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Meme stocks are all the rage, but inflation data is far more important for the market. Just don’t expect one reading to answer all the market’s questions.
May inflation data is due today, and investors would love for prices to rise at a slower pace than they did in April. That didn’t happen. But another blowout reading won’t doom stocks.
That wasn’t the case last time. Prices rose 4.2% year over year in April, higher than economists predicted and the highest level since 2008. The
dropped 2.1% the day the data was released, and the S&P hasn’t been able to eclipse its May 7 high since.
Today, economists predicted prices rose 4.6% year over year in May. Expectations always matter. Coming in below that level would have been a positive for stocks. But prices rose 5% year over year. U.S. stock futures, however, aren’t doing much after the inflation report.
May is in the past. Prices of some key commodities are starting to drop, which will help inflation readings in coming months. Steel, lumber, corn, copper, and aluminum prices are off roughly 12%, on average, from May peaks. Lumber is down more than 30%.
The worst outcome for stocks would be higher-than-expected inflation, even as commodity prices drop, a sign that higher prices are here to stay.
And no single report can tell us that.
—Al Root
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GameStop Taps Amazon Executives for CEO, Finance Chief
answered one of the key questions that had been puzzling investors, naming a new chief executive and finance chief as it disclosed its results for the fiscal first quarter on Wednesday.
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Matt Furlong, who oversaw
Australia business, starts as CEO on June 21. Mike Recupero, who was most recently Amazon’s chief financial officer for the North American Consumer business, starts as CFO on July 12.
- GameStop reported a fiscal first-quarter adjusted net loss of 45 cents per share, beating consensus estimates for a loss of 82 cents a share, according to FactSet. Sales of $1.28 billion exceeded estimates for $1.16 billion. The stock fell 7.1% to $281.
- Earlier on Wednesday, GameStop’s new Chairman Ryan Cohen addressed shareholders directly for the first time during the videogame retailer’s annual meeting, but the Chewy co-founder declined to lay out a detailed plan for a turnaround.
What’s Next: “We have a lot of work in front of us and it will take time,” Cohen told shareholders. “We’re trying to do something that nobody in the retail space has ever done. But we believe we’re putting the right pieces in place and we have clear goals: delighting customers and driving shareholder value for the long-term.”
—Connor Smith
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Securities Watchdog to Take a Closer Look at Market Function
The Securities and Exchange Commission is undertaking a broad review of U.S. stock markets, including taking a closer look at the pricing incentives brokers and exchanges pay to attract orders and whether markets function in a way that benefits regular investors.
- The SEC may consider potential rule changes related to how exchanges and brokers price shares, SEC Chairman Gary Gensler said at an investor conference on Wednesday.
- Gensler has been a critic of a practice where trading sites sell their customer orders to Wall Street firms for execution. The SEC is also looking at the rebates that exchanges pay trading firms for orders, The Wall Street Journal reported.
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Frenzied trading in stocks like GameStop and
this year prompted the SEC to take a closer look at the online brokerage industry’s so-called payment-for-order flow business model.
- GameStop said Wednesday it received a request from the SEC to voluntarily make documents about trading activity available to the agency, adding it would cooperate fully.
What’s Next: Gensler, a former Goldman Sachs partner and Obama administration official who took over the agency in April, told a conference Wednesday he is focused on “whether our equity markets are as efficient as they could be.”
—Liz Moyer
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Biden Reverses Trump Orders That Tried to Ban TikTok
President Joe Biden signed an executive order requiring that foreign-controlled apps be evaluated as potential security risks, reversing an attempt by former President Donald Trump to block popular apps like Chinese-owned TikTok and
- Biden’s order directs the Commerce Department to evaluate apps that could present “an undue or unacceptable risk” to national security, especially personally identifiable data and genetic information.
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TikTok, owned by Beijing-based ByteDance, has an estimated 100 million users in the U.S., and WeChat, owned by Shenzhen-based
is popular in China. TikTok declined to comment, and WeChat could not be reached, The Wall Street Journal reported.
- Trump tried to shut down TikTok in the U.S. if it wasn’t put under control of U.S. owners, but federal courts blocked the orders from taking effect, and the Biden administration shelved the idea.
- Biden recently banned U.S. investment in 59 Chinese defense and surveillance technology firms that might “undermine the security or values of the U.S. and allies,” and has sought to make supply chains more independent of China and other countries.
What’s Next: One of Biden’s goals during his meetings with the Group of Seven and NATO countries this weekend is to rally allies against the threat of rising authoritarianism in China and other countries, The Wall Street Journal reported.
—Janet H. Cho
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U.S. to Donate 500 Million Doses of Covid-19 Vaccine Overseas
President Biden is expected to announce at the Group of Seven summit on Thursday that the U.S. will donate 500 million doses of
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s coronavirus vaccine to other countries, including 92 lower-income nations and the African Union, via the Covax initiative for equitable vaccine distribution.
- The U.S. has partially vaccinated 51% of its population, and is donating 80 million doses by the end of June, but critics have called its international efforts slow and inadequate. Of the additional doses, 200 million doses will be donated this year, and 300 million in 2022.
- In Africa, only 0.1% of Nigeria’s and 0.8% of South Africa’s population is fully vaccinated, and at least five countries have not administered a single shot, the AP reported. The continent of 1.3 billion people is short by 700 million doses, the World Health Organization estimates.
- WHO Director-General Dr. Tedros Adhanom Ghebreyesus said vaccine inequality is creating a “two-track pandemic.” Of more than 2 billion vaccine doses administered worldwide, wealthier countries have given 44% of the doses, while low-income countries administered only 0.4%.
- Dr. Ashish Jha, dean of Brown University’s School of Public Health, wrote that the U.S. could easily vaccinate the estimated 30 million to 40 million global healthcare workers who haven’t received doses, and “transform the dynamics of infection without jeopardizing its own recovery.”
What’s Next: Vaccine diplomacy is expected to be a top issue at the G-7 gathering as India and Brazil struggle with outbreaks. British Prime Minister Boris Johnson has called on the group of leaders to commit to vaccinating the entire world by the end of 2022.
—Janet H. Cho
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Biden to Warn Boris Johnson Not to Mess With the EU Over Northern Ireland
President Biden is expected to tell U.K. Prime Minister Boris Johnson at a meeting today in Cornwall that the U.K. should settle its post-Brexit dispute with the EU on Northern Ireland, or risk a flare up of intra-Irish tensions that would imperil the 1998 Good Friday agreement.
- According to the Times of London, the U.S. sent its top diplomat in London to read to Brexit minister David Frost the text of a “demarche”—a rare diplomatic reprimand—criticizing London’s stance on border checks between Great Britain and Northern Ireland.
- Frost and European Commissioner Maros Sefcovic failed to come to an agreement Wednesday after four hours of talks triggered by the U.K.’s insistence to amend the “Protocol on Ireland” signed by the two sides in December, whereby London agreed to leave Northern Ireland in the European single market.
- London has threatened to take unilateral steps to overcome the strict controls mandated by the treaty, notably on meat and agricultural products imported from Britain into Northern Ireland, and the EU has warned it would then retaliate with tariffs and other measures.
What’s Next: Biden had expressed similar feelings during his campaign, and he now drives the point home more forcefully. His warning may be seen as meddling by some hardcore Brexiteers, but it could also be the trigger that pushes Johnson to tone down the rhetoric and seek a compromise with the EU.
—Pierre Briançon
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A contractor was building a new house for us in Georgia, but abruptly canceled because construction materials have shot up in price. We lost months of house hunting waiting for a house that will never be built. What’s our recourse, and where can we move to now?
The cost of materials has gone up considerably for home builders in recent months. The price of the lumber used to frame homes has risen more than 300% since April of last year, according to the National Association of Home Builders. As a result, the price of a new home has increased by around $36,000 on average. And lumber isn’t the only supply in short supply—to say nothing of the labor shortages that contractors are facing to get work done.
Builders’ backlogs are growing because of all this, and some have even opted to pour the foundations for homes and leave them there for weeks until they can get a hold of lumber to continue building.
Anecdotally, some builders have taken the extreme step of canceling contracts with prospective clients like yours did, according to Robert Dietz, chief economist at the National Association of Home Builders.
“We’re certainly hearing more anecdotes of that occurring,” Dietz told me. “About half of all builders right now are using some form of price escalation clauses, where the buyer is sharing in the higher costs.”
Home prices have certainly risen a fair amount since you signed your contract—nationally, the median listing price for a home as of May was $380,000, up from $346,000 in January, according to Realtor.com. That’s a nearly 10% jump in the span of four months.
Your best bet may be to wait and see if more homes come on the market. Data from Realtor.com has shown growth in the number of home listings. Should that trend continue, you may have more options to choose from, and might not need to spend as much to score a deal.
Read more here.
—Jacob Passy
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—Newsletter edited by Liz Moyer, Stacy Ozol, Mary Romano, Matt Bemer, Ben Levisohn
