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Bitcoin is in a bear market—and it may be because there are too many crypto millionaires.
Bitcoin has fallen nearly 4% Friday, and the cryptocurrency, which now trades under $50,000, has dropped 23% from its all-time high. That was just nine days ago on April 14. Things happen fast in the cryptocurrency market.
The current leg down began after reports broke that President Joe Biden might propose sharply higher capital-gains tax rates, causing risky assets, including stocks and Bitcoin, to slump. But where stocks seem to have found a floor Friday morning—
S&P 500
futures are up 0.2%—Bitcoin has continued falling. For someone who made a mint in crypto, this might feel like a good time to take the money and run.
Bitcoin isn’t alone in its suffering. Ethereum, the second-largest cryptocurrency by total market value, is down more than 5% Friday and off about 8% for the week. Dogecoin, a favorite of
Tesla
CEO Elon Musk, is down about 9% Friday and 45% for the week. Polkadot—yes there is a crypto named Polkadot—is down about 11% Friday and 30% for the week. There is carnage all over the crypto market.
The drops come just as cryptocurrency trading has just gone mainstream. Now new crypto traders are learning what market pros have known for a long time: Gains can disappear as quickly as they arrive.
—Al Root
*** Join Barron’s senior managing editor Lauren R. Rublin and deputy editor Ben Levisohn Monday at noon to discuss the outlook for financial markets, industry sectors, and individual stocks. Sign up here.
***
Fears of Higher Taxes for Rich Investors Spook Stock Market
Reports that federal tax rates could rise to as much as 43.4% on investment gains for Americans earning $1 million or more caused all three major U.S. stock indexes to slump on Thursday. The
Dow,
S&P 500, and
Nasdaq
all closed down nearly 1%.
- As first reported in the New York Times, the tax increase would help fund President Joe Biden’s American Families Plan, aimed at helping Americans improve their job skills and enhance childcare options. Biden is expected to unveil the details before his first address to a joint session of Congress on Wednesday.
- For wealthy Americans, capital-gains taxes would effectively double, from the current 20% to 39.6%. An additional Obama-era tax of 3.8% on capital-gains taxes for high earners would push total investment taxes to as high as 43.4%.
- When asked about the reports Thursday, White House press secretary Jen Psaki said, “We’re still finalizing what the pay-fors look like.”
What’s Next: Details of the president’s plan have not been completed and could change before he announces it. Despite Thursday’s sharp drop, the Dow and S&P are still up more than 10% year-to-date with the Nasdaq up more than 7%.
—Janet H. Cho
***
Global Chip Shortages to Last Two More Years: Intel CEO
New
Intel
Chief Executive Pat Gelsinger said Thursday that supply constraints, and the immense investment needed to meet demand, mean that chip shortages affecting the automobile industry and other sectors are likely to last two more years.
- It “takes a while until people can put more capacity in the ground,” he said as Intel announced first quarter results that beat sales and earnings expectations.
-
Germany’s
Daimler
on Friday became the latest car maker to warn that the persistent shortage of semiconductor chips could affect its sales in the second quarter.
Renault,
- Jaguar Land Rover said Thursday that two of its British factories will close temporarily as of next week due to Covid-19-related supply chain disruptions, including the lack of semiconductor chips.
- President Joe Biden last week used a meeting with auto and tech executives to push his $2.3 trillion infrastructure spending plan to plead for a stronger domestic chip-building industry.
What’s Next: One year of supply chain disruptions has forced governments the world over to examine ways to reshore critical industries, with chip-making high on the list of strategic priorities. Last week, the British government launched a probe of the $40 billion
Nvidia
takeover of U.K.-based Arm on security grounds.
—Pierre Briançon
***
Senators Urge Action After Latest Tesla Crash Over Autopilot Concerns
Following a fatal Tesla crash over the weekend, two U.S. senators are urging safety regulators to address growing concerns about automated driving systems such as those used in Teslas that effectively allow the cars to drive themselves.
- “We fear safety concerns involving these vehicles are becoming a pattern, which is incredibly worrisome and deserves your undivided attention,” Sen. Richard Blumenthal of Connecticut and Sen. Ed Markey of Massachusetts, both of whom are Democrats, wrote.
- Both the National Highway Traffic Safety Administration and the National Transportation Safety Board are independently investigating the fatal crash last weekend of a 2019 Model S near Houston that left two people dead.
- Tesla CEO Elon Musk said earlier in the week that neither the Autopilot feature nor the more advanced Full Self-Driving feature were in use at the time of the accident. He added that engaging Autopilot reduces chances of an accident by nearly 10 times.
- Separately, Consumer Reports said Thursday that its test drive found the 2020 Tesla Y’s Autopilot feature can “easily get the car to drive even with no one in the driver’s seat.” The group attached a weight to the vehicle’s steering wheel to simulate a human hand in its test.
What’s Next: The weekend crash is the 28th to be investigated by the NHTSA, Reuters reported. Tesla shares have fallen nearly 3% since the crash was reported.
—Anita Hamilton
***
Biden Brings Out the Celebrities to Get More People Vaccinated
With vaccine supply in the U.S. poised to outstrip demand, the Biden administration has recruited a slate of influencers to encourage more Americans to get inoculated.
- People from actress Eva Longoria to billionaire Mark Cuban will join in a campaign launched Thursday called “We Can Do This: Live.” The celebrities, who also will include Nascar, NBA and WNBA stars, will answer questions about the vaccines on social media and during virtual events.
- The campaign comes as some states are shutting down mass vaccination sites due to falling demand. The seven-day average for vaccinations has fallen more than 10% from its high of nearly 3.2 million on April 11, according to data from the Centers for Disease Control and Prevention.
- Vaccine hesitancy rates vary by region with Wyoming having the highest rate in the nation. Some 33% of adults there say they are reluctant to get vaccinated, according to a Census Bureau survey. The top three reasons are: “concerned about side effects,” “don’t believe I need it,” and “don’t trust Covid-19 vaccines.”
What’s Next: On Friday, an advisory panel is expected to issue a recommendation to the CDC on whether to resume use of
Johnson & Johnson’s
Covid-19 vaccine, which was temporarily paused on April 13 over concerns about rare but serious blood clots.
—Janet H. Cho
***
Boston Beer Earnings Get Boost From Hard Seltzer
Boston Beer’s
first-quarter earnings were double what Wall Street analysts expected. The company has the hard seltzer craze to thank.
- The Truly hard seltzer brand, along with growth for Twisted Tea, helped offset some declines in Boston Beer’s traditional beer business including Samuel Adams. Truly has a market share of more than 28%, Boston Beer says.
- A flood of hard seltzer brands entered the market last year including those from Corona, Bud Light, and Molson Coors. Despite the crowded field, Boston Beer found success with its Truly Lemonade Hard Seltzer and Truly Iced Tea Hard Seltzer.
- The brewer reported earnings of $5.26 a share against Wall Street’s consensus estimate of $2.61 a share. Net revenue of $545.1 million sailed over estimates calling for $477.3 million. The stock jumped 7.6% after hours.
What’s Next: White Claw, a hard seltzer owned by Mark Anthony Brands, last week announced a version called Surge that cranks up the alcohol content to 8% from 5%. Meanwhile, Boston Beer plans a Truly Punch Hard Seltzer in the current quarter.
—Connor Smith
***
Do you remember this week’s news? How well do you know your Wall Street history? Take our quiz below about this week’s news. Tell us how you did in an email to thebarronsdaily@barrons.com.
1. Facebook announced that it is launching a suite of audio products. The social-media giant will include a feature that will compete with Clubhouse that should be available to everyone on the Facebook app by the summer. The name of the feature is:
a. Live Audio Speak
b. Live Audio Rooms
c. Live Audio Chat
d. None of the above
2. Moody’s Analytics estimates that consumers have saved an extra $5.4 trillion globally, or about 6% of global GDP since the onset of the pandemic. Consumers are feeling upbeat about the economy paving the way for a rebound in spending. Which country has the highest estimated excess in savings as a percent of its GDP?
a. U.S.
b. Canada
c. U.K.
d. Spain
3. President Joe Biden pledged to cut U.S. greenhouse gas pollution in half from 2005 levels at a two-day virtual climate summit attended by some 40 heads of state. What is the year the administration is targeting to meet this goal?
a. 2025
b. 2030
c. 2035
d. 2040
4. Apple introduced a subscription podcast service at its first product event of the year. The new model will intensify competition with Spotify which also plans to announce its own subscription podcast model as soon as next month. The Apple Podcasters Program, which includes all of the tools needed to offer premium subscriptions on Apple Podcasts, will be available to creators in over 170 countries and regions for a yearly fee of:
a. $39.99
b. $29.99
c. $19.99
d. $9.99
5. Amazon.com has been expanding into physical spaces opening its first bookstore in 2015 and the purchase of Whole Foods Market in 2017. Now, the e-commerce behemoth is launching a new retail space in London that will allow consumers to experience some of the leading technology, products and services in which type of retail setting?
a. A hair salon
b. A home goods store
c. A sporting goods store
d. A fashion apparel store
100 Years of Barron’s
6. The opening of Disneyland in 1955 was attended by which future California governor?
a. Jerry Brown
b. Pat Brown
c. Ronald Reagan
d. Arnold Schwarzenegger
Answers: 1(b); 2(a); 3(b); 4(c); 5(a); 6(c)
—Pauline Yuelys and Kenneth G. Pringle
***
—Newsletter edited by Anita Hamilton, Stacy Ozol, Mary Romano, Matt Bemer, Ben Levisohn
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