Airline executives said they are starting to see a path out of the coronavirus pandemic as more passengers resume travel, following a weekend when airport volumes hit their highest levels in a year.
Delta
DAL 2.33%
Air Lines Inc. bookings began picking up five or six weeks ago as people have begun making plans for spring and summer, Chief Executive Officer
Ed Bastian
said at an industry conference Monday.
“We’ve seen some glimmers of hope over the last year, but they’ve been false hope,” Mr. Bastian said. “But this seems like it’s real.”
Airline stocks climbed Monday. Shares of
United Airlines Holdings Inc.
UAL 8.26%
rose 8.3%, while shares of
American Airlines Group Inc.
AAL 7.70%
climbed 7.7% and Delta shares rose 2.3%.
The pandemic brought travel to a near halt last spring. Travel restrictions and fear of infection kept people at home and out of airports for most of the year: U.S. airlines carried 60% fewer passengers in 2020 than in 2019, bringing passenger traffic to the lowest level since the mid-1980s, according to the Bureau of Transportation Statistics.
Major U.S. airlines lost about $35 billion in 2020. But on Monday, United and Delta said they could stop bleeding cash this month.
That was hard to imagine at the beginning of this year. Airline executives said January and February were even weaker than they expected, as a high numbers of cases, the rise of more contagious variants, and new Covid-19 testing requirements for people arriving from abroad had a chilling effect.
Executives said they remain cautious. The Centers for Disease Control and Prevention still advises against travel, and the number of people passing through U.S. airports is still half—or less—of what it was for most days in 2019, according to the Transportation Security Administration.
But the numbers are climbing. Airports screened nearly 1.36 million people Friday and more than 1.34 million people on Sunday, two of the busiest days since March 2020.
Numbers of new Covid-19 cases are dropping, and distribution of vaccine doses has picked up. President Biden said earlier this month that the U.S. will have enough vaccines for all American adults by the end of May.
Some states, including New York and Connecticut, are relaxing rules requiring that inbound travelers quarantine.
And there is more to do once people arrive. California, for instance, has paved the way for
Walt Disney Co.
’s Disneyland and other attractions to reopen at limited capacity if certain test positivity benchmarks are met. State and local governments—even in heavily restrictive states such as Michigan and Illinois—are allowing restaurants to seat some patrons indoors again.
Southwest Airlines Co.
LUV 1.75%
and JetBlue Airways Corp. also said Monday that more people are making plans to travel, booking vacations or trips to visit friends and family, helping to pare expected revenue declines this quarter.
Amy Curtis, who lives in Arizona, has been vaccinated since the end of February. When she learned over the weekend that her mother in Pennsylvania had also received her second shot, Ms. Curtis decided to book a visit.
“It was one of those impulsive things,” she said. “Life is so short—I feel like I need to take this opportunity. I don’t know when I may have it again.”
Ms. Curtis said she doesn’t yet feel comfortable traveling just for fun or vacation. But others are hitting beaches and ski resorts, according to airlines and analysts. JetBlue sold more bundled flight-and-hotel vacation packages last week than ever before, Chief Executive
Robin Hayes
said at the conference hosted by
JPMorgan Chase
& Co.
Bookings to destinations such as Florida and Hawaii, while still down from 2019 levels, are holding up better than other areas, according to data from ForwardKeys, a travel-analytics company. Domestic bookings were 42% of 2019 levels in the first week of January but were at 64% of 2019 levels in the first week of March, according to its data.
“There has been progressive growth in U.S. domestic bookings every week since the beginning of the year,” said
Olivier Ponti,
vice president of insights at ForwardKeys.
The recent uptick in flight bookings is helping to stem the amount of cash the carriers have been losing daily, executives said Monday. Airlines have been on track to burn through $150 million in cash a day during the first three months of this year, according to trade group Airlines for America.
United CEO
Scott Kirby
said at the conference Monday that the company expects its cash flow to turn positive, excluding debt payments, this month. Mr. Bastian also said Delta expects to stop burning cash as soon as this month.
“We know that we can’t yet put Covid in the rearview mirror,” Mr. Kirby said, noting that the airline remains unprofitable and would have to focus on repaying the debt it has taken on. But he said he expects there could be a steady travel boom on the way after a year when many people suspended or curtailed leisure experiences.
Airline executives have long said that travel demand would roar back once more people are vaccinated. While many international borders remain closed and businesses aren’t rushing to resume client meetings and conferences, executives said there are signs that pent-up demand is returning.
“Our last three weeks have been the best three weeks since the pandemic hit,”
American Airlines
AAL 7.70%
CEO
Doug Parker
said.
Airports in Paris and Singapore as well as airlines including United and JetBlue are experimenting with apps that verify travelers are Covid-free before boarding. WSJ visits an airport in Rome to see how a digital health passport works. Photo credit: AOKpass
Carriers are also on firmer financial footing, having secured three rounds of government aid to cover the costs of paying workers, in addition to billions of dollars of private funding. The American Rescue Act that President Biden signed into law last week includes $14 billion to cover salaries and benefits for airline workers in exchange for pledges not to furlough or lay off employees until the fall. That brings the total amount of government payroll support for airlines to $54 billion.
American Airlines also said last week it would raise $10 billion by putting up its frequent-flier program as collateral.
Mr. Parker said, “For the first time since this crisis hit a little over a year ago, we at American are not looking to go raise any money.”
RIYADH, Saudi Arabia—Yemen’s Iran-aligned Houthi rebels said they attacked a major Saudi Arabian oil port on the Persian Gulf with drones and missiles on Sunday. Saudi authorities said the strike caused no casualties or damage.
The Saudi Energy Ministry said an assault “coming from the sea” had targeted petroleum tanks at the Ras Tanura port. It condemned what it called “repeated acts of sabotage and hostility” targeting energy supplies to the world.
“All indications point to Iran,” said an adviser to the Saudi royal court who said he was briefed on the matter. He said it wasn’t clear whether the origin was Iran or Iraq but that it hadn’t come from the direction of Yemen.
Iranian officials didn’t immediately respond to a request for comment. An Iraqi official said he was unaware of any connection between his country and the attack.
Oil prices rose after the market opened Sunday evening in New York following the attack. Brent crude, the global gauge of oil prices, added more than 2.5% and rose above $71 a barrel. Prices have surged to their highest level since May 2019, lifted by rising demand as the global economy reopens from shutdowns designed to stop the coronavirus and supply curtailments around the world.
In 2019, a drone and missile attack on the heart of Saudi Arabia’s oil industry temporarily shut down half the kingdom’s crude production. At the time, the Houthis claimed responsibility, but the U.S. said the attack was launched from Iraq or Iran, which denied the accusations.
Yahya Saree, spokesman for Houthi forces fighting the Saudi-led military coalition in Yemen, said the group on Sunday used 10 drones and a ballistic missile in an attack on Saudi Arabia’s Eastern Province, as well as four drones and six missiles aimed at the southern Saudi regions of Asir and Jazan.
The Houthis have stepped up aerial attacks on Saudi Arabia following the inauguration in January of President Biden, who has pledged to end the six-year-old civil war in Yemen and recalibrate Washington’s relationship with Riyadh.
The Biden administration has said it wants to re-enter the 2015 nuclear deal and then negotiate a deeper, broader agreement with Tehran that also addresses Iran’s military posture and activities in the Middle East.
Saudi Arabia is leading a military coalition that intervened in the conflict in Yemen, which now faces one of the world’s worst humanitarian crises. The coalition launched a new round of airstrikes on the capital Sanaa earlier Sunday, warning that targeting civilians in Saudi Arabia was “a red line.”
Hussein Nasser, a father of two living in Sanaa, said the coalition bombardment of a nearby military base shattered the windows in dozens of homes in his neighborhood, injuring several people. “Five airstrikes at the same time while people and their kids were having lunch,” he said.
Following the incident at Ras Tanura, the port was operating as normal, according to several shipping sources. “Loadings are continuing normally,” said a manager at a shipping agency there who declined to be named. He wasn’t aware of any distribution center being hit.
Ras Tanura is the site of Saudi Aramco’s oldest and largest oil refinery and the world’s biggest offshore oil loading facility. The 550,000 barrel-a-day refinery supplies over a quarter of the kingdom’s fuel supply.
Shrapnel from a ballistic missile, which the Houthis said they had fired at military targets in nearby Dammam, fell near Aramco’s residential area in neighboring Dhahran, the Saudi statement said.
An Aramco employee living in the area said he saw two projectiles intercepted overhead by Saudi air defenses, which rely heavily on U.S. Patriot antimissile systems. Nearby residents reported the windows of their homes had trembled or even shattered from the blasts.
Images shared on social media showed bright blasts of light in the sky above Saudi Arabia’s oil-rich Eastern Province and later a plume of white smoke.
—Benoit Faucon, Saleh al-Batati and Amrith Ramkumar contributed to this article.
Write to Summer Said at summer.said@wsj.com and Stephen Kalin at stephen.kalin@wsj.com
It was Jan. 4, and Chamath Palihapitiya was ready to tease another deal. “Shooters Shoot,” he tweeted to his followers, along with a GIF of Alec Baldwin berating weary salesmen to “Always Be Closing.” The retweets and likes for the “Glengarry Glen Ross” reference came fast and furious. “We’re ready,” one follower replied.
Three days later, when Mr. Palihapitiya announced his intention to take online lender Social Finance Inc. public via a “blank-check” company, Reddit message boards popular with the day-trading crowd lit up. One fan called it a “stock that you buy with hopes of transforming you into a millionaire”—even though SoFi did not expect to be profitable until 2023 and faced stiff competition.
Mr. Palihapitiya is the man of the market moment. The founder of tech-investing firm Social Capital Holdings Inc. has charmed Wall Street to raise billions of dollars to bring startups public. Amateur traders hang on his every word for clues about his next target—and for the insults he hurls at the high-finance elite. (Hedge funds, he said last April, deserved to get wiped out when coronavirus shutdowns devastated the economy.)
Wall Street has always had its rock stars.
Warren Buffett’s
carnival-like annual meeting, after all, is nicknamed “Woodstock for Capitalists.” But Mr. Palihapitiya, a former
Facebook Inc.
executive who now has 1.4 million
Twitter
followers, belongs to a new class of market influencers—social-media savants who’ve figured out how to take shots at the establishment while taking its money.
Mr. Palihapitiya, left, is a Sri Lankan immigrant to Canada whose family got by on welfare payments when he was a child. He moved to the U.S. during the dot-com era and eventually worked for Facebook Inc.
Photo:
Brian Ach/Getty Images for TechCrunch
No one has marshaled the twin forces reshaping markets—the blank-check boom and the retail-trading surge—quite like Mr. Palihapitiya. So far this year, as of Thursday, 225 companies that use money from initial public offerings to buy established businesses have raised roughly $71 billion—a figure that accounts for more than 70% of all public stock sales, according to Dealogic data. These outfits are known as “blank-check” firms or SPACs, an acronym that stands for special-purpose acquisition companies.
Ordinary investors, homebound and flush with cash, are fueling the surge. Social Capital raised $3.7 billion for five SPACs last year and filed confidentially to raise money for seven more, according to people familiar with the matter. They have helped make Mr. Palihapitiya a fortune—at least on paper. Their structure gives Mr. Palihapitiya the right to buy one-fifth of its outstanding shares at discount prices. That means he is sitting on a mountain of gains.
SoFi, a decade-old startup that made its name refinancing student loans, is his latest prize. He and his bankers pitched some of Wall Street’s top firms to participate in the deal, and Mr. Palihapitiya’s pull with stalwarts like money manager
BlackRock Inc.
was a big reason why the lender spurned other SPAC suitors and accepted Mr. Palihapitiya’s offer, according to people familiar with the matter.
He unveiled the $8.7 billion deal to the public on Jan. 7—on CNBC and on Twitter, naturally. Nearly 65 million shares of Mr. Palihapitiya’s
Social Capital Hedosophia Holdings Corp.
V changed hands that day, more than all but 22 U.S.-listed stocks, according to Dow Jones Market Data. IPOE, as it is known, closed up 58% at $19.14, even though the deal wasn’t final and the SPAC had no real assets yet.
Leaving Facebook
A Sri Lankan immigrant to Canada whose family got by on welfare payments when he was a child, Mr. Palihapitiya graduated from the University of Waterloo and worked at
Bank of Montreal
before moving to the U.S. during the dot-com era. He joined Facebook in 2007 to help grow its user base after stints at a venture-capital firm and America Online; he left in 2011 after he said Mark Zuckerberg denied his request to start a mobile-phone business and later emerged as a critic of his former employer.
He used the money he made at Facebook to fund a lifestyle of billionaire whimsy. He is a partial owner of the Golden State Warriors, a three-time contestant in the World Series of Poker and a cryptocurrency evangelist who said he paid $1.6 million in bitcoin for an undeveloped property in Lake Tahoe. “When BTC hits $100k, I’m going to buy @GoldmanSachs and rename it Chamathman Sachs,” he recently tweeted the weekend before he also publicly toyed with running for governor of California.
Chamath Palihapitiya, far left, is a partial owner of the NBA team Golden State Warriors and a three-time contestant in the World Series of Poker.
Photo:
Poker Go
Recently, Mr. Palihapitiya has been touting a plan to “fix climate change,” as he tweeted last month. He has approached potential investors about raising billions of dollars for a partnership with tech giants on climate efforts, people familiar with the matter said.
The year he left Facebook, he founded Social Capital with a mission of backing young startups that want to solve the world’s toughest problems. He gravitated to SPACs as a way to provide an alternative path to the public markets for startups that didn’t want to deal with the costs, hassle and uncertainty of a prolonged registration process.
Mr. Palihapitiya called the idea “IPO 2.0.” A SPAC avoids many of the rules governing a traditional IPO by executing a reverse merger between a corporate shell that raised the money and a private company that takes both the cash and the shell’s stock listing. Mr. Palihapitiya raised money for his first SPAC, Social Capital Hedosophia Holdings Corp., in 2017.
Not everyone was enamored with that first SPAC attempt. Tech companies, including
Slack Technologies Inc.
where Social Capital was an early investor, rebuffed Mr. Palihapitiya’s efforts to take them public via his SPAC, according to people familiar with the matter.
During this period Mr. Palihapitiya often frustrated his colleagues with his extended absences from the office and meetings. Those absences would occasionally cause him to miss fundraising meetings he had set up for himself and
Tony Bates,
a former Skype CEO who joined Social Capital to lead a growth-investing unit Mr. Palihapitiya launched in 2017, some of the people said.
Mr. Palihapitiya’s now ex-wife was a partner at Social Capital. While they were still married, he traveled with a new woman he was dating, according to people familiar with the matter. Partners left. Many other projects, including a credit-investing fund, fell by the wayside. Nonetheless, Social Capital was able to earn an annualized internal rate of return of 33% in its first eight years, it said in its most recent annual letter.
Mr. Palihapitiya got his big break as a SPAC investor from billionaire Richard Branson.
Mr. Palihapitiya, fourth from left, got his big break as a SPAC investor from billionaire Richard Branson, pictured here with a gavel in his hand.
Photo:
Richard Drew/Associated Press
Virgin Galactic Holdings Inc., Mr. Branson’s space-tourism company, called off a roughly $1 billion financing deal with Saudi Arabia’s Public Investment Fund in October 2018, after the Saudi government was linked to the disappearance of journalist Jamal Khashoggi.
Throughout 2019, Mr. Palihapitiya, Mr. Branson and their teams spent months negotiating a deal to take Virgin Galactic public through a SPAC merger. Over meetings in Park City, Utah, and at Mr. Branson’s Necker Island in the Caribbean, the two sides hammered out an arrangement that included a $100 million personal investment from Mr. Palihapitiya. The deal, which valued the company at roughly $2 billion, closed that fall.
Mr. Palihapitiya went viral in April 2020, just as he began fundraising for two additional SPACs. After appearing on CNBC to urge the government not to bail out wealthy investors in airlines and other hard-hit companies, he gained about 100,000 new followers on Twitter, according to social-media data company Captiv8 (Social Capital is an investor in Captiv8).
“We’re talking about—a hedge fund that serves a bunch of billionaire family offices? Who cares?” Mr. Palihapitiya said. “They don’t get to summer in the Hamptons? Who cares!”
The rant endeared him to amateur investors. “Through all the pain watching all of our portfolios go up in flames the past few weeks, this motherf—er came in and spoke for all us and really put a smile on my face,” one trader wrote in a post on Reddit’s WallStreetBets that was upvoted about 2,000 times.
Meanwhile, Mr. Palihapitiya was reeling in Wall Street investors. Before coronavirus lockdowns put an end to schmoozing, he hosted dinners and meetings to pitch his SPACs to hedge funds. When the SPACs made their market debut in April, hedge funds, the target of his flamethrowing, were the primary buyers.
Mr. Palihapitiya found big targets for two of his SPACs last fall, taking house-flipping startup Opendoor Labs Inc. public in a deal worth $6.3 billion and insurance-tech startup
Clover Health Investments Corp.
to market at a $4.4 billion valuation. Big institutional investors including BlackRock, Fidelity Investments and Healthcare of Ontario Pension Plan pumped hundreds of millions of dollars into the deals alongside Mr. Palihapitiya.
Mr. Palihapitiya took insurance-tech startup Clover Health Investments Corp. public via a SPAC at a $4.4 billion valuation. Here a nurse practitioner for Clover Health takes a patient’s blood pressure.
Photo:
John Taggart/Bloomberg News
“It was like this guy walks on water,” said Michael Edwards, deputy chief investment officer of Weiss Multi-Strategy Advisers LLC, who invested in Mr. Palihapitiya’s first SPAC. “Everything he does is going to be oversubscribed.”
In December and March, Mr. Palihapitiya sold 10 million shares of Virgin Galactic to free up more than $300 million for other ventures, according to securities filings. (He indirectly co-owns another 15.75 million shares through an investment vehicle). Mr. Palihapitiya and the other managers of the SPAC that took Opendoor public are sitting on paper gains of about $475 million on the warrants and discounted shares they received through the IPO of the SPAC, as well as for their participation in a related private placement of the SPAC shares, according to estimates based on an analysis of securities filings by Michael Ohlrogge, a professor at New York University’s law school.
Mr. Palihapitiya is separately looking to start a new family of SPACs for biotech companies, some of the people said.
How much Mr. Palihapitya earned or invested personally is more difficult to discern from the filings. He highlights that he invests hundreds of millions of dollars in private placements accompanying his SPAC deals, a decision that helped sway Opendoor and SoFi to take his offers, according to people familiar with the matter. But it is sometimes unclear how much of that money is coming directly from him or from investment firms he helps manage. The Securities and Exchange Commission proposed new guidance in December for SPAC sponsors to provide more disclosure around their compensation arrangements.
Hype Man
People who know and have worked with Mr. Palihapitiya describe him as a great salesman but a poor manager. When Social Capital decided to transition away from a traditional venture-capital firm in 2018 to be more of a holding company for startups, many employees learned they would be losing their jobs from a Medium post Mr. Palihapitiya published, a person familiar with the matter said.
Mr. Palihapitiya’s skills as a hype man, though, are particularly well-suited to the features of SPACs. Unlike in a traditional IPO, executives and sponsors of SPAC transactions can make projections about the company’s future revenue and profits. Because such deals are structured as mergers, SPAC sponsors don’t have to worry about restrictions on talking openly about a business before its shares start trading.
Mr. Palihapitiya takes advantage of these loopholes. He talks his deals up on Twitter, which his lawyers then submit to the Securities and Exchange Commission to comply with stock-solicitation rules. Mr. Palihapitiya arranged with CNBC extended airtime on the days his deals were announced and went through slides from his investor presentation, according to people familiar with the matter. CNBC declined to comment. YouTube and
Amazon.com Inc.’s
Twitch have also approached him about moving his deal announcements to their live-video streaming services, some of the people said.
Mr. Palihapitiya talks his deals up on Twitter, which his lawyers then submit to the Securities and Exchange Commission to comply with stock-solicitation rules. Mr. Palihapitiya also arranged with CNBC extended airtime on the days his deals were announced, according to people familiar with the matter.
Photo:
David Paul Morris/Bloomberg News
As many as 70% of the investors in Mr. Palihapitiya’s SPACs are everyday investors, these people said. He allocates a small percentage of the shares in the offerings of his SPACs for that crowd, with an eye toward getting his underwriters to increase their share above 50%, the people said.
Alex Cruzado watched each of Mr. Palihapitiya’s CNBC clips after seeing his April 2020 rant. The 20-year-old university student living in Geneva, Switzerland, bought shares in IPOE on the day of the SoFi announcement and later posted positive reviews of it on WallStreetBets.
“For companies like Opendoor and SoFi, the fact that he talks about it and makes a public announcement directs people in,” Mr. Cruzado said in an interview. “He’s really great at marketing… [but] there’s no significant value he adds but that branding and packaging,” Mr. Cruzado said.
During his Jan. 7 appearance on the business network to elaborate on SoFi’s merits, Mr. Palihapitiya offered his thoughts on how SPACs are helping to reduce wealth inequality by letting ordinary Americans get earlier access to future blue-chip companies.
“How do you do that? You’re not going to do that by owning
American Express.
Those companies are dormant legacy businesses. That game is over. You need companies like SoFi. You need companies like Opendoor, like Clover and others,” he said.
The moderators of WallStreetBets later banned its millions of members from posting about SPACs. “They are too easily pumped to allow on a subreddit of our size,” one wrote at the time.
Mr. Palihapitiya jumped into the fray in late January when traders, inspired by posts on WallStreetBets, bid up
GameStop Corp.
and other beaten-down stocks, dealing painful losses to hedge funds that had bet the stocks would fall.
“This is some insane, crazy, baller shit: r/wsb just ran over one of the most successful hedge funds around,” Mr. Palihapitiya tweeted, linking to a Wall Street Journal article about hedge fund Melvin Capital Management’s emergency cash infusion.
In solidarity, he bought GameStop call options. He closed his position the next day and donated the proceeds.
When Robinhood Markets Inc. and other online brokerages restricted trading in hot stocks, enraging investors, Mr. Palihapitiya went on the attack. Robinhood executives were “corporatist scumbags” who “should go to jail,” he said on his podcast, “All-In.”
On Jan. 28 and 29, he told his Twitter followers that he turned Robinhood down when the startup was raising money years ago—and that Robinhood was misleadingly monetizing user data. He suggested they ditch the app and use SoFi, instead. A Robinhood spokeswoman declined to comment.
Over each of the two days, shares of the SPAC merging with SoFi notched double-digit gains. Retail interest was so strong that Robinhood placed limits on users’ ability to purchase them lest the brokerage have to deposit additional collateral with its clearinghouse to cover the trades. Of the 51 stocks in which Robinhood restricted trading on Jan. 29, Mr. Palihapitiya was tied to four.
In early February, investors in Mr. Palihapitiya’s SPACs were reminded that there is risk in taking unproven companies public quickly. Short seller Hindenburg Research published a report on Feb. 4 accusing Clover Health of failing to tell investors about a Justice Department investigation into its practices and misleadingly marketing its services to the elderly. Hindenburg previously exposed irregularities at electric-truck startup
Nikola Corp.
after it merged with a SPAC.
“Chamath has done a masterful job marketing himself, capitalizing on the recent chaos with GameStop and WallStreetBets to align himself with “everyday” investors – but his public persona strikes us as the sugar that helps the poison go down,” Hindenburg wrote in the report.
Clover said the report was full of inaccuracies and mischaracterizations. In a response published last month on Medium, Clover’s CEO and president said Hindenburg framed its report around Mr. Palihapitiya “in order to sensationalize what is otherwise a rather underwhelming piece of research.” Mr. Palihapitiya took to—where else—Twitter to defend Clover, saying he and the company would have been happy to have met with Hindenburg: “Instead, they chose to take the cheap path of screaming into the ether.”
The tweet got more than 3,000 retweets and 17,000 likes, but, since then, Clover shares are down 44%.
—Amrith Ramkumar contributed to this article.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Maureen Farrell at maureen.farrell@wsj.com
The New York Stock Exchange and Nasdaq are closed on Presidents Day 2021.
Spencer Platt/Getty Images
Nearly a year ago, the Covid-19 pandemic had just begun rocking U.S. equities. Still, the prospect of a year of shutdowns in the U.S. seemed far fetched at the time. And yet, the
S&P 500 index
is up 16% from one year ago.
Investors are optimistic about the hopes of a return to normalcy in the coming months as states roll out Covid-19 vaccinations. For now, traders in the U.S. will get some time off for Presidents Day.
The federal holiday, which dates back to 1885 and was established to recognize George Washington, occurs on the third Monday of February. It has since expanded to celebrate all U.S. presidents. Government offices are closed today and it is a bank holiday. The U.S. Postal Service will not deliver mail on Presidents Day.
Is the stock market open on Presidents Day 2021?
The New York Stock Exchange and Nasdaq are closed on Monday, Feb. 15. U.S. bond markets and over-the-counter markets will also be closed for the day. Both senior U.S. exchanges will be back open on Tuesday at 9:30 a.m.
Are international markets closed on Presidents Day 2021?
The Shanghai Stock Exchange is closed through Wednesday, local time. That’s because of Lunar New Year, not Presidents Day. The Hong Kong stock exchange is closed on Monday for the fourth day of the Lunar New Year. The Toronto Stock Exchange is closed on Feb. 15 for Family Day in Canada.
The London Stock Exchange and Tokyo Stock Exchange will be open at normal trading hours on Monday.
What about the rest of the week?
Some U.S. schools are closed the whole week of Presidents Day for vacation. Traders might look to do the same.
Going back to February 1971, the S&P 500 index has averaged a decline of 0.1% on the Tuesday following Presidents Day, according to Dow Jones Market Data. The average performance during the week of Presidents Day is a decrease of 0.05%, with the index rising in half of the 50 weeks.
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.
Shares of Norwegian Cruise Line Holdings Ltd.
NCLH,
+0.25%
inched 0.25% higher to $24.14 Wednesday, on what proved to be an all-around mixed trading session for the stock market, with the Dow Jones Industrial Average
DJIA,
+0.20%
rising 0.20% to 31,437.80 and the S&P 500 Index
SPX,
-0.03%
falling 0.03% to 3,909.88. Norwegian Cruise Line Holdings Ltd. closed $30.14 short of its 52-week high ($54.28), which the company achieved on February 12th.
The stock outperformed some of its competitors Wednesday, as Royal Caribbean Group
RCL,
-0.17%
fell 0.17% to $68.77, Carnival PLC ADR
CUK,
-1.95%
fell 1.95% to $18.11, and Carnival Corp.
CCL,
-0.57%
fell 0.57% to $20.93. Trading volume (13.7 M) remained 4.9 million below its 50-day average volume of 18.5 M.
Editor’s Note: This story was auto-generated by Automated Insights using data from Dow Jones and FactSet. See our market data terms of use.
