CNN Business/Paul R. La Monica
The 2021 stock market looks an awful lot like 2000. That’s bad news for Big Tech
The recent pullback in tech stocks followed a spectacular surge at the start of the year. That should have longtime market observers worried about the similarities between now and the height of the dot-com bubble in 2000.
For all those Millennial Robinhood traders who were just kids 20 years ago and are relative newbies to the market, the recent volatility should serve as a lesson. For all the times that people say that “this time is different” that’s usually a telltale sign that it actually isn’t.
The rise of meme stocks like GameStop (GME), the flurry of initial public offerings and special purpose acquisition company mergers as well as the stunning runs in Tesla (TSLA) and bitcoin (XBT) are nothing more than another case of the forces of market speculation running amok.
Investors are buying companies with significant challenges and ignoring the weak fundamentals. GameStop isn’t the only “meme” stock out there. Movie theater chain AMC (AMC), clothing retailer Express (EXPR) and headphone maker Koss (KOSS) have been soaring.
And all the talk about “stonks” and cryptocurrencies on Reddit and in TikTok videos isn’t really that much different than people chattering about how high they thought Qualcomm (QCOM) and Cisco (CSCO) were going to go in the late 1990s on Raging Bull and Yahoo Finance message boards.
There are numerous other echoes to the tech craziness of the late 1990s.
Inflation may have been warming up in February, but it could be hot by May
Inflation is just warming up, but by late spring it could get downright hot, even if temporarily.
February’s consumer price index — a measure of inflation — is expected to be up moderately when it is released Wednesday at 8:30 a.m. ET. By May, the pace of headline consumer inflation on an annualized basis could be double February’s pace.
The debate in the market is whether the spike is transitory as the Fed and many economists say, or the start of a bigger trend.
“The big question to ask is will that level of heat we’re going to see by May be sustained or not?” said Barclays senior U.S. economist Blerina Uruci.
“I’m in the camp of people who think probably not, but there are some who think the opposite,” she said.
Economists expect the consumer price index rose 0.4% in February, or up 1.7% from a year ago. That compares to a 0.3% increase in January, and a 1.4% rise on an annual basis.
When energy and food are excluded, the core CPI is expected to be up 0.1% in February, or an annual pace of 1.3%.
Signs of inflation are already showing up in the goods side of the economy, and Uruci expects that to spread to the service side.
Consumers will soon be armed with another stimulus check. Pent-up demand should start sending up prices on things like airfare, public transportation, hotels, dining out, and rental cars as more people feel comfortable leaving their homes.
CNBC/Yen Nee Lee
China’s uneven recovery from Covid has been ‘understated,’ says S&P economist
China’s services sector has been slow to rebound from the Covid-19 pandemic — and that’s one aspect of its economic recovery that’s been downplayed, according to S&P Global Ratings’ Asia-Pacific chief economist.
China was the only major economy that grew last year despite challenges posed by the Covid-19 pandemic. It reported a growth of 2.3% in 2020, but the performance across sectors was uneven with exports staying resilient while consumption has continued to lag.
“This is one of the most understated aspect of China’s recovery, the fact that it is so unbalanced,” Shaun Roache told CNBC’s “Squawk Box Asia” on Wednesday.
“China’s Covid strategy has been successful from a health perspective, but it is imposing a long-run economic cost in the sense that … we’re seeing the services sector come back much more slowly than people thought. That’s depressing jobs and that in turn is depressing consumer confidence,” he added.
Roache pointed out that Chinese retail sales have not recovered to levels seen before the pandemic. For most of 2019, China reported monthly retail sales growth of above 8% year-on-year. But sales have been contracting every month since March last year, as Covid-19 forced large swathes of the economy to shut down.