It’s been another busy week with gains and stocks seem to be off to a good start.
Revenues aside, the expectation that new stimulus packages will warm the US economy has fueled optimism. Treasury Secretary Janet Yellen said President Joe Biden’s $ 1.9 trillion contingency plan could generate enough growth to restore full employment next year.
As further signs of optimism on the recovery, Brent crude oil futures BRN00,
hit $ 60 a barrel for the first time in more than a year on Monday. The return on the US 10-year Treasury TMUBMUSD10Y,
rose to 1.20%.
The Reddit powered GameStop GME,
The frenzy seems to have cooled off after stocks in the badly shorted video game retailer plummeted 78% last week while skyrocketing 1,737% in the past three weeks.
In our call of the day, Deutsche Bank DB,
strategists said the stocks with the most short positions had already fared better since March last year, long before users on Reddit’s WallStreetBets forum hit the mark.
They said that while short stocks tend to do better during broad market rallies, the magnitude of the current rally was “off the chart”.
Since the market bottomed in March, the stocks with the most short positions – defined as the top 10% of short-term interest rates as a percentage of market capitalization – have risen 245%, outperforming the Russell 3000 Index RUA,
by 147 percentage points.
Compustat, Haver, Deutsche Bank Asset Allocation
Led by chief strategist Binky Chadha, they noted that half of that outperformance came before the US election in November and the positive vaccine developments.
They said the outperformance could not be explained by the broad market or ‘all rally’, nor could it be fully attributed to the retail buying trend, which has accelerated outperformance since November.
“We see it as a result of the fact that short positions have remained highly concentrated in stocks with low profitability and growth, especially in pandemic sectors, even as the unfolding economic recovery has improved the outlook for these companies,” they said.
Despite the recovery starting to unfold, shorts are still largely aimed at pandemic-affected industries, they noted, adding that there was skepticism about a strong recovery. “Nine months after the shortest recession ended in our view, the consensus has continuously lagged behind the actual improvement of the macro data.”
They also said that despite a third consecutive quarter of “ massive ” record earnings for S&P 500 companies, the consensus for 2021 has crept only slightly higher and well below its own forecasts.
The markets
US Equity Futures YM00,
ES00,
NQ00,
be higher for the open at the start of another busy week of earnings. European stocks also made gains during early trading, despite concerns about the spread of new variants of the coronavirus causing COVID-19. Asian markets were largely higher overnight on the back of growing optimism about the global economic recovery.
The buzz
The price of Bitcoin BTCUSD,
rose to $ 44,088 and hit new all-time high after Tesla TSLA,
said it acquired $ 1.5 billion worth of cryptocurrency in January and could accept the digital asset for payment in the future.
Hyundai Motor Co. 005380,
said on Sunday it is not in talks with technology giant Apple AAPL,
to develop a self-driving electric car, contrary to several reports.
Social media platform Twitter TWTR,
According to FactSet analysts, it will record its second quarter of $ 1 billion when it reports earnings on Tuesday.
The Biden administration will announce this week that it will again agree with the United Nations Human Rights Council that former President Donald Trump withdrew nearly three years ago, US officials said Sunday.
Apple chip supplier Dialog Semiconductor DLG,
0OLN,
has been picked up by Japan’s Renesas Electronics in a deal worth € 4.9 billion ($ 5.9 billion).
The Tampa Bay Buccaneers dominated the Kansas City Chiefs when Tom Brady secured his seventh Super Bowl title.
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