Stocks are bouncing back big time Monday, with big tech and big travel poised for the biggest gains. This is what happens when everything comes up roses following a brutal week of selling.
Investors can thank two headlines for the better tone. First, Johnson & Johnson’s vaccine, which requires just one dose and can be stored without extreme refrigeration, has been given emergency use authorization. Second, bond yields are falling.
The vaccine was big news for travel stocks. American Airlines shares are up almost 4% in premarket trading. Stock in cruise operator Carnival is up almost 6%. More vaccinations should mean more travel.
The drop in bond yields—the 10-year Treasury has fallen 0.02 percentage point to 1.43%—is great news for big tech. Higher yields cause investors to question the sky-high valuations of growth stocks, and that’s what investors did last week.
The 10 largest stocks in the Nasdaq, including Apple, Amazon.com and Tesla, lost more than $660 billion in value this past week. The Nasdaq is up 1.2% in premarket trading Monday.
Whether tech’s big rebound continues remains to be seen. Those stocks can be hurt by optimism about the U.S. economy, and investors will get releases on housing, manufacturing, and the job market this week.
A full reopening is still months away, but if the data are good, don’t be surprised by renewed tech weakness.
—Al Root
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Fauci Urges Americans to Take Johnson & Johnson Vaccine Despite Concerns
Dr. Anthony Fauci, President Joe Biden’s chief medical advisor, urged Americans to take the newly approved Johnson & Johnson coronavirus vaccine, while cautioning that “we’re not victorious yet” against the virus despite rapidly falling infection rates and three approved vaccines in the U.S.
- “If you go to a place and you have J&J, and that’s the one that’s available now, I would take it. I personally would do the same thing,” Fauci said on NBC’s “Meet the Press.” He added, “It’s not the weaker vaccine. They are all three really good vaccines.”
- The J&J vaccine was 66% effective overall compared with Pfizer’s 95% and Moderna’s 94% in clinical trials. The lower efficacy rate has led to concerns that some people will decline or defer getting vaccinated if they are only offered the J&J vaccine.
- A key difference in the trials, however, is that the Pfizer and Moderna drugs were tested before newer, more contagious variants were widespread. “They were not compared head-to-head. They were compared under different circumstances,” Dr. Fauci said.
- Meanwhile, the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices has approved the J&J vaccine for widespread use. The vaccine will arrive in states and vaccination sites as soon as Tuesday, the Biden administration said.
What’s Next: J&J has promised to ship 3.9 million doses this week—including 800,000 doses sent directly to pharmacies—as part of its 20 million total this month. Combined with the expected Pfizer and Moderna doses, that gives the U.S. enough vaccine to inoculate 130 million adults by the end of March.
—Janet H. Cho
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Senate Democrats to Drop Minimum Wage From Relief Package
After last week’s ruling from the Senate parliamentarian blocked lawmakers from passing President Joe Biden’s $15 minimum wage proposal through the budget reconciliation process, Democrats are dropping plans to raise the federal minimum wage in the Covid-19 relief bill.
- Senate Democrats will drop a plan to introduce an amendment to the Senate stimulus bill that would have used tax penalties and incentives to raise wages for the lowest-paid workers at big companies.
- Lawmakers are aiming to the pass the relief package before federal unemployment benefits run out on March 14. That was too tight of a time frame to try to use the tax code to raise wages, according to sources The Wall Street Journal spoke with.
- Raising the minimum wage to $15 was a priority for the progressive wing of the Democratic Party, led by Senate Budget Committee chair Bernie Sanders (I., Vt.) who proposed the amendment. Biden press secretary Jen Psaki on Sunday told Fox News that President Biden “supports exactly what Sen. Sanders does, which is increasing the minimum wage for the American people.”
What’s Next: The president has also voiced support for a stand-alone bill on minimum wage. While he supports a $15 federal minimum wage, some members of the party have not yet said whether they think it’s the right level. Passing any change to the federal minimum wage would require Senate Democrats to reach an agreement on that.
—Barron’s staff
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Danone to Sell Chinese Unit in Bid to Soothe Activist Investors
Danone said Sunday it would sell its stake in China Mengniu Dairy Co. and return the proceeds to shareholders. The Danone board is due to meet today to debate a response to increasing pressure from activist funds.
- The maker of Evian and Volvic bottled water and Actimel yogurt will first convert its indirect stake in Mengniu into a holding company detaining 9.8% of the Chinese group, then divest the stake, pending regulatory approval, before returning the proceeds to investors through share buybacks.
- Danone’s Mengniu stake is worth about $2 billion at current market prices.
- Group Chairman and Chief Executive Officer Emmanuel Faber has been facing calls to give up one of his roles from activist funds Artisan Partners and BlueBell Capital Partners.
- The funds also ask for a bigger divestment program, after the French food company lost a fourth of its market value last year.
What’s Next: Faber has said he would be ready to agree on a split of the chairman and CEO positions, and the divided Danone board will have to decide today how far it goes toward addressing the activists’ concerns.
—Pierre Briançon
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Iran Rejects EU Offer to Resume Nuclear Talks With U.S.
An Iranian government official said Sunday that Tehran would not accept to resume talks to salvage a 2015 nuclear deal with world powers that former President Donald Trump denounced, demanding the U.S. first lift economic and trade sanctions against the country.
- “The U.S. should end its illegal and unilateral sanctions and return to its JCPOA commitments,” a foreign ministry spokesman quoted by The Wall Street Journal said. The Joint Comprehensive Plan of Action is the formal name of the 2015 deal.
- President Joe Biden said Wednesday that the U.S. was ready for talks on how both sides could resume compliance with the agreement.
- The new U.S. administration has insisted that Iran should first comply with the agreement, which it has gradually breached in the last two years, before formal, direct talks can happen.
What’s Next: Iran’s decision is hardly the end of the diplomatic story. A White House spokesperson said Washington was “disappointed” by Iran’s decision but remained “ready to reengage in meaningful diplomacy to achieve a mutual return to compliance” with the 2015 accord.
—Pierre Briançon
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Why Utilities Are a Smart Way to Get In on the Green Energy Boom
The $500 billion utility sector has badly trailed the overall stock market lately, but electric utilities are at the center of a seismic shift away from coal—and utility company stocks and funds are a cheap way to plug into this critically important transition.
- By the next decade, clean power sources such as wind and solar are projected to provide 39% of the U.S. utility industry’s generating capacity, versus 13% today, while coal is forecast to account for just 3%, versus 19% now, according to Morgan Stanley analyst Stephen Byrd.
- Utilities are likely to have annual earnings growth of 5% to 8%, for a total of 10% total returns. Those results will be driven by heavy investment in renewable-energy sources, batteries and other power-storage devices, transmission lines, and investments to harden the electrical grid driving that growth.
- “Utilities are a stealth green-energy play, with much lower valuations than most alternative-energy providers and less risk,” Hugh Wynne, co-head of utilities and renewable energy research at SSR, an independent research consulting firm, told Barron’s.
What’s Next: Rising returns for utilities will make them competitive with the S&P 500 and much better than those in the bond market, where Treasuries and municipals yield just 1% to 2%. Learn more about specific investments to consider here.
—Andrew Bary
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