A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.
Wall Street threw a party as President Joe Biden signed his sweeping $1.9 trillion stimulus package into law, giving investors confidence in their projections for a surge of economic activity once the threat of the pandemic recedes.
What’s happening: The legislation is expected to boost demand for goods and services, especially as the country’s vaccination campaign picks up. That would pad corporate earnings, which are set to boom this year — helping to justify high valuations for stocks.
One feature of Biden’s relief plan, checks of up to $1,400, could help the market in an even more direct way — by handing passionate retail investors wads of cash as soon as this weekend.
Since GameStop (GME) mania earlier this year, when hype from non-professional traders helped send shares of the struggling video game retailer soaring, Wall Street has kept an eye on this class of investors.
One investment firm launched a new exchange-traded fund that will focus on stocks generating buzz on social media, while an alternative data company quickly created a tool to give its hedge fund and investment bank clients insight into the most-mentioned stocks on Reddit.
Watch this space: These traders have proved they have the power to use commission-free apps to influence the stock market. And they could be back in the spotlight soon, if a recent Deutsche Bank survey is any indication.
The bank polled 430 US users of online brokerages in February, and found that respondents planned to put “a large chunk” (37%) of forthcoming stimulus payments into stocks. Strategists estimated that could produce a $170 billion inflow into equities.
The actual number may be lower. Since Deutsche Bank’s report was published, US lawmakers agreed to narrow the income eligibility determining payouts. But many retail investors will be pocketing large sums of money in the coming days — and it’s worth watching where they put it.
Wall Street predicts there could be a long list of market winners as the relief bill feeds through the economy, my CNN Business colleague Paul R. La Monica reports.
Analysts and economists at Jefferies said this week that companies with direct ties to consumers, such as retailers and leisure firms, stand to benefit the most. Its analysts cited Airbnb, restaurant chains Bloomin’ Brands (BLMN) and Brinker (EAT), theme park operator Six Flags (SIX), Southwest (LUV), Lyft (LYFT), Home Depot (HD), Lowe’ (LOW)s and TJX (TJX) as having the best chance to gain as consumers spend stimulus checks and venture back out into the world.
Suspense builds on Wall Street over expiring Covid relief
With the economy crashing and markets in chaos last spring, the Federal Reserve handed out get-out-of-jail free cards to America’s big banks. Now that the recovery is gaining steam, the Fed has to decide if it’s time to enforce the rules again.
Suspense is building on Wall Street over whether the Fed will extend an exemption that loosened leverage rules applying to large lenders, my CNN Business colleague Matt Egan reports. JPMorgan and Citigroup (C) have called for the Fed to consider making the waiver permanent.
Leading Democrats — including Sen. Elizabeth Warren — want the Fed to let the exemption lapse as scheduled at the end of March. They fear big banks are using the pandemic as an excuse to weaken the post-2008 crisis rules.
In an interview with CNN Business, Democratic Sen. Sherrod Brown, the chair of the Senate Banking Committee, said the focus should be on keeping the banking system safe.
“We have strong capital requirements to make sure we don’t have a situation where banks have to be bailed out like they were a decade ago,” he said. “We can’t, as a nation, afford for that to happen again.”
Investor insight: Faith that an economic boom is coming later this year has encouraged investors to pile back into bank stocks, which benefit from healthy levels of activity (and potentially higher interest rates). Shares of JPMorgan Chase (JPM) are up 21% this year, while Bank of America’s stock has climbed nearly 23%.
NFTs are feeding a digital art boom. But what are they?
It’s official: Non-fungible tokens are taking the art world by storm. And as interest in digital assets grows, Wall Street is paying attention, too.
First things first: A so-called “NFT” is a digital token — often created on the Ethereum blockchain — that allows sellers and buyers to verify the authenticity and ownership of an asset that lives online.
Chatter about these tokens has exploded this week after Christie’s closed its auction for Beeple’s “Everydays: The First 5000 Days,” a NFT-based collage of 5,000 images that took 13 years to make.
The artwork, which had a starting bid of just $100, sold for an eye-popping $69.3 million.
Step back: The art world is abuzz about NFTs, which many claim could revolutionize the market. Virtual art faces challenges that physical art does not, since it can theoretically be copied and disseminated any number of times on the internet, reducing its value. But NFTs allow for proof that an item is an original — giving collectors access to an entirely new class of works.
“Artists have been using hardware and software to create artwork and distribute it on the internet for the last 20+ years but there was never a real way to truly own and collect it,” Beeple, whose real name is Mike Winkelmann, said in a press statement following the sale. “With NFTs that has now changed.”
It’s not just about art. Christopher Torres, creator of the decade-old “Nyan Cat” GIF, recently sold an NFT of the animation for almost $600,000. Others are using NFTs to buy NBA highlights. As we live greater parts of our lives online, expect the trend to continue — and to hear more about it from investors increasingly looking for creative places to park their cash.
The February Producer Price Index, a closely-watched measure of inflation, posts at 8:30 a.m. ET. The University of Michigan’s consumer sentiment survey for March follows at 10 a.m. ET.
Coming next week: Central bank watchers will be busy with policy decisions from both the Federal Reserve and the Bank of England.