Why this Prime Day could fall flat for Amazon stocks | Connecticut News
(CNN) – After months of failure, Amazon stock is near an all-time high. Thank Prime Day, the annual sales windfall that starts on Monday.
What’s happening: In 2020, analysts estimated that Amazon’s Prime Day saw sales of $ 9 billion to $ 10.5 billion. The rush to sell as the economy reopens could encourage even bigger spending this time around by consumers armed with excess savings. Adobe Analytics believes spending could reach $ 11 billion.
Amazon shares have risen in six of the last nine trading sessions and are now only 1.3% below their all-time high reached in September 2020.
But there are several reasons Prime Day may not help the company’s shares as much as one might expect.
First, there is the impact of disruptions to the global supply chain due to the pandemic. Some independent sellers interviewed by CNN Business said they couldn’t run their regular promotions because they feared they might not be able to meet customer demand. They also cannot afford to turn a profit as the cost of moving goods around the world increases.
“I don’t have enough profit margin to do it,” said Ivan Ong, co-founder of Keababies, which sells baby care and maternity products. Keababies pays double the price of shipping containers to import products from China compared to a year ago.
The issues come as Amazon tries to bolster the role independent merchants play in the event, which last year included more than one million global discounts. Third-party sellers account for nearly 60% of Amazon’s $ 236 billion annual retail sales.
Amazon stocks are also coming under broader pressure as investors assess signals from the Federal Reserve that it may raise interest rates sooner than expected.
The lower rates have been a boon for fast growing companies like Amazon. They have helped keep government bond yields extremely low, spurring interest in riskier investments like stocks that offer better returns.
The worry: As rates rise in the coming years, investors may start to consider putting their money elsewhere. Some are already making this choice.
Amazon stock is only up 7% year-to-date, much lower than the 76% gain in 2020. Apple stock is actually down 1.7%. % in 2021 after gaining 81% last year.
Some Big Tech names are doing better. Google’s parent company Alphabet has grown 37% so far this year, beating last year’s 31% increase.
But it’s clear Amazon is grappling with a change in mood – even if its Prime Day 2021 is a success.
The Fed Adds Gasoline to the Real Estate Market
Bidding wars. Offers all in cash. Homes sold for $ 1 million above asking price. The real estate boom has officially reached the stage of ridicule.
Despite soaring house prices which are increasing at the fastest rate on record, the Federal Reserve continues to support the housing market by buying $ 40 billion worth of mortgage bonds each month.
And while the Fed is “finally talking about talking” about cutting some of its support, some fear the US central bank will create another real estate bubble as it deliberates, reports my CNN Business colleague Matt Egan.
This is because the Fed’s emergency strategy artificially lowers the cost of mortgages and further raises prices which already appear to be tight in many markets.
“The Fed continues to pour more gasoline on this fire,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
Of course, the central bank deserves credit for its historic efforts to prevent the Covid recession from turning into a total depression.
Kicked into action early last year, the Fed quickly cut interest rates to zero, launched emergency programs to thaw credit markets, and promised to buy $ 120 billion in treasury bonds. and mortgages per month. This unprecedented support, along with billions of dollars in stimulus packages from Congress and the Trump and Biden administrations, paved the way for a rapid recovery.
But given how quickly the economy is rebounding and the fact that inflation is rising, it may be time for the Fed to start putting on the brakes – at least on its bond buying program.
“Home prices are exploding right now. Everything in the housing industry is going up in price,” Jason Furman, former economic adviser to the Obama administration, told CNN’s Poppy Harlow. “This is probably not the case as the Fed should continue to artificially keep mortgage rates low.”
American Airlines can’t cope with the travel boom
The travel industry in the United States has seen a huge revival, as Americans rush to take the vacations they have had to sit down for the past year and a half.
The latest: Royal Caribbean’s Freedom of the Sea cruise set sail from Miami on Sunday evening – America’s first test of Covid security protocols aimed at getting the industry back on its feet. About 600 employee volunteers who were vaccinated were on board, along with a representative from the United States Centers for Disease Control and Prevention.
But getting back to normal is not without complications. American Airlines is canceling hundreds of flights until the middle of next month as the company struggles to maintain service amid soaring demand.
“The first weeks of June brought unprecedented weather conditions to our largest hubs, severely affecting our operations and causing delays, canceled flights and disruption to crew member schedules and our customers’ plans,” spokeswoman Shannon Gilson said. “This, combined with the labor shortages some of our suppliers face and the incredibly rapid rise in customer demand, has resulted in us building the resilience and certainty of our operations by adjusting a fraction of our flights scheduled until mid-July. . “
American Airlines recorded 120 cancellations on Saturday and the company expects 50 to 80 flight cancellations per day going forward, according to Gibson.
Investor perspective: American Airlines shares have climbed 41% this year, and investors don’t seem scared in the pre-market trading Monday. But the pressure on operations is a sign of the difficulty for the airline to restart its activities.
More data on the hot US housing market is expected this week, with existing home sales for May released on Tuesday and new home sales arriving on Wednesday.