Stock market futures are up the day after the S&P 500 set a record high, and Target just reported the strongest quarterly sales growth in its history. Investors are looking past the pandemic, for a variety of reasons, which we explain below. (Want this delivered to your inbox each day? Sign up here.)
‘This market is nuts’
The S&P 500 is 0.1 percent higher than it was six months ago, setting a record at the close of trading yesterday. That doesn’t seem so momentous — until you consider what happened in between: The blue-chip index shed a third of its value in the early stages of the pandemic and then roared back, soaring more than 50 percent from its low in late March.
What gives? A new market record may seem strange when set against the human and economic devastation of the pandemic. (Or as one analyst put it: “This market is nuts.”). As Andrew explains in a guest appearance in The Morning, our sister newsletter, there are five major considerations that investors are making to justify the rally:
1️⃣ Looking past bad news today and anticipating better conditions 12 to 18 months from now
2️⃣ The continued good fortunes of a few big tech companies
3️⃣ An almighty market pop that would arise from news of a vaccine breakthrough
4️⃣ An accommodating Fed printing money and keeping rates low
5️⃣ The hope that Congress overcomes its divisions and pumps the economy with more stimulus
Can it last? “Markets often operate as something of an experiment in mass psychology,” The Times’s Matt Phillips writes. So what could dampen the mood?
• The market is very top-heavy, with just five companies — Alphabet, Amazon, Apple, Facebook and Microsoft — accounting for more than a fifth of the S&P 500’s market value. Those tech giants have gained around 40 percent so far this year, while the 495 other stocks in the index have collectively lost a few percentage points.
• Another potentially ominous sign comes from company insiders, who have been selling their holdings in greater numbers. The data platform AlphaSense sifted through regulatory filings for DealBook and found that disclosures of executive stock sales so far this month have already surpassed last month’s total, and are on track to beat the record set in February, when the market set its previous high.
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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New Jersey, and Michael J. de la Merced and Jason Karaian in London.
And we are thrilled to introduce Lauren Hirsch, who joins DealBook this week as a reporter in New York. Welcome, Lauren!
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Here’s what is happening
In case there was any doubt, Joe Biden has been confirmed as the Democratic presidential nominee. He was formally nominated by the party last night at the party’s national convention. Also onscreen: Former President Bill Clinton and Jill Biden rejected President Trump’s handling of the pandemic, Representative Alexandria Ocasio-Cortez highlighted progressive priorities in her cameo appearance, and other Democrats focused on improving health care. Tonight’s agenda includes Senator Elizabeth Warren (more on her below), former President Barack Obama and Senator Kamala Harris, Mr. Biden’s running mate.
Cost-cutting measures at the Postal Service were put on hold. Postmaster General Louis DeJoy announced that operational changes, which drew criticism for causing mail delays and for potentially affecting voting by mail, would now take place after the November elections.
A Senate panel found extensive links between the 2016 Trump campaign and Russia. The Republican-led Senate Intelligence Committee released a nearly 1,000-page report concluding that some Trump advisers maintained extensive contacts with Russian intelligence officials who sought to disrupt the 2016 election.
The shipping giant A.P. Moller-Maersk raised profit expectations. The world’s biggest container company not only reinstated full-year financial guidance, but pegged it above pre-pandemic levels, a sign that international trade may not be as bad as feared (provided there isn’t a second wave of the virus, the company noted). The Danish company’s shares jumped more than 7 percent in early trading today.
C.E.O. pay reached a seven-year high. The left-leaning Economic Policy Institute found that leaders of the 350 largest American companies earned an average of $21.3 million last year, setting the ratio of C.E.O.-to-worker pay at 320-to-1. Rising stock markets could propel executives’ pay to similarly high levels again this year, despite pandemic-inspired cuts to salaries, which tend to be a small proportion of C.E.O.’s stock and option-based pay packages.
Wall Street isn’t out of the woods yet with Warren
Elizabeth Warren is set to take the virtual stage at the Democratic National Convention tonight, a week after Wall Street sighed in relief when Joe Biden chose Kamala Harris as his vice-presidential running mate instead of the longtime critic of the financial industry. But here’s the thing …
Ms. Warren’s ability to influence a Biden administration may be stronger now than if she were to become vice president, where she would be more directly limited by the wants of her boss. And while progressive Democrats have rallied behind Ms. Harris, they’ll likely expect something in return. That may mean giving Ms. Warren a spot in the administration, making her speech tonight a showcase — or a tryout, of sorts — of the ideas and approach that she would promote during a Biden presidency.
Could she be the next Treasury secretary? It would be a natural fit for the senator, who has made financial regulation a priority (although she is seen as a long shot). If named to the role, Ms. Warren would emphasize Main Street over Wall Street, push for higher taxes on the wealthy and promote spending over fiscal restraint, experts say. But even if she isn’t nominated for the role, Mr. Biden would probably turn to her for advice, especially on priorities for the S.E.C. and the Consumer Financial Protection Bureau, the agency she helped create. “She understands financial regulation as a tool to bring about better outcomes,” said Sarah Bloom Raskin, a law professor at Duke and a former deputy secretary at the Treasury Department.
But even Ms. Warren’s allies worry that her regulatory zeal could backfire. “The financial institutions are very negative about her,” the former representative Barney Frank told CNN last month. “If you have someone who is that much opposed by the people being regulated, it doesn’t work smoothly.” (Mr. Frank, a co-author of the Dodd-Frank financial regulations, is now a director at Signature Bank.) He suggested that he’d prefer Ms. Warren stay in the Senate, where she has been a prominent advocate of progressive causes. Indeed, Democrats may not want to give up Ms. Warren’s seat in the Senate, depending on the balance of power in the chamber.
There are other jobs a Biden administration could offer her, like attorney general, where she would oversee investigations into the market power of big technology companies, or a bespoke position like a regulatory czar. But first, of course, there’s the small matter of whether Mr. Biden can win the election in November.
SPACs are so hot right now
Another day, another flurry of news about so-called special-purpose acquisition companies, the publicly traded M.&A. machines that are Wall Street’s hot new craze. (How hot? These “blank check” firms have raised more than $30 billion so far this year, according to SPAC Research, compared with $13.6 billion in all of 2019.)
Another electric vehicle maker went public by merging with a SPAC. Canoo, which sells van-like vehicles that require a subscription, announced plans to merge with Hennessy Capital Acquisition Corp IV to gain a stock listing. It’s the fourth electric vehicle company to pursue this route, after Nikola, Lordstown Motors and Fisker.
More SPACs have been founded, featuring some prominent names:
• Starboard Value, the activist hedge fund, announced plans to raise $300 million, following in the footsteps of Bill Ackman and Dan Loeb.
• Bill Foley, a longtime financier with plenty of experience with SPACs, raised $1.3 billion, increasing the size of the deal by $100 million.
• And Kevin Hartz, the co-founder of Eventbrite, raised $200 million for a new SPAC to buy a tech start-up.
Mr. Hartz explained to DealBook the thinking behind his SPAC, and how he’s dealing with the competition. Consumer internet companies, marketplaces and fintech start-ups are on his radar, and the fund’s smaller size allows it to target younger companies with founders that he wants to take a bet on, much like the traditional venture model. Indeed, he is banking on his relationships with venture funds and start-up founders around Silicon Valley to stand out in an increasingly crowded field. (In addition to founding Eventbrite, Mr. Hartz was an early investor in Airbnb and Uber.)
• What, in his mind, is driving the SPAC boom? Strong equity markets are helping SPAC deals get done quickly despite pandemic-imposed travel restrictions. “We had our first board meeting with Goldman Sachs on June 18 — we retained our lawyer then — and 60 days later we’re now a public entity in the market ready to go,” Mr. Hartz told Lauren Hirsch, our new DealBook reporter.
How to spend it
As lockdowns ease, where people are opening their wallets shows how the pandemic is reshaping spending habits. Check out this series of infographics assembled by The Times using location-tracking data from smartphones for state- and store-level details of shopping activity.
The revenge of brick-and-mortar retailers. In-store shopping is still (mostly) down from pre-pandemic times, forcing retailers with physical locations to up their online game. For some, that has paid off handsomely: Target reported its strongest sales growth in history this morning, propelled by digital sales that nearly tripled in its most recent quarter. That followed Walmart’s blowout earnings yesterday, in which its U.S. online sales doubled.
• New nationwide e-commerce data also reflects this trend, with retailers that sell online as well as in store (Walmart and Target) growing faster than their online-only counterparts (Amazon). As of June, online-only retailers accounted for 55 percent of overall e-commerce sales in the U.S., according to the Census Bureau.
Look out ahead. Walmart executives said that government stimulus was the main “tailwind” driving the jump in sales: They mentioned “stimulus” 13 times on their call with analysts yesterday. Keeping up that red-hot sales streak might depend on lawmakers negotiating a new round of unemployment insurance and support measures, which is shaping up to be less generous than before. “As stimulus funds tapered off toward the end of the quarter, sales started to normalize,” Brett Biggs, Walmart’s C.F.O., said on the call.
The speed read
Deals
• ViacomCBS is reportedly in talks to sell CNET, a tech news site, to Red Ventures for about $500 million. (WSJ)
• Elon Musk’s SpaceX has raised $1.9 billion in new funding. (Reuters)
• Despite the pandemic’s effect on tourism, the travel-booking start-up Omio managed to raise $100 million. (Reuters)
Politics and policy
• Major business trade groups, including the U.S. Chamber of Commerce and the National Retail Foundation, warned that many companies won’t participate in President Trump’s proposal to defer payroll taxes. (Politico)
• The latest sticking point for trade talks between Britain and the E.U.: truckers. (FT)
Tech
• President Trump said he could support Oracle’s takeover bid for TikTok: “I think that Oracle would be certainly somebody that could handle it.” (WSJ)
• Rights activists said that a 2015 data breach at Twitter stole information later used by Saudi Arabia to arrest critics of its government. (Bloomberg)
Best of the rest
• Sweden has already drawn controversy for its approach to pandemic lockdowns. Now it is attracting scrutiny for its lax rules on face masks. (FT)
• “America Has Two Feet. It’s About to Lose One of Them.” (NYT)
• Jeremy Burge is the Samuel Johnson of emoji. (New Yorker)
We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.
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The Stock Market’s Record High: Why Now? - The New York Times
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