Wednesday,
April 14, 2021

Market recap

Dow Jones

33,677.27

-68.13 (-0.20%)

S&P 500

4,141.59

+13.60 (+0.33%)

Nasdaq

13,996.10

+146.10 (+1.05%)

Walmart

$139.37

-$0.43 (-0.31%)

Johnson & Johnson

$159.48

-$2.16 (-1.34%)

Moderna

$149.71

+$10.31 (+7.40%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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Top Story

Nation’s Banks Gear Up for Economic Recovery

Banks Expected to Post Profits

Some of the nation's largest banks including JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup, (C), and Bank of America (BAC) will report earnings this week. It is expected that their first quarter profits will be much higher than during the same period a year ago. Banks set aside tens of billions of dollars to prepare for loan losses during the pandemic last year, which weighed on their balance sheets. Analysts expect the banks to release those reserves now that the economy is recovering, which will improve their bottom lines.

The banks are optimistic about the coming months, hoping that government stimulus and fewer restrictions on businesses will spur economic recovery. In his annual letter to shareholders which was sent out last week, JPMorgan Chief Executive Jamie Dimon said the coming boom in the US could last until 2023.

Bank Stocks Climb

Investors are optimistic about banks’ post-pandemic prospects. The KBW Nasdaq Bank Index, which tracks large financial institutions, has climbed 27% in 2021. This is almost triple the S&P 500’s gains during the same period.

This is a big change compared to a year ago when bank stocks tumbled as the pandemic hampered global trade and commerce. US banks are seen as a proxy for the health of the US economy. Now that hopes of economic recovery are rising, so are bank stocks.

Challenges Abound for US Banks

Despite the optimism, financial giants are still facing some difficulties. They still have to contend with a low interest rate environment, which weighs on earnings from lending. Banks have the money to lend, but demand for credit is weak, which may also impact profits. On the real estate side, mortgage rates are rising, which is causing originations to decline. Banks make money by charging fees on those home loans. That could decrease if buyers continue to sit on the sidelines.

Trading and investing are still bright spots as interest in special purpose acquisition companies heats up. Banks are dealing with a lot of moving parts. This week’s earnings reports will give a clearer picture of their recent performances.

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Retailers Struggle With Store Presentation in the Wake of the Ecommerce Boom

Walmart and Macy’s Receive Criticism for Disorganized Sales Floors

Walmart (WMT), Macy's (M), and other retailers are getting criticized for their appearances. As demand for ecommerce surged during the pandemic, many stores began to use portions of their floorspace to process online orders. Now that customers are returning to brick-and-mortar locations, some retailers are struggling to make their stores look the way they once did. Stray boxes, empty shelves, and messy displays are greeting customers at some recently reopened stores.

This trend is having repercussions for retailers as they work to recover from the pandemic. Recently, a Wall Street firm downgraded its rating on Walmart’s stock because of store presentation problems.

The Importance of the In-Store Experience

Retailers will need to fix the recent issues with in-store logistics in order to lure customers back through. This is especially important because in-store sales tend to be more profitable than ecommerce sales for retailers.

Thanks to the recent round of stimulus checks, many consumers may be looking to make purchases they had put off over the past year. If consumers are faced with half empty shelves, sloppy displays, or disorganized racks when they return to stores after a year of shopping online, retailers could suffer.

Walmart Invests in Revamping Stores

Walmart is planning to invest $14 billion in its business this year. Part of the money will be used to turn some Walmart locations into automated fulfillment centers. This move will reduce Walmart’s warehouse labor costs and will allow the company to place more employees in stores to help with customer service. Walmart is also redesigning physical stores so they are more aesthetically pleasing and easier to navigate.

The past year has been full of challenges for retailers. With a post-pandemic future in sight, companies are now working on ways to keep customers happy as they shop online and in person.

The Ski Industry Learns from the Pandemic

Digital Tools Help Ski Resorts Through the Pandemic

Vail Resorts (MTN) and Alterra Mountain Co. are taking the lessons they learned during the 2020-2021 ski season to transform the customer experience for future seasons. As ski resorts worked to implement social distancing rules and capacity restrictions this past winter, they relied heavily on technology.

Resorts implemented virtual ski lift lines, online reservation systems, and more to keep ski mountains running efficiently and safely. These initiatives helped resorts stay afloat during a difficult year for the tourism industry. Vail reported that visits were only down 8.2% this past ski season. Net income was $147.8 million, 28.4% lower than a year ago, largely because of lost revenue from closures at its ski school and restaurants. The travel and tourism industry contracted by 74% last year overall, so ski resorts performed well compared to the sector as a whole.

Vail to Improve Customer Service

As COVID-19 vaccinations become more widely available and pandemic restrictions begin to lift, Vail Resorts and other ski companies plan to continue using the systems they built during the pandemic. For example, Vail will keep using some of the technology it implemented to enable online reservations for its slopeside restaurants.

Vail Resorts is also quadrupling the size of its customer support team to handle the new initiatives and to help process a backlog of pandemic-related refunds and cancellations. Vail Resorts is also giving its customer service reps the ability to answer questions through text messaging and other digital platforms.

Virtual Ski Lifts Coming Soon

Alterra Mountain Co. also expects technology to play a bigger role in next year's ski season. The company is investing $30 million to expand its digital capabilities. Alterra's CEO Rusty Gregory sees a future where guests sign up for a spot in a digital queue to ride gondolas, freeing them up to shop and socialize while they wait. In addition to virtual lift lines, Alterra Mountain wants to make it possible for guests to call for a ski instructor on demand, the way they might hail an Uber (UBER).

The travel and leisure industry faces a variety of unknowns as the pandemic subsides. The ski sector is optimistic that demand will be strong and customer experience will be improved thanks to systems developed during the pandemic.

Not-So-Breaking News

  • Grab, a Southeast Asian ride-hailing startup, is going public by merging with Altimeter Growth Corp (AGC), a special purpose acquisition company. The deal values Grab at $39.6 billion. If it goes through, this will be the biggest SPAC merger to date.
  • The FDA is calling on states to stop using Johnson & Johnson's (JNJ) COVID-19 vaccine because six people in the US developed a rare blood clotting disorder after receiving the shot. The FDA said the request is "out of an abundance of caution."
  • American Airlines (AAL) expects its revenue to decline by roughly 62% for its first quarter. It also expects to see losses of between $2.7 billion and $2.8 billion.
  • Data released yesterday showed that in March, the Consumer Price Index increased at its fastest pace since 2012 as the US economy continues to reopen. CPI, which is often used to track inflation, increased by 2.6% year-over-year and 0.6% from February. Core inflation, which excludes food and energy prices, increased by 0.3% in March.
  • Yum! Brands' (YUM) Taco Bell is opening a digital-only restaurant today. To buy food, customers must place an online or mobile order or use one of the in-store kiosks. The store is located in New York City's Times Square.
  • To answer your tax questions, we’ve compiled a selection of informational articles about such main tax topics as capital gains, retirement savings, stock options, refunds, and more. Visit SoFi’s Guide to Understanding Your Taxes to learn more.

Financial Planner Tip of the Day

“Your credit score is based on factors such as how often you pay your bills on time, how many loans and credit cards you have, what your debt is relative to your credit limits, and the average age of your accounts. It also considers negative financial events, such as judgments, collections actions, or bankruptcies.”

Brian Walsh, CFP® at SoFi

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