Business Updates: S&P 500 Breaks 4,000 for First Time
By: Ella Koeze.Data delayed at least 15 minutes.Source: FactSet
A rally in big technology stocks, a tailwind of economic optimism following the latest big spending plan from the Biden administration and a jump in oil prices all came together on Thursday to lift Wall Street and to lead the S&P 500 index above 4,000 for the first time.
It was a second consecutive day of gains in technology stocks, which had struggled in February and March to keep pace with the rest of the market as investors shifted their focus to companies that stood to gain from the pandemic recovery, such as smaller businesses and manufacturing and industrial firms.
Among the biggest technology companies, Microsoft, which was up more than 2.5 percent, and Alphabet, which was up more than 3 percent, stood out on Thursday. The Nasdaq composite was up more than 1.5 percent, bringing its gain over the past two days to about 3 percent. The broader S&P 500 was up about 1 percent, to about 4,013.
“Round numbers can be big psychological barriers for markets, so breaking 4,000 could provide a confidence boost to stocks in the short term,” said Lule Demmissie, president of online banking and trading firm Ally Invest. “And we think the market has room to run longer term, too.”
Because of their sheer size, the biggest tech companies can influence the direction of the entire market, as they did on Thursday. But the best-performing stocks in the S&P 500 were smaller energy companies. Marathon Oil and Diamondback energy, for example, were up more than 8 percent.
Thier gains came as oil prices rallied. The Organization of the Petroleum Exporting Countries and its allies agreed on Thursday to a gradual increase in output starting in May in a move reflecting optimism about the economy. Increases in oil supply tend to dampen prices, but analysts described the agreement as modest enough not to hurt. West Texas Intermediate, the U.S. benchmark, climbed as much as 3.9 percent to $61.48 a barrel.
The mood in financial markets also has been lifted this week by more signs of economic recovery in the United States and abroad. On Thursday, a measure of manufacturing activity rose to its highest since 1983, the Institute for Supply Management said. A weekly report on unemployment claims showed an uptick in the number of people applying for benefits, but investors will get a more complete picture of the job market on Friday when the employment report for March is released.
Analysts also pointed to President Biden’s $2 trillion infrastructure plan, unveiled on Wednesday, as a tailwind. It includes money for repairing roads and bridges, building affordable housing and caregiving facilities, and expanding access to broadband. And it comes just weeks after the passage of a nearly $2 trillion stimulus bill that could raise consumer spending by sending payments directly to Americans.
Mr. Biden proposed paying for the infrastructure plan with an increase in corporate taxes, but many on Wall Street had already anticipated that.
“Biden’s proposed tax increases have been discussed for months, so few were surprised by their inclusion,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note to clients on Thursday, though he and other analysts did note that Mr. Biden could yet propose other tax increases — including one on capital gains from investments.
On Friday, markets will be closed in the United States, Europe and some other countries for Good Friday.
Eshe Nelson contributed reporting.
The real estate brokerage firm Compass raised $450 million in a scaled-down initial public offering Wednesday night, indicating a waning appetite among investors for quickly growing technology companies that remained unprofitable.
Compass’s offering valued the firm at $7 billion, far less than the $10 billion it had originally sought. The company, which bills itself as a technology platform transforming the real estate industry, is not the only firm that has changed its I.P.O. plans after a tech stock sell-off last month. Intermedia Cloud Communications postponed its offering Wednesday, citing market conditions, and the discount airline Frontier priced its I.P.O. on the low end of its range.
“I think it’s been a challenging market for I.P.O.s over the last few weeks, which you can see in the market conditions,” Robert Reffkin, Compass’s chief executive, said in an interview.
Shares of the company jumped nearly 18 percent in their debut Thursday on the New York Stock Exchange.
Compass, founded in 2012, has raised money from investors including SoftBank Vision Fund, Dragoneer Investment Group and Qatar Investment Authority. It says its goal is to remake the traditional brokerage model by focusing on its two million real estate agents, whom the company calls in its prospectus “remarkably underserved” in both capital and technology.
“There is no company that gives agents everything they need to succeed,” Mr. Reffkin said. He compared Compass to the e-commerce technology company Shopify. If you’re a merchant, he said, “Shopify will give you everything that you need to succeed in one place. We are building the Shopify for real estate agents.”
Mr. Reffkin said that investors should, in turn, value Compass as a technology company. But like many high-flying tech companies, Compass is losing money: In 2019, it lost $388 million on $2.4 billion in sales. Last year, it lost $270 million on $3.7 billion in sales.
“We have a clear path to profitability,” Mr. Reffkin said, adding that he believes it will take years to meet demand for new homes created by people who feel a new freedom to relocate after working remotely during the pandemic. With scale, Compass expects to operate more efficiently, though it does not plan on altering its real estate agent compensation structure as it focuses on narrowing its losses, he said.
With the offering, Mr. Reffkin will also become one of only a handful of Black chief executives in the United States.
“I feel very fortunate to be able to have benefited from so many mentors that have helped me get to where I am today,” Mr. Reffkin said. “I feel like it’s my responsibility to work hard and to create success; that will help pave the way for others.”
An activist investor who pushed for the ouster of Jack Dorsey as Twitter’s chief executive last year will step down from Twitter’s board of directors, signaling an end to the pressure campaign on the social media company.
Twitter announced the change in a regulatory filing on Thursday, adding that the boardroom shift would occur once it had identified a new candidate to fill the role. Elliott Management, the hedge fund that led the campaign, will participate in the search for the candidate.
Early last year, Elliott Management, which has successfully shaken up many companies, quietly amassed a significant stake in Twitter. That culminated in an effort to push Mr. Dorsey out of the company he helped start. Among Elliott’s complaints were that Twitter’s stock price was too sluggish and that Mr. Dorsey was distracted by his leadership of a second company, the financial services firm Square.
Last March, Elliott Management reached a truce with Twitter that allowed Mr. Dorsey to remain. Silver Lake, a big investor in tech companies, invested in Twitter and helped negotiate for Mr. Dorsey. As part of the deal, Jesse Cohn, the Elliott executive who oversaw the Twitter campaign, took a seat on Twitter’s board.
Mr. Cohn will step down once a new independent director is appointed, Twitter said in its filing. Since Mr. Cohn joined the board last year, the company has launched a slew of new products and its stock price has nearly doubled.
Elliott Management and Twitter declined to comment beyond the filing.
The Treasury Department is working with global partners toward a new allocation of $650 billion worth of the International Monetary Fund special drawing rights a reserve boost that is intended to help poor countries combat the pandemic, it said Thursday.
The support for the plan is a reversal of the Trump administration’s stance. Steven Mnuchin, the former Treasury secretary under President Trump, had opposed such allocations as an inefficient way to boost liquidity for poorer nations, because a big chunk of the reserves wind up going to advanced economies.
But Janet L. Yellen, the Treasury secretary, had earlier this year signaled support for the expansion as a way to bolster poorer nations.
“Containing the pandemic across the globe is paramount to a robust economic recovery,” the Treasury said in a release on Thursday. “To this end, Treasury is working with I.M.F. management and other members toward a $650 billion general allocation” of the reserve assets.
Special drawing rights, known as S.D.R.s, are reserve assets whose value is based on a basket of currencies — the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen and the British pound sterling. They can supplement shortfalls in reserves, easy-to-access assets that countries can use to meet their balance of payments, foreign borrowing and foreign exchange needs.
“The global recession has strained central bank foreign exchange reserves in many countries,” the Treasury said in its fact sheet Thursday. The allocation “will help buffer reserves, supporting governments’ efforts to address the health and economic crises.”
The Treasury said expanding the allocation would provide about $21 billion worth of liquidity support to low-income countries and about $212 billion worth of support to other emerging and developing countries, excluding China.
“We are working with our international partners to pursue ways for advanced economies to lend a portion” of their allocations “to support low-income countries,” it said.
The Treasury also stressed the importance of improved transparency as a necessary part of the package, saying it was “working with the I.M.F. and other member countries to maximize the benefits and limit the possible downsides of an allocation by enhancing transparency, accountability and equitable burden sharing.”
The new administration’s approach has raised concerns among some Republicans that the United States would be effectively spending money to help adversaries such as China and Russia — a claim Treasury officials have pushed back on.
The European Central Bank’s chief economist argued on Thursday that fears of a big rise in inflation are overblown, a sign that the people who control interest rates in the eurozone are likely to keep them very low for some time to come.
The comments — by Philip Lane, an influential member of the central bank’s Governing Council whose job includes briefing other members on the economic outlook — are an attempt to calm bond investors who are nervous that the end of the pandemic will lead to high inflation.
Fueling their fears, inflation in the eurozone rose to an annual rate of 1.3 percent in March from 0.9 percent in February, according to official data released on Wednesday, the fastest increase in prices in more than a year.
Market-based interest rates have been rising because investors worry that President Biden’s $2 trillion stimulus program will provoke a broad increase in prices for years to come. The interest rates that prevail on bond markets ripple through the financial system and can make mortgages and other types of borrowing more expensive, creating a drag on economic growth.
Despite big monthly swings in inflation during the last year, the average had been remarkably stable at an annual rate of about 1 percent, Mr. Lane wrote in a blog post on the central bank’s website on Thursday. That is well below the European Central Bank’s target of 2 percent.
“The volatility in inflation over 2020 and 2021 can be attributed to a host of temporary factors that should not affect medium-term inflation dynamics,” Mr. Lane wrote.
That is another way of saying that the European Central Bank is not going to panic about short-lived fluctuations in inflation and put the brakes on the eurozone economy anytime soon.
On the contrary, Mr. Lane’s analysis suggests that the European Central Bank will continue trying to push inflation toward the 2 percent target. In March, the central bank said it would increase its purchases of government and corporate bonds to try to keep a lid on market-based interest rates.
Mr. Lane said it was no surprise to see “considerable volatility in inflation during the pandemic period.” He attributed the ups and downs to quirky factors that are not likely to recur.
Germany and some other countries cut their value-added taxes to encourage consumer spending, then raised them again later. The price of fuel fluctuated wildly. People spent almost nothing on travel, but increased spending on home exercise equipment or products that they needed to work from home. That affected the way inflation is calculated and made the annual rate look higher, Mr. Lane said.
“The medium-term outlook for inflation remains subdued,” he wrote, “and closing the gap to our inflation aim will set the agenda for the Governing Council in the coming years.”
The pandemic has intensified a spotlight on long-running questions about how communities can do a better job supporting seniors who need care but want to live outside a nursing home.
The coronavirus had taken the lives of 181,000 people in U.S. nursing homes, assisted living and other long-term care facilities through last weekend, according to the Kaiser Family Foundation — 33 percent of the national toll.
The occupancy rate in nursing homes in the fourth quarter of 2020 was 75 percent, down 11 percentage points from the first quarter, according to the National Investment Center for Seniors Housing & Care, a research group. The shift may not be permanent, but this much is clear: As the aging of the nation accelerates, most communities need to do much more to become age-friendly, said Jennifer Molinsky, senior research associate at the Joint Center for Housing Studies at Harvard.
“It’s about all the services that people can access, whether that’s the accessibility and affordability of housing, or transportation and supports that can be delivered in the home,” she said.
But there are hurdles for those who wish to stay out of a facility, Mark Miller reports for The New York Times:
A major shortage of age-friendly housing in the United States will present problems for seniors who wish to stay in their homes. By 2034, 34 percent of households will be headed by someone over 65, according to the Harvard center. Yet in 2011, just 3.5 percent of homes had single-floor living, no-step entry and extra-wide halls and doors for wheelchair access, according to Harvard’s latest estimates.
Medicare does not pay for most long-term care services, regardless of where they happen; reimbursement is limited to a person’s first 100 days in a skilled nursing facility. Medicaid, which covers only people with very low incomes, has long been the nation’s largest funder of long-term care. From its inception, the program was required to cover care in nursing facilities but not at home or in a community setting. “There’s a bias toward institutions,” said Judith Solomon, a senior fellow specializing in health at the Center on Budget and Policy Priorities.
A year after the pandemic turned the nation’s digital divide into an education emergency, President Biden is making affordable broadband a top priority, comparing it to the effort to spread electricity across the country. His $2 trillion infrastructure plan, announced on Wednesday, includes $100 billion to extend fast internet access to every home.
The money is meant to improve the economy by enabling all Americans to work, get medical care and take classes from wherever they live. Although the government has spent billions on the digital divide in the past, the efforts have failed to close it partly because people in different areas have different problems. Affordability is the main culprit in urban and suburban areas. In many rural areas, internet service isn’t available at all because of the high costs of installation.
“We’ll make sure every single American has access to high-quality, affordable, high speed internet,” Mr. Biden said in a speech on Wednesday. “And when I say affordable, I mean it. Americans pay too much for internet. We will drive down the price for families who have service now.”
Longtime advocates of universal broadband say the plan, which requires congressional approval, may finally come close to fixing the digital divide, a stubborn problem first identified and named by regulators during the Clinton administration. The plight of unconnected students during the pandemic added urgency.
“This is a vision document that says every American needs access and should have access to affordable broadband,” said Blair Levin, who directed the 2010 National Broadband Plan at the Federal Communications Commission. “And I haven’t heard that before from a White House to date.”
Some advocates for expanded broadband access cautioned that Mr. Biden’s plan might not entirely solve the divide between the digital haves and have-nots.
The plan promises to give priority to municipal and nonprofit broadband providers but would still rely on private companies to install cables and erect cell towers to far reaches of the country. One concern is that the companies won’t consider the effort worth their time, even with all the money earmarked for those projects. During the electrification boom of the 1920s, private providers were reluctant to install poles and string lines hundreds of miles into sparsely populated areas.
Taxpayers who received unemployment benefits last year — but who filed their federal tax returns before a new tax break became available — could receive an automatic refund as early as May, the Internal Revenue Service said on Wednesday.
The latest pandemic relief legislation — signed into law on March 11, in the thick of tax season — made the first $10,200 of unemployment benefits tax-free in 2020 for people with modified adjusted incomes of less than $150,000. (Married taxpayers filing jointly can exclude up to $20,400.)
But some Americans had already filed their tax returns by March and have been waiting for official agency guidance. Millions of U.S. workers filed for unemployment last year, but the I.R.S. said it was still determining how many workers affected by the tax change had already filed their tax returns.
On Wednesday, the I.R.S. confirmed that it would automatically recalculate the correct amount of benefits subject to taxation — and any overpayment will be refunded or applied to any other outstanding taxes owed. The first refunds are expected to be issued in May and will continue into the summer.
The I.R.S. said it would begin processing the simpler returns first, or those eligible for up to $10,200 in excluded benefits, and then would turn to returns for joint filers and others with more complex returns.
There is no need for those affected to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return, the agency said. Those taxpayers may want to review their state tax returns as well, the I.R.S. said.
People who still haven’t filed and expect to do so electronically can simply answer the questions asked by their online tax preparer, which will factor in the new tax break when they file. The agency provided an updated worksheet and additional guidance in March for taxpayers that prefer paper.
The delivery company UPS on Thursday joined other corporations like Delta Air Lines and Coca-Cola in making a statement on voting rights. “UPS believes that voting laws and legislation should make it easier, not harder, for Americans to exercise their right to vote,” the company said in a statement. But UPS, which is based in Atlanta, held back from criticizing a sweeping law in Georgia restricting voter access. A group of prominent Black executives on Wednesday called on companies to publicly oppose a wave of similarly restrictive voting bills that Republicans are advancing in almost every state.
Microsoft said that it would begin producing more than 120,000 augmented reality headsets for Army soldiers under a contract that could be worth up to $21.9 billion. The HoloLens headsets use a technology called the Integrated Visual Augmentation System, which will equip soldiers wearing them with night vision, thermal vision and audio communication. The devices also have sensors that help soldiers target opponents in battle. The deal is likely to create waves inside Microsoft, where some employees have objected to working with the Pentagon.