U.S. Stock Futures Dropped As Treasury Yields Continue To Strengthen
The Dow futures edged higher on overnight trading on Sunday. The move in the U.S. stock futures came after the Senate passed a $1.9 trillion economic relief and stimulus bill on Saturday. That paved the way for extensions to unemployment benefits, another round of stimulus checks, and aid to state and local governments. Despite displaying strength on Sunday evening, Dow futures fail to hold up in this morning’s trading. The yield of 10 year Treasuries has been edging up, hovering around 1.6%. This has led investors to reconsider assets perceived as having lofty valuations such as tech stocks as bonds become more attractive.
“10-year yields finally caught up to other asset markets. This is putting pressure on valuations, especially for the most expensive stocks that had reached nosebleed valuations,” Mike Wilson, the chief U.S. equity strategist at Morgan Stanley
From the stock futures, investors could expect another round of sell-off among tech stocks today. The major future indexes are all trading in the negative territory. The Dow, S&P 500, and Nasdaq were all in the negative territory, moving 0.15%, 0.68%, and 1.54% lower as of 7:42 a.m. ET.
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This week, all eyes will be on the inflation data set to be available on Wednesday. Investors have been fearing a possible increase in inflation. And such fears have put a brake on the stock market in the past few weeks. Consensus economists anticipate that the Consumer Price Index (CPI) accelerated to see a 0.4% month-over-month increase in February. That is up from the 0.3% monthly rise in January, according to Bloomberg-compiled data.
Despite, or perhaps because of the $1.9 trillion US stimulus package to spur global economic recovery, inflation fears persist. You can’t blame them though. As the economy reopens, many are expecting pent-up demand from consumers who have been saving up during the pandemic.
“If our forecast is correct, February would mark the beginning of a reversal of COVID-induced relative price changes. That would imply goods prices might decline but service prices might increase in coming months, as consumer demand shifts back to services requiring personal contact,” Nomura chief economist Lewis Alexander wrote in a note Friday.
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Investors looking for the next red-hot IPO stocks to invest in have their eyes on Roblox. For those unfamiliar, it is an online platform for playing and creating video games. The company will make its public debut through a direct listing on March 10. It is set to take place on the New York Stock Exchange under the ticker symbol ‘RBLX’. Investors want a piece of Roblox stock because the gaming platform has seen its daily users skyrocket 85% over the past year. That brought sales up 82% in 2020 to $924 million. And that figure is even more impressive when you consider that in 2018 the company’s top line was just $325 million.
Perhaps, you may not have heard about the game. But if you have a kid back home or one of your nieces is in elementary school, the chances of you encountering the game are not low. Roblox is a massive success not just because of the increase in daily paying users. In fact, the time gamers spend on its platform is the real deal. Gamers spent more than 30.6 billion “hours engaged” last year, up 124% from 2019.
According to the company’s S-1 filing, it does not “expect these activity levels to be sustained, and in future periods we expect growth rates for our revenue to decline, and we may not experience any growth in bookings or our user base during periods where we are comparing against COVID-19 impacted periods.” Of course, all that is saying is to manage investors’ expectations on the revenue trajectory after the pandemic. Does that make Roblox a less attractive investment? Not exactly. After all, many believe in the company’s long-term potential. Considering the recent weaknesses in tech stocks, however, would you be jumping into RBLX stock right away?
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Apart from Roblox, Korean e-commerce giant Coupang is also scheduled to make its public debut this week, just one day after Roblox. Coupang will be trading in the New York Stock Exchange under the ticker ‘CPNG’. The company aspires to be the Amazon (NASDAQ: AMZN) of South Korea, establishing an end-to-end e-commerce logistics network that provides free next-day delivery 365 days a year.
A leading player in its home market, the company nearly doubled revenue in 2020 and has expanded its margins in recent years. While yet to be profitable, the company has been successful in narrowing its losses in recent years. Financials aside, the company sees strong potential for further expansion. That is because South Korea is home to one of the largest and fastest-growing e-commerce opportunities globally.
Now, the company has raised its value from $30 billion earlier this year to nearly $50 billion. Investors have to take note that the steep premium price tag could take away the potential price appreciation from CPNG stock at least in the near term. With such a premium price tag, doubling from a $50 billion valuation on its first day of trading seems not very likely to me. But you never know.
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Earnings Winding Down
Recall that Zoom Video Communications (NASDAQ: ZM) powered through the pandemic with its video conference offering. This shows us that there will always be a silver lining in a heavily battered economic environment. Earnings and revenue came in higher than Wall Street’s expectations. As we continue to wind down the earnings season, there are still big names reporting this week. These include StitchFix (NASDAQ: SFIX), MongoDB (NASDAQ: MDB), DocuSign (NASDAQ: DOCU), Oracle (NYSE: ORCL), and Bumble (NASDAQ: BMBL). As such, whether you are looking for the best IPO stocks to buy, waiting for the stimulus package to pass, or following earnings reports, these should be enough to keep you busy this week.