💰 Rising prices, falling stocks

Wednesday, May 12, 2021 by Robinhood Snacks |
_The entire drive-thru just got pricier [Foodcollection via GettyImages]_

The entire drive-thru just got pricier [Foodcollection via GettyImages]

Yesterday’s Market Moves
Dow Jones
34,269 (-1.36%)
S&P 500
4,152 (-0.87%)
Nasdaq
13,389 (-0.09%)
Bitcoin
$57,120 (+2.56%)

Hey Snackers,

Apparently, you can eat your chia and mine it, too: an "eco-friendly" crypto coin called Chia claims to solve Bitcoin's biggest problem. But can you sprinkle it on an acai bowl?

Stocks dropped again yesterday on inflation fears. About that...

Pricey

It's going Dow... and Wall Street yelled "timber" (thanks, Ke$ha). The industrials-heavy Dow index fell 1.4% yesterday, after closing last week at a record high. On Monday, the techy Nasdaq plunged 2.5%, dragging the whole market down. What's going on:

  • A widespread surge in prices is spooking investors, inspiring the "i word" (inflation). Inflation = a general rise in the price level of an economy. Inflation concerns have lingered for months, but hit the market yesterday.
  • Why investors worry: Spiking prices can decrease the purchasing power of a dollar (aka: your $1 gets you less). Investors are worried the Fed will raise interest rates sooner than expected to fend off inflation.

The entire drive-thru just got pricier... including the car. Supply chain and labor shortages are driving up prices of raw materials and consumer goods. Meanwhile, the Fed has added trillions to the money supply through stimulus packages and bond-buying sprees, adding to concerns. Some areas seeing notable spikes:

  • Raw materials and commodities like copper, steel, lumber, and corn, are hitting record prices as production quickly revs up.
  • Consumer packaged goods giants like General Mills, Kimberly Clark, and Smucker's hiked prices (on everything from diapers to peanut butter) for the first time since 2018, citing higher materials and production costs.
  • Car prices hit records thanks to the Great Chip Shortage, which is shutting down factories.
  • Poultry prices are at all-time highs, as demand for fried chicken sandwiches soars. Chicken nugget icon Tyson just warned that "substantial" inflation pressures would hurt its profit margins.
THE TAKEAWAY

Everyone's asking: temporary or trend?... Is this a one-time price increase as the economy rebounds — or, the start of higher yearly inflation? Economists expect these rising costs are temporary. But if they become a trend, that could push the Fed to hike interest rates. Higher rates can make bonds and savings accounts more attractive than riskier assets (like stocks). They also increase the cost of borrowing, which can dampen growth. So far, the Fed has stayed committed to its low-rate policy. But investors worry rising prices could change that.

Shop

"Give my regards to Broadway... remember me to Herald Square!" (Macy's mood right now). Macy's flagship Herald Square location is one of the largest department stores in the world (think: 50 departments across 10 floors). Now, the mall OG wants to go even bigger — despite a rough, losing year that spurred it to close dozens of stores. The ambitious proposal:

  • Step 1: Transform Herald Square. Macy's is commiting $235M to improve the Herald Square subway stations, and “transform Herald Square and Broadway Plaza into a modern, car-free pedestrian-friendly urban space for New Yorkers and visitors.” Bold.
  • Step 2: Put an office on it. Macy's wants to build a big commercial office tower on top of its Herald Square store (which can only happen after the area is rezoned — Step 1). Macy's says the proposal would support ~16K jobs.

Not your typical "future of work"... For all the talk about permanent WFH, hybrid workspaces, and hologram colleagues, companies are still investing in office space. NYC expects a boom in new office jobs, forecasting a return to pre-pandemic office employment by the end of the year. NYC would get $250M in new tax revenue from the proposal. Macy's would get prime corporate real estate (that it can charge sky-high rent for).

THE TAKEAWAY

Lean into your strengths (creatively)... Macy's understands physical retail, and it knows where tourists want to shop (Buddy the Elf worked at its Herald Square location). Now, Macy's is leaning into its strengths — boldly and creatively. Coincidentally, it was also one of the few departments stores that didn't go corona-bankrupt (see: JCPenney, Lord Taylor, Neiman Marcus). Last quarter, it even managed to turn a small profit. We'll see if "revenge spending" boosted its sales when it reports earnings next week.

What else we’re Snackin’

  • Fine: The UK unveiled a new law to fine social media companies that fail to remove online abuse. The fine: up to 10% of sales or $25M.
  • Free: Uber and Lyft will provide free rides to and from vaccination sites until July 4 under a new White House partnership.
  • Gas: The Colonial Pipeline hack/outage is leading to panic-buying — gas stations from FL to VA started running dry as prices jumped.
  • Rising: Marriott posted another weak quarter. But in North America, room occupancy jumped from 33% in January to 49% in March.
  • Highlight: A spotlight on the future of connectivity and transportation (plus, how hospitals are prepping for the next pandemic).

Wednesday

  • Earnings expected from Bumble, Wendy's, Lemonade, Coupang, Wix, Wish, Vroom, and Toyota
  • Eid begins

Authors of this Snacks own shares of: Uber

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