The SEC could decide as early as Monday to allow American ETFs to hold Bitcoin (BTC-USD) futures, making it easier for small investors to gain exposure to the cryptocurrency. The agency is facing a Monday deadline to decide whether to approve or deny a filing by ProShares to launch a ProShares Bitcoin Futures ETF. Several other ETF firms have also filed to launch similar funds and will be watching closely to see whether regulators green light ProShares' plan.

Snapshot: Many investors have been anticipating the ability to trade crypto assets through exchange traded funds, but the SEC has yet to allow ETFs to directly hold things like Bitcoin. In the past, the agency has cited investor hazards like liquidity, manipulation and extreme price swings. The list of issuers that are currently anticipating the approval include names such as Valkyrie, Galaxy Digital, VanEck, ETF Series Solutions, ARK Invest, Invesco and ProShares.

"Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits," the SEC wrote in a tweet late Thursday. "Check out our Investor Bulletin to learn more."

Movement: All the hype is adding to bullish crypto sentiment as Bitcoin traded up 3% overnight to over $59,000. At that level, the token has doubled in value this year and is near April's record high of $64,895. While the proposed Bitcoin-futures ETFs won't invest directly in crypto, issuers aim to trade futures contracts based on Bitcoin.

Aviation - Indicted for MAX fraud

Mark Forkner, chief technical pilot of the Boeing (BA) 737 MAX program, has been indicted by a federal grand jury in Texas for allegedly deceiving safety regulators which had been evaluating the plane before its approval. As a result of a series of missteps, two MAX crashes occurred in late 2018 in Indonesia and early 2019 in Ethiopia that claimed 346 lives. While the pilots tried to regain control of the plane, both went into fatal nosedives minutes after taking off.

Backdrop: The "Maneuvering Characteristics Augmentation System" was a flight stabilizing program developed by Boeing that became notorious for its role in the fatal accidents. MCAS mitigated the MAX's tendency to pitch up during certain maneuvers - because of the aerodynamic effects of its larger CFM LEAP-1B engines - though Boeing requested the FAA remove its description from aircraft manuals (leaving pilots unaware of the new system when the jet entered service in 2017). Meanwhile, the decision allowed the MAX to be certified as another 737 version, which appealed to airlines due to the reduced cost of pilot training.

737 MAX jets were grounded worldwide for more than a year and a half following the deepest corporate crisis in Boeing's history. The FAA only approved the plane for flying again late last year after company made changes to MCAS. In January, Boeing also agreed to pay more than $2.5B in fines and compensation after reaching a deferred prosecution agreement with DOJ over the MAX crashes, which cost the company a total of more than $20B.

Justice comes knocking? Forkner is expected to make an initial court appearance today in Fort Worth, Texas. He faces a maximum penalty of 20 years in prison for each of the four counts of wire fraud, and 10 years in prison for each of the two counts of fraud involving aircraft parts in interstate commerce. That could mean decades behind bars if convicted.

Tech - LinkedIn reevaluates China

Microsoft (MSFT) is shutting down the Chinese version of LinkedIn, effectively turning out the lights on the last major American social media provider operating in the country. Beijing had once touted the model, which involves a partnership between LinkedIn and Chinese nationals who actually own the platform, as a way for American tech giants to access its market. However, the framework didn't allow overseas headquarters to have too much control over the Chinese operations, making it an unpopular choice in Silicon Valley.

Behind the decision: "While we've found success in helping Chinese members find jobs and economic opportunity, we have not found that same level of success in the more social aspects of sharing and staying informed," LinkedIn said in a blog post. "We're also facing a significantly more challenging operating environment and greater compliance requirements in China."

Back in March, LinkedIn temporarily paused new member sign ups in China to ensure it complied with local law. China's internet regulator also told company officials to better regulate its content and gave them 30 days to do so. Since then, LinkedIn has notified a number of China-focused activists, academics and journalists that their profiles were being blocked for containing prohibited content.

Going forward: "Our new strategy for China is to put our focus on helping China-based professionals find jobs in China and Chinese companies find quality candidates. Later this year, we will launch InJobs, a new, standalone jobs application for China. InJobs will not include a social feed or the ability to share posts or articles. We will also continue to work with Chinese businesses to help them create economic opportunity."

Financials - Bank earnings

It's been a solid first week of Q3 earnings so far as the largest U.S. banks posted another robust round of quarterly results. A rebounding economy allowed lenders to release more cash they had set aside for pandemic losses, while equity financing and trading boosted bottom lines. Don't forget about the deal bonanza that continued to ring the register for the banks' Wall Street operations, with a hefty quarter for mergers-and-acquisitions fees.

JPMorgan (NYSE:JPM) - Q3 net interest income of $13.2B, driven by balance sheet growth and higher rates, while Asset & Wealth management net revenue came in at $4.3B (+5% Q/Q and +21% Y/Y).

Bank of America (BAC) - Regained the organic customer growth momentum it experienced before the pandemic, as well as reporting a record quarter for M&A transactions.

Wells Fargo (WFC) - Consumer Banking & Lending net income of $2.5B climbed 15% from Q2 and 181% from Q3 2020, while total outstanding loans were down from a year ago, but up from the previous quarter.

Citibank (C) - Spending on Citi credit cards rose 20% Y/Y to a record and continued climbing from the summer, though "strong consumer balance sheets impacted lending."

Morgan Stanley (MS) - Topped expectations as investment bankers scored their best quarter ever, with the division posting a 67% increase in revenue to $2.85B.

Commentary: "The banks painted a strong and healthy picture of the U.S. consumer," said Edward Moya, senior market analyst at Oanda. "Wall Street can't turn negative on the economy after seeing reserve releases, moderating trading revenue, mixed loan growth, and a consumer willing to take on debt."


 

The deadline in the debt ceiling showdown in Washington approaches, with a government shutdown possible on Friday, Oct. 1. Democrats in the House have passed a bill that would avert a shutdown and suspend the debt ceiling temporarily, but that will go nowhere in the Senate without support from some Republicans.

Democrats have disagreements within their party as well over a $1.2T infrastructure bill and a $3.5T reconciliation bill. A temporary spending bill would need to pass Thursday night. Congress has raised the debt ceiling more than a dozen times in the last 20 years, with the last major face-off coming in 2011 between the GOP and the Obama administration.

"Today’s macro environment is very different from previous debt ceiling episodes over the past decade," BlackRock Investment Institute strategists led by Jean Boivin write. "An economic restart is underway in the U.S., and inflation pressure has increased amid pandemic-related supply disruptions." "This is in contrast with the debt ceiling showdown in 2011 that triggered a downgrade in the United States’ AAA sovereign credit rating by S&P just as the euro area debt crisis and worries about slower growth kept investors on their toes," Boivin says. "It also differs from 2018, when worries about U.S.-China trade tensions and their impact on the economy were flaring up."

Technical default: The deadline for the U.S. government defaulting on its obligations is further down the line, but not that far off. Without a suspension or raising of the ceiling, there will be a risk of default between Oct. 15 and Nov. 4, according to the Bipartisan Policy Center.

"Due to the unpredictability of cash flows - and thus, all debt limit projections - policymakers need to act in the coming weeks if they intend to ensure that all obligations of the U.S. government are paid in full and on time," the center's report says. That's something the two parties have never let happen and it's unclear what the impact would be to the full faith and credit of the United States and the economy.

In a worst-case scenario, Moody's Analytics says a prolonged standoff would cause another recession, this one akin to the financial crisis, with $15T in household wealth lost and 6M jobs lost.

"We believe Congress will ultimately reach an agreement to raise or extend the debt limit, but likely not until right before the Treasury exhausts its borrowing capacity," BlackRock's Boivin says. "The good news: Neither political party wants to see a technical default, and there are no calls for substantive spending cuts," he adds. "Hence we do not believe the debt ceiling represents a fundamental risk to the market."

"The risk: The timeline to resolve the debt ceiling is tight," he says. "Political brinksmanship appears likely, and any miscalculation could lead to a short-lived government shutdown that triggers market volatility."

Market impact: So far, the debt ceiling debate has taken a back seat on Wall Street to issues like the Fed, rising commodity prices, supply chain issues and China's Evergrande crisis. The S&P 500 (SP500) (NYSEARCA:SPY) snapped a two-week losing streak last week. And while Treasury yields have been rising, that's been more to do with the response to global central banks looking to remove accommodation.

"Risk assets could suffer temporary pullbacks after an extended run higher, but we favor looking through any volatility and staying pro risk over the next six to 12 months," BlackRock, who recently moved to Neutral in U.S. equities, says.

Bloomberg highlights a near-term risk to money market funds, as investors have tended to pull cash from those funds with the increase in risk of technical default that could hit T-bill prices. Those funds could turn further to the Fed's overnight reverse repo facility, which now stands at $1.28T.

Energy - U.K. gas shortage

BP (NYSE:BP) says panic buying has caused 30% of its 1,200 gasoline stations in the U.K. to run out of the two main grades of fuel. A lack of truck drivers began to hit some fueling stations earlier this week, and lines of vehicles formed at stations over the weekend as some motorists waited for hours to fill up tanks.

Royal Dutch Shell (RDS.A, RDS.B) also says it has seen heavy demand across its network, which has caused some stations to run low on some grades.

The government said it would issue temporary visas for 5,000 foreign truck drivers, but business leaders say it is not enough to solve a labor shortage that risks major disruption beyond fuel deliveries, including for retailers ahead of the Christmas season.

Stocks - Gamification rules

Investor Michael Burry tweeted that his firm received a subpoena from the SEC in regard to GameStop (NYSE:GME). He deleted the tweet later with no explanation. The development adds intrigue to what may happen with the investigation after SEC Chairman Gary Gensler said earlier in the month that the agency was "pretty close" to releasing a report.

Burry-led Scion Asset Management reported owning a 2.4% stake in GameStop at the end of Q3 last year after starting to accumulate a position in 2019. However, Burry called the GME rally in January "unnatural, insane, and dangerous" and his public comments on the retailer supported a long-term bull thesis.

The SEC has been stepping up its focus on what it calls the "gamification" of trading, which some analysts see as a risk to Robinhood Markets (NASDAQ:HOOD). New rules could also slow down some of the meme rallies and the ability of hedge funds to front-run social sentiment moves.

Cryptocurrency - Summers on crypto

"When you have large financial sums in secret, you have risks of money laundering, risks of supporting criminal activity, risk of innocent people being ripped off," former Treasury Secretary Lawrence Summers told Bloomberg in an interview.

The crypto market shouldn't be considered a "libertarian paradise" that is immune to government regulations, but enthusiasts would do well to embrace a regulatory framework on the industry, "not just for the protection of consumers but protection of themselves," Summers said. He compares the crypto industry's lack of regulatory oversight to that of the airline and automobile sectors, which wouldn't be viable without being regulated.

 

The possibility of China property company Evergrande collapsing and overall worries about China's crackdown on indebted firms is taking its toll on Hong Kong shares. The Hang Seng Index (HSI) is down more than 3% with China and Japan closed for a holiday. The benchmark index hit an 11-month low earlier, with the index tracking construction and property off more than 6%. Evergrande (OTCPK:EGRNF) (OTCPK:EGRNY) is down more than 11% today and has fallen more than 80% this year as it struggles to meet debt payments. The company has more than $300M in debt and has warned about default. It has an $83.5M interest payment due on Thursday for a March 2022 bond, according to Reuters.

Domino effect: A collapse of Evergrande would have a domino effect on other China and Hong Kong property developers and a systemic effect on the rest of the economy, according to Jenny Zeng, co-head of Asia fixed income at AllianceBernstein.

“In the offshore dollar market, there is a considerable large portion of developers (who) are implied to be highly distressed,” Zeng said on CNBC. Developers “can’t survive much longer” if the refinancing channel continues to be shut. But she played down the possibility of Evergrande being akin to the collapse of Lehman Bros., noting the fragmentation of the China property market.

“Despite Evergrande’s size, we all know it is the largest developer in China, probably the largest in the world, (the company) still accounts for only 4% and now it’s even less of the total annual sales market,” Zeng says. “The debt, particularly the onshore debt, is well collateralized.”

Regulatory crackdown: Along with Evergrande, pressure is on the Hong Kong market as China's leaders look to rein in what it calls monopoly behavior, much like it has taken aim at the tech sector. But also like the moves against big tech companies, the exact actions the government will take are unclear. It is part of President Xi Jinping's "common prosperity" plan to address inequality.

“People may be worried about whether they have to take up extra responsibility to build more subsidized housing,” Philip Tse, head of Hong Kong and China property research at BOCOM International, says, according to Bloomberg. "Foreign investors will be concerned if administrative matters in China will lead to a price cap, more stringent purchasing limits, or some tax-payment proof is required in order to pay for buying a flat.”

“The price action across several asset classes in Asia today is horrendous due to rising fears over Evergrande and a few other issues, but it could be an overreaction due to all of the market closures in the region,” Brian Quartarolo, portfolio manager at Pilgrim Partners Asia, says.

Trending - IPO arrivals

FTSE Russell has added a record 62 recent IPOs to its popular Russell 2000 index, which could boost stocks like Krispy Kreme (NASDAQ:DNUT) and Flywire (NASDAQ:FLYW) as early as Monday because index funds will have to buy some shares.

“A rising tide lifts all boats, so it's not surprising that the continued influx of capital into the stock market has pushed up valuations for IPO companies, lifting more of them into the index at an earlier stage,” said Donovan Jones, a Seeking Alpha contributor who follows initial public offerings.

The Russell 2000 tracks 2,000 of the market’s small-cap stocks, making it the basis for popular small-cap index funds like the iShares Russell 2000 ETF (NYSEARCA:IWM). Because small-cap stocks are typically more volatile and riskier than large-cap stocks, investors expect bigger rewards from them. As a result, IWM frequently outperforms the large-cap SPDR S&P (NYSEARCA:SPY), as has happened over the past year.

Streaming pause

Streaming's share of television viewing, inching forward steadily in recent months, has taken a pause to go back to school. Three months of growth in streaming share turned flat in August, according to "The Gauge" from Nielsen, its monthly macro look at TV delivery platforms.

And there's a definitive back-to-school effect, as streaming share was flat at 28% but with a more pronounced drop in viewership among children aged 6-17 (down 7.5% from July).

Broadcast, which had bounced back from steady declines last month to touch 24% (with the help of live sports timing), was also flat, as was cable (which had taken a step back last month to land at 38%, still the leading option but in secular decline).

Economy - Dot plot coming

The Federal Reserve meets on Tuesday and Wednesday this week to discuss monetary policy. The central bank has already said they're not planning to start reducing asset purchases yet - the much-discussed taper. In addition, Fed Chairman Jerome Powell has explicitly said the Fed won't raise rates until well after tapering of its asset purchases starts.

Still, investors will be looking for hints of when the central bank will ease off the gas that it's been providing since the start of the pandemic. Economists surveyed by Bloomberg expect the Fed to make a formal announcement on reducing its purchases of Treasurys and mortgage-backed securities at the end of the November meeting.

Two-thirds of the 52 economists surveyed expect a November announcement, with more than half expecting the Fed to start the taper in December. As a reminder, the Fed is currently purchasing $80B of Treasurys and $40B of MBS per month.

At least five of the 12 Fed district bank presidents expect tapering to start this year, in comments they've publicly made starting in late August. Earlier this month, Atlanta Fed President Raphael Bostic said he expects the Fed to reduce its pace of asset purchases this year, but not this month.

Stocks - Monster reallocation

Cash poured into equities this past week and out of money market funds. Capital outflows from money market funds were $45.3B, the biggest of the year according to Refinitiv Lipper.

The market is seeing a "monster reallocation cash-to-stocks as tax redistribution threat recedes & Fed expected to remain Wall St-friendly (liquidity easiest since Jul’07)," Michael Hartnett, BofA chief investment strategist, wrote in the "Flow Show" note on Friday.

There was the largest inflow into U.S. large-cap funds ever at $28.3B. U.S. growth funds saw inflows of $6.9B, small-cap funds had inflows of $4.2B, with $1.6B to U.S. value. Among large-caps, tech had its 12th week of inflows and the most since March.


 

The business community in the U.S. is still sizing up the new vaccine mandate unveiled by the Biden administration on Thursday night. The expansive rules will demand that private employers with more than 100 workers require their staff to be vaccinated or test weekly for COVID-19 (affecting about 80M Americans). Government and health care workers (another 17M people) will also be required to get vaccinated - with no option to opt for regular testing - as a rise in Delta cases triggers fresh concerns about the pandemic. The legal basis for the order hangs on the Occupational Safety and Health Administration (OSHA), which has the authority to enforce regulations affecting workers' well-being (expect many legal challenges).

Quote: "President Biden's announcement prompts critical questions that require immediate clarification," said the Consumer Brands Association, which represents makers of packaged goods. "As with other mandates, the devil is in the details. Without additional clarification for the business community, employee anxieties and questions will multiply."

While OSHA is still developing the emergency regulation, some officials say employers could face fines of nearly $14,000 per violation. The mandate also follows more than a year of upheaval, which started as months of lockdowns and new costs for hand sanitizer, face masks and plexiglass barriers. Many businesses are still struggling under safety protocols, and additional compliance costs and verification for the new mandate could hand them a new set of potentially complex requirements.

Go deeper: Following the announcement, companies like General Motors (NYSE:GM) and Delta Air Lines (NYSE:DAL) issued statements describing the efforts they've made to get their employees vaccinated, but didn't announce whether they endorsed Biden's plan. Others, such as Walgreens Boots Alliance (NASDAQ:WBA) and Intel (NASDAQ:INTC), said they were studying it. While many in Corporate America have already required vaccines, including Facebook (NASDAQ:FB), Netflix (NASDAQ:NFLX), Disney (NYSE:DIS), McDonald's (NYSE:MCD) and Tyson Foods (NYSE:TSN), the new mandate also affects small or mid-sized companies that are already dealing with labor shortages. "It wouldn't surprise me if others look for an employer who doesn't have 100 employees - and that's a huge issue for me, especially in this competitive job market," said Jay Baker, president of Jamestown Plastics in Brocton, New York.

Trending - Crypto caution

The Bitcoin (BTC-USD) warnings are coming from far and wide following a big week that saw El Salvador legalize the crypto as legal tender. Bitcoin -0.5% to $46,087.

Riksbank Governor Stefan Ingves: "Private money usually collapses sooner or later. And sure, you can get rich by trading in Bitcoin, but it's comparable to trading in stamps," he warned at a banking conference in Stockholm. Earlier this year, Ingves said that cryptos as a whole are unlikely to escape regulatory oversight as their popularity grows. "When something becomes large enough, factors such as consumer interests and money laundering enter the picture."

Banxico Governor Alejandro Diaz de Leon: "Whoever receives Bitcoin in exchange for a good or service, we believe that [transaction] is more akin to bartering because that person is exchanging a good for a good, but not really money for a good. In our times, money has evolved to be fiat money issued by central banks. People will not want their purchasing power, their salary to go up or down 10% from one day to another. You don't want that volatility for purchasing power. In that sense, it is not a good safeguard of value."

Regulation coming? Don't forget the warnings from SEC Chair Gary Gensler earlier this month, who called crypto the "Wild West." It's "rife with fraud, scams, and abuse in certain applications. If we don't address these issues, I worry a lot of people will be hurt." What exactly the SEC ends up doing is yet to be determined, but the agency did go after Coinbase (NASDAQ:COIN) this week over a product called Lend, which would let users earn interest by lending digital assets. The SEC said the program securitizes crypto via interest passed on to the customer, though the Wells notice caused an uproar in the DeFi community and prompted some charged tweets from Coinbase CEO Brian Armstrong.

Tech - Smart shades

Facebook (FB) and Ray-Ban (OTCPK:ESLOF) have finally unveiled Wayfarer Stories - their stab at using an iconic sunglasses line to make smart spectacles more cool and palatable than past attempts. The new eyewear can snap photos and record videos, answer phone calls, and play music and podcasts. It also represents the latest effort by Facebook to erase boundaries between people's virtual and real lives as the company dips further into the Metaverse.

Some nostalgia: The move is the latest attempt to bring smart eyewear to the masses after notable attempts from Google Glass (GOOGL) and Snap Spectacles (SNAP).

Facebook teased the big event with Ray-Ban yesterday with links to action-sports videos from Mark Zuckerberg and Andrew Bosworth, head of Facebook Reality Labs. The Wayfarer Stories start at $299, come in 20 styles, and sport a tiny front-facing light that lets others know when the camera is recording (privacy concerns?).

Bosworth tells the NYT: "We asked ourselves, how do we build a product that helps people actually be in the moment they're in? Isn't that better than having to take out your phone and hold it in front of your face every time you want to capture a moment?" He also scoffs somewhat at comparisons with Google and Snap's products, noting they're focused more on the frames' fashion than the tech inside: "This product has not been tried before because we've never had a design like this before."

Outlook - Tax evasion

The top 1% of Americans ranked by income fail to pay as much as $163B in owed taxes per year, according to Natasha Sarin, deputy assistant secretary for economic policy at the U.S. Treasury. The study drives a point home that has surfaced several times this year. Just last week, executives at hedge fund Renaissance Technologies agreed to pay approximately $7B in back taxes and penalties in one of the largest settlements with the IRS, while ProPublica leaked some of the ways the wealthiest Americans avoid taxes back in June.

'We are the 99%': "Today's tax code contains two sets of rules: one for regular wage and salary workers who report virtually all the income they earn; and another for wealthy taxpayers, who are often able to avoid a large share of the taxes they owe," continues Sarin. "Today, the 'tax gap' - the difference between taxes that are owed and collected - totals around $600B annually and will mean approximately $7T of lost tax revenue over the next decade. The sheer magnitude of lost revenue is striking: it is equal to 3% of GDP, or all the income taxes paid by the lowest earning 90% of taxpayers."

Tax numbers are in the spotlight as the White House proposes investing $80B into the IRS over the next 10 years. The funds would be earmarked for more enforcement staff and would overhaul technology systems. The Biden administration is also calling for "using information that financial institutions already possess, so the IRS can deploy these additional resources to audit more sophisticated tax evaders."

Outlook: Democrats hope that collecting more unpaid taxes will help fund a $3.5T spending package they are in the process of drafting by bringing in $700B over 10 years. Others say not so fast. The bipartisan Congressional Budget Office estimates new revenue from the proposal would total around $200B over the decade, while many Republicans are hesitant about granting more power or privacy rights to the IRS.


 

September 9, 2021, may go down as a day of reckoning for the vaping industry, with the FDA set to decide whether and how e-cigarette companies may keep selling their products in the U.S. The biggest impacts could be felt by Vuse, which is owned by Reynolds American (NYSE:BTI), and Juul, in which Altria (NYSE:MO) has a 35% stake. Some other companies like Philip Morris (NYSE:PM), Swedish Match (OTCPK:SWMAF) and Imperial Brands (OTCQX:IMBBY) could also see a significant competitive advantage if their product is approved, or could get hit if rejected.

Backdrop: Last September, all U.S. e-cigarette manufacturers were required to take their vaping products off the market or submit them for FDA review. Scientific evidence was required to demonstrate that each product was less harmful than traditional cigarettes and that cigarette smokers would be more likely to stop smoking if they used it. Since then, more than 500 companies have filed applications for some 6.5M products, while the FDA enacted temporary restrictions on some sweet and fruity products to curb youth vaping.

Today's decision will likely come down to whether e-cigarettes have a net positive or negative effect on American public health. Is there enough data that supports the potential good of adult cigarette smokers switching to a less harmful option? Can a case be made that vaping is more detrimental than smoking due to young people getting hooked on nicotine? Stricter controls may also be implemented on the way e-cigarettes are marketed and sold, while manufacturers might have to submit future marketing campaigns to the FDA.

Outlook: While the agency won't be able to render decisions on every single product by today's deadline, it is fast-tracking those with the largest market share. The FDA has already blocked the sale of 55,000 flavored vape products from three companies that did not meet its standards and more crackdowns may be on the way. In April, the FDA announced plans for a proposal that would ban menthol cigarettes and flavored cigars, and is also reportedly considering whether to seek limits on nicotine levels in cigarettes to reduce their addictive potential.

Stocks - Investors grow cautious

Another day of losses may be in store for the U.S. stock market, with futures contracts tied to the Dow, S&P 500 and Nasdaq falling another 0.3% overnight. The major averages have slid over the last three consecutive trading days as investors question valuations amid worries about Fed tapering and the Delta variant. Recovery optimism was also thrown a curveball last Friday, with a jobs report that showed a sharp slowdown in the pace of hiring in the U.S.

Strange anomaly: 8.4M Americans are still unemployed across the country despite fresh figures yesterday that showed 10.9M job openings for July (the most on record dating back to 2000). Companies are even raising pay and bonuses to people who accept job offers or recruit their friends, but that doesn't seem to be helping. While many businesses have blamed enhanced unemployment benefits, economists at J.P. Morgan have found "zero correlation," at least so far, between job growth and state decisions to drop federal unemployment aid.

Whatever the case may be, a delay in the return of millions to the workforce could weigh on GDP and the recovery. In fact, overall growth has already "downshifted slightly to a moderate pace," according to the latest Beige Book, which was published on Wednesday. Investors this morning will also be watching the latest weekly jobless claims report, a metric that's seen as a proxy for layoffs, for a better look at the employment picture.

Lingering concerns: The potential tapering of central bank stimulus is not limited to the U.S. The ECB today determines whether the recovery is strong enough to warrant a pullback in monetary stimulus despite supply chain bottlenecks and the rapidly spreading Delta variant. "The real unknown is if the ECB will revise its inflation and growth forecast," said Agnes Belaisch, strategist at the Barings Investment Institute. "If it raises its inflation forecast closer to 2%, that will make markets wonder if it could overshoot and if the ECB could have to raise interest rates."

Energy - All in on solar

Solar is going to play a massive role in decarbonizing the American power grid, according to a newly released plan by the U.S. Department of Energy. The Solar Futures Study shows that by 2035, solar energy has the "potential to power 40% of the nation's electricity," before ultimately hitting 45% by 2050. Further modeling indicates that the remainder of a carbon-free grid would be supplied by wind (36%), nuclear (11%-13%), hydroelectric (5%-6%) and biopower/geothermal (1%).

How to get there? The U.S. already installed a record amount of solar in 2020 - 15 gigawatts - to total 76 GW, representing 3% of the current electricity supply. In order to accomplish the above-stated goals, the country would need to install an average of 30 GW of solar capacity per year between now and 2025 and 60 GW per year from 2025-2030. Storage will also enable more flexibility and resilience, while advanced tools like grid-forming inverters, forecasting, and microgrids would play a role in maintaining the reliability and performance of a renewable-dominant grid.

"This is code red. The nation and the world are in peril," President Biden said on Tuesday while visiting areas slammed by Hurricane Ida. "Climate change poses an existential threat to our lives, to our economy. And the threat is here. It's not going to get any better."

Go deeper: The bipartisan Infrastructure Investment and Jobs Act passed by the Senate in August includes billions of dollars for clean energy projects. While several big policies were left out, like extending tax credits, those initiatives could still be included in the $3.5T budget resolution approved by the House. The latest study from the DOE also estimates that the transition to a solar-driven grid could "employ as many as 1.5M people in the process - without raising electricity prices."

Trending - Debt limit stalemate

Treasury Secretary Janet Yellen is urging Congress to raise the government's borrowing limit, noting that lawmakers in recent years have addressed the subject with broad bipartisan support. She already made a statement on the debt limit on Aug. 9 and sent a letter to Congress about the issue in July, but is now stressing a state of urgency. Yellen estimates the Treasury's coffers could run out of cash in October and the administration is worried about a possible debt default.

Quote: "We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States. A delay that calls into question the federal government’s ability to meet all its obligations would likely cause irreparable damage to the U.S. economy and global financial markets."

Since Aug. 1, when the debt limit was reinstated, the Treasury started using certain extraordinary measures to finance the government on a temporary basis. Such measures include suspending certain investments in the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefits Fund, and the Government Securities Investment Fund of the Federal Employees' Retirement System Thrift Savings Plan.

Stalemate: House Speaker Nancy Pelosi has said raising the $28.5T debt ceiling won't be included in the $3.5T reconciliation measure that House Democrats hope to pass this fall. Senior congressional Republicans have also pledged not to vote for an increase of the limit, instead urging Democrats to pass it via reconciliation. The political wrangling and failure to increase the limit could prompt a government shutdown, which has occurred three times over the past decade.


 

The Bitcoin (BTC-USD) subreddit community is looking at a coordinated plan to buy the cryptocurrency to commemorate El Salvador's law making it legal tender. President Nayib Bukele tweeted yesterday that the country had purchased a total of 400 Bitcoins.

It was three months ago (and with the price at $35K) that Bukele made a surprise appearance at Miami's Bitcoin 2020 conference to announce plans to make the crypto legal tender in his country.

The law in El Salvador goes into effect at 3 PM local time (5 PM ET) and citizens will be able to download a digital wallet and receive $30 in Bitcoin after entering their ID number. Bitcoin is now down about 1%, moving below $52K.

According to tweets, a large Brazilian Reddit (REDDIT) community with more than 3M users, plans is being called on to buy $30 each in Bitcoin. Reddit coordinating. In a post titled "So ... We all buying $30 worth of Bitcoin on Tuesday,' user thadisusb writes: "3,316,862 Community Members X $30/each = $99,505,860 (give or take based on currencies used) ... El Salvador will have the crypto launch @ 3 PM. I say we coordinate for this time, which is 2 PM Pacific Standard time. Thoughts? ... I have meant this as more of a support gesture, rather than a pump. It's a first that a nation has adopted Bitcoin. This is an important time in Bitcoin. Let's show El Salvador, for those who are on the fence about it still, that Bitcoin has value for them. And for everyone. Bitcoin is meaningful." The post has more than 2,000 comments, with 86% giving the idea a thumbs up.

Whether the plan comes to fruition is another matter, with Vijay Ayyar, head of Asia Pacific with crypto exchange Luno in Singapore telling Bloomberg it would be challenging. “Saying something and actually doing it are very different,” Ayyar says.

On Friday, SA contributor John Rhodes argued that even "if there's a high chance of failure, or loss, over a long period of time, Bitcoin can be an outstanding asymmetric bet."

Tech - China and tech

For several months, one of the major topics involving tech companies has been China. Whether it's been the Beijing government imposing more regulations on its own e-commerce leaders, or fears about shortages in semiconductors and other products made in China, barely a day of late has gone by without the topic of China being brought up in regards to the tech sector.

But, just how much does China weigh on the thinking of top tech chief executives and other corporate officials? Are they that worried about China and its impact on their businesses?

Since CEOs know that whatever they say will be parsed for any hints about where their businesses are headed, they often only speak publicly when they want to promote something positive about their companies. But, one of those rare times when they, or their CFOs, do go before the public is on their quarterly earnings calls. And in addition to telling how well their companies have done over the prior three months, those executives have a fiduciary duty to let their shareholders know about any challenges they are facing. And with China seemingly being a worry to much of the tech sector, those quarterly conference calls would appear to be the appropriate place for company officials to address the China question. But, a look at the recent conference calls of some of the biggest tech companies shows that, in many cases, China doesn't even warrant a mention, much less a worry, to some top tech CEOs.
     
Financials - Don’t fear financials

Normally a huge miss on headline payrolls (235K vs. 750K expected) would send money away from risk into bonds, pushing yields down and hitting Financials (NYSEARCA:XLF) on net interest margin. But BTIG still has an Overweight rating on the sector, looking at the bigger picture.

"Taking a step back, Financials relative performance vs. the S&P 500 continues to build out a base that has been a decade-plus in the making, after holding the GFC era low," Julian Emanuel, chief equity and derivatives strategist, writes in a note. "This suggests that should financials maintain their momentum and relative strength break out, there is plenty of room for further outperformance - this is consistent with our view that Value began a period of longer-term outperformance vs. Growth in September 2020."
     
Cryptocurrency - Biotech comeback plays

Barron's spoke with investors and analysts who focus on the biotech field to find names that are poised to make a comeback.

Many biotech stocks have had a tough year so far. The SPDR Biotech ETF (NYSEARCA:XBI) is down 4.7% year-to-date. That compares to a 20.8% return in the same period for the S&P 500.

The companies Barron's highlights are: Acceleron Pharma (NASDAQ:XLRN), Invitae (NYSE:NVTA), Sarepta Therapeutics (NASDAQ:SRPT), COMPASS Pathways (NASDAQ:CMPS), and AlloVir (NASDAQ:ALVR).
     
Covid - Vaccine boosters

White House chief medical advisor Dr. Anthony Fauci says that the U.S. COVID-19 vaccine rollout scheduled for Sept. 20 will likely start with Pfizer (NYSE:PFE)/ BioNTech (NASDAQ:BNTX) COVID-19 vaccine, soon followed by the introduction of Moderna (NASDAQ:MRNA) COVID-19 booster shot.

Speaking on CBS' "Face the Nation," on Sunday, the top U.S. infectious disease expert said Pfizer/ BioNTech have likely submitted sufficient data for regulators to make a decision before the deadline, set by The White House last month. “It is conceivable that we will only have one of them out, but the other will likely follow soon thereafter," Fauci said.