Thursday,
April 15, 2021

Market recap

Dow Jones

33730.89

+53.62 (+0.16%)

S&P 500

4124.66

-16.93 (-0.41%)

Nasdaq

13857.84

-138.26 (-0.99%)

American Airlines

$22.37

-$0.19 (-0.84%)

LVMH

$146.56

-$1.29 (-0.87%)

Dollar General

$213.55

+$1.51 (+0.71%)

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

Coinbase Goes Public

A Volatile Day for Coinbase

Coinbase (COIN), a cryptocurrency exchange, started trading on the Nasdaq yesterday. The stock began trading at $381. Shortly after markets opened, the price shot up to $429 before falling to about $328 at the end of the day.

Coinbase chose to list its shares directly instead of hiring investment bankers to sell the IPO to institutional investors. The startup is the first major cryptocurrency company to go public. Brian Armstrong co-founded Coinbase in 2012 and holds a 20% stake in the company.

Regulators May Be Coming for Crypto

Coinbase’s public debut comes at a complicated time for cryptocurrencies. Digital currencies are becoming more mainstream, but some investors are concerned that lawmakers around the world may soon pass more regulations on how cryptocurrencies can function. Governments want to ensure cryptocurrencies are not being used for money laundering, terrorism financing, and other elicit activities. US Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde are among the government officials to raise concerns about crypto.

The US government is already taking steps to increase oversight. Lawmakers recently proposed a rule that would require individuals who own cryptocurrency in digital wallets to undergo an identity check for transactions of $3,000 or more. Some crypto executives are concerned this could reduce demand for digital currencies.

A Direct Listing on the Nasdaq

Coinbase is among a growing list of companies to go public through direct listings, but the first major one to select the Nasdaq. Slack Technologies (WORK), Palantir Technologies (PLTR), and Roblox (RBLX) went public via direct listings on the New York Stock Exchange. Coinbase said the decision was partly due to the fact that the Nasdaq offered Coinbase the ticker, “COIN”. The Nasdaq’s ability to provide a private market for shares and offer investor relations services also helped win Coinbase over.

The Nasdaq is home to a number of large tech companies. It has hosted other direct listings, but never one of Coinbase's size. Coinbase’s market debut is the first test of the Nasdaq’s ability to handle major direct listings.

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Luxury Goods Are in High Demand Amidst Pandemic Recovery

LVMH Sales Surge in First Quarter

The European luxury goods company LVMH Moët Hennessy Louis Vuitton (LVMUY) saw its sales rebound during the first quarter of the year. Q1 sales surged 30% year-over-year and were 8% higher than during the first three months of 2019. The strong results are being driven by shoppers in the US and China—two countries where pandemic-related shutdowns have been eased.

LVMH is seen as a bellwether for the entire luxury industry and an important part of the European economy. The company’s first quarter results lifted its stock price to an all-time high yesterday. With a market value of more than $359 billion (or €300 billion) LVMH is Europe's most valuable company, eclipsing Nestlé (NSRGY) and Roche (RHHBY).

LVMH Sees Growth in the US and China

LVMH sells products which appeal to consumers of different ages and incomes. It owns 75 brands including Louis Vuitton and Moët Hennessy. The company’s array of holdings enables it to sell everything from $3,000 leather bags to $25 bottles of Cognac.

LVMH's recent expansion in the US and China as well as its focus on ecommerce has helped it weather the pandemic. These initiatives have made the company less dependent on Europe, which was hit hard by the pandemic and is recovering more slowly than some other parts of the world. Because of vaccine rollout delays, new lockdowns have recently been enforced in France, Italy, and other parts of Europe.

These trends have impacted sales for LVMH. First quarter sales in Asia, excluding Japan, were up 86% year-over-year. In the US, sales increased 23%. In contrast, sales in Europe are down 9% year-over-year.

LVMH Looks Ahead

As the global economy gradually begins to bounce back from the pandemic, LVMH is the first major luxury goods company to report recovering sales in some regions. Investors hope to see similar results from other luxury goods companies.

Earlier this week, LVMH's Dior brand unveiled a new ready-to-wear fall collection in front of a large audience in Shanghai. Meanwhile Tiffany & Co., the US jewelry retailer which LVMH recently acquired, is off to a strong start in 2021. Tiffany & Co. has raised prices for some of its products and is working on improving its merchandising, distribution, and marketing. The past year has been challenging for LVMH and the rest of the luxury goods industry, but some parts of the company’s business are beginning to return to normal.

Airlines Get Ready for Takeoff this Summer

Pent Up Demand Drives Bookings

American Airlines (AAL) is planning to return to an almost normal summer schedule as more people receive COVID-19 vaccinations and begin to travel again. After more than a year of lockdowns and pandemic restrictions, there's pent up demand for travel.

American Airlines and several other carriers have added flights within the US as well as to Mexico and the Caribbean as demand increases. The summer tends to be the busiest and most profitable time of year for airlines. Last summer schedules had to be scaled back after rising coronavirus cases led to more travel restrictions in the US and around the world. With vaccinations now rolling out at a rapid pace, airlines finally expect demand for flights to get close to pre-pandemic levels.

American Airlines to Offer Over 90% of Pre-Pandemic Seating Capacity

This summer, American Airlines plans to offer more than 90% of its pre-pandemic seating capacity in the US and about 80% of its international capacity. The airline operator will fly 150 new routes, and will focus on taking passengers to places with outdoor leisure options like national parks and beaches. American Airlines is also adding weekly nonstop flights to Orlando from eight cities.

So far, customers seem eager to book flights for summer travel. “Despite continuing to add more and more capacity in these markets, the bookings just keep coming,” said Brian Znotins, American Airlines’ Vice President of Network and Scheduling.

Concerns for Airlines

The airline industry's summer plans could backfire if new cases of COVID-19 continue to rise in some states across the country. Michigan just resumed lockdown restrictions in response to an increase of cases for a more transmissible virus variant. Tuesday, the FDA decided to pause rollout of the Johnson & Johnson (JNJ) COVID-19 vaccine because of six cases of blood clotting in people who received the shot. This has caused some to worry that it will now take longer than expected for the US to achieve herd immunity.

Additionally, demand for international travel and flights in parts of the Northeast is still lackluster. The airline industry hasn’t seen a pickup in business travel either. Despite these remaining challenges, airlines are optimistic that this past year of turbulence is almost over.

Not-So-Breaking News

  • JPMorgan Chase’s (JPM) first-quarter profits blew past Wall Street's expectations. This was due to strong trading and the release of $5.2 billion which the bank set aside for loan losses that didn't materialize. Profit for the quarter was $14.3 billion, or $4.50 per share. Wall Street had forecast profit of $3.10 per share.
  • Goldman Sachs’ (GS) first-quarter net profits surged 489% year-over-year. Net profit was $18.60 per share. This was driven by strong performances from its trading and investment banking units. Revenue in the quarter was $17.7 billion. Wall Street expected EPS of $10.22 and revenue of $12.6 billion.
  • Wells Fargo (WFC) posted first quarter results that topped Wall Street expectations. The bank said this was partially the result of a net benefit of $1.05 billion from reserves it set aside for loan losses. Many banks bolstered their loss reverses in response to the pandemic, but didn't end up needing to use them.
  • Toshiba (TOSYY) CEO Nobuaki Kurumatani stepped down Wednesday amidst controversy surrounding CVC Capital Partners' offer to buy the Japanese electronics company for $20 billion. CVC wants to take Toshiba private and retain the current management team. This was seen as a way to protect Kurumatani and other executives from other activist shareholders.
  • Dollar General (DG) plans to hire up to 20,000 new workers this spring to meet increased demand as the US economy reopens and people spend their stimulus checks. Dollar General will be filling positions in stores, distributions centers, and at its corporate offices.
  • Recently, there’s been a new gold rush—sort of. At the very least there’s been a rush of new folks trying their hands at mining. But these new miners aren’t chasing veins of gold deep in the earth...they’re mining Bitcoin. Learn more about How Bitcoin Mining Works.

Financial Planner Tip of the Day

“The value of a cryptocurrency is largely, if not completely, contingent upon supply, demand, and the public’s faith that it carries value. For example, when demand for Bitcoin increases, the price or value of Bitcoin goes up. Conversely, when demand drops and many people are selling Bitcoins, the price or value falls.”

Brian Walsh, CFP® at SoFi

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