Tag Archives: surging

Business

Shock-and-Awe Rate Hikes Begin in the Emerging Markets amid Surging Inflation

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“A front-loaded and strong additional monetary tightening.”

By Wolf Richter for WOLF STREET.

In a shock-and-awe move, the Central Bank of Turkey today jacked up its policy rate, the one-week repo rate, by two full percentage points, from 17% to 19%. Economists had expected a rate hike of half that magnitude.

The Monetary Policy Committee said in its press release that, considering the inflation developments – the inflation rate had jumped to 15.6% in February – it “has decided to implement a front-loaded and strong additional monetary tightening.”

And more hikes are on the way: “The tight monetary policy stance will be maintained decisively, taking into account the end-2021 forecast target, for an extended period until strong indicators point to a permanent fall in inflation and price stability.”

The battered lira – over the past five years, it has plunged 60% against the US dollar, even after the 15% rise since the low point in November – jumped 1.5% today against the dollar.

Turkey’s government and corporate sector have borrowed heavily in foreign currency, primarily in euros and dollars. That debt gets difficult to service with a plunging lira. This has left Turkey teetering on the edge of a financial crisis for the past three years.

Other developing economies are now facing a similar quandary: Inflation is shooting higher, their currencies need to be propped up, and debt levels have exploded during the Pandemic from already high levels.

Brazil’s shock-and-awe rate hike yesterday.

The Central Bank of Brazil put down the hammer with a rate hike of 0.75 percentage points yesterday, bringing its Selic rate to 2.75%. A rate hike had been expected but not a Volker-type surprise monster.

And it said that another biggie of “the same magnitude” is likely to come “at the next meeting.”

The primary topic in the statement released by the rate-setting committee (Copom) was inflation, and the rate hike was designed to combat it. Inflation shot up to 5.2% in February from 4.6% in January.

“The continuing increase in commodities prices, measured in local currency, are affecting current inflation and triggered additional increases in inflation forecasts for the next months, especially through its effects on fuel prices,” it said.

“The various measures of underlying inflation are in levels above the range compatible with meeting the inflation target,” it said.

And it added that “the Committee maintains the diagnosis that the current shocks are temporary.” Which is what the Fed has said it will say when inflation numbers become ugly over the next few months.

The Bank of Brazil is tightening monetary policy – engaging in “a partial normalization process,” as it said – because the stimulus is not needed anymore, with GDP “growing strongly at the margin” at the end of 2020, with inflation expectations “above target at the relevant horizon for monetary policy,” and with inflation projections “close to the upper bound of the target for 2021.”

Central Bank of Russia meets on Friday: Shock and awe for economists who expect no rate hike?

On March 19, the Central Bank of Russia – facing an inflation rate that has shot up to 5.7% in February from 5.2% in January, and from 3.7% six months ago – is expected by 27 of 28 economists polled by Reuters to maintain its policy rate of 4.25%, but communicate to markets that it will raise rates soon.

Are these economists underestimating the will of the Bank of Russia to fight inflation, like they underestimated the will of the central banks of Turkey and Brazil? Are they in for another shock-and-awe treatment?

The inflation target of the Central Bank of Russia is 4%, and that target was hit in October and now there’s the overshoot of 5.7%. When the inflation data was reported on March 11, the Central Bank of Russia said in a statement, “Moving forward, the monetary policy pursued will keep annual inflation close to 4%.”

In this statement, there was nothing about being happy with the overshoot and allowing the overshoot to overshoot further, as the Fed might say.

At its last meeting on February 12, the Bank of Russia  kept its policy rate at the record low level of 4.25%, but the statement focused on inflation. “Prices continued to grow at an elevated pace,” it said. Amid demand that “is recovering faster and more sustainably than expected,” supply restrictions continued “to exert upward pressure on prices.” And inflation expectations by households and businesses were “elevated.”

Then it said that rate hikes are on the horizon: “If the situation develops in line with the baseline forecast, the Bank of Russia will determine the timeline and pace of a return to neutral monetary policy….”

So what is “neutral monetary policy?” That would be 5% to 6%, according to Central Bank Deputy Governor Alexei Zabotkin last week, cited by Reuters, and this was possible sooner rather than later, he said.

Following this statement, economists now expect for the Bank of Russia to lay additional groundwork at tomorrow’s meeting, on top of the groundwork it has already laid, for a rate hike at the April or May meeting. So let’s see if the Bank of Russia follows those expectations or if it channels Turkey and Brazil and hits the economists with a surprise rate hike.

All eyes are on Nigeria.

Food price inflation is a particular issue because poorer population spend disproportionate amounts of their income on food, and food price inflation can be devastating for them.

In Nigeria, the inflation rate in February surged to 17.3% from 16.5% in January and from 13.7% six months ago. Despite the surge of inflation, the Central Bank of Nigeria kept its policy rate at 11.5% at the January meeting. Nigeria’s economy is in stagflation currently, and raising rates could hit the economy further, but allowing inflation to accelerate could turn ugly.

India’s markets price in most rapid tightening in Asia. RBI says no.

India’s inflation rate jumped to 5.0% in February from 4.1% in January, with food inflation more than doubling to 3.9%.

At the January meeting, the Reserve Bank of India maintained its benchmark repo rate at 4%. RBI Governor Shaktikanta Das has stuck to Fed Chair Powell’s line to keep monetary policy accommodative as long as necessary to support the recovery. And for now, inflation remains within the RBI’s wide target range of 2% to 6%.

But markets are beginning to price in rate hikes. The three-month government bond yield has risen by roughly a quarter percentage point since early January, and is today at 3.32%. Given the three-month time frame of the maturity, the rate reacts to expected moves within those three months.

India’s Five-year interest-rate swap rates surged 63 basis points in February, the biggest monthly move since the taper tantrum in 2013, according to Bloomberg. On Wednesday, the five-year swap rate closed at 5.38%, up from 4.5% in early January. According to Naveen Singh, head of fixed-income trading at ICICI Securities Primary Dealership in Mumbai, cited by Bloomberg, these swaps are pricing in rate hikes amounting to about 1 percentage point over the next year, which would be the most rapid tightening of any country in Asia.

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World

Brazil coronavirus variant and surging second wave are overwhelming hospitals

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While a new variant of the coronavirus spreads throughout the country, many Brazilians continue to defy mask mandates mobility restrictions following the example of President Jair Bolsonaro, who recently said people need to “stop being sissies” and “whining” about the virus.

The consequences of that combination are deadly, experts say. “We are going through the worst-case scenario since the beginning of the pandemic. You just have to look at the trends in the average number of deaths,” Gonzalo Vecina Neto, a Sao Paulo University professor of Public Health, recently told Reuters television. “This could have been avoided and the most important factor is gatherings.”

Brazil has broken its own record three times this month for number of deaths in a 24-hour period. On Wednesday, Brazil’s Health Ministry registered a devastating new high — 2,286 lives lost to the virus. In total, more than 270,000 people are known to have died due to Covid-19, making Brazil’s the second-highest national death toll after the United States.

In 22 of Brazil’s 26 states, ICU occupancy has surpassed 80%. In the southern state of Rio Grande do Sul, hospital patients must line up to wait for beds as occupancy rates in intensive care units soar past 103%. The neighboring state of Santa Catarina has already surpassed 99% occupancy and is on the verge of collapsing, as cases surge throughout the state.

One hospital in Santa Catarina’s capital, Florianopolis, is already beyond capacity. David Molin, the hospital’s head nurse, tells CNN his team is exhausted and overwhelmed.

“I was here during the first wave and it wasn’t like this. We are completely overwhelmed, with our occupancy rate at over 100%. Many of those patients who are waiting for an ICU don’t make it,” Molina told CNN during a telephone interview.

Health workers blame gatherings

Molina and other health care workers blame the recent surge of Covid-19 cases on larges parties and gatherings that began around New Year’s Eve and continued through the pre-Lent carnival holiday and into today. Many of these were held in defiance of local city and state restrictions.

Last week, Rio de Janeiro’s Mayor Eduardo Paes announced a new curfew for bars and restaurants throughout the city, limiting hours of operation from 6:00 am to 5:00 pm. But hundreds of people stayed out anyway — 230 curfew-related fines and closures were issued from Friday to Saturday alone, according to the city government. At one bar, more than 200 mostly-maskless partygoers were found at a party that had been going for seven hours, reported CNN affiliate CNN Brasil.

Many municipal and state health officials and lawmakers blame Bolsonaro’s government for undermining their efforts to slow the spread of the coronavirus. And the country’s National Council of Health Secretaries (CONASS) has asked the federal government to adopt stricter measures to support hospitals and enforce social distancing.

“The health system in Brazil is on the verge of collapse,” Sao Paulo Governor Joao Doria told CNN’s Becky Anderson during a recent interview. “There is no national coordination to combat the pandemic in Brazil. It would be important for the President and the governors to send the same message to the population, but this unfortunately, doesn’t happen in Brazil.

The issue of social distancing measures and lockdowns has become a political football in Brazil. While Doria ordered nonessential businesses to close for two weeks in his state last weekend, Bolsonaro claims that such restrictions sink Brazil’s economy and lead to an increase of suicides and depression. He has made disobeying health guidance a point of pride, congratulating agricultural workers at an event last week for not staying home “like cowards.”

“We have to face our problems. Stop being sissies, enough whining, how long are they going to keep on crying? We have to confront the problems, respecting the elderly, those with illnesses, chronic conditions. But where is Brazil going to end up if we all stop?” he said.

This week, Bolsonaro declared that he had the “power” to declare a national lockdown — but would never do so. “My army is not going to force the people to stay at home,” he said.

Fears over new variant

With Brazilian hospitals overloaded and government officials divided over lockdown measures, the country has few defenses against a coronavirus variant that may be even more contagious.

A preprint of a new modelling study by researchers in Brazil and the UK suggests the variant first detected in the northern city of Manaus late last year, known as P.1, may be up to 2.2 times more transmissible.

The study, which has not yet been peer-reviewed or published in a medical journal, suggests that even people who have already had the coronavirus could be vulnerable. The same study showed that the P.1 variant could evade immunity from previous Covid-19 infection by up to 61%.

That variant is now prevalent in Covid-19 patients across at least six Brazilian states, according to a study earlier this month released by the Oswaldo Cruz Foundation (Fiocruz), a Brazilian Ministry of Health research institution. P.1 has also been detected in the United States, United Kingdom and neighboring Venezuela.

“The emergence of new variants, which combine both the potential to be more transmissible and the absence of broad and articulated mitigation and suppression measures, are highly worrisome,” the study’s authors wrote, urging Brazil to encourage behaviors that limit the viral spread.

“The data showing the prevalence of this variant in several states and its ample spread throughout the country, as well as the challenges presented due to its high level of transmission, reinforce the immediate need to adopt non-pharmaceutical measures in order to reduce the speed or its spread and the increases in cases.”

Felipe Naveca, virologist and researcher at Fiocruz Amazonia and one of the main authors of the study, told CNN that the Covid-19 virus and the different variants and strains are likely to get stronger if not stopped.

“This is what viruses do: They evolve, they get stronger. The only way to stop it is to contain its spread, which is why we need restrictive measures — there is no other solution. Even if the Government decrees a national lockdown, we need the population to adhere. The action of each one of us will impact everyone as a whole,” Naveca said.

Vaccination

Hope could be on its way, in the form of vaccines. But Brazil’s vaccination rollout was slow in comparison to other countries, including others in the region, like Chile and Mexico.

In January, health regulator Anvisa authorized emergency use of vaccines by Sinovac and Oxford/AstraZeneca. Since then, roughly 4% of Brazil’s 211 million citizens have received at least one vaccine dose, according to data from the Brazilian Health Ministry, and 2.3 million have had two doses.

According to the Health Ministry, Brazil is in negotiation to buy Pfizer, Moderna, Janssen, Sputinik and Covaxin vaccines as well, though only the Pfizer/BioNTech vaccine among those has been granted authorization from Anvisa.

Bolsonaro had long promoted the Oxford AstraZeneca vaccine as the only one he would back, dismissing and discrediting many of the other vaccines on the market, including Pfizer’s. Brazil’s health minister Eduardo Pazuello even turned down an August offer from Pfizer to purchase up to 70 million doses of its vaccine.

“Pfizer says this very clearly on the contract, ‘we are not responsible for any collateral side effects’ – if you turn into an alligator it’s your problem,” Bolsonaro said in December. “If you become Superman, or grow a beard as a woman, or a man’s voice becomes high pitched, they say they have nothing to do with that.”

But a New England Journal of Medicine study now suggests that the Pfizer/BionTech vaccine could “efficiently” neutralize the P.1 variant. The news came as Bolsonaro held a virtual meeting Monday with Pfizer Global CEO Albert Bourla and other executives to negotiate the purchase of 100 million vaccines.

“I thank you for this meeting and we recognize Pfizer as a great world company,” Bolsonaro said, during an excerpt of the meeting posted to his official Twitter account. “We would like to close these deals with you, even more given the aggressiveness of this virus in Brazil.”

For now, Brazil’s failure to contain the virus is increasingly a cautionary tale for the world. Dr. Michael Ryan, the executive director of the World Health Organization’s Health Emergencies Program, said at a briefing last week that he worried the country’s surge in cases could be repeated elsewhere.

“The story in Brazil can be and will be repeated elsewhere if we stop implementing the measures as we need to implement them,” he said. “Countries are going to lurch back into third and fourth surges if we’re not careful.”

For Molina, the exhausted Santa Catarina nurse, Brazil’s future seems bleaker than ever.

“Unfortunately, I don’t think we’ve learned our lesson,” Molina said. “We [health workers] are tired, exhausted and are getting sick. We feel powerless. We need a more coordinated action if we’re going to keep this from happening again.

Journalist Marcia Reverdosa reported from Sao Paulo and CNN’s Flora Charner reported from Atlanta.

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Business

Dow futures fall 200 points after a steep sell-off on Wall Street amid surging bond yields

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Stock futures fell in overnight trading Thursday following a tech-led rout on Wall Street amid a surge in bond yields.

Futures on the Dow Jones Industrial Average dipped 200 points, while S&P 500 futures slid 0.8%. The Nasdaq 100 futures fell 1%.

All eyes will be on February jobs report, which is set to be released Friday morning. Economists expect to see that 210,000 payrolls were added in February, compared to just 49,000 in January, according to Dow Jones.

The move in futures followed a sharp sell-off triggered by Federal Reserve Chair Jerome Powell’s remarks on rising bond yields. He said the recent runup caught his attention but he didn’t give any indication of how the central bank would rein it in. Some investors had expected the Fed chair to signal his willingness to adjust the Fed’s asset purchase program.

The economic reopening could “create some upward pressure on prices,” Powell said in a Wall Street Journal webinar Thursday. Even if the economy sees “transitory increases in inflation … I expect that we will be patient,” he added.

“The market’s translation of ‘patient’ is that patient doesn’t mean ‘never,’ and that Powell is indicating that easy money will at a certain point come to an end,” said Mike Loewengart, managing director of investment strategy at E-Trade Financial. “So while the verbiage isn’t too far away from the Fed’s previous stance, it’s enough to move a jittery market south.”

The 10-year Treasury yield jumped back above 1.5% following Powell’s comments. The benchmark rate had stabilized earlier this week after a spike to 1.6% last week amid higher inflation expectations.

Tech stocks led the market decline as growth-oriented companies tend to be more vulnerable to higher interest rates. The Nasdaq Composite dropped 2.1% Thursday, bringing its losses this week to 3.6%. The tech-heavy benchmark also turned negative for the year and fell into correction territory, or down 10% from a recent high, on an intraday basis.

The S&P 500 and the Dow both fell more than 1% Thursday, headed for a losing week. Energy outperformed with a 2.5% gain in the previous session amid a jump in oil prices.

“Rates soared once again, which opened the door for more selling of technology stocks,” said Ryan Detrick, chief market strategist at LPL Financial. “The bright side is the economy continues to improve and leadership from financials and energy is something that suggests this isn’t a sell everything moment.”

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Sports

NBA Power Rankings: Nets on Jazz’s heels for top spot; Lakers keep dropping; surging Raptors make big jump

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1


Jazz

Utah emerged with a 2-1 record against two of the league’s best teams this week, beating the 76ers before splitting with the Clippers. The win over the Clippers came with Paul George and Kawhi Leonard on the sideline, and both were back for Friday’s rematch. Even in the loss, Donovan Mitchell’s heroic effort made things interesting down the stretch. Another silver lining is that Mike Conley returned for that game, scoring 16 points in 25 minutes following a six-game absence. Despite the loss, the Jazz have still won 20 of 22 games and occupy first place in the West. — 24-6
2


Nets

This week served as a warning shot to the league, and proved just how dangerous the Nets are. James Harden was simply phenomenal, leading Brooklyn to a comeback win over Phoenix on Tuesday without Kyrie Irving and Kevin Durant. The Nets followed that up with wins over the Lakers and Clippers to complete a perfect five-game West Coast road trip. Harden averaged nearly 32 points, 11 assists and nine rebounds on 47 percent 3-point shooting this week. 5 20-12
3


Clippers

The Clippers pulled off an impressive victory over the Heat without Paul George and Kawhi Leonard, then split a pair of games after the duo came back against the Jazz and the Nets. The loss to a Kevin Durant-less Brooklyn team on Sunday was not without controversy, as Kawhi Leonard’s late, potentially game-tying layup was wiped off due to an offensive foul. Hopefully the Clippers stay healthy so we can see exactly what they’re capable of over the next few weeks. 1 22-10
4


Suns

Blowing a 24-point lead against the Nets without Kevin Durant and Kyrie Irving was a tough way to start the week for the Suns, but they turned around to pull off a fourth-quarter comeback of their own against the Pelicans before destroying an undermanned Grizzlies squad on Saturday. Chris Paul has been a madman of late, averaging 20 points and 10.7 assists for the week on scorching 61 percent 3-point shooting to go along with Devin Booker’s 22.7 points per game, which helped the Suns to an absurd 131.5 offensive rating. 1 19-10
5


Lakers

Hey, it turns out not having Anthony Davis makes things a little more difficult for your team. Who knew? After beating the Wolves, the Lakers lost to the Nets and Heat at home to close out the week. Dennis Schroder missed the two losses as well, making offense a struggle, particularly when LeBron James was on the bench. Kyle Kuzma has stepped up, averaging 15.3 points and 5.7 rebounds on 39 percent 3-point shooting for the week, and they’ll need him to continue producing for as long as Davis is out. 1 22-9
6


Trail Blazers

Damian Lillard and the Blazers ran their win streak to six games by beating the Thunder and Pelicans before losing to the Wizards on Saturday. Lillard was his normal outstanding self this week with 36.3 points, 12.7 assists and more than six 3-pointers per game. Gary Trent Jr. kept up his strong play with 19.3 points on 41 percent 3-point shooting, while Derrick Jones Jr. has provided some solid minutes. CJ McCollum’s fractured foot is set to be reevaluated in about a week, and the Blazers have done about as well as possible without him. 1 18-11
7


Raptors

Well we knew the Raptors would eventually go on a run, and it started this week with four wins, including two in Milwaukee and one over the Sixers. Even more impressive is that Toronto did it with Kyle Lowry only playing 22 total minutes this week due to an ankle injury and OG Anunoby missing two games. Fred VanVleet and Pascal Siakam stepped up as expected, and Norman Powell came through with 29- and 30-point efforts against the Bucks and Wolves. The Raptors’ defense is flying around the court, making them a very dangerous team. 8 16-15
8


76ers

The Sixers beat the Rockets and Bulls this week while falling to the Jazz and Raptors. Joel Embiid missed the Utah game, but had a career-high 50 points in the win over Chicago in another phenomenal week. Ben Simmons dropped a career high of his own with 42 points against the Jazz, and returned from illness on Sunday to score 28 points on 9-for-11 shooting in the loss to Toronto. 1 20-11
9


Bucks

The Bucks saw their losing streak extend to five games with back-to-back losses to the Raptors to start the week, but they bounced back to beat the Thunder and Kings. The Bucks offense has struggled, and the eventual return of Jrue Holiday should help them in that department. Giannis Antetokounmpo had another monster week, averaging 31 points, 14.8 rebounds and 7.0 assists, while Khris Middleton broke out for 32 points on 13-for-22 shooting in Sunday’s win over the Kings. 1 18-13
10


Spurs

The Spurs had all three games this week postponed due to positive COVID tests within the organization. Monday’s game against the Pacers has also been postponed. 2 16-11
11


Celtics

The Celtics were on their way to a 3-1 week, but saw a 24-point lead evaporate on Sunday as the Pelicans prevailed in overtime. Kemba Walker looked to have found his shooting stroke, but then put up another 5-for-21 clunker in Sunday’s loss. Jayson Tatum averaged 28.3 points and 7.3 rebounds for the week, but shot just 31 percent from 3-point range, while Jaylen Brown added 22.8 points on 41 percent 3-pointers. It’s been hard to find consistent contributors behind Tatum, Brown and Walker with Marcus Smart out of the lineup. 3 15-15
12


Warriors

After a thrilling comeback victory over the Heat on Wednesday, the Warriors were oh so close to winning three straight games for the first time this season, but they lost to a severely depleted Magic team. They followed that up with a valiant effort without Steph Curry against the Hornets, but Draymond Green’s two technical fouls and Terry Rozier’s insane game-winner made it two losses in a row for Golden State. Kelly Oubre Jr. has really found his stride after a dreadful start, averaging 22 points on 48 percent 3-point shooting this week. 1 16-15
13


Nuggets

Jamal Murray had a week for the ages, averaging 35 points per game on 56 percent 3-point shooting, but that only translated to one win for the Nuggets, partly due to a thin rotation because of various injuries. Nikola Jokic averaged 26.8 points, 8.8 rebounds and 7.5 assists on 53 percent 3-point shooting, but Denver once again had defensive issues in losses to the Celtics, Wizards and Hawks. The Nuggets now have a bottom-10 defense, allowing 111.9 points per 100 possessions. 7 16-14
14


Mavericks

The Mavericks had their only two games postponed this week due to government closures as Texas faces severe weather conditions. Dallas has home games scheduled for Monday and Tuesday, so we’ll see if it’s able to play those. 2 13-15
15


Heat

The Heat’s losing streak extended to three games with losses to the Clippers and Warriors to start the week, but they finished strong with wins over the Kings and Lakers as a tough seven-game road trip winds down. Goran Dragic missed all four games this week, and Kendrick Nunn filled in admirably with 17 points per game on 52 percent 3-point shooting. Bam Adebayo and Jimmy Butler continue to lead the way, but Miami needs to string together some wins if it wants to get back into the upper echelon of the Eastern Conference. 3 13-17
16


Pacers

The Pacers played two overtime games, losing to the Bulls and beating the Wolves, before their final game of the week against the Rockets was postponed. Domantas Sabonis had a monster triple-double against Minnesota, putting up 36 points, 17 rebounds and 10 assists. Malcolm Brogdon seems to have returned to his early season form after a short slump, averaging 27.5 points, 12 rebounds and 6.0 assists on 50 percent 3-point shooting in the two games. 3 15-14
17


Hornets

The Hornets had two games postponed this week due to health and safety protocols, then beat the Warriors in one of the most unbelievable endings you’ll ever see in sports. With the Hornets trailing by two, Draymond Green picked up two technical fouls, which allowed Terry Rozier to tie the game at the free throw line. On the ensuing Hornets possession, Rozier hit an absolutely ridiculous fall-away jumper from the corner to beat the buzzer and give Charlotte the win. The Hornets looked out of sorts after six days off and nearly failed to capitalize against the Steph Curry-less Warriors, but Rozier absolutely took over in the fourth quarter, finishing with 36 points on 8-for-11 3-point shooting to continue his breakout season. — 14-15
18


Pelicans

Zion Williamson averaged almost 30 points on 67 percent shooting this week, to go along with 7.0 rebounds and 4.5 assists. He was an absolute monster as the Pelicans went 2-2 this week, capped off by a thrilling comeback overtime win against the Celtics on Sunday. Brandon Ingram was no slouch himself, averaging 23.5 points on 42 percent 3-point shooting, while Lonzo Ball continues to play excellent all-around basketball. 7 13-17
19


Grizzlies

Memphis was blown out by the Pelicans and Suns this week, but picked up wins over the Thunder and Pistons in between. Ja Morant struggled from 3-point range, but still put up 21 points and 7.3 assists per game, while Kyle Anderson was impressive with over 18 points per game on 60 percent 3-point shooting. Justise Winslow made his long-anticipated Grizzlies, putting up nine points and seven rebounds in 21 minutes. 3 13-13
20


Magic

Steve Clifford might deserve Coach of the Year buzz for what he did this week with the Magic. The return of Evan Fournier was apparently all the team needed, as Orlando rattled off wins over the Knicks, Warriors and Pistons for a perfect week. Nikola Vucevic is an undisputed beast, and Fournier took over the perimeter scoring duties for a team that has played consistent, disciplined defense. It’s not pretty, but the Magic are getting it done against all odds. 8 13-18
21


Knicks

The Knicks beat the Hawks and Timberwolves this week, but lost a winnable game against the short-handed Magic in Orlando. Julius Randle scored 44 points and sunk a career-high seven 3-pointers in the win over the Hawks as he continues his breakout season. RJ Barrett also had a strong week, scoring 21 points against both the Hawks and Wolves. 2 15-16
22


Wizards

Well, well, well. The Wizards won all three games this week to make it four in a row overall, and beating the Nuggets and Blazers should certainly provide this group with some confidence. Bradley Beal averaged 33 points on 54 percent field goals this week, while Russell Westbrook put up 18.3 points, 13.3 assists and 12.3 rebounds per game. Davis Bertans went berserk in the win over the Nuggets, scoring 35 points on 9-for-11 3-pointers to become the first player to ever score 30 or more points without attempting a 2-point shot. 1 10-17
23


Bulls

Chicago went 3-1 this week with wins over the Pacers, Pistons and Kings, and its loss came on the road to the 76ers. The defense was much better, and Zach LaVine continued his monster season with 33.8 points per game on 42 percent 3-point shooting. He also averaged over 10 points in the fourth quarter over the three games, as he’s become one of the game’s best closers. All-Star or not, LaVine has made a huge leap this season. 1 13-16
24


Hawks

The Hawks lost to the Knicks, split with the Celtics, then finished off the week by beating the Nuggets behind 35 points and 15 assists from Trae Young. After all of their offseason moves, Atlanta’s bench unit is a hodgepodge of journeymen and rookies, as Bogdan Bogdanovic, Rajon Rondo and DeAndre Hunter all deal with injuries. If they can stay afloat while those guys recuperate, the Hawks could be poised for a second-half run. 2 13-17
25


Thunder

OKC had some offensive struggles in three losses to start the week, but it finished things off with a win over the Cavs on Sunday. Shai Gilgeous-Alexander went for 31 points and nine assists in the win, and he was one of six Thunder players to average double-figure scoring for the week. 5 12-18
26


Kings

Oof. After appearing to be on the cusp of turning their season around, the Kings lost all four games this week to make it seven straight, as the defense has regressed to its early season lows. Harrison Barnes, Richaun Holmes and Glenn Robinson III all missed time this week, necessitating more minutes for Hassan Whiteside and Nemanja Bjelica, which never helps your defense. Marvin Bagley looked good offensively as he continues to ramp up his minutes, and Tyrese Haliburton went for 23 points and eight assists in Sunday’s loss to the Bucks. 5 12-18
27


Pistons

The Pistons went back to their losing ways after three big wins last week, falling to the Bulls, Grizzlies and Magic. An injury to Delon Wright leaves Dwane Casey with a tricky situation at point guard, as Dennis Smith and rookie Saben Lee are his only options. Lee played well in Sunday’s loss to the Magic, while Jerami Grant scored a career-high 43 points in the loss to the Bulls. 5 8-22
28


Rockets

Houston dropped two games this week before the other two were postponed due to mandatory closures in Texas brought on by severe weather. John Wall had a huge game in his return to Washington, and averaged 28.5 points and 9.0 assists in the two losses this week. The big news is that Houston has cut ties with DeMarcus Cousins, possibly indicating a more concrete shift toward rebuilding amid a seven-game losing streak. 1 11-17
29


Cavaliers

The Cavs aren’t just losing — they’re not even coming close. That’s now 10 losses in a row, nine of which were by at least 16 points. On the plus side, Jarrett Allen has played well since Andre Drummond left the mix and Darius Garland has shown flashes of brilliance, but a team that can’t score and can’t get stops isn’t going to win many games. — 10-21
30


Timberwolves

If the Wolves are going to turn their season around, they’re going to have to do it with a new coach. Ryan Saunders was relieved of his duties after Sunday’s loss to the Knicks, and will reportedly be replaced by Raptors assistant Chris Finch, who will inherit the worst team in the NBA, record-wise at least. Karl-Anthony Towns is starting to get his legs under him after recovering from COVID-19, but he’s getting very little consistent help with D’Angelo Russell sidelined. — 7-24

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Business

Despite surging stocks and home prices, U.S. inflation won’t be a problem for some time

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When America’s amusement parks and baseball stadiums no longer must serve as COVID-19 mass vaccination sites, some investors believe that households pocketing pandemic financial aid from the government might start to splurge.

While a consumer splurge could initially boost the parts of the economy devastated by the pandemic, a bigger concern for investors is that a sustained spending spree also could cause prices for goods and services to rise dramatically, dent financial asset values, and ultimately raise the cost of living for everyone.

“I don’t think inflation is dead,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management Company. “The desire by key policy makers is to have it, and it’s the strongest it’s ever been. You will see rising inflation.”

Wall Street investors and analysts have become fixated in recent weeks on the potential for the Biden Administration’s planned $1.9 trillion fiscal stimulus package that targets relief to hard-hit households to cause inflation to spiral out of control.

Economists at Oxford Economics said on Friday they expect to see the “longest inflation stretch above 2% since before the financial crisis, but it’s unlikely to sustainably breach 3%.”

Severe inflation can hurt businesses by ratcheting up costs, pinching profits and causing stock prices to fall. The value of savings and bonds also can be chipped away by high inflation over time. 

Another worry among investors is that runaway inflation, which took hold in the late 1970s and pushed 30-year mortgage rates to near 18%, could force the Federal Reserve to taper its $120 billion per month bond purchase program or to raise its benchmark interest rate above the current 0% to 0.25% target sooner than expected and spook markets.

At the same time, it’s not far-fetched to argue that some financial assets already have been inflated by the Fed’s pedal-to-the-metal policy of low rates and an easy flow of credit, and might be due for some cooling off.

U.S. stocks, including the Dow Jones Industrial Average
DJIA,
+0.09%,
S&P 500 index
SPX,
+0.47%
and Nasdaq Composite
COMP,
+0.50%
closed on Friday at all-time highs, while debt-laden companies can now borrow in the corporate “junk” bond, or speculative-grade, market at record low rates of about 4%.

Read: Stock market stoked by stimulus hopes — what investors are counting on

In addition to rallying stocks and bonds, home prices in the U.S. also have gone through the roof during the pandemic, despite the U.S. still needing to recoup almost as many jobs from the COVID-19 crisis as during the worst of the global financial crisis in 2008.

This chart shows that jobs lost to the pandemic remain near to levels seen in the aftermath of that last crisis.

Job losses need to be tamed


LPL Research, Bureau of Labor Statistics

Fed Chairman Jerome Powell said Wednesday that he doesn’t expect a “large or sustained” outbreak of inflation, while also stressing that the central bank remains focused on recouping lost jobs during the pandemic, as the U.S. looks to makes serious headway in its vaccination program by late July. 

Treasury Secretary Janet Yellen on Friday reiterated a call on Friday that the time for more, big fiscal stimulus is now.

“Broadly, the guide is, does it cost me more to live a year from now than a year prior,” Jeff Klingelhofer, co-head of investments at Thornburg Investment Management, said about inflation in an interview with MarketWatch.

“I think what we need to watch is wage inflation,” he said, adding that higher wages for upper income earners were mostly flat for much of the past decade. Also, many lower-wage households hardest hit by the pandemic have been left out of the past decade’s climb in financial asset prices and home values, he said.

“For the folks who haven’t taken that ride, it feels like a perpetuation of inequality that’s played out for some time,” he said, adding that the “only way to get broad inflation is with a broad overheating of the economy. We have the exact opposite. The bottom third are no where near overheating.”

Klingelhofer said it’s probably also a mistake to watch benchmark 10-year Treasury yields for signs that the economy is overheating and for inflation since, “it’s not a proxy for inflation. It’s just a proxy for how the Fed might react,” he said.

The 10-year Treasury yield
TMUBMUSD10Y,
1.209%
has climbed 28.6 basis points in the year to date to 1.199% as of Friday.

But with last year’s sharp price increases, is the U.S. housing market at least at risk of overheating?

“Not at current interest rates,” said John Beacham, the founder and CEO at Toorak Capital, which finances apartment buildings and single family rental properties, including those going through rehabilitation and construction projects.

“Over the course of the year, more people will go back to work,” Beacham said, but he added that it’s important for policy makers in Washington to provide a bridge for households through the pandemic, until spending on socializing, sporting events, concerts and more can again resemble a time before the pandemic.

“Clearly, there likely will be short-term consumption increase,” he said. “But after that it normalizes.”

The U.S. stock and bond markets will be mostly closed on Monday for the Presidents Day holiday.

On Tuesday, the only tidbit of economic data comes from the New York Federal Reserve’s Empire State manufacturing index, followed Wednesday by a slew of updates on U.S. retail sales, industrial production, home builders data and minutes from the Fed’s most recent policy meeting. Thursday and Friday bring more jobs, housing and business activity data, including existing home sales for January.

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