Finance

A trader works on the trading floor on the last day of trading before Christmas at the New York Stock Exchange (NYSE) in Manhattan, New York City, December 23, 2021.
Andrew Kelly | Reuters

U.S. stock futures ticked higher Tuesday night following a mixed session as traders continued to assess the threat of the omicron Covid-19 variant.
Futures tied to the Dow Jones Industrial Average were up 38 points, or 0.1%. S&P 500 futures gained 0.2%, and Nasdaq 100 futures advanced 0.3%.

There have been more than 4.1 million Covid cases confirmed in the U.S. this month, according to data from Johns Hopkins University. That’s well above November’s tally of 2.54 million. The country’s seven-day average of cases is also at 231,888 cases, more than triple the mean from Nov. 27.
However, the Centers for Disease Control and Prevention recently shortened its isolation recommendation for people who test positive from 10 days to five if they don’t have symptoms. Research from South Africa also shows that omicron infections can boost immunity against the delta variant.
Stocks were under pressure in late November, when news of the omicron variant first broke. They have since rebounded, however, with the S&P 500 up 4.8% for December.
Virtus Investment Partners’ Joe Terranova told CNBC’s “Closing Bell” that the market has shown resiliency in the past few weeks, as traders weigh the omicron variant and potentially tighter monetary policy from the Federal Reserve next year.

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He noted, though, that the “risk profile of the market is clearly changing” due to the potential for higher volatility in the new year.

The market is “gravitating toward a more qualitative holding,” Terranova said. “I don’t think the market wants the speculative areas in which investors have been rewarded the last couple of years. That’s the hyper-growth stocks, the high P/E, the crypto, the cannabis [names].”
During the regular trading session, the Dow notched its fifth straight day of gains, rising more than 90 points. The S&P 500 eked out an intraday record before closing lower on the day. The Nasdaq Composite lagged, falling 0.6%.
Tuesday’s moves are taking place during the “Santa Claus rally” period, which encompass the last five trading days of December and the first five of January. This is a historically strong period for the market, with the S&P 500 averaging a return of 1.7% since 1928.
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Coinbase signage in New York’s Times Square during the company’s initial public offering on the Nasdaq on April 14, 2021.
Robert Nickelsberg | Getty Images

Check out the companies making headlines in midday trading. 
Coinbase — Shares of the crypto exchange fell nearly 7% on Tuesday as digital currencies came under pressure. The price of bitcoin and ethereum were each down by about 5% in midday trading.

Boeing — Shares of Boeing rose 1.5% to lead the Dow Jones Industrial Average. Indonesia on Tuesday lifted a ban on Boeing’s 737 Max, two years after the aircraft’s deadly crash in the country. Ethiopian Airlines also plans to resume flying the 737 Max in February.
Carnival, United Airlines — Shares of travel related stocks rebounded Tuesday after struggling Monday amid Covid-related disruptions to the industries. Cruise line Carnival rallied more than 1% before rolling over. United Airlines added 1.6%, American Airlines gained 2% and Delta Air Lines rose 1.6%.
Vipshop Holdings — The China-based e-commerce company’s stock fell over 5% after it cut its current quarter revenue guidance. Meanwhile, Jefferies said warmer weather and an increase in Covid-19 cases likely dented consumer demand for Vipshop.
Vista Outdoor — Shares of the shooting sports company jumped nearly 4% after it announced the acquisition of hunting-gear manufacturer Stone Glacier.
Digital Turbine — The software stock dipped 1.7% after the company announced a multiyear strategic partnership with Google. The company said the deal will accelerate its product and growth strategy to support the Android ecosystem.
— CNBC’s Hannah Miao and Jesse Pound contributed reporting.

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About 62% of businesses with a 401(k) automatically enroll workers into the retirement plan, according to the Plan Sponsor Council of America.
2020 was the first year employers most commonly used a 6% “deferral” rate, rather than 3%.
Automation comes as many workers feel they’re falling behind on savings and as they shoulder more individual responsibility to prepare.

Marko Geber | DigitalVision | Getty Images

Employers are increasingly putting retirement savings on autopilot for their workers.
About 62% of businesses with a 401(k) plan used automatic enrollment in 2020, up from 60% the year prior and 46% a decade ago, according to the Plan Sponsor Council of America, a trade group.

This feature lets an employer divert a portion of workers’ paychecks into a 401(k), either immediately or after a few months, if that worker hasn’t signed up voluntarily.
Auto-enrollment leverages worker behavior (inertia, in this case) to their advantage. Workers receive a paper or digital notification ahead of time and can opt out — but most do not.
Vanguard Group, one of the largest 401(k) providers, found that 92% of new hires were still saving in the 401(k) plan three years after being automatically enrolled; in plans with voluntary enrollment, just 29% were still saving.

Companies are also beefing up the automated savings rate for workers, in a bid to help them build a bigger nest egg.
Last year marked the first time more employers used a 6% “deferral” rate rather than 3%, which had been most common. (This is the share of a worker’s paycheck that is saved automatically.)

A third of businesses with a 401(k) plan chose 6% in 2020, while 29% used that lower rate, according to the Plan Sponsor Council of America.
“I think there’s just a recognition that 3% just won’t get us to where we need to be in the long run,” said Hattie Greenan, director of research at the Plan Sponsor Council of America.

Automation

MoMo Productions | Stone | Getty Images

The increased automation comes as Americans shoulder more individual responsibility for their retirement savings relative to past generations. Life spans are gradually rising, meaning a nest egg must last families a longer time. Almost half of Americans think their retirement savings isn’t on track, according to the Federal Reserve.
Businesses also have an incentive to boost workers’ retirement savings. Financial security may mean greater productivity at work; it may also mean earlier retirements, which could equate to employer savings on health-care benefits, for example, which generally becomes costlier with older age.
More from Personal Finance:Employers adding Roth 401(k) option at fast clipThere’s still time to slash your 2021 tax billThe Santa Claus rally is your end-of-year gift from the stock market
Ten states have also created “auto-IRA” programs, according to the Georgetown University Center for Retirement Initiatives. These require employers to automatically enroll workers into a state-administered individual retirement account if they don’t offer a 401(k) or other workplace retirement plan.
(Four states — California, Connecticut, Illinois and Oregon — are currently active; Maryland and New Jersey are expected to launch their programs in 2022, for example, according to the Center.)
Financial planners and retirement services firms generally recommend people save at least 15% of their gross salary each year for retirement. (That total includes an employer 401(k) match.)

Research shows that raising an employee’s deferral rate (to 6% instead of 3%, for example) doesn’t generally cause workers to quit a 401(k) plan due to lower take-home pay.
About 85% of workers earning between $15,000 and $30,000 a year participated in their 401(k) regardless of whether they were automatically enrolled at 2% or 6%, according to Vanguard.
However, the firm notes that 6% likely isn’t a sufficient savings rate for most workers unless an employer also has a “very generous” match.
Employers have automated other aspects of the plan, too, to help boost savings rates and overall 401(k) participation. Nearly 79% percent of plans with auto-enrollment also use “automatic escalation,” a feature that gradually raises a worker’s savings rate over time, generally once a year and up to a maximum rate. That share is up from 75% in 2019 and 68% five years ago.
Most plans cap the rate at 10%, but there’s been a shift toward higher rates, according to the Plan Sponsor Council of America. Some employers may also automatically “sweep” all non-participating employees into their 401(k) each year, with the goal of keeping more workers in the plan over time.

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Check out the companies making headlines before the bell:
Apple (AAPL) – The company is once again approaching a $3 trillion market value, needing to reach $182.86 per share to achieve that milestone. Separately, Apple is closing its 12 New York City stores to indoor traffic due to the spread of the Covid-19 omicron variant. Apple edged higher by 0.3% in premarket action.

Vipshop Holdings (VIPS) – The China-based e-commerce company’s stock fell 2.4% in the premarket after cutting its current-quarter revenue guidance. Vipshop cited its “latest view on the market and operational conditions” without being specific, but a Jefferies report said warmer weather and an increase in Covid-19 cases likely dented consumer demand.
R.R. Donnelley (RRD) – R.R. Donnelley slid 1.6% in premarket trading after the business communications and marketing services company disclosed an intrusion into its technical systems. Donnelley said it is investigating and is not aware of any client data being compromised.
Coinbase (COIN) – The cryptocurrency exchange operator’s shares dropped 2.2% in the premarket as the price of bitcoin retreated, putting the stock in danger of breaking a four-day win streak that saw it gain 17.7% over that stretch.
Extreme Networks (EXTR) – The cloud computing company’s stock jumped 3.6% in premarket action after Needham raised its price target on the stock to $18.50 per share from $16. The stock had closed Monday at $16.03.
Howard Hughes (HHC) – The real estate firm has reportedly agreed to sell a controlling interest in the Bank of America Tower in Chicago to private equity firm Oak Hill Advisors for more than $1 billion, according to a Dow Jones report quoting sources familiar with the deal.
Nvidia (NVDA) – The graphics chip maker’s shares added 1.2% in the premarket after rising for the past 4 days in a row and helping to lead the iShares Semiconductor ETF (SOXX) to a record high in Monday trading. Advanced Micro Devices (AMD) – also a big factor in driving the SOXX higher – added 1% in premarket trading. Chip stocks have been rising amid supply shortages and strong demand, leading to higher prices for chips.

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THE TROUBLE with the 12-month outlook, an obligation at this time of year, is that the forecasts will be wrong. Of course they will. In financial markets there are so many ways to err—on direction, timing or speed of change. A year is both too long and too short. Too long, because the blistering pace of the current financial-business cycle means even a well-identified idea plays out in a matter of weeks. Too short, because deep trends may take years to become fully apparent.So let us shelve the immediate outlook and ask instead how things might change over the next decade or so. Today capital is abundant. A middle-aged global workforce has lots of savings to put to work. Low long-term interest rates and expensive assets point to a scarcity of worthwhile ways to deploy those savings. New businesses are often ideas-based and do not need a lot of capital. It can be hard to imagine this state of affairs ending. But over time capital is bound to become less abundant. Greater demand for it will come from three sources in particular: economic populism; shorter supply-chains; and the energy transition.Start with economic populism. Thirty years ago two academic economists, Sebastian Edwards and Rudiger Dornbusch, sketched out its key elements. Above all, it is an approach that sees no constraints—such as borrowing limits or inflation—on economic growth. The Latin American populists studied by the scholars printed money to pay for public-spending binges. This ended badly. But economic populism lives on. It is in its purest form in Venezuela. Turkey seems hell-bent on embracing a version of it. Argentina never quite threw it off.A diluted form of economic populism is becoming more evident in rich countries, too. One sign is a revival of discretionary fiscal policy. The $1.9trn package signed in March by President Joe Biden is the crowning example. The EU’s €750bn ($900bn) recovery fund is more modest but still significant. Fiscal stimulus is back in favour because of a realisation that policy constraints, such as budget deficits, bind less when interest rates are low. But over time deficit-financed spending will start to absorb excess savings. There has also been a shift in monetary policy. You see this in a change in targets and in personnel. The old-style central banker—aloof from politics, paranoid about inflation—is all but extinct in the rich world. A new breed frets about inequality and finds reasons to be sanguine about inflation risks. Marko Papic of Clocktower Group, an investment firm, calls the shift towards stimulus the “Buenos Aires Consensus”, to contrast with the Washington Consensus, which counsels prudence.A second factor is rising investment in business continuity. Global value chains are likely to shorten somewhat. In part this is to avoid the bottlenecks that weighed on output in 2021. Even modest near-shoring will require more capital. A general increase in working capital seems likely. Companies lost sales during the pandemic for want of stock. The interest cost of carrying inventory is now far lower than it was when business practice shifted towards lean stock levels and just-in-time supply. As Mr Papic points out, a national-security imperative also favours greater redundancy in supply chains. Rivalry between America and China is leading each country to duplicate capacity in certain key industries, such as semiconductors. Such duplication will soak up capital.A third reason to expect capital scarcity is climate change. The transition to greener energy is essentially a capital-spending problem, argue Eric Lonergan and Corinne Sawers in a forthcoming book. Any serious attempt to arrest the climb in the global temperature requires junking the assets underpinning the carbon economy—oil rigs, coal-fired power stations, petrol forecourts—and building a new infrastructure based on electric vehicles, wind and solar power and battery storage. A lot of capital has to be deployed to create these assets.None of these three trends is the kind that plays out fully over a calendar year. Indeed, such are the ironies of forecasting that 2022 may furnish evidence against the capital-scarcity thesis. If the Federal Reserve raises interest rates, it will do so quite early in the business cycle, belying the idea of a populist policy tilt. Mr Biden’s “Build Back Better” spending bill may gather dust. As bottlenecks ease, security of supply may slip down companies’ lists of priorities. But today’s capital abundance cannot last for ever. Wait long enough and some forecasts are almost bound to be right. More

GoDaddy logo
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Check out the companies making headlines in midday trading.
GoDaddy — The web hosting company saw its shares jump 8.4% following a Wall Street Journal report that activist investor Starboard Value has taken a 6.5% stake in it, worth roughly $800 million.

Delta Air Lines — Shares of airlines declined, but rallied off their lows Monday following thousands of canceled flights over the holiday weekend amid staffing shortages. Delta lost 0.8%, United dipped 0.7% and American Airlines shares also traded 0.5% lower. More than 2,000 flights were canceled from Christmas Eve through Sunday evening. Carriers cited the spread of the omicron Covid variant among crews as behind the cancellations, with bad weather also affecting flights.
Norwegian Cruise Line, Royal Caribbean — Cruise line shares also retreated after reported Covid outbreaks on ships. Royal Caribbean slid 1.4%. Carnival fell 1.2%, and Norwegian Cruise Line dipped 2.6%.
Las Vegas Sands, MGM Resorts — Shares of casino operators sold off in unison as the omicron variant dents demand for travel and leisure. Las Vegas Sands fell 1.9%. Wynn Resorts retreated 1,5%, and MGM Resorts dipped 1.2%.
APA Corp, Devon Energy — Energy names rose as oil prices moved higher. APA Corp added 7.3%, Devon Energy gained 6.1%, and Diamondback Energy rose 4.9%.
Moderna — Moderna shares dipped 1.2% after the Financial Times reported the drugmaker is fighting a shareholder proposal that the company open up its vaccine technology to poorer countries. The proposal calls on Moderna to explain why its prices are so high in light of the amount of government financial support it has received.

Didi Global — Chinese ride-hailing company Didi’s shares fell 5.4% after the Financial Times reported Didi is blocking employees from selling company shares for an indefinite period. That follows a move by the company earlier this month to delist the stock in the United States.
Ralph Lauren, American Eagle — Retail stocks rose on Monday after early holiday shopping sales numbers showed strong consumer spending in recent weeks. Shares of Ralph Lauren rose 4.3%, while American Eagle’s stock jumped 3.5%
— CNBC’s Jesse Pound, Tanaya Macheel, Pippa Stevens and Yun Li contributed reporting

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Spencer Platt | Getty Images

Activist investor Starboard Value has taken a 6.5% stake in GoDaddy, sparking a rally in stock of the web services company.
The hedge fund bought more than 10,000 shares of GoDaddy, worth about $800 million, according to a regulatory filing. The new stake became the biggest holding for Starboard.

Shares of GoDaddy jumped more than 8% on the news Monday.

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The stock is flat on the year even as the company has experienced a surge in online traffic amid the Covid-19 pandemic.
The Wall Street Journal first reported Starboard’s stake.
Starboard Value and GoDaddy did not immediately respond to CNBC’s requests for comment.
Starboard Value’s CEO, Jeff Smith, has been a prolific activist investor even during the pandemic as he pushed for changes in companies across the veterinary, chemicals and health-care industries.

Starboard Value manages about $6.2 billion in assets, according to filings through the first quarter of 2020. Smith spun the New York-based hedge fund out of investment firm Ramius in 2011.
— CNBC’s Jesse Pound contributed reporting.

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The share of 401(k) plans offering a Roth savings option grew to 86% in 2020, up from 75% in 2019 and 49% a decade ago, according to the Plan Sponsor Council of America.
A Roth is a type of after-tax account that may yield financial benefits for savers relative to traditional pre-tax accounts.
There are some roadblocks to employee use, such as automatic enrollment and the structure of 401(k) matching contributions.

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The share of employers allowing Roth 401(k) savings surged last year, giving more workers access to the financial benefits that accompany such contributions.
A Roth is a type of after-tax account. Workers pay taxes up front on 401(k) savings, but investment growth and account withdrawals in retirement are tax-free. This differs from traditional pre-tax savings, whereby workers get a tax break up front but pay later.

Not all plans let workers save in a Roth account. The percentage of 401(k) plans offering the option grew to 86% in 2020, up from 75% in 2019 and 49% a decade ago, according to the Plan Sponsor Council of America, a trade group.

“It’s been increasing steadily,” said Hattie Greenan, the group’s director of research.
That’s likely because awareness of the benefits of Roth accounts has grown over time among employers and employees, who may be pressuring businesses to add the option, Greenan said.
The profile of the Roth option may have further grown this year as Democratic lawmakers have weighed rules to rein in the use of such accounts as tax shelters for the rich. A ProPublica article in June outlined how billionaires like PayPal co-founder Peter Thiel used Roth accounts to amass vast wealth.
The largest employers are most likely to offer the option — about 91% of 401(k) plans with more than 5,000 savers have a Roth feature.

Roth benefits

Roth 401(k) contributions make sense for investors who are likely in a lower tax bracket now than when they retire, according to financial advisors.
That’s because they would accumulate a larger nest egg by paying tax now at a lower tax rate.
It’s impossible to know what your tax rates or exact financial situation will be in retirement, which may be decades in the future. However, there are some guiding principles for Roth.
More from Personal Finance:Some Americans may receive more stimulus money this tax seasonMonthly child tax credit payments have endedHow we work from home needs to change in the new year
For example, Roth accounts will generally make sense for young people, especially those just entering the workforce, who are likely to have their highest-earning years ahead of them. Those contributions and any investment growth would then compound tax-free for decades. (One important note: Investment growth is only tax-free for withdrawals after age 59½.)
Some may shun Roth savings because they assume both their spending and their tax bracket will fall when they retire. But that doesn’t always happen, according to financial advisors.
There are benefits to Roth accounts beyond tax savings, too.
For example, savers who roll their Roth 401(k) money to a Roth individual retirement account don’t need to take required minimum distributions. The same isn’t true for traditional pre-tax accounts; retirees must pull funds from their pre-tax accounts starting at age 72, even if they don’t need the money.

Roth savings can also help reduce annual premiums for Medicare Part B, which are based on taxable income. Because Roth withdrawals are considered tax-free income, pulling money strategically from Roth accounts can prevent one’s income from jumping over certain Medicare thresholds.
Some advisors recommend allocating 401(k) savings to both pre-tax and Roth, regardless of age, as a hedge and diversification strategy.
Investor use of Roth 401(k) savings has increased in recent years along with broader availability. About 26% of workers who save in their 401(k) plan used the Roth option in 2020, up from 18% in 2016, according to the Plan Sponsor Council of America.
“Use tends to lag a little bit behind availability as companies do education around it,” Greenan said.

Road blocks

There are several reasons why people may not be making Roth contributions.
Automatically enrolling employees into 401(k) plans has become popular — 62% of plans use so-called “auto enrollment.” Often, companies don’t set Roth savings as the default savings option, meaning automatically enrolled employees would have to proactively switch their allocation.
Further, employers that match 401(k) savings do so in the pre-tax savings bucket. Higher earners may also mistakenly think there are income limits to contribute to a Roth 401(k), as there are with a Roth individual retirement account.

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