Axios Markets

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March 10, 2021

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🚨 Situational awareness: Gaming company Roblox will go public today via direct listing at a reference price of $45, giving it a market value of about $30 billion, an unnamed source said. (Bloomberg)

🖥 Don't sleep: Join Axios' Russ Contreras and Alexi McCammond today at 12:30pm ET for a Hard Truths event on systemic racism in politics, featuring Rep. Joyce Beatty (D-Ohio) and NALEO Educational Fund CEO Arturo Vargas.

🎙 "Mr. Watson, come here. I want to see you." - See who said it and why it matters at the bottom.

1 big thing: America's $5 trillion bet

Illustration of the United States flag with the stars replaced by dollar signs.
Illustration: Sarah Grillo/Axios

Axios Capital author Felix Salmon writes: Democrats' coronavirus relief bill will dramatically change many low-income families' lives over the next year. And in the process, it's setting a new precedent for what Washington can and will do in a crisis.

Why it matters: Once President Biden signs the latest relief bill into law, Washington will have spent more than $5 trillion in less than a year — far more than it has in past crises.

By the numbers: In a letter to colleagues Tuesday night, Senate Majority Leader Chuck Schumer wrote that the poorest 20% of Americans are estimated to see about a 20% boost in income from Biden's bill, citing an analysis from the Tax Policy Center.

  • 85% of households will get $1,400 in stimulus checks; the unemployed will receive an additional $300 per week through the fall; and families with children under 17 will get $3,000 per child.
  • That's in addition to increased rental assistance, food aid and health insurance subsidies. A recent Washington Post analysis found that 54% of Biden's package provides direct aid to individuals, compared with 40% or less in previous packages.

Between the lines: This bill and the series of other COVID-19 packages passed in the last year work out to just over $43,000 per U.S. household — the type of spending that would have been unthinkable as recently as 2009, when Biden was last in office.

  • Flashback: Former President Obama's stimulus package, the American Recovery and Reinvestment Act, cost $840 billion.

Americans don't seem to mind the spending, and Democrats are betting the popularity of this legislation will propel them through the midterms.

The big picture: Economists predict the economy will grow at a pace of well over 6% in both the second and third quarters of 2021 as Biden's stimulus plan kicks in, according to FactSet.

  • This time last year, the Wall Street consensus was that a coronavirus-addled economy would grow by only 2% in 2021.
  • Congressional aides say that the expected economic boon, in conjunction with scientists promising a light at the end of the pandemic tunnel, mean this $2 trillion bill is likely the last mammoth COVID-related package we'll see.

Yes, but: There are also some foreseeable problems that could come back to haunt Democrats. Almost all the relief for families expires over the coming year, which could create economic pain down the line.

  • The package is also so big that some experts worry the economy might grow too fast, resulting in inflation.

2. Catch up quick

China's most senior diplomats are in talks to meet in Alaska with their American counterparts in a bid to reset the U.S.-China relationship, according to an unnamed source. (SCMP)

The OECD raised its economic outlook for global growth this year, projecting 5.6% growth, up 1.4 percentage points from the December report, and raised 2022's projection to 4.0%. (Report)

With the Biden administration fixated on vaccine distribution and Cabinet confirmations, Big Tech has gotten an unexpected respite from federal regulatory threats that's likely to continue. (Axios)

The Nasdaq jumped 3.7% Tuesday, for its best day in four months. (CNBC)

3. Inflation pressures keep rising

More signs of inflation are popping up in U.S. data and economic reports, suggesting the rising inflation expectations of both consumers and investors are starting to play out in the economy.

Driving the news: The NFIB's latest small business jobs report showed the percentage of firms raising average selling prices increased to 25% in February, the highest since August 2008.

That backed the findings of a WSJ piece tracking larger firms that noted "companies across a range of industries are grappling with higher prices for commodities such as lumber and steel."

  • The jump in commodities prices has pushed many U.S. businesses, like La-Z-Boy, the Container Store and Sleep Number, to increase prices to offset the costs, WSJ's Kristin Broughton reported.

Don't sleep: NFIB's survey also found the number of businesses who said finding qualified labor was a challenge jumped, with 91% of those trying to hire reporting few or no “qualified” applicants for their open positions, up 5 points from January.

  • 40% of small-business owners had job openings they couldn't fill in February — the largest share on record, dating back to 1973.
  • That flies in the face of traditional supply/demand economics, considering the glut of unemployed workers, and could spell trouble for future employment trends.

What to watch: "The proportion of firms reporting that finding qualified labor is their biggest problem has now recovered most of the drop triggered by Covid, and both actual and expected employee compensation are rising," Pantheon Macroeconomics chief economist Ian Shepherdson said in a note to clients. 

  • "The labor market, in short, looks nothing like the wasteland seen after the crash of 2008, and the potential for wage inflation to rise as the economy recovers is much greater."

Of note: Despite the increasing inflationary inputs, today's consumer price index is expected to remain anchored below 2%, as major contributors like salaries and housing costs have been muted largely as a result of the pandemic.

4. Disney+ surpasses 100 million subscribers

Data: Company filings; Chart: Michelle McGhee/Axios
Data: Company filings; Chart: Michelle McGhee/Axios

Axios Media Trends author Sara Fischer writes: Disney said Tuesday its streaming service Disney+ surpassed 100 million subscribers in just 16 months, a major milestone for the company and the streaming industry.

Why it matters: Disney's streaming success has helped the entertainment giant survive economic headwinds driven by COVID-induced closures of its parks and resorts.

  • Its subscriber base is roughly half the size of Netflix's, which launched subscription streaming more than a decade ago.
  • Disney's stock reached all-time highs this week after the company said it would open its Disneyland park in California earlier than expected.

The big picture: Streaming — combined with optimism around movie theaters and theme parks reopening — breathed new life into Hollywood giants.

  • ViacomCBS' stock hit a decade-high Monday following massive ratings for Oprah Winfrey's explosive interview with Prince Harry and Meghan Markle.
  • Comcast, home to NBCUniversal, is also seeing positive momentum.

5. JPMorgan wants to launch crypto stock basket

CoinDesk's Zack Seward writes: In the latest sign of Wall Street players warming to bitcoin, the largest U.S. bank wants to issue a debt instrument linked to cryptocurrency-focused companies.

Driving the news: JPMorgan’s proposed “Cryptocurrency Exposure Basket” will be heavy on MicroStrategy, Square and Riot Blockchain stocks, according to a new SEC filing.

Between the lines: The basket gives JPM clients access to the industry's upside without all the fuss of holding cryptocurrencies and digital tokens themselves.

  • Until the SEC approves a bitcoin ETF, stocks of publicly traded companies deep in the bitcoin business may be the next best thing for investors.

The bottom line: While BNY Mellon and Goldman Sachs are getting their hands dirty with cryptocurrency assets themselves, JPMorgan is taking a more circumspect approach (and staying true to CEO Jamie Dimon's infamous dislike of bitcoin).

6. Mortgage applications fall again

Data: Investing.com; Chart: Axios Visuals
Data: Investing.com; Chart: Axios Visuals

Mortgage applications declined for the fourth time in five weeks (and the sixth time in the last eight weeks), data from the Mortgage Bankers Association’s weekly survey found, as mortgage rates continued to follow U.S. Treasury yields higher, dampening demand.

By the numbers: The benchmark 30-year fixed mortgage rate rose to "the highest since last July and up 40 basis points since the start of 2021," Joel Kan, MBA’s associate vice president of economic and industry forecasting, noted in a release.

  • "The run-up in mortgage rates continues to cool demand for refinance applications."

Yes, but: Kan also pointed to MBA's purchase index, which showed gains in both conventional and government applications, as overall activity increased 2.4% from its year ago level, and loan sizes declined for the second straight week — "potentially a sign that more first-time buyers are entering the market.”

  • The share of mortgages that were refinances rather than purchases declined to 64.5% from 67.5% last week, another sign that first-time buyers, rather than companies or repeat buyers, are becoming a more important force in the market.

What's next: April begins the all-important spring buying season. Demand is expected to increase, but could be hamstrung by the increase in rates.

Thanks for reading!

Quote: "Mr. Watson, come here. I want to see you."

Why it matters: On March 10, 1876, inventor Alexander Graham Bell said those words in the world's very first telephone call to his assistant Thomas Watson, who was in the other room.