Good morning. Happy Friday.
The Asian/Pacific markets posted solid gains. Japan, Hong Kong, South Korea, India, Taiwan, Malaysia, Indonesia, Singapore, Thailand and the Philippines led. Europe, Africa and the Middle East are currently mostly up. Denmark, Turkey, Russia, Norway, the Netherlands, Israel and the Czech Republic are up 1% or more. Futures in the States point towards a moderate gap up open for the cash market.
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The dollar is down. Oil is up; copper is down. Gold and silver are down. Bonds are down. Bitcoin is up big.
Stories/News from Seeking Alpha…
Job market recovery?
The upbeat mood on Wall Street is likely to outshine any weak job numbers seen today as equities continue to tack on record highs. A huge negative miss in the ADP’s private payrolls figure already seen Wednesday did little to impact market sentiment as traders bet a new Democratic-controlled government would lead to robust fiscal stimulus to support the country’s economic recovery. Futures also marched higher overnight, advancing another 0.3%, after a stellar session on Thursday.
Forecasts: Consensus estimates see 75,000 jobs added last month, less than a third of November’s gains, as the coronavirus spread rapidly across the U.S. A number of Wall Street firms even see negative job growth, with predictions from Goldman Sachs, JPMorgan, Credit Suisse and Barclays ranging from a loss of 25,000 to 50,000 positions.
Quote: “I think it’s 50/50 whether it’s going to be up 50,000 or down 50,000. We’re kind of on the knife’s edge between creating additional jobs and the recovery falling back a step,” added Chris Rupkey, chief financial economist at MUFG Union Bank. “Nobody is going to be rushing to hire back more people at this stage, and certainly for leisure and hospitality. There’s a risk jobs fall further in next month’s report because of further lockdowns.”
Meanwhile, the unemployment rate is expected to increase slightly to 6.8% in December from 6.7% in the previous month, while average hourly earnings are seen falling 0.2% (from 0.3% in November). For the entire 2020, average hourly earnings are anticipated to remain stable at 4.4%.
Tariffs and taxes
The U.S. has backed off a threat to slap tariffs of 25% on French luxury goods, valued at around $1.3B annually, in response to France’s digital service tax (DST) on companies like Google (GOOG, GOOGL), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB). The suspension was welcomed by U.S. importers and retailers that had criticized such punitive tariffs as a tool that aims to protect one industry at the expense of another, while hurting American consumers.
Backdrop: In August 2019, President Trump and French President Emmanuel Macron reached a deal by promising that the French government would scrap the French tax as soon as the OECD found a way to properly tax tech companies. In December 2019, the U.S. promised 100% tariffs on French wine, cheese and handbags because the previous deal wasn’t good enough, while in January 2020, the two sides agreed to wait a little bit to see if the OECD framework would materialize.
What they’re saying: France and other countries feel American companies are profiting enormously from local markets while making only limited contributions to public coffers. Paris has offered to withdraw the tax as soon as an OECD deal is reached, while other countries are looking at implementing their own DST. The USTR has indicated it wants to coordinate its response in similar disputes with other nations, but gave no time frame for further action.
The decision puts the responsibility of the tax disputes on the incoming Biden administration. “America is going to have to respond,” declared Sen. Ron Wyden (D., Ore.), the likely next chairman of the Senate Finance Committee. “Many of these unilateral taxes have been designed to target American companies that are generating high-skill, high-wage jobs.”
Tesla drives past Facebook
The certification of President-elect Joe Biden and Democrat wins in the Georgia Senate races have combined to put more charge in battery packs of the electric vehicle rally on expectations for heightened industry support. Tesla (NASDAQ:TSLA) printed a new high of $816.99 yesterday, enough to make Elon Musk the richest person in the world, and the EV mother ship recharged overnight to hit over $850 in premarket trade.
Some stats: Musk’s net worth totaled around $195B on Thursday, up from roughly $30B a year ago and topping Amazon’s (NASDAQ:AMZN) Jeff Bezos by about $10B, according to the Bloomberg Billionaires Index. “How strange,” the outspoken entrepreneur tweeted. “Well, back to work…” Musk’s wealth is largely connected to Tesla, whose stock has skyrocketed more than 700% in the last year to become the world’s most valuable carmaker. It also overtook Facebook (NASDAQ:FB) by market value on Thursday, making it the fifth-largest company in the U.S.
Tesla delivered nearly half a million vehicles globally last year and was included in the S&P 500 index in December. Investors see Elon Musk screaming future not only with Tesla, but many of his other high-profile startups like SpaceX (SPACE), The Boring Company and Neuralink.
Late to the party: Long-term bear RBC Capital Markets just upgraded its recommendation on Tesla, admitting it had misjudged the growth opportunity, positioning and valuation of the EV maker.
Supersonic travel
Nearly a week after the FAA launched new drone rules that could help open the skies for widespread commercial deliveries, the agency has issued guidelines to facilitate the safe development of civil aircraft at speeds greater than Mach 1. New developments in engine technology, lighter-weight carbon fiber structures and precision electronics have all led to a wave of projects for newer supersonic planes.
Backdrop: While there have been many supersonic military aircraft, the only models to carry civilian passengers were the Concorde and the Russian-built Tupolev Tu-144. The Concorde went out of service in 2003, weighed down by high expenses and a fatal crash in 2000 that prompted the model to be grounded, while the Tu-144 had limited service and retired in 1999. Commercial supersonic travel was such a hot topic when it developed in the 1960s that Seattle named its NBA franchise the “SuperSonics” after Boeing’s (NYSE:BA) supersonic transport project, which was later canceled.
Fast forward: The main companies currently in the race are Boom Technology and Aerion, which are going full throttle with plans to bring supersonic airplanes to the skies by the mid-2020s. Boom is working with Collins Aerospace (NYSE:RTX), Japan Airlines (OTCPK:JAPSY) and Rolls-Royce (OTCPK:RYCEY) for propulsion systems, and plans to introduce a demonstrator aircraft in October, though recent reports suggested Boeing (BA) and Spirit AeroSystems (NYSE:SPR) disbanded engineering teams designing Aerion’s AS2 business jet as a way to conserve cash during the coronavirus pandemic. Developers are also working on ways to make supersonic aircraft quieter as the loud sonic boom of existing models led the FAA to prohibit commercial supersonic flight over land in 1973, severely restricting the areas in which they could fly.
Joining the future sector are SpaceX (SPACE) and Virgin Galactic (NYSE:SPCE), which are not only exploring supersonic flight, but how point-to-point travel – which includes going to the outer edge of Earth’s atmosphere – could turn long-haul flights into shorter, regional trips.
Boundaries of speech
Simon & Schuster, a unit of ViacomCBS (NASDAQ:VIAC), has decided to cancel publication of Senator Josh Hawley’s forthcoming book, The Tyranny of Big Tech, after “witnessing the disturbing, deadly insurrection that took place on Wednesday in Washington, D.C.” The publisher said it “will always be our mission to amplify a variety of voices and viewpoints,” but “at the same time we take seriously our larger public responsibility as citizens, and cannot support Senator Hawley after his role in what became a dangerous threat to our democracy and freedom.”
Response from Hawley: “This could not be more Orwellian. Simon & Shuster is canceling my contract because I was representing my constituents, leading a debate on the Senate floor on voter integrity, which they have now decided to redefine as sedition. Let me be clear, this is not just a contract dispute. It’s a direct assault on the First Amendment. Only approved speech can now be published. This is the Left looking to cancel everyone they don’t approve of. I will fight this cancel culture with everything I have. We’ll see you in court.”
Backdrop: In December, Hawley became the first senator to announce he’d bring forth a challenge of Electoral College votes as part of an effort to overturn the results of the 2020 presidential election. Congress formally certified the outcome on Thursday, but the process was interrupted by a mob that stormed the U.S. Capitol in a riot that resulted in several deaths.
Yesterday, Facebook (FB) blocked President Trump from accessing his accounts indefinitely, citing “risks of allowing the president to continue to use our service during this period are simply too great.” First Amendment constraints don’t apply to private platforms, the Supreme Court affirmed back in a case from 2019, though the recent moves are sure to make debate over the boundaries of public speech extend into 2021.
What else is happening…
Trump returns to Twitter (TWTR) with video message on Capitol storming.
Apple (NASDAQ:AAPL) and Hyundai (OTCPK:HYMLF) in talks over EV partnership.
Boeing (BA) fined $2.5B, charged with 737 MAX fraud conspiracy by DOJ.
Coronavirus vaccine from Pfizer (PFE) appears to work on variants.
Thursday’s Key Earnings
Bed Bath & Beyond (NASDAQ:BBBY) -10.9% on Christmas store traffic decline.
Constellation Brands (NYSE:STZ) +2.3% after topping expectations.
Micron Technology (NASDAQ:MU) +1.3% AH amid strengthening DRAM prospects.
Walgreens (NASDAQ:WBA) +5.2% boosted by cost management efforts.
Today’s Economic Calendar
8:30 Non-farm payrolls
10:00 Wholesale Inventories (Preliminary)
11:00 Fed’s Clarida Speech
1:00 PM Baker-Hughes Rig Count
PM Consumer Credit
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Good morning. Happy Thursday.
The Asian/Pacific markets did great. Japan, China, South Korea, New Zealand, Taiwan, Australia, Indonesia, Singapore, Thailand and the Philippines posted solid gains. Europe, Africa and the Middle East currently lean up. The Denmark, Poland, South Africa, Finland, Norway, Portugal, Israel, Austria and Sweden are up 1% or more. Futures in the States point towards a moderate gap up open for the cash market.
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The dollar is up. Oil is flat; copper is up. Gold and silver are up. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Chaos in Washington
Congress has formally confirmed the election of Joe Biden as 46th president of the United States after rebuffing efforts by a small group of Republicans to object to the acceptance of Electoral College wins for Biden in Arizona and Pennsylvania. The House and Senate began the process of counting Electoral College votes Wednesday afternoon, but the proceeding was interrupted for about six hours by a mob that stormed the Capitol Building. The count resumed at about 8 p.m, but that was after a woman was shot and killed by Capitol Police, while three other people died from medical emergencies.
Terrifying day or historic day for American democracy? Maybe a bit of both. While the mob delayed presidential certification and led to horrible violence, it didn’t stop the process or institutions, and lawmakers were able to reconvene later that night.
Some other happenings: The second of two runoff elections in Georgia was called in the Democrats’ favor, handing Biden control of the Senate and solidifying his economic policy platform. Both Jon Ossoff and Raphael Warnock led their opponents by more than the 0.5 percentage-point threshold for a recount, triggering a blue wave to descend on Washington.
How did the market respond? Trading was largely unaffected by the chaos in the U.S. Capitol and ended the session mostly higher on expectations of a more robust stimulus package. Tech fell back on the possibility of antitrust legislation, though futures linked to the major averages all powered higher overnight. “I think the reason the markets aren’t too flummoxed is it’s not going to change the transition of power,” said Tom Lee of Fundstrat Global Advisors. The 10-year Treasury yield also broke above 1% for the first time since the pandemic began in late March, sparking a rally in the banking sector.
Censoring social media content
The disarray seen in Washington also shifted online as both Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) suspended President Trump from posting on their sites. It marked the social media industry’s strongest actions to date to rein in controversial content, citing “risks of violence” and “repeated and severe violations” of their policies. Twitter, which locked Trump’s account for 12 hours, also warned that further violations of its rules could lead to a permanent suspension.
What happened? The platforms have been labeling election-related tweets by Trump since November, which made declarations of victory and claimed there was a plot to steal votes. The final straw appeared to be a video circulated by Trump, in which he described those who showed up for the rally as “very special,” called the election “fraudulent” and said he understands how the protesters “feel.” “It was a landslide election and everyone knows it, especially the other side,” he added. “But you have to go home now. We have to have peace. We have to have law and order.”
Thought bubble: Censorship bias concerns over violence were raised during a recent U.S. Senate Commerce Committee hearing, when Twitter’s Jack Dorsey was asked how Supreme Leader Ayatollah Ali Khamenei of Iran was allowed to glorify bloodshed in many of his tweets without any takedowns. His response: “We did not find those to violate our terms of service because we considered them ‘saber-rattling’ which is part of the speech of world leaders in concert with other countries. Speech against our own people, or countries on citizens, we believe is different and can cause more immediate harm.”
Outlook: Some have pointed to Parler as a free-speech-focused alternative to the giants of Silicon Valley. The service leaves virtually all moderation decisions up to individuals, collects almost no data about its users and doesn’t use content-recommendation algorithms (it shows users all the posts from everyone they follow, in reverse chronological order). However, many that have emigrated to the platform have continued posting on Twitter, raising questions of whether Parler will eventually fizzle, complement or replace larger platforms with much bigger audiences.
Corporate America speaks out
Business leaders and trade groups, including the U.S. Chamber of Commerce, Business Roundtable and National Farmers Union, are calling for the peaceful transfer following the turmoil seen in the U.S. capital. Since the start of the week, we’ve already heard warnings. Prominent company leaders have cautioned about challenging election results and undermining economic stability, motivated in part by the desire to get members of Congress back to focusing on repairing an economy that’s been shredded by the pandemic.
What they’re saying: “The insurrection that followed the president’s remarks today is appalling and an affront to the democratic values we hold dear as Americans. There must be a peaceful transition of power,” said Blackstone (BX) CEO Stephen Schwarzman, one of Mr. Trump’s most loyal allies on Wall Street. “This is not who we are as a people or a country,” added JPMorgan (JPM) CEO Jamie Dimon, while Apple’s (AAPL) Tim Cook said it marked a “sad and shameful chapter” and called for those responsible to be held to account. The head of the National Association of Manufacturers, a group representing 14,000 companies in the U.S., even called on Vice President Mike Pence to “seriously consider” invoking the 25th Amendment to remove Trump from office.
Response: “Even though I totally disagree with the outcome of the election, and the facts bear me out, nevertheless there will be an orderly transition on January 20th. I have always said we would continue our fight to ensure that only legal votes were counted,” President Trump tweeted through the account of Dan Scavino, White House director of social media. “While this represents the end of the greatest first term in presidential history, it’s only the beginning of our fight to Make America Great Again!”
Earlier this week, an interesting study from the Yale School of Management found that more than 30 CEOs were considering pulling their financial support for the Republicans who plan to challenge the Electoral College results in Congress.
Latest crypto milestone
The total value of the entire cryptocurrency market has surpassed $1T for the first time as Bitcoin (BTC-USD) skyrocketed through $37,700 overnight to hit a fresh record high. Bitcoin is already up about 30% since the start of 2021 and in the past 12 months has surged over 380%. It makes up about two-thirds of the crypto market value, followed by Ether (ETH-USD) at about 13%, according to data from CoinGecko.
Reasons behind the rally? Many large institutional investors have been piling into the market, looking to diversify even more of their assets to hedge against inflation and geopolitical risks. A large number of retail investors and trend-following quant funds have also joined the race recently due to FOMO on a quick and easy buck.
The bulls: Nikolaos Panigirtzoglou and the team at JPMorgan suggest Bitcoin could rise to $146K as an “alternative” currency if it were to match gold in terms of market capitalization. That’s a mere 3.8x the current price, but about 35x from the level at which JPMorgan CEO Jamie Dimon called bitcoin a “fraud,” and threatened to fire any bank employee dealing with it.
The bears: “The parabolic move in Bitcoin in such a short time period, I would say for any security, is highly abnormal,” said David Rosenberg, economist and strategist at Rosenberg Research. He considers Bitcoin the biggest market bubble right now, but also sees stocks in bubble territory, and recommends investing in laggards like utilities and energy, as well as gold, which just completed its best year in a decade.
New York looks to fill budget gaps
Facing a projected budget deficit of more than $8.7B, New York is planning to raise revenue by increasing taxes on the wealthy as well as legalizing marijuana and sports betting. Members of the state Senate and Assembly gathered yesterday to discuss the initiatives in Albany, with many lawmakers attending virtually rather than visiting the chamber due to the coronavirus pandemic
Quote: “We need to get serious in making sure that everyone shares the burden. We need to make sure that more of the millionaires and billionaires who have gotten even richer step up during this pandemic,” said Senate Majority Leader Andrea Stewart-Cousins from Yonkers, while Governor Andrew Cuomo began outlining his formal agenda before a presentation on Monday.
Stocks like DraftKings (NASDAQ:DKNG), Flutter Entertainment (OTCPK:PDYPF) and Penn National Gaming (NASDAQ:PENN) took off after he said his proposal to legalize online sports betting would run through the lottery system, instead of casinos to save more money for the state. Twenty-five states and the District of Columbia already allow sports betting after a 2018 U.S. Supreme Court ruling cleared the way for states beyond Nevada to legalize the practice. Cuomo’s budget director, Robert Mujica, estimated mobile sports betting could generate around $500M in annual revenue for the state.
Besides New York marijuana legalization, the Georgia Senate election could be a gamechanger for the cannabis industry. “We go from speculating what President-elect Biden could have done for cannabis reform via Executive Order (or by directives/’memos’ from his incoming Attorney General) and if the Senate would have held a vote on the SAFE act (banking reform) would have even taken a vote, to a new world, in which the question is more about the timing and scope of much broader reform for the cannabis industry,” wrote Cantor Fitzgerald analyst Pablo Zuanic.
What else is happening…
Electric vehicle stocks gain as Georgia election digested.
Roblox (RBLX) switches to direct listing from IPO.
GM (NYSE:GM) dethrones Ford (NYSE:F) in closely watched truck race.
Chinese tech, EV stocks fall on concerns of U.S. ban.
Today’s Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 International Trade
9:00 Fed’s Harker: Economic Outlook
10:00 ISM Service Index
10:30 EIA Natural Gas Inventory
12:00 PM Fed’s Bullard: U.S. Economy and Monetary Policy
1:00 PM Fed’s Evans Speech
3:00 PM Fed’s Daly Speech
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly down. China and Hong Kong did well, but South Korea, Australia, Malaysia, Indonesia, Thailand and the Philippines were weak. Europe, Africa and the Middle East are currently posting solid gains. The UK, France, Turkey, Germany, South Africa, Norway, Hungary, Spain, Italy, Portugal, Austria and the Czech Republic are up big. Futures in the States point towards a down open for the S&P and a big down open for the Nas.
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The dollar is down. Oil and copper are up. Gold and silver are down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
The Blue Wave?
Democrat Raphael Warnock, a senior pastor at the historic Black church Ebenezer Baptist Church in Atlanta, has defeated Republican incumbent Sen. Kelly Loeffler in the Georgia Senate runoff elections, according to the Associated Press. The victory puts the Senate 50-49 in favor of the GOP, but Democrats could flip control of the chamber if Jon Ossoff prevails over incumbent David Perdue (that race remains too close to call). Vice President-elect Kamala Harris would be the tiebreaking vote in the Senate, giving the Democratic party control of the White House and Congress, and solidifying President-elect Joe Biden’s economic policy platform.
What’s moving? Big Tech appears to be getting nervous about possible legislation, with Nasdaq futures off by 1.8%, though the potential of a big fiscal boost saw contracts linked to the Dow rise 0.4% and the S&P 500 remain steady. Knee-jerk reactions are typical following any election, but the key to actual price movement will depend on the final results and how subsequent lawmaking will play out.
Outlook: “For new tech companies, Congressional action could mean opportunity to compete, to innovate, to build products and services without immediately being squashed by one of the giants,” political strategist and venture capitalist Bradley Tusk declared. “So while a Democratic Senate is unquestionably bad for Big Tech, it’s not necessarily bad for tech overall.” He also predicts Democrats would likely enact laws around internet privacy, similar to Europe’s GDPR legislation.
As reported yesterday, a repeat of the chaotic vote re-counts that followed the U.S. presidential election in November is likely to ensue. More drama will come today as the House and the Senate formalize Biden’s Electoral College win (a group of 13 Republican senators are objecting to the certification).
OPEC+ unity
Oil prices jumped on Tuesday after Saudi Arabia pledged to slash another 1M barrels per day in production in February and March, while Russia and Kazakhstan said they would increase their output by a combined 75,000 bpd. Energy shares outperformed all other sectors and rose the most since late November on the news, while Moscow hailed the concession a “new year gift” for the crude markets.
What’s happening? On the one hand the kingdom is caught in supply/demand fundamentals, but at the same time, Saudi Oil Minister Prince Abdulaziz painted the decision as some kind of leadership position. He said it was a sovereign political move to support the Saudi economy, members of the OPEC+ group, as well as the wider industry.
Frothy IPO market pours in Oatly
Oatly (OATLY) is planning a 2021 initial public offering that could raise $1B, sources told CNBC, noting the vegan milk brand’s valuation will depend on the status of the pandemic-hit economy. Bloomberg already reported on the potential listing back in September, but the latest account suggests 2021 might be another record year for the IPO market.
Some statistics: During 2020, oat milk sales in the U.S. soared over 300% to $213M, becoming the second most consumed plant milk after almond milk ($1.5B in 2020 sales). Soy milk fell down a spot, with sales declining 4.5% to $202M (a decade ago, they topped $1B).
Oatly’s got some big backers betting on shifting consumer preferences. Last summer, Blackstone led a $200M funding round in the Sweden-based brand which saw Oprah Winfrey, Natalie Portman, Jay-Z’s Roc Nation and former Starbucks (NASDAQ:SBUX) CEO Howard Schultz come aboard. In fact, Starbucks is launching Oatly in all its U.S. stores this spring following a successful regional trial.
Bigger picture: Led by Gen Z and millennials, trends are moving away from conventional animal products due to environmental, health and ethical concerns. Shares of Beyond Meat (NASDAQ:BYND), an alternative protein supplier, are up 400% since the company went public a year and a half ago.
Rethinking the mall
The coronavirus pandemic is turning struggling malls into new kinds of real estate. Latest? The company behind popular videogame Fortnite, Epic Games, is shelling out $95M for the Cary Towne Center mall in North Carolina, converting it into its new global headquarters. Epic plans to open the new 980K-square-foot campus by 2024, which would nearly quadruple the size of its current property.
Will there be videogame tournaments at the new HQ? Epic hasn’t yet offered details, but it’s considering including space for use by the local community.
Thought bubble: While many businesses are aiming to downsize their office space and welcome work-from-home policies, others are looking for good deals to make new and larger office locations as a part of their future. Underperforming malls could also become attractive acquisition targets for investors aiming to convert them into residential units or warehouses.
Recent examples: In West Los Angeles, Calif., the Westside Pavilion is undergoing a makeover into an office campus that will be occupied by Google (GOOG, GOOGL), while Urban Edge Properties said this week that it had scooped up the Sunrise Mall in Massapequa, N.Y., and plans to redevelop it for industrial purposes.
Another question… How will all the news impact mall and shopping center players like Simon Property Group (NYSE:SPG), Taubman Centers (NYSE:TCO) and Macerich (NYSE:MAC)?
Fresh U.S.-China tensions
Alipay (NYSE:BABA) has been in Washington’s crosshairs for months, but the White House just locked on target. President Trump has signed an order banning transactions with eight Chinese payment apps in 45 days, and while he won’t be in office by that date, the move will cement his tough-on-China legacy, which has involved a trade war and using national security powers against China’s largest technology companies.
Other companies included in the ban are Tencent’s (OTCPK:TCEHY) QQ Wallet and WeChat Pay, CamScanner, SHAREit, Tencent QQ, VMate and Beijing Kingsoft Office Software’s WPS Office. The new measure also deals a blow to Ant co-founder Jack Ma, who hasn’t been seen in public ever since Chinese regulators halted Ant’s $35B IPO and opened an antitrust investigation into Alibaba.
“By accessing personal electronic devices such as smartphones, tablets, and computers, Chinese connected software applications can access and capture vast swaths of information from users, including sensitive personally identifiable information and private information,” the executive order states. Such data collection “would permit China to track the locations of federal employees and contractors, and build dossiers of personal information.”
Outlook: The directive mirrors executive orders signed in August that aimed to ban downloads and block some U.S. transactions on Chinese-owned WeChat and TikTok. While those restrictions were blocked by courts mainly on freedom of speech grounds, the White House sees the latest executive action standing up to judicial scrutiny as apps like Alipay would struggle to bring a First Amendment case.
What else is happening…
Feds say Russia was likely behind SolarWinds (NYSE:SWI) hack.
NYSE (NYSE:ICE) may go through with Chinese telco delisting plan.
Amazon (NASDAQ:AMZN) grows fleet with purchase of Boeing (NYSE:BA) jets.
Macy’s (NYSE:M) is shuttering 45 more locations this year.
GE (NYSE:GE) will not claw back Jeff Immelt’s pay – WSJ.
M&A… UnitedHealth (NYSE:UNH) to acquire Change Healthcare (NASDAQ:CHNG).
Today’s Economic Calendar
Auto Sales
7:00 MBA
Mortgage Applications
8:15 ADP Jobs Report
9:45 PMI Composite Final
10:00 Factory Orders
10:30 EIA Petroleum Inventories
2:00 PM FOMC Minutes
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Good morning. Happy Tuesday.
The Asian/Pacific markets did well. China, Hong Kong, New Zealand and Thailand posted solid gains; the Philippines were weak. Europe, Africa and the Middle East currently lean down. The UAE and South Africa are up, but Denmark, Finland, Turkey, Germany, Russia, Greece and Israel are down. Futures in the States point towards down open for the cash market.
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up relative to Friday’s trading.
Stories/News from Seeking Alpha…
Down to Georgia
Investors are eyeing today’s Senate runoff election in Georgia, which will decide if Joe Biden has the ability to pursue his preferred economic policies at the onset of his administration.
Backdrop: Democrat Jon Ossoff, a documentary filmmaker, and Rev. Raphael Warnock, a senior pastor at the historic Black church Ebenezer Baptist Church in Atlanta, are taking on Republican incumbent senators David Perdue and Kelly Loeffler. As of now, the GOP holds a 50-48 majority in the Senate, but if Democrats win both of the runoff races, Vice President-elect Kamala Harris would be the tiebreaking vote, giving the party control of the White House and Congress.
Bigger picture: Both contests are tight and the results may not be immediately known, which could lead to a repeat of the chaotic vote re-counts following the U.S. presidential election in November. More drama will ensue on Wednesday as the House and the Senate formalize Biden’s Electoral College win (a group of at least 12 Republican senators are objecting to the certification).
What it means for the market: Uncertainty about the Georgia runoffs already sent Wall Street sharply lower on Monday and volatility could return. Democrats taking the Senate would mean “an ever greater convergence of loose fiscal and monetary policy which would have negative implications for U.S. Treasuries and the dollar,” according to Chris Woods at Jefferies. “Nonetheless, it could be the excuse for a near-term consolidation in risk markets after a strong post-election rally,” added James Knightley, chief international economist at ING. Still, a blue wave would only give the party a slim Senate margin, meaning Democratic proposals – from rewriting the tax code to increased regulatory risks for Big Tech, banks and the energy sector – could be watered down.
Worries about inflation
President-elect Joe Biden has also referred to the latest coronavirus aid package as a “down payment” for dealing with the pandemic and today’s runoff election in Georgia could make that a reality. Another stimulus bill providing cash for testing and vaccinations, aid to cities and states and a third round of direct payments could be valued in the trillions of dollars, and that is prompting worries about inflation and the massive federal deficit.
Backdrop: The U.S. hasn’t seen significant inflation in almost 40 years, and since the 2008 financial crisis the economy has experienced very low inflation and even deflation. A moderate level of inflation occurs naturally in a growing economy, yielding higher prices that encourages businesses to invest, interest rates to go up and higher wages.
Bigger picture: Central bank officials have said they will tolerate inflation levels higher than 2% to juice the economy and get back to full employment, but if the number rises at a faster rate, it could be harmful for investors and force the Fed to tighten policy sooner than expected.
Outlook: “The bottom line is that it will take a long time for average inflation to reach 2%,” Chicago Fed President Charles Evans said on Monday. “To meet our objectives and manage risks, the Fed’s policy stance will have to be accommodative for quite a while.” Others like Bill Dudley, the former president of the New York Fed, made waves last month by suggesting inflation might come back “much more quickly than the consensus suggests” due to pricing differentials and the lingering effects of the pandemic.
RIP Haven
It’s not easy disrupting the U.S. healthcare sector and JPMorgan (NYSE:JPM), Amazon (NASDAQ:AMZN), and Berkshire Hathaway (BRK.A, BRK.B) are learning that the hard way. Haven, the joint venture launched by the three companies back in 2018, will get disbanded at the end of January, with little to show for its three years of effort.
Mission: Haven aimed to combat the high and rising costs for employee healthcare by combining the might of leaders in technology and finance. It would radically improve the American healthcare system, which features a complicated configuration of doctors, insurers, drugmakers and middlemen that costs the country $3.5T each year.
What happened? Each of the three founding companies executed their own projects separately with their own employees, obviating the need for the joint venture to begin with, CNBC reports. Haven also faced several high profile departures, such as CEO Atul Gawande in May 2020.
Outlook: The three companies are still expected to collaborate informally on healthcare projects, while the venture has achieved no-deductible plans with wellness incentives for employees of Amazon, JPMorgan, and some Berkshire companies.
Minority union forms at Google
In a rare Silicon Valley development, a few hundred employees have formed a union at Google (GOOG, GOOGL), marking the latest new peak in what has been swelling worker activism at the tech giant.
Backdrop: The Alphabet Workers Union formed mostly in secret over the past year, the NYT notes, and elected leadership last month. It’s affiliated with the Communications Workers of America, a union that represents workers in telecommunications and media in the U.S. and Canada.
Bigger picture: As a minority union, it’s not really in a position to negotiate over wages and work contracts, but it does add some staying power to what has been growing unrest among workers over issues tied to pay policies, harassment and company ethics.
Response from Google: “We’ve always worked hard to create a supportive and rewarding workplace for our work force. Of course, our employees have protected labor rights that we support. But as we’ve always done, we’ll continue engaging directly with all our employees.”
Clash at OPEC+
Moscow and Riyadh are again at odds over how much extra oil the market can tolerate as the escalating COVID-19 pandemic threatens a wave of tighter lockdowns.
What happened? At a meeting on Monday, Saudi Energy Minister Prince Abdulaziz bin Salman proposed rolling back the 500K barrel-a-day production increase the group made this month, while his Russian counterpart, Deputy Prime Minister Alexander Novak, wanted to maintain that supply hike and add the same amount for February. OPEC+ talks were unexpectedly suspended as a result, but will resume today.
Note: While failure to reach a compromise is rare, it can have damaging consequences, like the month-long price war seen in 2020.
Outlook: The extension of talks also casts doubt on the production increase of 500K barrels a day traders had penciled in for March and April. OPEC+ producers are currently idling 7.2M barrels a day, or about 7% of world supplies, and had planned to return a further 1.5M barrels a day in installments over the coming months.
What else is happening…
Stock futures volatile after negative start to the year.
NYSE (NYSE:ICE) scraps plans to delist Chinese telco giants.
England enters its third national lockdown.
Jack Ma suspected missing; Alibaba (NYSE:BABA) falls 2%.
Slack (NYSE:WORK) goes down for several hours.
Bitcoin (BTC-USD) hangover as Ethereum (ETH-USD) steals the show.
Today’s Economic Calendar
Auto Sales
8:55 Redbook Chain Store Sales
10:00 ISM Manufacturing Index
3:45 PM Fed’s Evans Speech
3:45 PM Fed’s Williams Speech
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Good morning. Happy Monday. Hope you had a great weekend.
The Asian/Pacific markets did great. China, South Korea, India, Taiwan, Australia, Indonesia, Thailand and the Philippines all rallied more than 1%; Japan and Malaysia were weak. Europe, Africa and the Middle East are currently posting big gains. The UK, Denmark, Poland, France, Germany, the UAE, Russia, Greece, South Africa, Finland, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are up 1% or more. Futures in the States point towards a positive open for the cash market.
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Online Course: Mini Masterclass in Trading
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The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up relative to Friday’s trading.
Stories/News from Seeking Alpha…
What’s in the cards for 2021?
Following one of the craziest years in recent memory, and one that almost nobody could have foreseen, investors are sketching their market predictions for 2021. “Recovery,” “rotation,” “reset” are some of the words being tossed around by analysts and investment firms, but only time will tell if the forecasts hold true. Other themes: Will COVID herd immunity be achieved? What about the economic policies of the incoming Biden administration? Fiscal and monetary policymaking? Will the labor market return to what it once was? Corporate earnings? What will happen with U.S.-China trade? Will crypto go mainstream? Electric vehicles and space exploration? IPOs and the SPACtacular market? Any other stock-related tea leaves?
First session of the year
“The stock market is positioned for further gains in 2021 based on the twin pillars of coordinated fiscal and monetary policy from the U.S. Treasury and the Federal Reserve Board and a successful COVID vaccine rollout,” wrote Marc Chaikin, CEO of Chaikin Analytics. “However, we envision some bumps in the road on the way.” Those bumps aren’t coming this morning, with traders awaiting the first opening bell of 2021 and stock index futures ahead by 0.5%. Wall Street is also keeping an eye on Georgia’s Senate runoff election tomorrow, which will decide control of the chamber and the fate of the incoming Biden administration’s economic policy. Over the weekend, President Trump pressured Georgia’s top election official to “find” enough votes to overturn his defeat in the state, while Nancy Pelosi was reelected as House speaker.
Big moves for Bitcoin
While most markets were closed over the first weekend of 2021, an eye-popping rally for Bitcoin (BTC-USD) continued with a jump over $34,000 before the crypto tumbled nearly 11%. Putting it in perspective: Bitcoin tripled in value during 2020 and the latest leg higher added more than 50% to its value since crossing $20,000 just two weeks ago. “The currency will be on the road to $50,000 probably in the first quarter of 2021,” said Antoni Trenchev, managing partner and co-founder of Nexo in London, which bills itself as the world’s biggest crypto lender. Bolder forecasts? Bitcoin should eventually climb to about $400,000, Scott Minerd, chief investment officer of Guggenheim Investments, told Bloomberg in a Dec. 16 interview.
The great delisting
China said it will take “necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises” after the NYSE started the process of delisting Chinese telco giants to comply with a U.S. executive order issued in November. Among those facing delisting from the NYSE are China Mobile (NYSE:CHL), China Telecom (NYSE:CHA) and China Unicom Hong Kong (NYSE:CHU), which will be suspended from trading between Jan. 7 and Jan. 11. The executive order has also resulted in a series of companies being removed from indexes compiled by MSCI, S&P Dow Jones Global Indices and FTSE Russell, marking the latest escalation in tensions between the U.S. and China. President Trump further signed a law last month that would kick Chinese companies off American exchanges if they have failed to comply with the U.S. Public Accounting Oversight Board’s audits for three years in a row.
Could a COVID vaccine passport be issued in the U.S.?
“Anything is on the table. Anything is possible, of course,” Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told Newsweek. “I’m not sure if it’s [the COVID-19 vaccine] going to be mandatory from a central government standpoint, like federal government mandates. But there are going to be individual institutions that I’m sure are going to mandate it” like companies, hospitals and schools. Looking abroad, Israel plans to launch a pilot of its “green passport” program on Jan. 5 to residents who have received a coronavirus vaccine or those who have recovered from the illness with antibodies. The passport will lift some restrictions, including mandatory quarantine following exposure to an infected person or traveling abroad, and may even be used for visiting malls or attending cultural and sporting events. While legal issues of the passport are still being debated, the country is leading the world in COVID vaccinations per capita.
Another reason for Musk to dance
Tesla (NASDAQ:TSLA) shifted into Ludicrous Mode this morning, with the stock up another 3% to $725/share, after the automaker delivered 499,550 vehicles for the year, which was a hair shy of its half a million target. That’s despite the Fremont factory shutdown period in the spring and other difficulties related to the coronavirus pandemic. In 2021, investors are likely expecting another year of sharp growth in vehicle deliveries from Tesla as the EV maker expands in China and opens new factories near Austin and Berlin. Rivals Nio (NYSE:NIO) and Xpeng Motors are also soaring in premarket trade after reporting solid delivery figures.
World’s fourth largest carmaker
Following two years of on-again off-again talks, the transformation of the car industry and a global pandemic, shareholders are poised to sign off on a merger today between Fiat Chrysler (NYSE:FCAU) and Peugeot (OTCPK:PEUGF) owner PSA. Calling the combined company Stellantis, executives hope to boost returns with scale. It’ll utilize Fiat’s Ram and Jeep divisions in North America, revitalized Peugeot and Citroen brands that have excelled in Europe, as well as greater resources to compete with electric carmakers that are reshaping the sector. Many challenges await. Neither company has much of a foothold in the luxury car business or China’s vast auto market. The prior merger of Fiat and Chrysler also did little to improve the fortunes of Alfa Romeo and Maserati, while PSA’s purchase of Opel only made the company more reliant on Europe.
Dollar logs first annual drop since 2017
The U.S. Dollar Index, a measure of the greenback against a basket of six major rivals, fell 6.7% in 2020, marking the first annual drop for the currency since a 9.9% decline in 2017. “Just under three months into 2020, the dollar was the world’s strongest major currency, though it was marginally weaker against the Hong Kong dollar,” said Kit Juckes, global macro strategist at Société Générale. “Since the Fed’s volley of policy actions in late March however, it is weaker against almost everything.” Will the downtrend continue? Actions from the Fed like financial market liquidity and expanding swap lines with foreign central banks have all been credited with helping the dollar turn south, and easy money policies look only set to increase under the Biden administration.
OPEC+ decides on production levels
A weaker dollar and investors positioning for a recovery in the oil sector could support oil prices in 2021, Energy Aspects analyst Virendra Chauhan declared as crude touched multi-month highs at $49/bbl. The forecast comes as OPEC+ looks poised to cap output at current levels in February, with the group meeting via videoconference (it previously decided to raise output by 500K barrels per day in December and agreed to meet every month to review production). Prices ended 2020 about 20% below 2019’s average, weighed down by global lockdown measures, which have slashed fuel demand, as well as a price war between Saudi Arabia and Russia. Not out of the woods yet… OPEC Secretary General Mohammad Barkindo said Sunday that while crude demand is expected to rise by 5.9M barrels per day to 95.9M bpd this year, the group sees plenty of downside demand risks in the first half of 2021.
What else is happening…
Moderna (NASDAQ:MRNA) vaccine doses may be cut in half to hasten rollout.
More drug price hikes, but at lower rate than last year.
Facebook’s (NASDAQ:FB) advertising integrity chief departs company.
Roku (NASDAQ:ROKU) bids to acquire rights to Quibi’s content – WSJ.
Icahn sells most of Herbalife (NYSE:HLF) stake, gives up board seats.
Today’s Economic Calendar
9:45 PMI Manufacturing Index
10:00 Construction Spending
10:00 Fed’s Evans: Economic Conditions and Monetary Policy
10:00 Fed’s Bostic Speech
12:15 PM Fed’s Mester Speech
12:30 PM Investor Movement Index
6:00 PM Fed’s Mester Speech
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