Raphael Stevens

Signs are posted in front of homes under construction at a KB Home housing development on January 12, 2022 in Novato, California.
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Check out the companies making the biggest moves in premarket trading:
Ferrari — Shares of the luxury automaker rose less than 1% early Monday after Morgan Stanley analyst Adam Jonas named it a top pick, replacing Tesla. In a note to clients, Jonas cited Ferrari’s backlog and pricing power as reasons to raise his price target on the stock by more than 10%.

Apple — The iPhone maker advanced 2% premarket after Goldman Sachs initiated coverage with a buy rating, saying Apple could get a big boost from its services business. The Wall Street bank’s 12-month price target of $199 implies Apple could rally more than 30% from here.
KB Home — The homebuilder slipped 1.4% following a double downgrade to underweight from overweight by JPMorgan. The firm cited the stock’s expensive valuation.
D.R. Horton — D.R. Horton, another homebuilder, fell a little more than 1% after it was downgraded by JPMorgan to neutral from overweight. Analysts said the stock’s premium valuation fairly reflected its above-average fundamental profile and expect the stock to only perform in-line with peers.
Vir Biotechnology — The biotech gained 5% after JPMorgan upgraded it to overweight from neutral. The bank said Vir has long-term pipeline opportunities across numerous disease indications.
Silvergate Capital — The bank continued its slide, dropping about 8% premarket. Last week, Silvergate Capital warned of its ability to continue as a going concern and delayed filing its annual report.
— CNBC’s Yun Li and Jesse Pound contributed reporting.

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Premier Li Keqiang’s government work report delivered Sunday pointed to growing uncertainties in the international environment
Beijing announced Sunday a target of “around 5%” growth in gross domestic product for 2023, with only a modest increase in fiscal support.
“The government’s conservative growth target of 5% for 2023 recognizes that the pickup in China’s growth continues to face headwinds,” Martin Petch, vice president and senior credit officer, Moody’s Investors Service, said in a note.

BEIJING — China’s leaders struck a cautious tone about the outlook for the country’s economic rebound, after ending most Covid restrictions on business activity late last year.
Beijing announced Sunday a target of “around 5%” growth in gross domestic product for 2023, with only a modest increase in fiscal support.

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“The government’s conservative growth target of 5% for 2023 recognizes that the pickup in China’s growth continues to face headwinds,” Martin Petch, vice president and senior credit officer, Moody’s Investors Service, said in a note. “These include the impact of slower global growth on China’s exports and risks associated with the property sector and local government debt.”
“The government’s only mild expansion in fiscal support and more targeted monetary measures indicate that long-term issues including constraining leverage and financial stability remain important elements of the long-term policy mix,” Petch said.

There are still quite a few factors restraining the recovery and growth of consumption … Resuming growth in real estate investment is an uphill battle.

National Development and Reform Commission report

Premier Li Keqiang’s government work report delivered Sunday pointed out growing uncertainties in the international environment. A separate report from the economic planning agency — the National Development and Reform Commission (NDRC) — went into grimmer detail about challenges domestically.
“There are still quite a few factors restraining the recovery and growth of consumption,” the report said. “Resuming growth in real estate investment is an uphill battle.”
“Some local governments are finding economic recovery difficult and are facing prominent fiscal imbalances,” the report said. “Debt risks from local governments’ financing platforms need to be addressed immediately.”

Consumption is key

Consumption can become the primary driver of economic growth this year, Li Chunlin, deputy director at the NDRC, told reporters Monday.
He added the commission has many tools to boost consumer spending.
GDP only grew by 3% last year, well below the official target, as Covid controls and the real estate slump dragged down growth. Retail sales fell by 0.2% in 2022.

A shopping mall in Qingzhou, Shandong province, broadcasts the opening ceremony of China’s National People’s Congress on Sunday, March 5, 2023.
Future Publishing | Future Publishing | Getty Images

The impact from the pandemic has weakened, and recovery in retail sales alone can drive growth, said Zong Liang, chief researcher at the Bank of China.
Overall, while there’s a need for some increase in fiscal support, it’s important not to “blindly” expand such support, he said, noting that leaves room for future policy moves. That’s according to a CNBC translation of his Mandarin-language remarks.
Retail sales rebounded by 12.5% in 2021 after a drop in 2020. GDP jumped by 8.1% in 2021.
This year, pressure on the economy has significantly declined, and the economy can grow off a low base, said Xu Hongcai, deputy director of the Economics Policy Commission at the China Association of Policy Science. “The key is to improve the quality of growth.”
An overall recovery in the economy can help fiscal revenues grow, and boost demand for workers, he said. But he pointed out that “this year, the biggest pressure is on overseas trade.”
Many economists expect China’s exports to, at best, barely grow this year. That’s due to a drop in demand for Chinese goods as a result of slowing U.S. and European economies.

A ‘fiscal buffer’

China announced Sunday its deficit-to-GDP ratio is expected to increase to 3% from 2.8% last year. The country also increased an annual quota of special-purpose bonds by 150 billion yuan to 3.8 trillion yuan, or about $551.12 billion.
The measures are not aggressive, serving more as a “fiscal buffer,” said Susan Chu, senior director at S&P Global Ratings.
“Because China is not completely back to a consumption-driven [economy],” she said. “There’s a lot of external challenges, property slowdown.”

Read more about China from CNBC Pro

The economic goals announced Sunday follow directives set in December at a top-level meeting called the Central Economic Work Conference.
While the policy direction is pretty clear, more confidence-boosting signals are needed, said Wang Jun, a director at the China Chief Economist Forum. He said such details could come in the next several days during China’s annual parliamentary meeting.
This year, the meeting is set to formalize the new premier and other government leaders, as well as issue a “reform plan” for the ruling Chinese Communist Party and state institutions.

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If you want to see what a world swimming in jobs looks like, visit Japan. At airports people are employed to straighten suitcases after they tumble onto the baggage carousel. Men in uniform with fluorescent batons stand outside construction sites, and politely remind you that walking on to the site is probably not a good idea. In department stores smartly dressed women help you use the lifts. And in one of Tokyo’s best bars, a team of four people was involved in the preparation of your correspondent’s gin martini (from the freezer, of course, free-poured, and very dry). Now the rest of the rich world is starting to look more Japanese. Since the heady post-lockdown days of 2021 gdp growth across the 38 countries of the oecd has slowed almost to a standstill, and in some countries is negative. Business confidence is below its long-run average. Yet there is not much sign of weakness in the labour market. Speaking on March 2nd Christopher Waller, a Federal Reserve governor, observed that America’s labour market was “excessively tight”. Across the oecd as a whole the unemployment rate was 4.9% in December, the latest month for which official data are available—the lowest in many decades (see chart 1). From the third to the fourth quarter of the year, the rich world added about 1m jobs, in line with the long-run average. In half of oecd countries, including Canada, France and Germany, there has never been a higher share of working-age folk in a job. Unemployment is rising in a few countries, including Austria and Israel. One of the worst performers is Finland, where the unemployment rate has risen by more than a percentage point from its post-lockdown low. In the face of soaring energy prices and reduced trade with Russia, gdp fell by 0.6% in the fourth quarter of 2022. But “worst” is relative. At 7.2% in December, Finland’s jobless rate is still well below its long-run average. Meanwhile, most of the places synonymous with the sky-high joblessness of the early 2010s—Greece, Italy, Spain—are doing much better now. This employment miracle hints at a profound change in Western economies. To understand why, return to Japan. Local employers dislike firing workers, even if they have little for them to do. In part because more and more people are retiring, firms struggle to find new staff, so they are reluctant to let people go unless they have no other choice. The result is an unemployment rate which barely rises, even in recessions. Over the past 30 years Japan’s jobless rate has varied by just 3.5 percentage points, compared with 9.5 percentage points for the average rich country. A more Japanese labour market would have disadvantages. If workers do not leave poorly performing firms, they cannot join more innovative ones which drive growth. Indeed, the data suggest that rich-world productivity growth is exceptionally weak at present. On the other hand, spells of unemployment can exert a terrible human toll, especially on the young, who may earn lower salaries for the rest of their working lives. Countries where unemployment is less volatile also tend to have milder recessions, points out Dario Perkins of ts Lombard, a financial-services firm. When the labour market does not crack, people can keep spending even as growth slows. What explains employers’ apparent Japanese turn? Perhaps, after the travails of the pandemic, bosses are simply kinder to workers than used to be the case. Another, more realistic, possibility is that firms are in a strong financial position. This may allow them to withstand lower revenues today without needing to slash costs immediately (see chart 2). Many firms received help from governments during covid. And in recent years corporate profits have been high. Businesses across the rich world are still sitting on cash piles about a third higher than before the pandemic.A more intriguing possibility concerns the labour force. According to our estimates the rich world is “missing” 10m workers, or roughly 1.5% of the total workforce, relative to pre-pandemic trends (see chart 3). In Britain and Italy the workforce has actually shrunk. Early retirements and an increasingly elderly population explain some of the deficit. Covid may have pushed people to reassess their priorities, prompting them to drop out. Some even speculate that long covid is forcing people to stay on the economic sidelines. Whatever the explanation, falling participation has wreaked havoc with companies’ plans. Many fired staff when the pandemic struck, only to struggle to rehire them in 2021. That year vacancies across the oecd hit an all-time high of 30m.Now that another downturn looms, employers may want to avoid making the same mistake. A recent global report by s&p Global Market Intelligence, a consultancy, identifies “a reluctance among companies to sanction job cuts due to the immense challenges they faced in rehiring post-pandemic”. In America gross job losses have so far not been as large as is normal for the start of the year. Daniel Silver of JPMorgan Chase, a bank, speculates that this is because “firms are reluctant to let go of workers given perceived difficulties in eventual rehiring.” Labour-market pain may end up being merely delayed rather than avoided. In some past recessions unemployment only started to rise decisively some time after gdp started to fall. Yet “real-time” data give little sign that joblessness is about to surge. A recent survey by ManpowerGroup, a staffing firm, suggests that employers in most countries still have ambitious hiring plans. In America a survey by the National Federation of Independent Business, a lobby group, finds an unusually large share of small firms plan to create new jobs over the next three months. Confronted with labour markets that are resilient even in the face of rising interest rates, central banks may be tempted to tighten monetary policy faster still. Further increases in rates, or another energy shock, could push some employers over the edge, forcing them to reduce headcount. Yet the pressure retain staff, come what may, could become a structural issue. Over the next decade rich-world populations will age rapidly, dragging further on labour supply. Good workers are likely to become harder to find. The search for the perfect martini maker will be even trickier than it is today. ■ More

As short maturity Treasury bond ETFs see big inflows, more investors are taking on single-bond strategies as a solution to macroeconomic challenges. 
Buying Treasury bonds typically involves opening an account on TreasuryDirect or through brokerage firms like Charles Schwab. But Dave Nadig, financial futurist at VettaFi, said this can often be complicated.

“It’s not the case that you can just simply click a button, get the exposure of the headline rate that you’re reading in The Wall Street Journal or seeing on CNBC,” Nadig told Bob Pisani on CNBC’s “ETF Edge” on Monday. “[And if] you want to do something like rebalance on the 15th of the month, now you got a whole ‘nother world of pain.”
TreasuryDirect and brokerage firms list all of the CUSIPs, which identify financial instruments, currently at auction. Nadig noted these can include a range of products from the last on-the-run zero-coupon bond published last month to a 15-year note that is now expiring. 
Dealing with this large number of products makes investors more prone to error when trying to do rebalances or allocations of individual dollar amounts, he said.
“All of those things make it inconvenient and often more expensive than just buying a 15 to 20 basis point ETF that’s going to do it for you,” Nadig added.
When seeking to invest in short-term Treasury bonds, Nadig advised looking for ETF products like this or a competitor’s ETF products that offer similar kinds of exposure.

On Friday, the 2 Year Treasury (US2Y) yield fell by more than 4 basis points to 4.86%, but returns have still increased 43 basis points this year. The 6 Month Treasury (US6M) currently holds the highest yield at 5.137% as of Friday’s close.  

Bond ETF products on the rise

F/m Investments — a $4 billion multi-boutique investment advisor — is preparing to launch six new single-bond ETFs, the firm’s CIO Alex Morris revealed during the segment on Monday.
“You’ll see the 6-month, 3-year, 5-year, 7-year, 20-year and 30-year come out,” he said.
The firm first launched three single-bond ETFs back in August — the US Treasury 10 Year ETF (UTEN), US Treasury 2 Year ETF (UTWO), and US Treasury 3 Month Bill ETF (TBIL). Morris mentioned a rise in demand for the ETFs led the firm to develop a wider array of offerings.
“Folks have asked us to give them a full rates toolset,” he said. “So, when the yield curve shifts, they can shift along with it. We’re going to give the people what they’ve asked for.”
More single-bond ETF product offerings allow investors to further diversify their portfolios. Nadig explained this diversification minimizes risk exposure to single-issue blowups, such as a Treasury bond getting repriced or an earnings recession.
“You don’t want to have all your eggs in one basket, [and] bonds have always traditionally been that zagging diversifier when equities zig,” he said.
But Nadig pointed out that assessing one’s stock/bond ratio isn’t the only opportunity here for investors to capitalize on.
“This is a fantastic opportunity for folks … [to] consider the role of other counter correlated assets they may have,” he said. “Whether that’s the equity in their home or a managed futures product.”

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Remote work ballooned during the Covid pandemic as a public health measure.
The share of full-time, remote work seems poised to flatline at a level five times that of 2019.
Workers and companies have reaped benefits, especially in so-called “hybrid” arrangements.

Morsa Images | Digitalvision | Getty Images

Workers and companies see benefits of remote work

In 2019, about 5% of full-time work was done from home. The share ballooned to more than 60% in April and May 2020, in the early days of the Covid-19 pandemic, said Nicholas Bloom, an economist at Stanford University who has researched remote work for two decades.
That’s the equivalent to almost 40 years of pre-pandemic growth virtually overnight, his research shows.
The share of remote work has steadily declined (to about 27% today) but is likely to stabilize around 25% — a fivefold increase relative to 2019, Bloom said.

“That’s huge,” he said. “It’s almost impossible to find anything in economics that changes at such speed, that goes up by 500%.”

Initially, remote work was seen as a necessary measure to contain the spread of the virus. Technological advances — such as videoconferencing and high-speed internet — made the arrangement possible for many workers.
Both employees and companies subsequently discovered benefits beyond an immediate health impact, economists said.
Employees most enjoy having a reduced commute, spending less time getting ready for work and a having a flexible schedule that more easily allows for doctor visits and picking up kids from school, Bloom said.
Some workers have shown they’re reluctant to relinquish those perks. Companies such as Amazon and Starbucks, for example, recently faced a backlash from employees after announcing stricter return-to-office policies.
Employers enjoy higher employee retention and can recruit from a broader pool of applicants, said Julia Pollak, chief economist at ZipRecruiter. They can save money on office space, by recruiting from lower-cost areas of the country or by raising wages at a slower pace due to workers’ perceived value of the work-at-home benefit, she said.

It’s almost impossible to find anything in economics that changes at such speed.

Nicholas Bloom
economist at Stanford University

For example, job seekers polled by ZipRecruiter say they’d be prepared to take a 14% pay cut to work remotely, on average. The figure skews higher — to about 20% — for parents with young children.
Twitter recently shut its Seattle offices as a cost-cutting measure and told employees to work from home, a reversal from an earlier position that employees work at least 40 hours a week in the office.
“The benefits for employers are pretty substantial,” Pollak said.

Hybrid work model is a ‘win-win’

Momo Productions | Digitalvision | Getty Images

Most companies have turned to a “hybrid” model, with a work week split between maybe two days from home and three in the office, economists said.
That arrangement has yielded a slight boost in average worker productivity, Bloom said. For one, the average person saves 70 minutes a day commuting; roughly 30 minutes of that time savings is spent working more, he said.
“Hybrid is pretty much a win-win,” Bloom said.
About 39% of new hires have jobs with a hybrid work arrangement, while 18% of new jobs are fully remote, according to ZipRecruiter. Both shares are up relative to their pre-pandemic levels (28% and 12%, respectively).
“It’s still an evolving trend, but the movement is very much toward increased remote work,” Pollak said.
Of course, not all workers have the option to work remotely. About 37% of jobs in the U.S. can plausibly be done entirely at home, according to a 2020 study by Jonathan Dingel and Brent Neiman, economists at the University of Chicago.
There are large variations by occupation and geography. For example, jobs in retail, transportation, hospitality and food services are far less likely than those in technology, finance, and professional and business services to offer work-from-home arrangements.

Remote work may endure even in a recession

Not everyone agrees that the benefits of working from home outweigh costs.
Evidence suggests employee mentoring, innovation and company culture may suffer if jobs are fully remote, Bloom said. Workers cite face-to-face collaboration, socializing and better work-life balance as top benefits of in-office work, his research finds.
Companies that are fully remote often have in-person gatherings or retreats as a way to build company culture, Bloom said.

Workers have enjoyed a high degree of bargaining power due to a hot labor market characterized by low unemployment and ample job openings. If the economy cools and their bargaining power dissipates, it’s unclear whether some employers would introduce stricter work-from-home policies, economists said.
For one, employers may see remote work as a useful way to trim labor costs in the face of recession, Bunker said. The more likely scenario is on the margin: perhaps three or four days in the office instead of one or two, he said.
The technology sector is a useful indicator, he said. Tech job postings have fallen this year amid industry struggles, but the share of Indeed job ads offering a remote work benefit has remained constant, Bunker said.
“It’s been quite sticky in the face of hiring pullbacks,” he said.

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