a Moderate Buy consensus rating. At $111.43, the average price target puts the upside potential at a modest 3.4%. (See Quest Diagnostics stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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