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US equity futures are flat after Dow sheds 290 points

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US equity futures are flat after Dow sheds 290 points

U.S. equity futures were flat Tuesday night after the Dow Jones Industrial Average fell nearly 300 points amid growing investor concerns about the state of the economic recovery and the Federal Reserve’s next move.

Dow Jones Industrial Average futures rose 8 points, or 0.02%. The S&P 500 and Nasdaq 100 futures contracts rose 0.05% and 0.08% respectively.

In regular trading on Tuesday, the Dow Jones fell 292.06 points, or 0.8%, to 34,577.57, after falling after five days of losses on Monday. The S&P 500 lost 0.6% to 4,443.05 and the Nasdaq Composite slipped 0.5% to 15,037.76.

The Dow, S&P and Russell 2000 Small Cap are now trading in the red for six of the past seven days. Tuesday was the fifth consecutive day of losses for the Nasdaq. According to the CFRA, September has historically been a month of decline for the markets, the month having recorded an average decline of 0.56% since 1945. And after eight consecutive months of gains, strategists say a major pullback could be imminent .

According to Fundstrat, the S&P 500 continued to advance throughout the year, falling just once below the 50-day moving average. Morgan Stanley chief investment officer Mike Wilson told CNBC’s “Fast Money” that this might just be the beginning.

“The mid-cycle transition always ends with an index correction,” he said of the S&P 500. “Maybe it will be this week, maybe a month. I don’t think so. not that we’ll be working with this year, though, with that 50-day moving average throughout the year, because that’s the trend we usually see.Let’s look at that part of the recovery phase.

On Tuesday, the Labor Department released data before the bell, showing a weaker-than-expected rise in US inflation for August. Consumer prices increased 5.3% from a year ago and 0.3% from July. Excluding food and energy, the consumer price index rose only 0.1% over the month.

Initially, the market was bullish, but closed after the market opened due to uncertainty over the timing of the decline in asset purchases by the Federal Reserve.

Davit Kebede, Senior Economist at the Credit Union, said: “The Federal Reserve will likely delay the slowdown in purchases of Treasury securities and mortgage-backed securities, despite modest signs that price increases in durable goods are temporary, as in the case of a used car. This is evident from the fall in prices. National association. “It’s because we are far from maximizing employment”, one of the two objectives of the Fed’s dual mandate.

According to Brad McMillan, chief investment officer at Commonwealth Financial Network, while the data was colder than expected, inflation is still on the rise.

“We will likely see inflation heat up for at least the rest of the year and maybe until 2022,” he said. “But we are seeing a change in trend, which indicates that the base change is taking effect and the economy is recovering.”

Stocks linked to the economic recovery fell on Tuesday. United Airlines fell 2.1% and Bank of America fell 2.6%. General Electric closed 3.9% lower.

Casino stocks have been hit hard as the Macau government seeks to increase regulatory oversight of casinos and Chinese health officials report the COVID-19 outbreak. Las Vegas Sands fell 9.7%, Wynn Resorts 10.8% and MGM Resorts 3.9%.

Apple shares closed nearly 1% lower after the company showcased the iPhone 13 at its annual product unveiling event.

Wednesday is the last day of the SALT conference in New York. In terms of economic data, US import and export prices and mortgage application data are expected to be released on Wednesday.

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Crypto sounds a wake-up call – and a tax opportunity – for investors

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Crypto sounds a wake-up call - and a tax opportunity - for investors

Detail of the statue of Satoshi Nakamoto, the pseudonym used by the inventor of bitcoin in Budapest, Hungary.

Janos Kumar | Getty Images News | Getty Images

The price of popular cryptocurrencies like bitcoin and ethereum fell on Friday after Chinese authorities stepped up the crackdown, essentially banning crypto.

Government intervention, while important, does not mean investors should run for the hills, financial advisers say. But it’s another reminder that crypto holdings are subject to wild price swings, he said.

“I wouldn’t call it the end of the world,” said Leon Labrecque, accountant and chartered financial planner at Sequoia Financial Group, based in Akron, Ohio. “It’s just a wake-up call.”

“You have to recognize that this is a volatile asset and all the ups and downs go hand in hand,” he said.

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This volatility opens up tax planning opportunities that could be available for a few more months, the advisers said, based on the Democrats’ final agreement on federal tax law.

By 3 p.m. ET on Friday, the price of bitcoin had fallen 6% to around $ 42,000. Ether, the second largest digital currency, fell more than 8% to almost $ 2,890.

Investors are stunned after the People’s Bank of China declared all crypto-related activities illegal. For example, these activities include trading services and foreign exchange transactions. This is the latest step in a nationwide crackdown on digital currencies.

The notice said the ban on bitcoin and other cryptocurrencies could be of concern to current and potential investors, as the government restricts the pool of buyers from a significant portion of the world’s population. And other governments will also be implementing additional rules, he said.

But for long-term prices, it may not make much of a difference. The daily drop in the cost of crypto, which may seem significant at the time, could be part of a long-term correction of course towards an average value, advisers said.

“Will government regulations cause major volatility in crypto?” Yes, ”said Wayne Wilbanks, Managing Director and Chief Investment Officer at Wilbanks Smith & Thomas Asset Management in Norfolk, Virginia. “Will this make crypto obsolete?” No.

“I don’t think Chinese regulations, or even US regulations, make a big difference in the long run,” he said.

Bitcoin, for example, is still up around 40% despite Friday’s drop. (However, it remains close to the April high of $ 63,000.)

Volatility has been a signature of cryptocurrencies to date. For example, prices have skyrocketed this year following a tweet from Tesla co-founder and crypto enthusiast Elon Musk.

Advisors generally advise investors to allocate a small portion of their portfolio (which they would be entitled to lose) because of risk.

tax benefit

According to Jeffrey Levine, accountant and planning director at Buckingham Wealth Partners in Long Island, New York, investors can use recent volatility in their favor.

Stock, crypto, and other investors are able to “reap” investment losses for tax benefits. Basically, they can sell a losing investment (eg, bitcoin) and use the loss to wipe out the gains from a winning investment elsewhere in their portfolio.

This “harvest of tax losses” reduces (or eliminates) the capital gains tax, which is due on the appreciable value of the investment sold.

However, unlike stock market investors, what crypto investors sell can quickly redeem in the same digital currency or a similar currency. As a result, they can benefit from the tax advantage mentioned above, as well as a portfolio advantage if volatile assets regain value too soon.

House Democrats have offered to close this crypto loophole later this year as part of a campaign to reform the tax code.

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CDC director defends controversial call for Pfizer’s COVID recall

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CDC director defends controversial call for Pfizer's COVID recall

Dr Rochelle Valensky, who has been chosen to serve as director of the Centers for Disease Control and Prevention, speaks at an event at the Queen Theater in Wilmington, Del. On Tuesday, December 8, 2020.

Susan Walsh | PA

CDC director Dr Rochelle Valensky insisted on Friday that she had not canceled a vaccine advisory committee by expanding agency approval of Pfizer’s COVID recall to include a proposal rejected by the panel.

In an unusual move, Valensky broke with the CDC’s advisory committee on immunization practices, which voted 9-6 Thursday against allowing vaccines in settings at high risk of transmission. Wolensky followed up on three other panel recommendations to distribute the third injection to adults with underlying health conditions and to all people 65 years of age and older. She said the final vote, which approves additional doses for teachers, health workers and other essential workers, was a “close scientific call.”

“I want to be very clear that I did not fire an advisory committee,” Valensky said during a COVID White House briefing on Friday. “I have listened to all of the deliberations of the FDA Advisory Board and listened intently to this amazing group of scientists who have deliberately and very transparently for hours on end on some of these difficult questions and the state of the science. . “

Valensky’s directive aligns closely with Wednesday’s Food and Drug Administration decision on the recall. The agency has also consulted its panel of scientific advisers in authorizing shots for a wider audience than that approved by its advisory committee on vaccines and related biologics.

“It was a tight science call,” Valensky said, noting the two-day meeting and the heated debate. With the vote divided, Valensky said, “It was my call. If I was in the room, I would have voted yes.

He sought to reassure public confidence by encouraging people to come back and listen to the committee’s deliberations. “We did it publicly, we did it transparently and we did it with some of the best scientists in the country,” she said.

President Joe Biden said the CDC’s recommendation extended the recall to nearly 60 million Americans – including teachers, health workers and supermarket workers – during a briefing Friday morning. Valensky said the broader recall standards better protect frontline workers and account for inequities in the administration of vaccines that affect people of color.

“I am also aware of the negative impact of this pandemic on racial and ethnic minority communities,” Valensky said. “Many of our frontline workers, essential workers and people in isolated environments come from communities that are already hardest hit. “

She said blocking access to boosters for these groups would only worsen inequalities in the pandemic, with black and Hispanic Covid patients dying at higher rates than whites.

According to the CDC, more than 55% of Americans have been fully immunized and more than 2.4 million people have received boosters since the agency cleared them on Aug. 13 for people with weakened immune systems.

Valensky said the agency will work to quickly assess Moderna and Johnson & Johnson’s recall data in the coming weeks.

“We intend to create several advisory committees at the CDC to consider several upcoming decisions, including Moderna, J&J, as well as pediatric vaccination,” Valensky said.

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Nike can take advantage of its poor supply chain

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Nike can take advantage of its poor supply chain

A pedestrian walks past a Nike store, an American multinational sportswear brand, and its logo as seen in Hong Kong.

Budrul Chukrut | SOPA Pictures | LightRocket | Getty Images

Weaker sales forecasts, slower growth in China and a disrupted supply channel. The news from Nike’s first quarter financial results report was not good.

Shares fell more than 6% on Friday afternoon after the report. Prior to the results, stocks had already fallen nearly 9% from the all-time high of $ 174.38 reached in August.

Some analysts see an opportunity for Nike to position its business and stocks for higher growth amid the sell-off. Nike’s supply chain woes provide it with cover to accelerate its direct-to-consumer sales strategy, which has been a key driver of profitability in recent quarters.

Now, it takes about 80 days for Nike to get goods from Asia to North America – double the time it took before the pandemic. Manufacturing facilities across Vietnam are starting to reopen, but Nike has lost nearly 10 weeks of production as the pandemic comes to a halt. About 43% of its total footwear and clothing units are produced domestically.

For the next few quarters, Nike expects consumer demand to exceed supply. This means Nike will need to be more strategic about where it ranks in running shoes and training tops. He will probably opt for his own stores rather than wholesale partners.

“As long as stocks are tight, it’s reasonable to assume that the pivot will be straightened out,” said Simeon Siegel, analyst at BMO Capital Markets. “They prioritize their channels with the first product. “

Before the Covid pandemic hit, Nike was on track to expand its direct-to-consumer sales business. It is also cutting partnerships with some wholesale retailers while growing its online business and opening Nike stores around the world. Over the past three years, Nike has removed about 50% of its wholesale junk accounts.

Nike calls the transition a “direct consumer offense,” a game of sports terminology. In fiscal 2021, Nike’s direct revenue represented approximately 39% of Nike brand sales, up from 35% the year before. Selling more goods at full price has also made a profit. Nike’s gross margin for fiscal 2021 increased to 44.8% from 43.4% in 2020.

The woes of an industry-wide supply chain could accelerate Nike’s DTC push to an even faster rate and, in turn, increase profitability.

Nike is “always in demand”

“This means Nike now has a free excuse to speed up its DTC transition and say, ‘We don’t have supplies for our wholesalers,’” Stacey Widlitz, president of SW Retail Advisors, said in an interview. “It’s a huge opportunity, because you see all these other brands doing wholesale, but they don’t have a high end line like Nike. There is always a demand for Nike.

And while Nike’s shelves may be a bit empty compared to normal times in the coming months, Widlitz doesn’t think this will definitely drive shoppers to other retailers.

“People are always going to come back for the big brands,” she said. “It’s the most blocked demand, because they’re basically saying to the consumer, ‘You can’t have this right now.’ You are creating FOMO due to a lack of supply. No headaches to take advantage of it.

During Thursday’s earnings call, Nike’s management team said it was prioritizing its direct channels.

Nike’s main partners are Foot Locker, Dick’s Sporting Goods and Nordstrom, and investors in those stocks are worried about what Nike’s problems will mean for their businesses. Foot Locker’s shares fell more than 6% on Friday, while Dick’s shares were down almost 2%. Nordstrom’s stock was almost flat.

CFO Matt Friend said the temporary disruption in the supply chain “is likely to further accelerate the transformation of the market – to Nike and our most important wholesale partners.”

“We’re going to have lean stocks,” he said. But added: “Strong brands are strengthening themselves in this environment.”

And according to City analyst Paul Lejuez, a temporary supply chain problem is a better problem than a demand problem. He doesn’t see Nike as a demand issue.

“We see these supply chain disruptions as fleeting… more [the delays] have a huge impact on the athletic shoe space, ”Lejuez said in a research note. “The biggest impact of the plant closure in Vietnam is expected to be post-holiday.”

Another way to accelerate growth

If growth slows in China, it will be even more important to strengthen Nike’s North American business. Greater China has long been Nike’s most profitable and important growth market. But in Nike’s last quarter, the region’s revenue grew at the slowest rate of any geography.

General Manager John Donahoe said Nike is playing the long game in China. Supply constraints will impact the performance of the industry in the second quarter, he said, but the company “will invest for the long term and we are confident in the long term opportunity.”

Wall Street research firm UBS said it expects Nike shares to rebound after Friday’s sell-off. UBS shares have a buy rating with a target of $ 185. As of Friday afternoon, Nike was trading at around $ 149 a share. According to FactSet, the average analyst rating for the stock is $ 184.35.

“While some uncertainty remains as to how long it will take to resolve supply chain issues and if Nike’s sales growth rate in China accelerates, we believe investor sentiment will improve. now that Nike has closed its factory in Vietnam. ” Let’s trigger the effect, ”said analyst Jay Sol. “We are confident that most investors will look to fiscal 2023 and see a rebound scenario.”

—CNBC Michael bloom contributed to this report.

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