As vaccinations pick up speed and Covid-19 cases fall from their recent peak, economic data out of the United States looks increasingly promising.
What’s happening: The Services PMI from the Institute for Supply Management, which uses surveys to track economic activity in the sector, just posted its highest reading in almost two years.
“It was a good report,” Anthony Nieves, chair of the survey committee, told reporters Wednesday. “We should see a good first half to the year, and a better second half. Things are looking more optimistic.”
The news comes after the Congressional Budget Office said Monday that America’s real gross domestic product, the broadest measure of economic activity, will grow at a pace of 4.6% in 2021. By that forecast, the economy will be back to its pre-pandemic size by the middle of the year.
The Back-to-Normal Index from CNN Business and Moody’s Analytics indicates that the US economy is currently operating at 81% of where it was in early March of last year.
Meanwhile, jobs data due Friday is expected to show that the US economy created positions last month after shedding jobs in December.
Economists surveyed by Refinitiv estimate that the United States added 50,000 jobs last month. That’s extremely weak growth, but better, of course, than posting additional losses.
One big caveat: A lot of Americans are still hurting. Even if the economy snaps back this year, the Congressional Budget Office doesn’t expect the number of employed Americans to return to its pre-pandemic level until 2024.
Yet the raft of positive data could complicate stimulus talks in Washington, where President Joe Biden is trying to find middle ground with Republicans on another round of spending.
The president’s $1.9 trillion plan released last month included a wide range of immediate assistance for struggling families, such as $1,400 stimulus checks and extended unemployment benefits, as well as longer-term changes, such as a $15 hourly minimum wage.
In response, a group of Republicans released a $618 billion counterproposal this week. Both sides are still talking, but appear to be a ways from reaching an agreement.
“If President Biden works with Republicans, and we make some modifications to his plan, it’s entirely possible that there would be some Republican support,” Sen. Mitt Romney told reporters Wednesday. “But if it goes forward without any changes from what was originally proposed, I would predict that not a single Republican will support the $1.9 trillion plan.”
Investor insight: Investors are factoring significant additional spending from Washington into their predictions for a strong economic rebound this year, which they also think will pad corporate earnings. But a lot of unknowns remain.
“There are still more questions than answers regarding the timing, size and scope of additional fiscal stimulus,” Goldman Sachs strategists said in a note to clients last week.
Can Robinhood still pull off a blockbuster IPO?
GameStop mania has put commission-free trading app Robinhood in the spotlight — and raised fresh questions about the firm’s Wall Street debut expected later this year.
The latest: Bloomberg reports that Robinhood is still eyeing an initial public offering around May, allowing it to cash in on a boom in new users during the pandemic.
But the startup’s role in the trading frenzy over the past two weeks has complicated matters. Robinhood is now in the hot seat with lawmakers and regulators, who want to know whether the app’s game-like trading experience is luring inexperienced investors to take excessive risks.
My CNN Business colleague Matt Egan reports that CEO Vlad Tenev is not licensed by FINRA, Wall Street’s powerful self-regulator, raising eyebrows among some industry analysts.
“This is a huge story that he is not registered,” said Stephen Sax, the former chief compliance officer at FBN Securities. “On a scale of one to 10, it’s a 10.” A Robinhood spokesperson said that the leadership of its broker-dealer and clearing broker are appropriately licensed.
The company also faced huge public backlash after it restricted trades of stocks like GameStop and AMC Entertainment last week, as angry customers claimed it was supporting the embattled hedge funds who’d bet those stocks would fall. Tenev said Robinhood was forced to act due to surging capital requirements from its clearinghouse. To meet those requirements, the company raised $3.4 billion within four days.
Robinhood — which has pitched itself as a democratizing force in the investment world — is set to run an ad during Sunday’s Super Bowl. Yet the damage to its reputation may be done.
“Retails investors were reminded of something I was told the first day I entered the marketplace, which is: ‘You have no friends on Wall Street,'” Mohamed El-Erian, chief economic adviser at Allianz, told my colleague Alison Kosik on Wednesday’s “Markets Now” show.
PayPal loves that you’re shopping online
During the pandemic, online shopping shifted from a luxury to a necessity. That’s been great news for companies that process internet payments.
The latest: A strong fourth quarter just topped off PayPal’s best year ever. Between October and December, payments on its network jumped 39% to $277 billion, the company told investors on Wednesday.
PayPal said it experienced record growth last year, adding 72.7 million active accounts. Active accounts now total 377 million.
Investor insight: Shares of the company are up 5% in premarket trading. They’ve gained 116% in the past 12 months, compared to an 18% jump in the benchmark S&P 500.
It’s all good mood music for online payment processing platform Stripe, rumored to be weighing a 2021 public offering. In April, the company raised $600 million from investors including venture capital firm Andreessen Horowitz, valuing the company at $36 billion.
“Businesses that deferred moving online or had no reason to operate online have made the leap practically overnight,” John Collison, Stripe’s cofounder, said in a statement at the time. “We believe now is not the time to pull back, but to invest even more heavily in Stripe’s platform.”
Watch this space: Bloomberg reported in November that Stripe was in talks to raise a new funding round that would value the company between $70 billion and $100 billion. That would make it the most valuable private startup in the United States.
Canada Goose, Clorox, Dunkin, Merck, New York Times, Tapestry and Yum! Brands report results before US markets open. Activision Blizzard, Ford, Gilead Sciences, Peloton, Pinterest and Snap follow after the close.
Also today: Economists polled by Refinitiv expect 830,000 first-time jobless claims for last week. The data posts at 8:30 a.m. ET.
Coming tomorrow: All eyes on the US jobs report for January.