Warren Buffett
Drew Angerer/Getty ImagesThe tech rally fizzled Wednesday. But, as they say, if at first you don’t succeed, try again.
The tech-heavy Nasdaq Composite, up 1.8% Thursday morning, is trying to dig itself out of a hole. A swift selloff, catalyzed by rising fears about inflation and rising rates pushed the index down more than 10% from its February high.
The Nasdaq, however, bounced back in a big way on Tuesday, and looked set to do so again on Wednesday after a benign inflation reading. Rising prices hit high-growth tech stocks harder than most because they usually mean higher rates, and higher rates make funding growth more expensive.
It wasn’t to be. The Nasdaq, though, finished the day down 5 points, while the Dow Jones Industrial Average, home to many large, stodgy, value-type stocks, gained 460 points.
The Dow has been kicking tech’s tail lately. And the rotation is having some interesting side effects. It has, for one, pushed shares of Berkshire Hathaway to a record high, and in doing so made Warren Buffett just one of six people worth more than $100 billion.
Inflation doesn’t hit Berkshire the way it does tech stocks. A little even helps. It makes it easier for the company to earn money on all the cash and assets it manages as part of its sprawling operations.
Too much inflation, though, is bad for everyone. Thankfully, there’s no sign of that just yet.
—Al Root
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Biden to Sign Third Stimulus Package Into Law Friday, With Checks Following Soon
President Joe Biden said he will sign the $1.9 trillion Covid-19 relief package into law on Friday, marking his first major legislative victory. “This bill represents a historic, historic victory for the American people. I look forward to signing it later this week,” he added.
- The House approved the bill Wednesday by a vote of 220-211, with all but one Democrat, Maine’s Jared Golden, supporting the bill and all Republicans opposing it. House Speaker Nancy Pelosi called the bill’s passage “the most consequential legislation that many of us will ever be a party to.”
- House Minority Leader Kevin McCarthy (R., Calif.) criticized the bill, saying, “House Democrats have abandoned any pretense of unity.” He noted that the $5.5 trillion in total Covid relief spending to date will cost taxpayers more than $5,000 each.
- The $1,400 stimulus checks will start arriving this month and will not include Biden’s signature. The bill also extends supplemental federal unemployment benefits and provides $350 billion in aid to state and local governments. A proposed increase in the federal minimum wage didn’t make it into the final bill.
- The Biden administration is working on a plan to promote the stimulus bill to the public in order to avoid what they see as a colossal mistake by the Obama administration of playing down early successes like the 2009 stimulus.
- Biden also said Wednesday that the U.S. plans to buy 100 million more doses of Johnson & Johnson’s one-shot vaccine and that it will share any surplus with the rest of the world. The U.S. is also giving $4 billion to an international program aimed at vaccinating the poorest countries.
What’s Next: Economists surveyed by The Wall Street Journal expect the stimulus package to help the U.S. gross domestic product grow by nearly 6% this year. They also expect consumer prices to rise 2.48% and employment to increase by an average of 514,000 jobs per month for the next four quarters.
—Janet H. Cho
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Gaming Company Roblox Hits $38 Billion Market Cap on Its Public Debut
The Silicon Valley children’s game company Roblox saw its market value surge nearly 30% in its first day of trading on the New York Stock Exchange.
- Valued at $29.5 billion after a private funding round in January, the company saw its value soar to $38 billion Wednesday. Shares opened at $64.75 and traded as high as $75 apiece before closing at $69.50.
- Roblox went public through a direct listing, which does not involve underwriters and enables existing shareholders to sell stock without a holding period. Tech firms Palantir, Slack and Spotify all used the same process.
- Cathie Wood was among the investors snatching up the stock yesterday. The ARK Next Generation Internet ETF bought more than 500,000 shares of Roblox worth about $36 million at Wednesday’s close, according to trading data posted on ARK’s website.
- The San Mateo, Calif. company makes an online gaming platform that players can use to create multiplayer games. The company reported more than 32 million daily active users in 2020, half of whom are under age 13. It lost $253 million on $924 million in revenue in 2020.
What’s Next: The $175 billion global gaming sector is poised to reach $300 billion in sales by 2035. To put that in context, “that’s larger than the Hollywood movie and film industry,” Pedro Palandrani, a research analyst at Global X, told Barron’s.
—Anita Hamilton
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Vail Resorts Extends Ski Season
Nearly a year ago, the pandemic cut short the ski season as Vail Resorts closed its North American mountains. This time around, Vail is extending the season.
- Vail said earlier this week that resorts would stay open to mid-April at Beaver Creek Resort, Keystone Resort and Vail Mountain Resort. The company expects Breckenridge Ski Resort to operate through Memorial Day.
- Shares of Vail, which operates 37 resorts in 15 U.S. states and three other countries, have bounced back from April 2020 lows of about $131. At about $305.19, the stock has almost doubled in the past 12 months.
- Though some analysts were worried the season would be cut short due to Covid-19 cases, a mix of capacity limits, mask mandates, and online reservations have kept lifts running.
What’s Next: Limited international travel, dining and ancillary services like lessons may weigh on Vail’s near-term profits. The company reports fiscal second-quarter results today after the market closes, and analysts forecast sales down 30% year-over-year.
—Connor Smith
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Democrats Want Biden’s Infrastructure Plan Signed Into Law by September
Senators are already working on President Joe Biden’s next legislative priority, a major transportation package at the heart of Biden’s “Build Back Better” plan, with the aim of getting the entire bill passed with Republican support by the end of September.
- Sen. Tom Carper (D., Del.), who heads the Environment and Public Works panel, told reporters Wednesday that he is confident Democrats can get at least 10 Republicans to sign on to the proposal, which would enable them to pass it without resorting to budget reconciliation.
- The bill, which is expected to cost at least $2 trillion, would modernize the nation’s infrastructure while creating millions of manufacturing and clean energy jobs to “rebuild our roads, our bridges, our ports, and to make them more climate resilient,” Biden said shortly after taking office in January.
- Although infrastructure reform has bipartisan support, the specifics are up for debate. Take clean energy, which Sen. Shelley Moore Capito (R. W.Va.) said Wednesday “isn’t just wind and solar power,” adding that it includes everything from low-carbon natural gas to “electricity generated conventionally from fuels like coal with innovative technologies.”
- Earlier this month, The American Society of Civil Engineers gave the nation’s infrastructure a grade of C-, saying improvements would cost $2.59 trillion over the next 10 years. A group of Democratic senators asked Biden to include recurring direct payments and automatically-extended unemployment benefits in the bill.
What’s Next: Carper has asked for input from governors and their transportation departments by March 19, with the aim of having the proposal clear the Environment and Public Works committee by the end of May. Sen. Joe Manchin (D., W.Va.) has said he will only support the bill if it’s paid for by tax increases.
—Janet H. Cho
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Rolls-Royce Hopes $5.6 Billion 2020 Loss Leaves “the Worst Behind”
The engine-maker and supplier of parts to the airline industry announced a worse-than-expected £4 billion ($5.6 billion) loss for 2020, but said it is still confident it can turn cash positive in the second half of this year, provided air travel picks up as forecast.
- Rolls-Royce has been hit hard by the unprecedented slowdown of air travel due to the coronavirus pandemic, as a big chunk of its revenue is indexed on the flying time of the planes it equips and services.
- Aircraft with the group’s engines last year only flew 43% of the time they flew in 2019, and Rolls-Royce expects that proportion to only rise to 55% this year.
- “We think that the worst is well behind us,” CEO Warren East said Thursday in a call with reporters.
- He added that if planes with Rolls-Royce engines flew 80% of their 2019 airtime next year, the company would turn cash positive in 2022 to the tune of £750 million.
- Rolls-Royce restructured its balance sheet with more than £7 billion of debt and equity last fall, and East on Thursday expressed confidence that it would be enough to see the company through the current crisis, even if it takes longer than forecast for the airline and travel industries to recover.
What’s Next: Investors focused on the hopeful tone of East’s presentation and shares rose nearly 2% in early trading in an overall stable London market. But the amount of the loss, way above the £3 billion expected by analysts, shows the extent of the damage that the air travel slump has brought to related industries.
—Pierre Briançon
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How can lenders increase the Black homeownership rate to 60% by 2040? Researchers at the National Community Reinvestment Coalition have an answer.
There has never been a time in America’s history where a majority of Black Americans were homeowners.
In the second quarter of 2019, the Black homeownership rate dropped to 40.6%, down 7 percentage points from roughly a decade earlier. Since then, the homeownership rate among Black Americans has improved. Still, for more than 100 years, a racial homeownership gap ranging between 20% and 30% has existed between Black and white Americans.
And over the past year, matters have gotten worse for Black Americans. Research has shown that layoffs amid the Covid-19 pandemic were more likely to cause housing instability among Black and Latino workers than among white workers. People of color were far more likely than their white peers to face challenges making their monthly rent payments throughout the coronavirus emergency.
Owning a home is one of the main drivers of wealth in this country, particularly across generations, which makes increasing Black homeownership a critical goal in addressing the overarching racial wealth gap. A new report from the National Community Reinvestment Coalition calls for setting a goal of 60% Black homeownership over the next 20 years.
As part of MarketWatch’s Value Gap series, MarketWatch spoke with Dedrick Asante-Muhammad, chief of race, wealth and community at the National Community Reinvestment Coalition, and Joshua Devine, the organization’s director of racial economic equality, to gain insight on what factors have contributed to the lower rates of homeownership among Black Americans and what policies could address them.
Read more here.
—Jacob Passy
***
—Newsletter edited by Anita Hamilton, Stacy Ozol, Mary Romano, Ben Levisohn, Matt Bemer
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