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Futures Near Record High Shake Off Yellen Comments, Brace For Inflation Data

Futures Near Record High Shake Off Yellen Comments, Brace For Inflation Data

US equity futures rebounded from a mild dip in the overnight session, rising back to just shy of all time high at 4,228 as of 7:45 am on Monday, shaking off Yellen’s



Futures Near Record High Shake Off Yellen Comments, Brace For Inflation Data

US equity futures rebounded from a mild dip in the overnight session, rising back to just shy of all time high at 4,228 as of 7:45 am on Monday, shaking off Yellen's Sunday comments that the US Tsy Secretary welcomes higher rates (i.e., inflation) which would be "good for the Fed and US society."  World shares were range bound on Monday as markets digested Friday’s disappointing yet "Goldilock" jobs report and a global tax deal between the G7 group of countries, while also looking ahead to critical CPI data due Thursday. The dollar was steady while the 10-year rate added two basis points after Janet Yellen said on Sunday a slightly higher interest-rate environment would be "a plus" for society. WTI slipped after rising to $70 per barrel as short-term demand worries continued.

Yellen set the stage for Monday trading on Sunday when she said Biden should push forward with his spending plans even if they spark inflation that persists into next year. Meanwhile, the Group of Seven rich nations secured a landmark deal that could help countries collect more taxes from big firms and enable governments to impose levies on U.S. giants such as Inc. and Facebook Inc.


Investors were wary how shares of major tech firms would react to the G7’s agreement on a minimum global corporate tax rate of at least 15%, although securing approval not to mention enforcement from the whole G20 could be a tall order. So far, the reaction was muted with Nasdaq futures down 0.4%, highlighting investor concern that a pure growth narrative may no longer be enough to support stocks. Technology shares underperformed in Europe as well, with the benchmark gauge for the sector falling from the highest level since April.

“I would assume that it (the tax deal) is not helping the market in the sense that these Internet giants are going to be taxed has an impact on sentiment in equity markets, but the reality is it has already been priced in,” said Sebastien Galy, senior macro strategist at Nordea Asset Management. “So even though equity markets in the U.S. are under pressure on the futures side, I’d expect it not to last till the end of the day.”

Here are some of the biggest U.S. movers today:

  • Tesla shares fall 1.3% after the electric-vehicle maker called off plans to build a Model S Plaid+
  • AMC Entertainment (AMC) gained as much as 3.5% in premarket trading, halting two days of declines for the money-losing movie theater chain that’s become the new favorite of meme-stock investors.
  • Cryptocurrency-related stocks like Marathon Digital (MARA) and Riot Blockchain (RIOT) edge lower in U.S. premarkettrading following a dip for Bitcoin and other tokens over the weekend.
  • Evofem Biosciences (EVFM) shares rise 10% in premarket trading after Morgan Stanley reported a stake in the biotech and amid touts for the stock on Reddit
  • Liminal BioSciences (LMNL) soars 44%, extending a postmarket rally on Friday, after the U.S. FDA approved Ryplazim for the treatment of patients with plasminogen deficiency type 1 (hypoplasminogenia).
  • Meme stocks including Sundial (SNDL) and Naked Brand (NAKD) advance in premarket, while AMC shares edge higher, reversing earlier drop

While resurgent inflation has sparked a debate about when the Fed will start tapering monetary accommodation, Bloomberg notes that recent data including the May nonfarm payrolls report on Friday seemed to vindicate the central bank’s dovish stance. Investors are trying to strike a balance between preparing for higher rates and riding a risk-on rally supported by Fed stimulus and a $4 trillion spending plan by President Joe Biden, which however is facing significant headwinds and may end up being substantially diluted before it passes. Traders await the U.S. consumer-price index report Thursday for more clues.

“The slightly softer-than-expected rise in U.S. payroll employment in May probably won’t change the Fed’s thinking, but another pickup in CPI inflation likely to be reported on Thursday will further spur the taper talk,” Shane Oliver, head of investment strategy and chief economist at AMP Capital, wrote in a note.

MSCI’s All-Country World index traded just below record highs and was flat on the day after the start of European trading.

European shares opened lower, easing from all-time highs with commodity shares leading declines as sentiment soured after weaker-than-expected China trade data and worries about inflation. Autos was the best performing sub-group in Stoxx 600 benchmark YTD, along with banks (+31%). The Stoxx 600 Automobiles & Parts index was poised to hit a record high, rising as much as 0.9% on Monday and with the sub-index up 31% YTD. So far in 2021, German automaker Volkswagen (+57%) and its controlling shareholder Porsche SE (+78%), and Daimler (+38%) are the top performers in the index.

Here are some of the biggest European movers today:

  • Tessi SA shares rose as much as 35%, biggest intraday increase ever, after the business services company’s main shareholder said it planned an offer for the remaining stock at EU172 a share.
  • Edenred gained as much as 3.5% in Paris after Deutsche Bank upgraded the stock, saying the French employee voucher company’s earnings may be surprisingly strong as economies reopen.
  • S4 Capital jumped as much as 6.5% to a record after an AGM statement with Jefferies noting that the company raised its guidance again given accelerating growth so far in the second quarter.
  • UniCredit advanced as much as 3% after Jefferies upgraded the stock to buy from hold and said brighter loan volume trends can support revenue at southern European banks, as the Italian lender has stronger gearing to a lending recovery.
  • Elekta AB gained as much as 3.1% to the highest since November 2019 after the firm and Royal Philips agreed to deepen a strategic partnership.
  • IWG slumped as much as 18% to the lowest since late January after the company warned 2021 earnings would be “well below” the previous year’s.
  • Argenx fell as much as 9% after a Johnson & Johnson unit ended its collaboration and returned the rights to the anti-CD70 antibody cusatuzumab. The setback could shift sentiment on Argenx’s perfect track record of execution, KBC said in a note.
  • Kinnevik dropped as much as 5.7% after Pareto downgraded to sell from buy, saying a strong performance made the stock expensive.

Asian equities swung between gains and losses as Hong Kong’s Hang Seng Index slid on the first day of trading following the start of its biggest-ever overhaul, while stocks in Singapore climbed. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.05% and risked a fourth session of losses. Japan’s Nikkei edged up 0.3% and touched its highest in almost a month. Taiwan stocks lost 0.4% as a spike in COVID-19 cases hit three tech companies in northern Taiwan, including chip packager King Yuan Electronics.

Financials and internet giant Tencent were among the biggest drags on the MSCI Asia Pacific Index, while advances in consumer staples and healthcare shares cushioned the downside. The regional benchmark has traded sideways for the past few sessions after recovering back above its 100-day moving average. Traders continue to speculate that the U.S. recovery will be strong enough to prompt the Federal Reserve to taper asset purchases. Still, a weaker-than-expected American jobs report eased fears about the economy running too hot and lifted U.S. stocks Friday. “Last time the Fed decided to taper, in 2013, markets priced in tapering before it was certain,” SMBC Nikko strategists led by Masashi Akutsu wrote in a note. “Even if markets correct, we would not expect a sharp pullback since the May jobs report was not sufficient to force the Fed to pull future rate hikes forward.” Vietnam’s main equity benchmark tumbled more than 1%, as traders pointed to profit-taking after a recent strong rally. Markets in New Zealand and Malaysia were closed for holidays.

In key Asian eco data, China’s imports grew at their fastest pace in 10 years, although export growth missed expectations, customs data showed. China's exports rose 27.9% yoy in May, slightly below expectations. This implies a sequential decline of 6.4% in May vs. +9.4% in April. Imports rose 51.1% yoy in May, also a slight miss to expectations, though sequentially, it fell 6.8% sa non-annualized in May (vs. +2.0% in April). Monthly trade surplus edged up to $45.5bn in May.

In FX, the greenback was still trading in follow through of Friday's poor jobs report. While the 559,000 rise in May U.S. jobs missed forecasts it was still a relief after April’s shockingly weak report. The jobless rate at 5.8% showed there was a long way to go to reach the Federal Reserve’s goal of full employment. After Friday's dollar tumble, the Bloomberg dollar index was steady and most Group-of-10 currencies traded in tight ranges against the greenback.

“The data was perfect for a goldilocks type outlook for risk: not too hot to bring in fears of a faster Fed taper, and not too cold to worry about the outlook for the recovery,” said NatWest Markets strategist John Briggs. “This caused a weaker USD, better stocks, reinforced the earlier bid in commodities, and boosted emerging markets.” Briggs suspected Fed officials might open the door to talking about tapering at the June policy meeting, with the start coming in early 2022 and a rate hike not until 2024.

Elsewhere, the pound led declines among Group of 10 currencies as concerns over whether the U.K. will be able to fully reopen the economy weighed on sterling. U.K. Health Secretary Matt Hancock has said it’s too early to say whether a planned easing of coronavirus restrictions on June 21 can go ahead, as ministers continue to weigh the threat of a potential fresh wave of the pandemic. The Aussie was little changed while Australian sovereign bonds traded higher, tracking gains in Treasuries on Friday after U.S. payrolls data missed estimates; S&P Global Ratings raised the nation’s rating outlook to neutral from negative. The yen kept consolidating versus the dollar while Japan’s 30-year government bonds erased gains ahead of an auction on Tuesday; benchmark 10- year bonds weren’t traded.

In rates, Yields on U.S. 10-year notes were a fraction higher at 1.58%, after diving 7 basis points on Friday and back to the bottom of the trading range of the last three months. Treasuries futures were near lows of the day as U.S. session begins, amid focus on this week’s Treasury supply following Friday’s squeeze higher after jobs report. Treasury yields are cheaper by 2bp-3bp across long-end of the curve -- 10-year by 2.5bp at ~1.58% -- with 20-year sector underperforming; long-end-led losses steepen 5s30s by ~1bp. Both bunds and gilts outperform Treasuries slightly over early European session. IG credit issuance is expected to be heavy this week, adding to cheapening pressure on Treasury yields. May CPI report is ahead on June 10, and no Fed speakers are slated ahead of June 16 FOMC meeting.

In commodities, the pullback in the dollar helped gold steady at $1,885 an ounce, up from a low of $1,855 on Friday. Oil prices ran into profit-taking after Brent topped $72 a barrel for the first time since 2019 last week as OPEC+ supply discipline and recovering demand countered concerns about a patchy global COVID-19 vaccination rollout.  Brent slipped 0.4% to $71.61 a barrel, while WTI eased 0.4% to $69.31 after rising above $70 for the first time since October 2018. Bitcoin rebounded above $36,000 after a roller-coaster ride over the weekend.

On today's calendar there are no major events until 3pm ET when we get the April Consumer Credit report, est. $20.5b, prior $25.8bn. Attention will then turn to the U.S. consumer price report on Thursday where the risk is of another high number, though the Fed still argues the spike is transitory.  Investors are also watching the tussle over U.S. President Joe Biden’s proposed $1.7 trillion infrastructure plan with the White House rejecting the latest Republican offer. The European Central Bank will hold its policy meeting on Thursday and is widely expected to maintain its stimulus measures with tapering a distant prospect.

Market Snapshot

  • S&P 500 futures down 0.15% to 4,221.75
  • STOXX Europe 600 little changed at 452.96
  • MXAP little changed at 210.16
  • MXAPJ little changed at 704.68
  • Nikkei up 0.3% to 29,019.24
  • Topix little changed at 1,960.85
  • Hang Seng Index down 0.5% to 28,787.28
  • Shanghai Composite up 0.2% to 3,599.54
  • Sensex up 0.3% to 52,282.40
  • Australia S&P/ASX 200 down 0.2% to 7,281.89
  • Kospi up 0.4% to 3,252.12
  • Brent Futures down 0.82% to $71.30/bbl
  • Gold spot down 0.34% to $1,885.11
  • U.S. Dollar Index little changed at 90.173
  • German 10Y yield rose 1.3 bps to -0.200%
  • Euro down 0.06% to $1.2160

Top Overnight News from Bloomberg

  • Treasury Secretary Janet Yellen said President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year and higher interest rates
  • Armin Laschet boosted his chances of succeeding Angela Merkelas German chancellor by helping secure a decisive victory for his Christian Democratic Union in the country’s poorest state
  • China’s exports continued to surge in May, although at a slower pace than the previous month, fueled by strong global demand as more economies around the world opened up. Imports soared, boosted by rising commodity prices.
  • German manufacturers unexpectedly saw demand decline in April, signaling that supply shortages and higher prices are undercutting the country’s economic recovery

Quick look at global markets courtesy of Newsquawk

Asian equity markets traded cautiously as the initial tailwinds from last week’s US jobs report eventually faded amid softer than expected Chinese trade data. ASX 200 (-0.2%) was choppy as the strength in tech and mining names was offset by underperformance in financials and with NAB among the worst performers as it faces an anti-money laundering investigation by AUSTRAC for potential serious and ongoing breaches. Nikkei 225 (+0.3%) rallied at the open and reclaimed the 29k level but then wiped out most of the gains amid the recent counterproductive moves in the local currency and broad cautious tone. Hang Seng (-0.5%) and Shanghai Comp. (+0.2%) were lacklustre as participants digested the latest Chinese trade data which mostly missed expectations and following punchy rhetoric from US officials on China including Secretary of State Blinken who said the Biden administration will get to the bottom regarding the origins of COVID-19 and that the US will hold China accountable, while US Trade Representative Tai commented that the US-China trade relationship has “significant imbalance” and that the Biden administration is committed to levelling it. The declines in Hong Kong were led by casino names after reports that Macau is to block non-residents entering from Guangdong beginning June 8th, although the world’s largest pork producer WH Group is at the other end of the spectrum with firm gains following the announcement of a USD 1.93bln share buyback. Finally, 10yr JGBs held on to Friday’s after-hour gains amid a surge in T-notes following the NFP miss but with further upside in Japanese bonds capped as Japanese stocks just about remained afloat and with the absence of the BoJ’s Rinban operations today, while the Aussie 10yr yield was lower by about 6bps after it tracked recent downside in global peers and with the RBA also conducting its regular QE operations.

Top Asian News

  • Flipkart Is Said in Talks for $3 Billion From SoftBank, Others
  • Thailand Ramps Up Vaccine Rollout as Phuket Reopening Nears
  • Evergrande Slumps to One-Year Low as Regulators Tighten Grip
  • Saudi Wealth Fund, Early Alibaba Investor Back Jordanian Startup

European equities trade with no firm direction (Euro Stoxx 50 Unch.) having experienced a mild downside bias at the cash open, whilst APAC markets closed mixed after the broader NFP-induced optimism waned. US equity futures are also trundling lower with the YM (-0.1%) faring slightly better than its ES (-0.2%), NQ (-0.4%) and RTY (-0.4%) counterparts, whilst US Treasury Secretary Yellen over the weekend sounded more comfortable with the prospect of higher rates, stating that it would be a "positive" for the country. Nonetheless, the overall tone of the market is similar to tentativeness last week heading into the US open, with news flow also on the quiet side. Sectors in Europe are now mixed after opening largely in the red. Basic Resources are weighed on by the subdued base metal prices after Chinese trade data missed the mark. Autos and Banks are among the top performers whilst Tech resides among the laggards alongside Healthcare. Sectors overall do not portray a clear overarching theme. In terms of individual movers, Royal Mail (+2.6%) sits as one of the Stoxx 600 winners as the Co. takes steps to fend off competition by offering timed delivery slots from next year. Reckitt (-0.1%) failed to garner much traction despite reports that it entered an agreement to sell its infant formula and child nutrition businesses to Primavera Capital Group for an enterprise value of USD 2.2bln. IWG (-16%) meanwhile plumbs the depths after a downbeat trading update in which it now sees underlying EBITDA to be well below 2020 levels.

Top European News

  • Tesco and Carrefour to End Buying Alliance and Go It Alone
  • Merkel’s Heir Bolsters Bid for Chancellorship With State Win
  • Oman Hires Advisers Including Citi, HSBC for Islamic Bond Sale
  • Bankers Demand Clarity as Sweden Watchdog Balks at ESG Rules

In FX, a choppy start to the week for the broader Dollar and index, with the latter managing to remain above its 21 DMA (90.108) vs the 90.023 post-NFP low print. The index notched a current intraday high at 90.302, but news flow and catalysts have remained light as traders set sights on this week’s ECB and US CPI. On that note, ECB and Fed speakers also remain scarce for the week as officials observe their respective pre-meeting blackout periods.

  • AUD, NZD, CAD - All vary vs the Greenbank but with the breadth narrow. The Aussie narrowly outperforms amid a rise in Chinese imports and S&P affirming its rating but upgrading the Aussie outlook. Some tailwinds could also be derived from technical factors as the pair topped its 50 and 100 DMAs (0.7723 and 0.7726 respectively) as it eyes the 0.7750 marks, coinciding with the 21DMA. NZD/USD meanwhile probes 0.7200 having had traded on either side of the mark, but with upside contained as the AUD/NZD cross eyes 1.0750 to the upside. The Loonie, meanwhile, lags as oil prices pull back after WTI briefly notched USD 70/bbl.
  • EUR, GBP - Sterling sees slightly more pressure vs the EUR – possibly technical as EUR/GBP tops 0.8600, but with some tailwinds emanating from more noise surrounding the Northern Irish protocol between Britain and the EU bloc, with weekend reports suggesting that Brexit European leaders are drawing up plans to impose trade sanctions on Britain and accused UK PM Johnson of “taking them for fools” over the Northern Ireland protocol. Cable has dipped back below its 21 DMA (1.4141) from a high of 1.4170 with no follow-through from a slight beat in May Halifax House Prices, whilst EUR/USD trades on either side of 1.2150 after testing but failing to breach its 21 DMA at 1.2173.
  • JPY - USD/JPY remains caged on both sides of 109.50 but still north of its 21 and 50DMA at 109.28 and 109.19 respectively, with the pair also eyeing several sizeable OpEx north of 109.50, with USD 1.25bln rolling off at the half-number.

In commodities, WTI and Brent front month futures are subdued as sentiment remains indecisive after the post-NFP optimism seen on Wall Street on Friday waned. WTI Jul however printed USD 70/bbl for the first time since 2018 before giving up gains and some more as it trades around USD 69/bbl at the time of writing. Brent Aug meanwhile resides in the low-USD 71/bbl levels after hitting a session high of USD 72.27/bbl. Oil-specific news flow has been quiet, although this week sees the trio of monthly oil market reports – with focus likely to fall on the demand picture heading into summer and risks surrounding Iranian oil returning to the market. OPEC-related commentary (i.e. production figures) will likely be stale given the monthly meetings and set quotas through July. Elsewhere, precious metals are subdued but holding onto a lion’s share of its post-NFP gains, with spot gold in a USD 10/oz range around USD 1,880/oz and spot silver just north of USD 27.50/oz as yields and the Buck dictate price action, although the former sees its 21 DMA (1,873/oz) in the vicinity. Turning to base metals, LME copper remains sub-10,00/t as China's unwrought copper imports fell M/M in May on record-high prices, whilst BHP kicks off labour talks with workers from its largest Chilean mine, Escondida, with initial proposals for a new contract submitted on Friday – the Co. has 10 days from the receipt date to respond to the union.

US Event Calendar

  • 3pm: April Consumer Credit, est. $20.5b, prior $25.8b

DB's Jim Reid concludes the overnight wrap

The big event this week is undoubtedly Thursday’s US CPI release. Consensus estimates for May currently expect both the headline and core rate to rise +0.4% month-on-month which would lift the YoY rate to 4.7% and 3.4% respectively which will be the highest since late 2008 and 1993 which would be a pretty impressive feat especially on the core. This will undoubtedly be the most watched data release this year so far.

We will also pay close attention to the inflation expectations data in Friday's University of Michigan consumer sentiment survey (89.0 vs 82.9). To beat a well worn drum, our rates strategists feel that expectations are heading back to their 1998-2014 regime after 7 years of rock bottom levels likely due to the slump in the oil price around that time. In turn this should be worth 3% on 10 year Treasuries. Their 2.25% YE forecast reflects a probability, rather than certainty, of this happening. Last month the 5-10 year expectation rose to a revised 3.0% with the 1yr at 4.6%.

This follows May’s employment report missing expectations. The 559k gain headline payrolls (496k private) was characterised by Cleveland Fed President Mester as "solid" but still short of "substantial further progress". She also noted that the data are "not anywhere near a wage-price spiral". While there was some evidence in the report that labour shortages are resulting in upward pressure on wages – high demand in the leisure & hospitality sector being the most obvious - we are clearly along way from normality in the US labour market. However things might change very quickly as the economy fully opens up this year.

Note that our US economists will be hosting a webinar with William English, Professor in the Practice, Yale School of Management and former Director of the Division of Monetary Affairs at the Federal Reserve Board, tomorrow at 09:00 EST / 14:00 BST / 15:00 CET to discuss the outlook for Fed policy (See "The outlook for Fed policy: Taper timeline and beyond" to register for the event). This is all ahead of next week’s FOMC.

Outside of US CPI the other main event of the week will be Thursday’s ECB meeting, where much attention will be on what sort of pace the Governing Council decides on for the bank’s PEPP purchases. Given the dovish tilt in the Council’s latest commentary, our economists expect the ECB to maintain the faster pace of PEPP purchases for the time being. However, they expect that after June the market focus will be on PEPP exit, as it is a pandemic policy and we expect exit to be confirmed in September or December. See here for their full note. Otherwise, the other G20 central bank policy decisions will come from Canada on Wednesday and Russia on Friday. There are no Fed governors set to speak this week as Saturday marked the start of their blackout period ahead of next week’s FOMC meeting. The rest of the data week is in the day by day calendar at the end.

In Asia, markets have started the week on a mixed footing with the Nikkei (+0.32%) and Kospi (+0.36%) up while the Hang Seng (-0.77%) and Shanghai Comp (-0.21%) are down. Meanwhile, futures on the S&P 500 are down -0.10% while those on the Stoxx 50 are also down -0.07%. In terms of overnight data releases, China’s May exports came in at +27.9% yoy (vs. +32.1% yoy expected) while imports came in at +51.1% yoy (vs. +53.5% yoy expected).

In other interesting overnight news, US treasury secretary Janet Yellen said that President Joe Biden should push forward with his $4tn spending plans and added that “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view.” She also said that Biden’s packages would add up to roughly $400bn in spending per year and contended that it’s not enough to cause an inflation over-run. Yields on 10y USTs are up +1.6bps this morning to 1.571%.

Ahead of this weekend’s G-7 meeting we saw an agreement in principle from the same seven countries for a minimum global corporation tax of “at least 15%” on overseas earnings. The focus will now shift to a meeting of G20 finance minister in July to see if we can get wider agreement and on long-running talks between about 140 countries at the OECD. Overall it’s been clear for the last couple of years, even before the pandemic, that a 40-year race to the bottom for corporate tax rates was coming to an end and was likely to reverse. The pandemic has accelerated this.

Turning to Germany’s state election now where Angela Merkel’s Christian Democrats are most likely to win in Saxony-Anhalt and fend off the AfD. According to projections from public broadcaster ARD, the CDU is on course to win 37%, an improvement over the 30% it received in 2016 in the state, while the far-right AfD, which was pushing for the lead in recent polls, is likely to be well back in second with 22% (24% five years ago). This was the final electoral contest before the national vote in September and will be a boost to the CDU’s Armin Laschet as he bids to succeed Merkel in the Chancellorship.

Now finally to review last week. Risk assets performed well for a second straight week with equities advancing to new highs in Europe, with the STOXX 600 up +0.80% to a new record. The S&P 500 was up +0.61% to close less than 0.1% away from its record closing high from early May. Large-cap tech did particularly well with the NYFANG index posting its third straight weekly gain (+0.99%) after falling for the previous four weeks.

With inflation expectations abating, sovereign bonds gained again last week, with yields on 10yr Treasuries down -4.1bps to 1.553%, with much of that drop coming on Friday (-7.2bps) following the weaker payrolls data. This was the 7th weekly decline in yields in the last 9 weeks. The decline on Friday was driven by lower real rates (-6.1bps) however the weekly drop in yields was more driven by the drop in inflation expectations (-2.7bps). In Europe, sovereign debt also performed well, with yields on 10yr bunds seeing a -3.0bps decline. Lastly, commodity prices rose to a new high as the Bloomberg commodity spot index rose +2.00%, led in part by oil prices reaching two year highs with Brent Crude (+3.25%) and WTI (+4.98%) seeing a strong week even as copper prices (-3.17%) sagged.

On the data front, the US job report showed +559k new jobs, less than the 675k expected, with no significant upward revision to last month’s historic miss.



Tyler Durden Mon, 06/07/2021 - 07:58

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Beer bankruptcy apocalypse claims another fan-favorite brand



Before the covid pandemic, craft breweries had a moment. Beer snobs ruled the day, creating a market for local brewers to expand their businesses into regional distribution.

The demand for interesting beers was clear: Younger drinkers drove a movement that pushed local brewers to challenge the established brands. But that movement was wiped out once covid hit because craft brewers relied on people visiting their breweries.

Related: Retailer goes from Chapter 11 bankruptcy to Chapter 7 liquidation

Even brands that had good distribution in grocery and liquor stores suffered during the period where people could not visit their brewery/bar locations. It was a financial drain that pushed a number of these popular brands to the edge of ruin.

And after the pandemic ended, many of these beer brands suffered as younger consumers moved away from drinking beer, Some embraced the alcohol-free mocktail movement while others simply swapped cocktails, hard seltzers or other alcohol for beer.

Now, the craft beer industry is facing an apocalypse. Most famously, Anchor Brewing, the San Francisco icon that had national distribution, shut down last summer. A wave of bankruptcies followed, including regional favorites like Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks and Cleveland’s Terrestrial Brewing.

It has been a devastating run for the craft-beer industry, and the bleeding has not stopped.

It has been a rough period for craft breweries.

Image source: Shutterstock

Another brewery files Chapter 11 bankruptcy

A brewery that touts being at an 8,530-foot elevation, Guanella Pass, also has the distinction of being the first brewery in Georgetown, Colo., since Prohibition. The company described its two locations on its website,   

“At the foot of the Guanella Pass Scenic Byway in Historic Georgetown, CO, sits the original Brewery, and at the foot of Berthoud Pass in downtown Empire sits our second tap room and kitchen. A true mountain brewery,” the company says. 

“We believe that where you drink beer is as important as what beer you drink. So leave the grind behind, sit for a bit, and share a story or two. Because here, all you need is what you have and a good beer.”

The brewery also distributes its beers regionally at a number of locations in Colorado.

Guanella Pass continues to operate after its late-December Chapter 11 filing and the brewery has an upcoming big event scheduled for Feb. 17.

“Pass it along, there’s a Pig Roast in town! Join us at Guanella Pass for our piggy throw down! We’ll be smokin’ this bad boy starting late Friday night to get ready for our grand meat cutting at 3pm. Feel free to swing by and say hi to our BBQ crew. It’s $15 per plate, come and grab some before we run out,” the company said on its website. 

Guanella Pass has a lot of debt

In its bankruptcy filing, Guanella Pass disclosed that it had $2.3 million of debt while bringing in only $860,000 of revenue in the previous year. The company showed $72,000 in assets at the time of the filing. 

The brewer, which hopes to restructure its debt and keep operating, has a significant number of creditors,

“It owes $573,000 to First Savings Bank, which loaned it money in 2021, and $256,000 to the Clear Creek Economic Development Corp., a nonprofit that loaned it money in 2019. Both loans are collateralized by the property at 501 Rose St. in Georgetown,” the Denver Post reported.

The brewer also owes its majority shareholders, Steven and Stacey Skalski, $700,000. In addition, the company has an unpaid $135,000 loan with the U.S, Small Business Administration and owes the Colorado Department of Revenue $100,000 along with $32,000 to its food vendor, $22,000 to its bookkeeper and $10,000 to its power company, the newspaper reported.

Related: Veteran fund manager picks favorite stocks for 2024


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Public Health from the People



There are many ways to privately improve public health. Such responses make use of local knowledge, entrepreneurship, and civil society and pursue standard goals of public health like controlling the spread of infectious diseases. Moreover, private responses improve overall welfare by lowering the total costs of a disease and limiting externalities. If private responses can produce similar outcomes as standard, governmental public health programs—and more—perhaps we should reconsider when and where we call upon governments to improve public health.

Two Kinds of Private Responses

Following Vernon Smith and his distinction between constructivist and ecological rationality, private actors can engage in two general kinds of public health improvements. They can engage in concerted efforts to improve public health, and they can engage in emergent responses through myriad interactions.1 Three stories below—about William Walsh, Martha Claghorn, and Edwin Gould—indicate concerted efforts to improve public health.

Walsh, a Catholic priest and President of the Father Matthew Society in Memphis, Tennessee, used the society to organize a refugee camp outside of the city and helped hundreds of people avoid yellow fever during the 1878 epidemic—one of the worst yellow fever epidemics in the country.2 Shortly after learning mosquitos carried diseases prior to 1901, Claghorn chaired the Civics committee of the Twentieth Century Club in the Richmond Hill area of Long Island and led a community-wide anti-mosquito campaign, which rid the area of potentially infectious mosquitos.3 After realizing that many of his employees were sick with malaria, Gould—president of the St. Louis Southwestern Railway—used his wealth and business firm to finance and develop an anti-mosquito campaign throughout Texas.4

These stories show how individuals recognize a public health problem given their circumstances and use their knowledge and available resources to resolve the problem. More recently, we might all be familiar with private, constructivist responses to Covid-19. We all made plans to avoid others and produce our desired amount of exposure. Many people made facemasks from old clothes or purchased them from facemask producers. Businesses, retailers, restaurants, and many others adapted in various ways to limit exposure for their workers and customers. My favorite example, albeit not relevant for most, is the so-called bubble that was implemented by the NBA, which housed teams, encouraged play, and limited infection. The NBA finished their season and crowned a 2020 champion only because of the privately designed and implemented bubble solution. The key is that the bubble pursued all of those objectives, not just one of them. All of these responses indicate how private interactions among people can minimize their exposure, through negotiation, discussion, and mutually beneficial means.

In addition to privately designed solutions, emergent public health responses are also important, perhaps even more so. Long-term migration and settlement patterns away from infectious diseases, consumption to improve nutrition, hygiene, sanitation, and the development of social norms to encourage preventative behavior are all different kinds of emergent public health responses. Each of these responses—developed through the actions of no one person—are substantial ways to improve public health.

First, consider how common migration operates as a means of lowering prevalence rates. As soon as people realized that living near stagnant bodies of water increased the probability of acquiring diseases like malaria, they were more likely to leave those areas and subsequently avoid them. Places with such features became known as places to avoid; people also developed myths to dissuade visitors and inhabitants.5 Such myths and associations left places like the Roman Campagna desolate for centuries. These kinds of cultural associations are also widespread; for example, many people in North and South Carolina moved to areas with higher elevation and took summer vacations to avoid diseases like malaria. East End and West End, in London, also developed because of the opportunities people had to migrate away from (and towards) several diseases.6

While these migration patterns might develop over decades, movement and migration also help in more acute public health crises. During the 1878 yellow fever epidemic throughout the southern United States, for example, thousands of people fled their cities to avoid infection. They took any means of transportation they could find. While some fled to other, more northern cities, many acquired temporary housing in suburbs, and many formed campsites and refugee camps outside of their city. The refugee camps outside of Memphis—like the one formed by William Walsh—helped hundreds and thousands of people avoid infection throughout the Fall of 1878.

Second, more mundane public health improvements—like improvements in nutrition, hygiene, and sanitation—are also emergent. These improvements arise from the actions of individuals and entrepreneurs, often closely associated with voluntary consumption and markets. According to renowned medical scientist Thomas McKeown, that is, rising incomes encouraged voluntary changes in consumption, which helped improve nutrition, sanitation, and lowered mortality rates.7 These effects were especially pertinent for women and mothers as they often selected more nutritious food and altered household sanitation practices. With advancing ideas about germs, moreover, historian Nancy Tomes argues that private interests advanced the campaign to improve house-hold sanitation and nutrition—full of advice and advertisements in newspapers, magazines, manuals, and books.8 Following Tomes, economic historians Rebecca Stein and Joel Mokyr substantiate these ideas and show that people changed their hygiene, sanitation, house-hold cleaning habits, and diets as they learned more about germs.9 Such developments helped people to provide their desired exposure to germs according to their values.

Obviously, there were concerted public health improvements during this time that also explain falling mortality rates. For example, waterworks were conscious efforts to improve public health and were provided publicly and privately, with similar, positive effects on health.10 The point is that while we might be quick to connect the health improvements associated with a public water system, we should also recognize emergent responses like gradual changes in voluntary consumption.

Finally, social norms or rules that encourage preventative behavior might also be relevant kinds of emergent public health responses. Such rules identify behavior that should or should not be allowed, they are enforced in a decentralized way, and if they follow from the values of individuals in a community.11 If such rules pertain to public health, they can raise the cost of infectious behavior or the benefits of preventative behavior. Covering one’s mouth when sneezing is not only beneficial from a public health perspective, it also helps avoid earning disapproval.

The condom code during the height of the HIV/AIDS epidemic is another example of an emergent public health rule that reduced infectiousness by encouraging safer behavior.12 People who adopted safer sexual practices were seen to be doing the right thing—akin to taking care of a brother. People who refrained from adopting safer sexual practices were admonished. No single person or entity announced the rule; rather, it emerged from the actions and interactions of individuals within various communities to pursue their goals regarding maintaining sexual activity and limiting the spread of disease. Indeed, such norms were more effective in communities where people used their social capital resources to determine which behaviors should be changed and where they can more easily monitor and enforce infractions. This seems like a relevant factor where many gay men and men who have sex with men live in dense urban areas like New York and Los Angeles that foster LGBTQ communities.

Covid-19 provides additional examples where social norms encouraged the use of seemingly appropriate behavior, e.g., social distancing, the use of facemasks, and vaccination. Regardless of any formal rule in place, many people adapted their behavior because of social norms that encouraged social distancing, the use of facemasks, and vaccination. In communities that valued such behaviors, people that wore face masks and vaccinated were praised and were seen as doing the right thing; people that did not were viewed with scorn. Indeed, states and cities that have higher levels of social capital and higher values for public health tend to have higher Covid-19 vaccine uptakes.13

Improving Public Health and More

“Private approaches tend to lower the total costs of diseases and they limit externalities.”

While these private approaches can improve public health, can they do more than typical public health approaches cannot? Private approaches tend to lower the total costs of diseases and they limit externalities. Each aspect of private responses requires additional explanation.

Responding to infectious diseases and disease prevention is doubly challenging because not only do we have to worry about being sick, we also have to consider the costs imposed by our preventative behaviors and the rules we might impose. Thus, the total costs of an infectious disease include 1) the costs related to the disease—the pain and suffering of a disease and the opportunity costs of being sick—and 2) the costs associated with preventative and avoidance behavior. While disease costs are mostly self-explanatory, the costs of avoiding infection warrant more explanation. Self-isolation when you have a cold, for example, entails the loss of potentially valuable social activities; and wearing condoms to prevent sexually transmitted diseases forfeits the pleasures of unprotected sexual activity. Diseases for which vaccines and other medicines are available are less worrisome, perhaps, because these are diseases with lower prevention costs than diseases where those pharmaceutical interventions are not available. Governmental means of prevention also add relevant costs. Many readers might be familiar with the costs imposed by our private and public responses to Covid—from isolation to learning loss, and from sharp decreases in economic activity to increased rates of depression and spousal abuse.14 Long before Covid, moreover, people bemoaned wearing masks during the Great Flu,15 balked at quarantine against yellow fever,16 and protested bathhouse closings with the onset of HIV.17

Figure 1 shows the overall problem: diseases are harmful but our responses to those diseases might also be harmful.

Figure 1. The Excess Burden of Infectious Diseases

This figure follows Bhattacharya, Hyde, and Tu (2013) and Philipson (2000), who refer to the difference between total costs and disease costs as the excess burden of a disease. That is, excess burden depends on how severely we respond to a disease in private and in public. The excess burden associated with the common cold tends to be negligible as we bear the minor inconvenience of a fever, a sore throat perhaps, or a couple days off work; moreover, most people don’t go out of their way to avoid catching a cold. The excess burden of plague, however, is more complicated; not only are the symptoms much worse—and include death—people have more severe reactions. Note too that disease costs rise with prevalence and with worsening symptoms but eventually decline as more severe diseases tend to be less prevalent. Still, no one wants to be infected with a major disease, and severe precautions are likely. We might shun all social interactions, and we might use government to impose strict quarantine measures. As disease severity rises along the horizontal axis, it might be the case that the cure is worse than the disease.

The private responses indicated above all help to lower the total costs of a disease because people choose their responses and they use their local knowledge and available resources to select cheaper methods of prevention. Claghorn used her neighborhood connections and the social capital of her civics association to encourage homeowners to rid their yards of pools of water; as such she lowered the costs of producing mosquito control. Similarly, Gould used the organizational structure of his firm to hire experts in mosquito control and build a sanitation department. These are cheap methods to limit exposure to mosquitos.

Emergent responses also help to lower the total costs of a disease because such responses indicate the variety of choices people face and their ability to select cheaper options. People facing diseases like malaria might be able to move away and, for some, it is cheaper than alternative means of prevention. Many people now are able to limit their exposure to mosquitos with screens, improved dwellings, and air conditioning.18 Consider the variety of ways people can limit their exposure to sexually transmitted diseases like HIV. If some people would rather use condoms to limit HIV transmission, they are better off doing so than if they were to refrain from sexual activity altogether. Similarly, some people would be better off having relatively risky sexual activity if they were in monogamous relationships or if they knew about their partner’s sexual history. That people can choose their own preventative measures indicates lower total costs compared with blunt, one-rule-for-all, governmental public health responses.

Negative and positive externalities of spreadable diseases indicate too much infectious behavior and too little preventative behavior, respectively. Hosting a party is fun, but it also incurs the internal costs of the drinks and appetizers and, more importantly, perhaps the external costs of raising the probability that people get sick. Attending a local cafe can be relaxing, but you have to pay for a cup of coffee and you might also transmit a disease to other coffee drinkers. The same could be said for many other public and social activities that might spread diseases like attending a class or a basketball game, transporting goods and people, and sexual behaviors. Our preventative behaviors from taking a vaccine to covering your mouth and from isolation to engaging in safer sexual practices emits positive externalities. If left unchecked, negative and positive externalities lead to higher rates of infection.

Overall, we should continue to think more critically about delineating how private and public actors can improve public health and overall welfare. More importantly, we should recognize that private actors are more capable than we often realize, especially in light of conscious efforts to improve public health and those efforts that emerge from people’s actions and interactions. These private efforts might be better at advancing some public health goals than public actors do. Individuals, for example, have more access to local knowledge and can discover novel solutions that serve multiple ends—often ends they value—rather than the ends of distant officials. Such cases and possibilities indicate cheaper ways to improve public health.


[1] Smith (2009), Rationality in Economics: Constructivist and Ecological Forms, Cambridge University Press.

[2] For more on Walsh, see Carson (forthcoming), “Prevention Externalities: Private and Public Responses to the 1878 Yellow Fever Epidemic,” Public Choice.

[3] For more on Claghorn, see Carson (2020), “Privately Preventing Malaria in the United States, 1900-1925,” Essays in Economics and Business History.

[4] For more on Gould, see Carson (2016), “Firm-led Malaria Prevention in the United States, 1910-1920,” American Journal of Law and Medicine.

[5] On the connection between malarial diseases, dragons, and dragon-slaying saints, see Horden (1992), “Disease, Dragons, and Saints: the management of epidemics in the dark ages,” in Epidemics and Ideas by Ranger and Slack.

[6] For more on migration and prevalence rates, see Mesnard and Seabright (2016), “Migration and the equilibrium prevalence of infectious disease,” Journal of Demographic Economics.

[7] The American Journal of Public Health published several commentaries on McKeown in 2002:

[8] Tomes (1990), “The Private Side of Public Health: Sanitary Science, Domestic Hygiene, and the Germ Theory, 1870-1990,” Bulletin of the History of Medicine.

[9] Mokyr and Stein (1996), “Science, Health, and Household Technology: The Effect of the Pasteur Revolution on Consumer Demand,” in The Economics of New Goods, NBER.

[10] See Werner Troesken’s work on public and private waterworks in the U.S. around the turn of the 20th century. See Galiani, Gertler, and Shargrodsky (2005), “Water for Life,” Journal of Political Economy.

[11] Brennan et al., (2013), Explaining Norms, Oxford University Press.

[12] For more on the condom code, see Carson (2017), “The Informal Norms of HIV Prevention: The emergence and erosion of the condom code,” Journal of Law, Medicine and Ethics.

[13] Carilli, Carson, and Isaacs (2022), “Jabbing Together? The complementarity between social capital, formal public health rules, and covid-19 vaccine rates in the U.S.,” Vaccine.

[14] Leslie and Wilson, “Sheltering in Place and Domestic Violence: Evidence from Calls for Service During Covid-19.” Journal of Public Economics 189, 104241. Mulligan, “Deaths of Despair and the Incidence of Excess Mortality in 2020,” NBER, Betthauser, Bach-Mortensen, and Engzell, “A systematic review and meta-analysis of the evidence on learning during the Covid-19 Pandemic,” Nature Human Behavior,

[15] On the great influenza epidemic, see CBS News, “During the 1918 Flu pandemic, masks were controversial for ‘many of the same reasons they are today’.” Oct. 30, 2020.

[16] On yellow fever quarantine in Mississippi, see Deanne Nuwer (2009), Plague Among the Magnolias: The 1878 Yellow Fever Epidemic in Mississippi.

[17] On these closures, see Trout (2021), “The Bathhouse Battle of 1984.”

[18] Tusting et al. (2017), “Housing Improvement and Malaria Risk in Sub-Saharan Africa: a multi-country analysis of survey data.” PLOS Medicine.

*Byron Carson is an Associate Professor of Economics and Business at Hampden-Sydney College in Virginia, where he teaches courses on introductory economics, money and banking, health economics, and urban economics. Byron earned his Ph.D. in Economics from George Mason University in 2017, and his research interests include economic epidemiology, public choice, and Austrian economics.

This article was edited by Features Editor Ed Lopez.

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Analyst unveils new Lowe’s stock price target ahead of earnings



They are three letters that represent a multi-billion dollar industry: DIY.

Mention do-it-yourself home repairs, and some people will probably think of This Old House or the 1990s sitcom “Home Improvement,” where Tim Allen portrayed the host of the fictional “Tool Time” TV program. 

Others might think of HGTV, the Property Brothers Jonathan and Drew Scott, or Joanna and Chip Gaines of Magnolia Network. Whatever your particular cultural reference, rest assured that the DIY market is a revenue monster.

An estimated 75% of U.S. homeowners take on DIY projects, and 62% named saving money a top reason for their home improvement efforts. As a result, total U.S. home improvement sales amounted to $538 billion in 2021, according to Statista, and is projected to grow to $621 billion in 2025.

The number of do-it-yourselfers climbed during the COVID-19 outbreak as people had more time on their hands, interest rates were at rock bottom, and stimulus checks were flowing. 

That was good news for home improvement retailers like Lowe’s, which saw its stock price soar in 2021 thanks to higher demand. 

Unfortunately, rising interest rates, inflation, and job uncertainty have increased, denting demand and causing investors to wonder what could happen to Lowe’s shares next.

Lowe’s shares are facing headwinds as do-it-yourself demand slips. Photographer: Luke Sharrett/Bloomberg via Getty Images.

Bloomberg/Getty Images

Pullback in DIY spending

Young homeowners are more likely to attempt do-it-yourself projects because they tend to have less disposable income and believe that the DIY approach will be less costly than hiring a contractor.

The most common types of DIY projects are home interior projects, such as painting, flooring, and décor, which are taken on by 31% of homeowners surveyed.

Unfortunately, those younger DIYers are also most susceptible to tighter budgets, and as a result, Lowe’s  (LOW) – Get Free Report revenue has declined year-over-year for three straight quarters.

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Lowe’s, which reports quarterly earnings on Feb. 27, is the second-biggest name in the home improvement game, behind Home Depot  (HD) – Get Free Report, which is slated to release updated earnings results on Feb. 19.

Lowe’s posted better-than-expected third-quarter earnings in November but trimmed its full-year profit forecast, echoing Home Depot’s warning that consumers were spending less on big-ticket items- those worth more than $1,000- heading into the holidays.

“While we’ve seen a more cautious consumer for some time now, this quarter, we saw some of these consumers increasingly prioritizing experiences over goods, spending on travel and entertainment,” Chairman and CEO Marvin Ellison said during a conference call with analysts at the time.

Ellison reminded the analysts that DIY customers drive 75% of the company’s revenue while professionals only account for 25% of sales, as opposed to the broader market where the market is roughly fifty-fifty. “As a result, whenever the DIY customer becomes cautious, it disproportionately affects us.”

Given that backdrop, analysts surveyed by FactSet expect Lowe’s to report earnings of $1.68 per share on sales of $18.3 billion, down from earnings of $2.28 per share and revenue totaling $22.45 billion one year ago.

Lowe’s CEO ‘Bullish’ on home improvement

Ellison said that Lowe’s remained bullish on the home improvement industry’s medium- to long-term outlook.

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“We expect home prices to be supported by a persistent supply-demand imbalance of housing, while at the same time, 250,000 millennial household formations are expected per year through 2025, and their parents and grandparents, the baby boomers, increasingly prefer to age in place in their own homes,” he said.

Nevertheless, on Feb. 5, Truist lowered its price target on Lowe’s stock to $244 from $252.

Analyst Scot Ciccarelli told investors in a research note that he is reducing his margin assumptions for fiscal years 2024 and 2025 and cutting his earnings estimates to $12.80 and $14.20 a share from $13.35 and $14.75, respectively.

He did, however, keep his buy rating on the company.

“For the medium-term, we are becoming increasingly bullish on the home improvement sector given general spending resilience, home equity increases, easing comparisons, and the recent positive inflection in Private Residential Fixed Investment PFRI data,” he said.

Ciccarelli said that he believed consumer spending remains fairly steady due to healthy personal balance sheets and strong employment. 

In addition, while the tightening cycle should slow spending, it shouldn’t derail it, he said.

The analyst said that while Lowe’s comparable store sales have decelerated notably over the last two quarters—down roughly 7% to 8%– he believes the company will also get to compare against these easier results in the second half of the calendar year.

Ciccarelli added, “We remain buyers and think that LOW can move sharply higher if we are indeed at the early stages of an easing cycle.”

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