* Nasdaq, S&P 500 in the red; Dow advances
* Utilities lead sector losses; energy, financials lead
gains
* Euro STOXX 600 index flat
* Dlr, crude up; gold falls; U.S. 10-Yr Treasury yield
~1.48%
March 3 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
UK BUDGET: SOROS PITCHES PERPETUAL BONDS TO SUNAK (1202
EST/1702 GMT)
While punters are debating whether Sunak's budget has the
right balance between propping up Britain's economy and starting
to fill the huge hole in public finances, financier George Soros
took up the opportunity to pitch his idea of launching perpetual
bonds again.
"Their issuing, in the context of COVID-19 and the economic
damage the pandemic has caused, looks eminently reasonable by
historical standards", he said in a statement.
"Issuing them in a climate where interest rates could hardly
fall any lower has the advantage of locking in the current rates
in perpetuity," he explained, adding that the "yield would be
little more than 1%".
Soros pitched the idea to France's Macron in an editorial in
French business daily Les Echos on Tuesday but had already urged
the European Union to embrace perpetual bonds in May.
Soros believes countries such as France, Sweden, Finland,
the Netherlands or Denmark could also benefit, hoping "Britain
could show them the way."
Here's a story from last May:
George Soros says EU may not survive coronavirus crisis
And here's Wednesday's UK budget story:
UK's Sunak extends COVID rescue plan but moves to bring in
more tax
(Julien Ponthus and Ritvik Carvalho)
*****
HIGH ANXIETY IN MORTGAGE SECTOR AFTER ROCKET BLASTS OFF
(1130 EST/1630 GMT)
The word "mortgage" is derived from the Old French term for
a pledge until death. The over 70% thrust in shares of mortgage
lender Rocket Companies perhaps left some short sellers
in critical condition, but more broadly, there is both cause for
optimism and worry in a sector that has been an overall winner
through the COVID-19 pandemic.
"There is a lot of anxiety amongst investors tied
specifically to rising rates and rising mortgage rates relative
to the lows seen last year," Wedbush Managing Director Henry
Coffey tells Reuters.
Fundamentally, Coffey says 2021 could possibly be the
second-largest mortgage market on record due to very high demand
for new and existing homes. In the mortgage sector, gain on sale
margins are under pressure, he points out, given recent trends
in the interest rate market and primary/secondary spreads.
That said, Coffey believes there's still a lot of value in
the sector, pointing to UWM Holdings Corp, whose stock
surged more than 30% in today's session.
However, regarding Rocket's drop on Wednesday, he says there
are only so many parties willing to sustain its share price at
these levels, adding "one has to assume a significant amount of
profit taking."
RKT shares, last down about 20%, are threatening to snap a
3-session winning streak. This as CEO Jay Farner presented at a
Morgan Stanley TMT virtual conference this morning.
Last Thursday, RKT provided an encouraging first-quarter
forecast and announced a special dividend of $1.11 per share.
(Aaron Saldanha, Lance Tupper)
*****
ADP, SERVICES PMI: WAITING FOR THE THAW (1102 EST/1602 GMT)
Wednesday brought with it data that showed a limping labor
market and a services sector losing its stamina as vaccines
battle new coronavirus variants and lawmakers battle each other
over the size of the next round of fiscal aid.
Private employers added 117,000 jobs last month
according to payrolls processor ADP, a deceleration from
January's more robust 195,000.
The number came in below consensus, and is 77,000 fewer
private job additions than analysts expect from the Labor
Department's more comprehensive employment report due on Friday.
"We expect the official payroll number to be stronger than
ADP, but we're pulling our estimate down to 300K from 400K,"
writes Ian Shepherdson, chief economist at Pantheon
Macroeconomics. "March likely will be much better, given the
spate of reopening announcements across the country in recent
days, though the sustainability of these reopenings is
contingent on the vaccine rollout keeping ahead of the spread of
the more infectious (COVID variants)."
Bruising layoffs have persisted since the initial outbreak
of the pandemic, with weekly new claims for unemployment
benefits remaining stubbornly above 665,000 - the worst week of
the global financial recession - for nearly a year.
The labor market has since stumbled through a halting
recovery, with lower-wage, customer-facing services jobs
returning at a disproportionately slower pace.
Speaking of which, the recovery of the U.S. services sector
unexpectedly lost some momentum in February.
The Institute for Supply Management's (ISM)
non-manufacturing purchasing managers' index (PMI)
surprised economists by dropping to 55.3 as new orders plunged
and the employment gauge edged lower.
A PMI number over 50 signifies increased activity over the
prior month.
But supply chain bottlenecks have helped push prices to
their fastest expansion in over 12 years, echoing broader
concerns over a looming inflation spike.
"Respondents are mostly optimistic about business recovery
and the economy," writes Anthony Nieves, chair of ISM's Services
Survey Committee. "Production-capacity constraints, material
shortages and challenges in logistics and human resources are
impacting the supply chain."
Indeed, ISM's survey respondents expressed concerns over
supply and prices:
"Suppliers are taking the opportunity with the
commodity-price increases in the last few months to propose
price increases that are above and beyond normal expectations,
causing significant concern," (accommodation/food).
"Supplier deliveries continue to be an issue as well as
lead-times," (retail).
"We are seeing an ongoing influx of price increases due to
raw-material shortages, labor shortages, and transportation
delays," (wholesale).
"We were excited [in January], when orders and activity were
increasing. Now, they are not receding, but they’re flat month
over month. That’s not the rebound we were hoping for,"
(professional/scientific/technical).
Global financial information firm IHS Markit also released
its take on February services PMI, coming in at
59.8, a 0.9-point monthly acceleration.
Although consumer-facing sectors, notably hospitality,
travel, and tourism, continue to be adversely affected by
COVID-19 restrictions, and will be for some time to come, other
parts of the economy are springing back into life," says Chris
Williamson, chief business economist at Markit. "A wide variety
of costs are rising, however, putting additional pressure on
companies across the board."
ISM and Markit PMIs differ in the weight they give to the
various subcomponents.
The chart below shows how widely the two PMI reports have
differed in recent months:
Meanwhile, in the housing sector, demand for loans to
purchase homes and refinance existing loans
both crept higher last week despite a jump in
mortgage rates, according to the Mortgage Bankers Association
(MBA).
The average 30-year fixed contract rate jumped 15
basis points to 3.23%, the highest level since last July. So how
to explain the overall 0.5% uptick in mortgage demand?
As Nancy Vanden Houten, lead economist at Oxford Economics
points out, the previous week's drop was "due to both the severe
weather in Texas and what appeared to be faulty seasonal factors
to account for the Presidents' Day holiday."
The major stock indexes were mixed as market participants
appeared to be catching their breath ahead of U.S. Federal
Reserve Chair Jerome Powell's expected remarks on Thursday and
Friday's hotly anticipated February jobs report.
(Stephen Culp)
*****
NASDAQ FALLS 1% EARLY, TECH WEIGHS (1005 EST/1505 GMT)
U.S. stocks were mostly lower in early New York trading on
Wednesday, led by a 1% fall in Nasdaq, which was down
1%.
Private employment data for February dampened optimism over
a quick economic rebound. U.S. private employers hired fewer
workers than expected last month.
A rise in Treasury yields added to recent inflation and
valuation worries, although yields on 10-year notes
remained below last week's peak.
Utilities, down 1.6%, led sector losses, followed
by S&P 500 technology, down 1.5%. Tech was the biggest
weight on the S&P 500.
Here is the early market snapshot:
(Caroline Valetkevitch)
*****
HINDENBURG OMEN: BUZZING THE TOWER (0900 EST/1400 GMT)
In the wake of recent market gyrations, especially within
the Nasdaq , a "Hindenburg Omen" has done
its first fly-by in more than a year.
The Hindenburg Omen is a composite indicator that typically
appears in an uptrend and highlights when the market has become
internally fractured, and therefore at risk of significant
near-term instability.
Among its inputs are data on advancing and declining issues
as well as new highs and new lows .
The Omen has been criticized for giving off too many false
signals. Additionally, there are slightly different
constructions of it, and there is disagreement on what
thresholds should be used to trigger an alert.
That said, using Refinitiv data, a more stringent
construction of the indicator shows a signal popped up Tuesday
on the Nasdaq. The last signal developed 12 trading days ahead
of the Nasdaq's Feb. 19, 2020 top and what would then prove to
be a 33% swoon in the tech-laden index into its March trough.
A more reliable development may be a swarm, or cluster, of
signals. Last year, the Nasdaq flashed on Jan. 30 and 31, while
the NYSE Composite saw indications 4 times between Jan.
27 and Feb. 3. The NYA had actually topped on Jan. 17, and then
put in a secondary high on Feb. 12. It ultimately collapsed as
much as 39% into its March low.
No signal occurred on the NYSE on Tuesday. Its last
occurrence was the Feb. 3, 2020 date.
Here are charts of the IXIC and NYA since 2007 with the Omen
flashes in red:
(Terence Gabriel)
*****
FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE:
(Terence Gabriel and Lance Tupper are Reuters market analysts.
The views expressed are their own)