Good morning. Happy Friday.
The Asian/Pacific markets had some big movers in both directions. China, South Korea, Malaysia and Indonesia did well; Japan, India, New Zealand, Taiwan, Australia, Singapore and Thailand were weak. Europe, Africa and the Middle East are currently posting solid gains. France, Turkey, Germany, Russia, South Africa, Norway, Hungary, Spain, the Netherlands, Italy, Portugal, Austria and Sweden are doing well. Futures in the States point towards a moderate gap up open for the cash market.
VIDEO: State of the Market
The dollar is up. Oil is down; copper is up. Gold is down; silver is up. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
Yellen doubles down
The stock market record highs seem to have fizzled in recent days, with the S&P 500 falling for a third straight day on Thursday. Fears of inflation may be at work amid concerns that if all the stimulus being pumped into the financial system works (i.e., people start spending, shopping etc.), that could begin pushing up prices. That may be risky for stock investors as money flows back into the rising yield bond market. In fact, a sizable selloff has been seen in the U.S. government bond market over the past six weeks, with yields on the 10-year Treasury note climbing from 1% in early January to 1.3% this week (yields move inversely to price).
Quote: “We think it’s very important to have a big stimulus package [that] addresses the pain this has caused – 15M Americans behind on their rent, 24M adults and 12M children who don’t have enough to eat, small businesses failing,” Treasury Secretary Janet Yellen told CNBC. “I think the price of doing too little is much higher than the price of doing something big. We think that the benefits will far outweigh the costs in the longer run.”
Asked whether the surge of federal spending could prompt a sustained rise in inflation, Yellen responded that it was a risk, but added that inflation has been very low for many years and the Fed could always mitigate that risk by raising rates. According to Speaker Nancy Pelosi, the House aims to pass its $1.9T coronavirus relief plan before the end of February to beat a deadline on extending key unemployment programs. U.S. stock index futures: Dow +0.2%; S&P 500 +0.3%; Nasdaq +0.4%.
Go deeper: Yellen also said the White House will likely propose a second economic recovery package later this year that would include spending on longer-term investments like infrastructure, renewable energy, education, job training and research and development. The proposal would also include tax increases on corporations and wealthy Americans that would “phase in slowly over time.” During his campaign, President Biden proposed raising the corporate rate to 28% from the current 21% (prior to President Trump’s tax cuts in 2017, the rate was 35%).
Grilling on the Hill
Yesterday’s GameStop (GME) hearing ran for over five hours, but it’s only the first of three planned by the House Financial Services Committee. Future hearings will likely feature representatives from the SEC and the Financial Industry Regulatory Authority, according to Chairwoman Maxine Waters. The gathering on Thursday was billed as a fact-finding mission and featured all the big names caught up in the retail trading frenzy that occurred back in January. Here are some of the highlights:
Robinhood’s Vlad Tenev – “Despite the unprecedented market conditions in January, at the end of the day, what happened is unacceptable to us.” The decision to restrict buying, but not selling of stocks and options was “not influenced by anyone outside the company.” Robinhood (RBNHD) had to work with clearinghouses on capital requirement and eventually restricted buying in 13 stocks, and without those moves, users could have lost complete access to the market.
Melvin Capital’s Gabe Plotkin – “I don’t you think you’ll see stocks with the kind of short interest we saw prior to this year and data scientists will be watching message boards much more closely.” He’d also abide by rules that would require disclosures of short positions.
Reddit’s Steve Huffman – “A board like WallStreetBets wouldn’t work without anonymity. Reddit’s (REDDIT) user base is especially good at sniffing out stories that are not true and reiterates that it hasn’t found any nefarious behavior.”
Citadel’s Kenneth Griffin – “With respect of ‘payment for order flow,’ we simply follow the rules of the road. If they change the rules… that’s fine with us.” The system has been an important source of innovation and drove the industry toward zero-dollar commissions, he added. “This has been a big win for American investors.”
WSB’s Roaring Kitty (a.k.a. Keith Gill) – “The idea that I used social media to promote GameStop stock to unwitting investors and influence the market is preposterous. My posts did not cause the movement of billions of dollars into GameStop shares.” He also noted that that some people lost money and “my heart goes out to them.” “For me personally, yes, I do find it’s [GameStop] an attractive investment at this point.”
Vaccine distribution a focus at G7 summit
French President Emmanuel Macron is urging Europe and the U.S. to allocate up to 5% of their current vaccine supplies to developing countries, saying failure to share vaccines fairly would entrench global inequality. He hopes the push could turn into some kind of international public policy, but it could be hard to convince populations to send their vaccines elsewhere. Britain also announced it will donate a majority of future surplus vaccines to poorer nations ahead of today’s G7 summit, which will focus on speeding up a coordinated effort on global vaccination.
Macron’s proposal was quickly rejected by the Biden administration, which said vaccinating Americans was its top priority and it wouldn’t donate doses until there was enough supply. President Biden is still expected to announce today the U.S. will spend $4B on international COVID vaccination efforts, which was appropriated by Congress as part of the last coronavirus relief bill approved in December. Half of that sum would be distributed “almost immediately” to COVAX, while the rest would be doled out in stages through 2022.
What is COVAX? The program is part of a global scheme co-led by an international vaccine alliance called Gavi, the Coalition for Epidemic Preparedness Innovations, as well as the WHO. It was established to ensure equitable vaccine access for every country in the world, and aims to deliver 2B doses of safe, effective vaccines by the end of 2021. Only after each nation receives vaccine doses for 20% of its population would countries’ COVID risk profiles be considered in a subsequent phase of vaccine distribution.
Returns of the vaccine makers: Shares of Pfizer (NYSE:PFE) have largely held in the $30-range over the past year, despite being the first to receive FDA emergency approval for its COVID jab. Many reasons have been given for the lack of movement, such as lower profitability versus prescription drugs and downward pressure on margins due to public interest in facilitating vaccine access. However, the opposite effect has occurred with partner BioNTech (NASDAQ:BNTX), which has seen its stock rise 275% since it first began work on a COVID shot in January 2020. The only other vaccine approved in the U.S. is from Moderna (NASDAQ:MRNA), which has seen its shares soar nearly 750% since it started working around-the-clock to develop a vaccine at the same time as BioNTech.
Uber loses case on driver rights
Uber (NYSE:UBER) shares are off 3.5% in premarket trading after losing a key legal fight in the U.K. The country’s Supreme Court upheld a ruling that its drivers should be classified as workers rather than independent contractors, entitling them to minimum wage, holiday and sick pay, as well as rest breaks. Britain is the Uber’s biggest European market with about 40,000 drivers.
Bigger picture: The verdict concludes an almost five-year legal battle between the ride-hailing giant and a band of former drivers led by Yaseen Aslam and James Farrar. In 2016, an employment tribunal ruled in favor of the group, and since then, two other court decisions have gone against Uber. The case will now be sent back to the employment tribunal, which could order Uber to pay compensation to about 20 original claimants. Thousands of other drivers have also taken legal action, and the decision could be rapidly applied to them.
Uber faced a similar situation in California this past year. Regulators there attempted to reclassify drivers of Uber and other ride-hailing services like Lyft (NASDAQ:LYFT) as employees to grant them more protections. Voters ended up supporting a ballot measure called Proposition 22, which continued the status quo, after the companies said they would guarantee new protections to workers. Those included giving drivers 30 cents per mile driven to account for gas and other vehicle costs, healthcare subsidies for drivers who work 15 hours or more a week and occupational accident insurance coverage while on the job.
Outlook: While the U.K. ruling will only apply to Uber, British businesses may have to review some of their terms, as it could give other contractors the drive to pursue similar claims. “It’s one of the biggest employment law decisions of my career,” said Joe Aiston, lawyer at Taylor Wessing. “It’s going to have a massive knock-on affect both to the gig economy and any business that engages independent contractors.”
What else is happening…
NASA’s Perseverance rover lands safely on Mars; sends back images.
Apple (NASDAQ:AAPL) aims to lead 6G cellular technology development.
Palantir (NYSE:PLTR) lockup expiration opens 80% of shares for trading.
IBM (IBM) explores sale of IBM Watson Health – WSJ.
Illumina (NASDAQ:ILMN) to study whole genome sequencing for genetic diseases.
Thursday’s Key Earnings
Barrick Gold (NYSE:GOLD) -2.6% reporting a smaller year-over-year profit.
Dropbox (NASDAQ:DBX) -4.6% AH
taking $400M real estate hit on WFH trends.
Roku (NASDAQ:ROKU) unchanged AH amid strong user metrics, second-half warning.
Walmart (NYSE:WMT) -6.6% posting mixed Q4 results and soft guidance.
Today’s Economic Calendar
8:00 Fed’s Barkin Speech
9:45 PMI Composite Flash
10:00 Existing Home Sales
10:00 E-Commerce Retail Sales
10:00 Quarterly Services Report
11:00 Fed’s Rosengren Speech
1:00 PM Baker-Hughes Rig Count
Good morning. Happy Thursday.
The Asian/Pacific markets were mostly weak. Japan, Hong Kong, South Korea, Malaysia and the Philippines dropped 1% or more. Europe, Africa and the Middle East currently lean down. Poland did well, but the UK, Denmark, Norway, Portugal and Austria are down more than 1%. Futures in the States point towards a moderate gap down open for the cash market.
VIDEO: State of the Market
The dollar is down. Oil and copper are up. Gold is up; silver down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
GameStop hearing on Capitol Hill
Grab the popcorn… Robinhood’s (RBNHD) Vlad Tenev, Melvin Capital’s Gabe Plotkin, Reddit’s Steve Huffman and Citadel’s Kenneth Griffin and Keith Gill are all set to testify before the U.S. House Financial Services Committee at 12 p.m. ET. Lawmakers will get their chance to grill the executives in a hearing focused on “short selling, online trading platforms, gamification and their systemic impact on our capital markets and retail investors.” Also making an appearance is Reddit trading star known as Roaring Kitty, who is credited with helping start the GameStop mania, though his actions are being probed by Massachusetts regulators because he was a registered securities broker.
Backdrop: An army of day traders following WallStreetBets – the Reddit forum dedicated to “making money and being amused while doing it” – upended some market dynamics last month by taking aim at some heavily shorted stocks. They ran them up as a group, triggering short squeezes and causing some hedge funds like Melvin Capital to record billions of dollars in losses. The party came to an end after brokerages restricted trading on stocks like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC), though Robinhood took the most flak due to its communication about the events and delay in taking curbs off of “meme” trading.
Investors and policymakers alike lambasted the limits, including Dave Portnoy, Alexandria Ocasio-Cortez and Ted Cruz, accusing the trading platform of seeking to protect Wall Street’s interests at the expense of smaller investors. “We need an SEC that has clear rules about market manipulation and then has the backbone to get in and enforce those rules,” added Sen. Elizabeth Warren, a longtime critic of Wall Street. “You’ve got to have a cop on the beat.” Robinhood cited clearing house requirements as reasons for the stoppage, and said it did not have a liquidity problem, but subsequently raised billions of dollars to reopen trading. More than half of its customer orders are routed to Citadel Securities, which provided rescue financing to Melvin after its short bet on GameStop went sour, in a series of events that prompted the hearing on Capitol Hill.
What to expect: There’s likely to be a lot of noise coming out of the hearing, but not a lot of consequences. While there could be some SEC regulations down the road, they won’t be coming from the House Financial Services Committee. If the SEC were to act, it could pursue a series of rules, ranging from short interest caps to taxing short-term bets, according to BofA analyst Michael Carrier. The commission may also move to review payment for order flows (PFOF) and pursue social media oversight to ward off potential market manipulation. Jefferies analyst Daniel Fannon meanwhile thinks the SEC could explore greater investor education around derivatives and risk management or increase costs for leverage services.
Stock market vs. casino
New York Stock Exchange (NYSE:ICE) officials have not been asked to testify at the upcoming House hearing, even though GameStop (NYSE:GME), AMC (NYSE:AMC) and several other “meme stocks” trade on the exchange. NYSE President Stacey Cunningham still has plenty to discuss on the subject, especially after Sen. Elizabeth Warren told the SEC that “investors big and small are treating the stock market like a casino” and the “recent [GameStop] chaos revealed a clear distortion in securities markets.”
Quote: “The markets are not a casino. They are highly regulated and they’re highly overseen,” Cunningham responded. “We are running a market that provides opportunities for investors to come in, invest in the companies they believe in, they believe that are gonna grow, and then share in that wealth creation. That’s what made this country so great, is that a dreamer, an entrepreneur with an idea can start that business and grow it by getting others to invest and share in their success.”
While casinos are also highly regulated and overseen, customers cannot build long-term positions or bet on future growth and value appreciation. That doesn’t mean gambling doesn’t happen in the stock market. In fact, recent academic research suggests that 15.2% of stock market volume in the U.S. is associated with “lottery stocks.” The percentage was determined by looking at volume divided by market cap, then filtering by remarkably large ratios.
Other comments on regulation: Cunningham also supports taking a “fresh look” at short selling, especially surrounding hedge funds that take large positions against a company’s success. “It’s interesting that shorting is not part of 13-F filings (i.e., mechanism used by investment managers to disclose positions). It’s also disclosed 45 days after the end of a quarter, meaning it is really old news by that time. There is an effort to look and modernize that.”
News Down Under
Australian lawmakers have begun debating legislation that would force Big Tech companies to pay publishers for news. The media bill, first introduced in December, would leave digital platforms on the hook for news content displayed in search results or feeds, meaning Google (GOOG, GOOGL) and Facebook (FB) would have to shell out cash to local media outlets and publishers for linking to their content. While the companies have both issued threats in the past (like pulling out of Australia), the two responded very differently on Wednesday.
Google – Pay for news. The tech giant announced a global deal with publishing group News Corp. (NWS) and is rushing to negotiate generous agreements with big and small Australian media companies. Seven West Media (OTC:WANHY) already reached a pact, its rival Nine Entertainment is reportedly close to a contract and Australian Broadcasting Corp. is in negotiations.
Facebook – Restrictions have been implemented. The decision will block Australians from sharing news stories and stop global users from sharing articles from Australian publishers. “The proposed law fundamentally misunderstands the relationship between our platform and publishers who use it to share news content,” Facebook regional managing director William Easton said in a statement.
Outlook: While Australia singled out these two companies in its proposed law, other tech companies are watching the drama unfold. Stances will take on greater importance as governments around the world increasingly put their sights on Big Tech. Politicians in Europe and Canada have already signaled support for the moves by Australia, while global news publishers have voiced support for the system as well.
Mexico calls in after Texas halts gas exports
Crude futures already climbed above $61/bbl, but natural gas prices rose another 1.8% overnight, after Texas Governor Greg Abbott banned sales of the state’s natural gas beyond its borders. Among those set to cash in on skyrocketing prices is Comstock Resources (NYSE:CRK), which is ahead by 4% in premarket trade after climbing over 9% on Wednesday. More than 1M households in the Lone Star State still did not have electricity early Thursday as pipelines remained frozen, while the conditions of the roads have delayed repairs. Mexico is even pressing the U.S. to guarantee natural gas supplies after power was interrupted earlier in the week.
What happened? The cold snap tested Texas’s highly decentralized electricity model, where power plants don’t have incentive to build reserve capacity, but are rather paid for the energy that they sell. A widespread electricity failure ensued due to freezing natural gas pipelines, as well solar and wind generation that went offline due to the weather. High demand overwhelmed the state’s grid, and Texas’s energy mix will likely be reevaluated in the wake of the outages.
Oil prices this week also returned to levels not seen since before the COVID pandemic, which erupted in early 2020. Lockdowns and weakening demand weighed heavily on the commodity, and crude even went negative in April as storage capacity filled up across the globe. Prices have been steadily recovering in recent months amid progress with vaccination programs, boosting hopes of an economic recovery later in the year and a pickup in oil demand.
Go deeper: The recent developments is having Saudi Arabia consider reversing its production cuts when OPEC+ meets in March. The world’s largest oil exporter surprised markets last month by unilaterally cutting 1M barrels a day of crude production in an effort to raise prices. “We are in a much better place than we were a year ago, but I must warn, once again, against complacency,” Prince Abdulaziz bin Salman, the Saudi energy minister, told a conference on Wednesday. “The uncertainty is very high, and we have to be extremely cautious.”
Landing Perseverance on Mars
NASA’s Perseverance rover and Ingenuity helicopter drone, part of the agency’s Mars Exploration Program, are set to arrive today at the Red Planet. The rover is expected to touch down in the Jezero Crater at about 3:55 p.m. ET (may soon stand for Earth Time) via a “sky crane maneuver,” which deploys a parachute before cables lower the car-sized vehicle to the ground. Lockheed Martin (NYSE:LMT) designed and built Perseverance’s aeroshell, a two-part structure that encapsulated the rover on its way to Mars, and was also responsible for the launch via ULA, a joint venture between the company and Boeing (NYSE:BA).
Mission: Another rover launched by NASA in 2011, called Curiosity, confirmed that Mars was once a wet and habitable world, at least for microbial life. Perseverance is going to build on that work, hunting for signs of past life in what scientists think may have been a river delta billions of years ago. The rover is equipped with sampling containers that will be returned to Earth on a future Mars mission, while the Ingenuity robotic helicopter will scout interesting targets and attempt the first controlled flight on another planet.
Backdrop: China and the UAE also both successfully put missions into orbit around Mars within a day of each other last week (the U.S. first orbited Mars in 1971). The three missions are all arriving at the same time because they were part of the July 2020 “Mars launch window,” which occurs every couple of years when Earth is closest to its galactic neighbor. China’s undertaking will search for evidence of life, explore soil composition and examine the Martian atmosphere, while the UAE’s space probe will study weather cycles and how conditions vary in different regions of the planet.
Space became a big focus area of the Trump administration, and President Biden looks set to follow. The White House has confirmed plans to continue NASA’s Artemis program, which aims to land the first woman and next man on the surface of the Moon by 2024, and threw its support behind the Space Force, the newest branch of the military that was established by Trump. It’s also been a big interest area of the private sector, with companies like SpaceX (SPACE) and Blue Origin (BORGN) putting billions into ventures that may turn into one of the next big investing themes.
Wednesday’s Key Earnings
Baidu (NASDAQ:BIDU) -5.3% falling short on revenues.
Energy Transfer (NYSE:ET) -1.7% AH missing estimates, buying Enable Midstream.
Shopify (NYSE:SHOP) -3.3% seeing slower growth in 2021.
Tilray (NASDAQ:TLRY) +8.5% AH given a rapidly expanding cannabis market.
Twilio (NYSE:TWLO) +10.8% AH posting a surprise Q4 profit.
Today’s Economic Calendar
8:00 Fed’s Brainard Speech
8:30 Initial Jobless Claims
8:30 Housing Starts and Permits
8:30 Philly Fed Business Outlook
8:30 Import/Export Prices
10:30 EIA Natural Gas Inventory
11:00 EIA Petroleum Inventories
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly down. Hong Kong and Taiwan did well, but South Korea, India, Australia, Malaysia, Indonesia, Singapore and Thailand were weak. Europe, Africa and the Middle East currently leans up. Germany, the UAE, Russia, Greece, Switzerland, Italy, Israel and the Czech Republic are leading. Futures in the States point towards a down open for the cash market.
Online Course: Masterclass in Trading
The dollar is up. Oil is up; copper is down. Gold and silver are down. Bonds are mixed. Bitcoin is up.
Stories/News from Seeking Alpha…
Bitcoin goes to the moon
The blistering rally in Bitcoin (BTC-USD) is continuing this morning, as the crypto tacked on another $1,500, a day after breaking above $50,000 for the first time in history. More are showing support for the alternative asset, with Mastercard (MA) and Bank of New York Mellon (BK) making it easier for customers to use cryptocurrencies. Tesla (TSLA) also invested $1.5B in Bitcoin and announced it would begin accepting the crypto for payment “in the near future.”
Quote: “I think bitcoin is a much more stable asset class today than it was three years ago,” said Michael Saylor, CEO of enterprise software firm MicroStrategy (NASDAQ:MSTR). “In March of 2020, you saw institutions start to arrive, and I think in 2021 you’re going to see that trend continue. They’re enthusiasts for bitcoin as a medium of exchange… but I personally believe that the compelling use case is a store of value.”
MicroStrategy even announced Tuesday it will offer $600M in convertible bonds to buy more Bitcoin, and there is speculation that it offered a blueprint for Tesla’s Bitcoin purchase after an exchange between Saylor and Elon Musk. MicroStrategy and Jack Dorsey’s Square (SQ) already made splashy headlines last year after using corporate cash to buy Bitcoin. Meanwhile, Uber (UBER) CEO Dara Khosrowshahi said last week that the ride-hailing giant had discussed – but “quickly dismissed” – the idea of buying Bitcoin, although it is weighing whether to accept cryptocurrencies as payment.
With innovation, comes regulation: A well-defined crypto regulatory regime is urgently needed, according to SEC Commissioner Hester Peirce. “It’s not only that there have been calls for clarity for some time and that a new administration brings the chance to take a fresh look, but it also is a moment where it seems others in the marketplace are also taking a fresh look.” Peirce was labeled “Crypto Mom” after she publicly dissented on the SEC’s decision in 2018 to reject a Bitcoin ETF application filed by Cameron and Tyler Winklevoss. She is currently serving her second term as one of the SEC’s five commissioners.
Treasury yields and the stock party
The 10-year Treasury yield topped 1.3% yesterday after hitting 1.2% on Friday, while the 30-year gained 8 basis points to 2.08%. Financials also took off due to the steepening of the yield curve. The rapid advance is prompting some chatter over how high yields can climb before spoiling the risk asset rally, as well as what that might mean when combined with more fiscal stimulus.
New environment: “We see stronger growth and negative real yields ahead as the vaccine-led restart accelerates and central banks limit the rise of nominal yields – even as inflation expectations climb,” wrote analysts at BlackRock. “Inflation will have different implications to the past. The policy revolution as a response to the COVID shock implies that real yields will be less responsive to rising inflation risk than in past episodes. This suggests risk assets will perform better than in past inflationary periods.”
Keep watching: “If you look at any historical norms, valuations are stretched. But we’ve never seen the long bond at 1.3% and so we’re in unchartered waters here so higher P/Es are justified based on lower interest rates,” said Scott Black, founder and president at Delphi Management. “The other thing is the Fed’s going to be highly accommodative… they’re going to keep interest rates low, and so you have the wind to your back.”
Fears overblown: “Our preference for stocks over bonds – supported by low interest rates – is one of our highest conviction recommendations for 2021,” LPL Financial’s Jeff Buchbinder declared. “Several segments of the equity market – particularly the energy sector and banks – offer higher yields than traditional high-quality bonds and offer attractive capital appreciation potential as interest rates rise.”
Meteoric funding round
SpaceX (SPACE) completed another equity funding round of $850M last week, sources told CNBC, sending the company’s valuation skyrocketing to about $74B. That’s a jump of about 60% compared to last August, when SpaceX raised near $2B at a $46B valuation. The new share price was reportedly $419.99 each, one penny less than Elon Musk’s infamous tweet from 2018, when he declared he had “funding secured” to take Tesla (TSLA) private.
Bigger picture: The latest influx of cash comes as SpaceX develops two capital-intensive projects. Starlink (STRLK) aims to build an interconnected internet satellite network, also known as a “constellation,” which would consist of 11,943 satellites that fly in low Earth orbit and beam high-speed internet to anywhere on the planet. SpaceX leadership has estimated Starlink will cost about $10B to build, but could bring in as much as $30B a year, or more than 10x the annual revenue of its existing rocket business.
The other program, Starship, is another ambitious endeavor. The reusable rocket system would launch cargo and as many as 100 people at a time on missions to the moon and Mars. While the company has successfully launched multiple prototypes, and landed them safely after short flights to about 500 feet, high-altitude flights have had more difficulties. The two most recent attempts exploded on impact during landings, though SpaceX has viewed the developments as steps forward in the rocket’s development.
More on Starlink: SpaceX started a public beta program in October, but last week, it widened the scope of the test, accepting pre-orders from potential customers. Starlink has already amassed “over 10,000 users in the United States and abroad” in the three months since the public beta began. The service is priced at $99 a month, in addition to a $499 upfront cost to order the Starlink kit, plus shipping. “Once we can predict cash flow reasonably well, Starlink will IPO,” Elon Musk wrote in a tweet on Feb. 9. He has also suggested that retail investors will get “top priority” in the coming offering.
Entirely electric in Europe
The switch to electric vehicles is happening fast as consumers increasingly accept the industry shift and governments across the globe unveil plans for regulating diesel and gasoline vehicles. Ford (NYSE:F) is the latest to announce its entire passenger vehicle range in Europe would be “zero-emissions capable, all-electric or plug-in hybrid” by 2024, with a “completely all-electric” offering by 2030. In fact, Ford will invest $1B on an EV production facility in Cologne, Germany, retooling an existing assembly plant to produce its next-generation lineup. F +1.6% premarket.
Quote: “Our announcement today to transform our Cologne facility, the home of our operations in Germany for 90 years, is one of the most significant Ford has made in over a generation,” said Stuart Rowley, President of Ford Europe. “It underlines our commitment to Europe and a modern future with electric vehicles at the heart of our strategy for growth.”
Ford currently rules the U.S. and European market for gasoline-powered commercial vehicles with a share of 40% and nearly 15%, respectively. Earlier this month, the automaker said it would “double down” on connected electric vehicles, investing $22B in electrification through 2025, nearly twice what it had previously committed to the EV dream.
Go deeper: Last month, General Motors (NYSE:GM) said it would aim for an entirely zero-emissions lineup by 2035, while Volkswagen (OTCPK:VWAGY) announced a €35B investment in battery electric vehicles (with roughly 70 all-electric models by 2030). South Korean carmaker Kia (OTCPK:KIMTF) is also launching its first dedicated electric vehicle this year, while Jaguar Land Rover (NYSE:TTM) said its luxury Jaguar brand would be entirely electric by 2025 and the rest of its lineup by 2030.
Real-world data of Pfizer vaccine
Israel has administered the most COVID-19 vaccine doses per capita in the world, with more than 4M citizens having received the first dose of the Pfizer-BioNTech (PFE, BNTX) mRNA vaccine since its vaccination campaign began on December 20. That represents about 44% of the country’s population, while more than 28% have received the second dose. Among those over 60, more than 80% have already been vaccinated, and anyone over the age of 16 can now be inoculated immediately.
Those efforts are bearing fruit, according to the latest data from Clalit, Israel’s largest healthcare provider. A study of 600,000 people who received two vaccine doses found that there had been a 94% drop in symptomatic COVID-19 infections and 92% fewer cases of severe illness among those given the jabs. It also showed the vaccine was equally effective among people 70 and older as it was among younger participants, and was most successful one week after the second dose, mirroring the company’s own clinical studies.
Backdrop: In early January, Israel struck a vaccines-for-data deal with Pfizer that promised to share vast troves of information with the drug giant in exchange for the continued flow of COVID-19 shots. “Israel will be a global model state,” Prime Minister Benjamin Netanyahu said at the time. “Israel will share with Pfizer and with the entire world the statistical data that will help develop strategies for defeating the coronavirus.” No funding was allotted for the agreement, and the country even paid a sizable premium for vaccine doses. Helping to demonstrate the impact of the vaccine on an entire population is Israel’s highly digitized universal healthcare system, which requires everyone over the age of 18 to register with one of four HMOs.
Outlook: Israel is now in talks with the two biggest drugmakers fighting COVID-19 to open up plants in Israel. A Pfizer factory would serve as a “research and development site for the fight against future viruses,” while Moderna’s (NASDAQ:MRNA) facility would focus on “filling the small vaccine vials.” Netanyahu is also negotiating with the companies to provide Israel with tens of millions of additional COVID vaccine doses to provide citizens with an anticipated booster shot every year.
What else is happening…
Berkshire pares Apple (NASDAQ:AAPL) stake, bets on Verizon (NYSE:VZ), Chevron (NYSE:CVX).
Bone-chilling weather disrupts FedEx (NYSE:FDX) deliveries.
Amazon (NASDAQ:AMZN) acquires Shopify (NYSE:SHOP) competitor Selz.
Strong box office numbers from China, while U.S. limps along.
Nestle (OTCPK:NSRGY) sells U.S. water unit to One Rock for $4.3B.
Tuesday’s Key Earnings
AIG (NYSE:AIG) -2.3% AH on higher catastrophe losses, loss development.
CVS Health (NYSE:CVS) -5% despite testing, vaccination tailwinds.
Occidental Petroleum (NYSE:OXY) rescheduled earnings release due to winter storm.
Palantir (NYSE:PLTR) -12.8% slumping after a surprise Q4 loss.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
8:55 Redbook Chain Store Sales
9:00 Fed’s Barkin Speech
9:15 Industrial Production
10:00 Fed’s Rosengren Speech
10:00 Business Inventories
10:00 NAHB Housing Market Index
1:00 PM Results of $27B, 20-Year Bond Auction
2:00 PM FOMC Minutes
Good morning. Happy Tuesday.
The Asian/Pacific markets did well. Japan, China, Hong Kong, New Zealand and the Philippines lead. Europe, Africa and the Middle East currently lean with small-to-moderate gains. Poland, South Africa, Finland, Hungary and Portugal are leading. Futures in the States point towards a positive open for the cash market.
Online Course: Mini Masterclass in Trading
The dollar is flat. Oil and copper are up. Gold and silver are down. Bonds are down. Bitcoin is up.
Stories/News from Seeking Alpha…
A deep freeze enveloping large swathes of the U.S. has resulted in rolling blackouts for at least 5M people from the upper Midwest to Houston. More than a million barrels a day of oil and 10B cubic feet of gas production have also gone offline, sending U.S. crude prices above $60 a barrel for the first time in more than year and natural gas prices up 6%. Pipelines have also declared force majeure, while massive refineries owned by Exxon Mobil (NYSE:XOM) and Marathon Petroleum (NYSE:MPC) have halted production, threatening to reduce supplies of gasoline and diesel across the country.
The energy crisis is not the only problem, with the frigid weather expected to remain through Wednesday. All air travel in and out of Houston was shut, and COVID vaccination efforts faced potential disruption, with city officials racing to administer doses before they go bad. The National Guard was also mobilized to get the elderly into warming shelters, while the power disruption spilled over into neighboring Mexico.
Backdrop: The cold snap is testing Texas’s highly decentralized electricity model. Power plants don’t have incentive to build reserve capacity, but are rather paid for the energy that they sell. On Monday, wholesale prices for electricity on the Texas grid even reached the price cap of $9,000 per megawatt hour (the average price is $25). Unlike utility monopolies in other states, electricity retailers in Texas compete fiercely for customer business and often tie prices to market conditions, but this has left generators worried about sending out skyrocketing bills.
Thought bubble: Storage and backup power will need to be addressed as grids across the U.S. change over from fossil fuels to cleaner energy. Competition from heavily subsidized wind power and cheaper natural gas, combined with stricter emissions regulation, has seen coal’s share of Texas’s electricity fall by more than half in the last decade to 18%. Meanwhile, wind’s share has tripled to about 25% since 2010 and accounted for 42% of power last week, but those turbines froze yesterday as the cold weather set in. The Texas grid has also been designed for hot summers, not freezing winters.
Climate efforts at the Treasury
Janet Yellen is looking to appoint someone to monitor the risks that climate change poses to the financial system as part of a new climate “hub” at the Treasury Department, according to the WSJ. She is reportedly eyeing Sarah Bloom Raskin, former deputy Treasury Secretary during the Obama administration, who worked alongside Yellen on the Federal Reserve Board. Raskin has warned in many speeches and interviews that U.S. regulators must do more to strengthen the financial system’s resilience to climate risks.
The appointment would be part of a broader climate action plan being implemented across many government agencies. The Biden administration has already rejoined the Paris climate accord and suspended new oil and gas leases on federal land. It is also preparing a $2T infrastructure proposal, which would double as an aggressive effort to combat climate change.
Quote: “Both the impact of climate change itself and policies to address it could have major impacts, creating stranded assets, generating large changes in asset prices, credit risks and so forth that could affect the financial system,” Yellen declared at her Senate confirmation hearing last month. “These are very real risks,” she added, calling climate change an “existential threat” to the U.S. economy.
What’s on the agenda? Yellen wants to assess the potential harm of more frequent severe weather events like flooding, wildfires or hurricanes on assets underpinning bank loans and mortgages. Shifts might also be seen in banks’ business due to declining fossil fuel demand. That could reduce the value of assets owned by oil and power companies and increase the riskiness of loans to those firms. Another area to explore is tax incentives to the energy industry, which is expected to reduce overall carbon emissions.
The major averages could hit fresh record highs in their first trading session after Presidents’ Day, with U.S. stock index futures pointing to gains of 0.5% at the open. The end of Trump’s Senate impeachment trial is set to make room for President Biden’s economic priorities, and in turn some catalysts for market momentum. Biden is eager to pass a $1.9T coronavirus relief bill, which would include $1,400 checks for many Americans, extra funding for unemployment benefits, child tax credit increases and aid to state and local governments.
In fact, Biden will take his first official trip outside of Washington, D.C. – since being inaugurated president on January 20 – to make his case. He’s heading to Milwaukee tonight to participate in a CNN Town Hall at 9 p.m. ET, after struggling to gain support for his plan from Republicans on Capitol Hill, who have taken issue with its price tag. Biden made Wisconsin a focus for his campaign in 2020, visiting the state three times, and ultimately flipped the state back from red to blue.
Bigger picture: Some are also citing a fall in the CBOE Volatility Index, widely viewed as Wall Street’s best fear gauge, for the recent market optimism. “Receding fear is followed by systematic and quant funds adding ‘leverage’ in other words, this is a set-up to see a rally,” said Fundstrat founder Tom Lee. The sentiment is extending to all areas of the market, and even the crypto world, with Bitcoin within a whisker of the $50,000 milestone.
Go deeper: Don’t forget the expanded COVID vaccine rollout and economic reopenings. The U.S. government has begun shipping 1M coronavirus vaccines to retail chains like CVS (CVS), Walgreens (WBA), Walmart (WMT) and Kroger (KR) as part of its Federal Retail Pharmacy Program. Earnings season is also continuing, with CVS and Palantir (PLTR) set to report results before the market opens, while AIG (AIG) and Occidental Petroleum (OXY) release figures after the close. “All the earnings being reported are generally a lot higher than most estimates,” said Charles Hepworth, a director at GAM Investments.
Parler comes back online
Parler, the social network popular with conservatives, has resurfaced after going dark for a month, though the app is still not available in the Apple (NASDAQ:AAPL) or Google Play (GOOG, GOOGL) stores. The tech giants, along with Amazon (NASDAQ:AMZN), had kicked the platform off its services following the deadly storming the U.S. Capitol on January 6. Parler said its service has grown to over 20M users and will be hosted by SkySilk Inc., which operates out of a Los Angeles-area data center.
Quote: “Skysilk does not advocate nor condone hate, rather, it advocates the right to private judgment and rejects the role of being the judge, jury, and executioner. Unfortunately, too many of our fellow technology providers seem to differ in their position on this subject. SkySilk truly believes and supports the freedom of speech and more specifically the rights afforded to us in the First Amendment. This is a non-negotiable issue for us. And while we may disagree with some of the sentiment found on the Parler platform, we cannot allow first amendment rights to be hampered or restricted by anyone or any organization.”
While old Parler user accounts have been restored, past “parleys” – the site’s term for posts – don’t appear to have carried over. The site will start accepting new signups next week, and some high-profile users, like Fox News host Sean Hannity, have already begun posting. The new Parler operation is being overseen by interim CEO Mark Meckler, co-founder of the Tea Party Patriots, following the ouster of John Matze by the board.
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 (NYSE:TWTR), raising questions of whether Parler will eventually fizzle, complement or replace larger platforms with much bigger audiences.
Rare earth curbs
Beijing is exploring whether it can hurt U.S. defense contractors by limiting the export of rare earth minerals that are crucial for the manufacture of Lockheed Martin’s (NYSE:LMT) F-35 and other sophisticated weaponry, according to the FT. The Ministry of Industry and Information Technology has proposed draft controls on the production and export of rare earth minerals from China, which controls about 80% of global supply. Industry executives say government officials have even asked them how badly companies in the U.S. and Europe, including defense contractors, would be affected if China restricted the exports.
Backdrop: The decision follows deteriorating ties between the U.S. and China. What started as a trade war has morphed into a technology war, and at times, possibly a currency war. The latest move suggests rare earths may be the next front, or could be used as leverage in some of those battles. The Biden administration has indicated it would maintain pressure on China (no quick lift for tariffs) but take a more multilateral approach. China’s Foreign Ministry also said last year it would also sanction Lockheed Martin, Boeing (NYSE:BA) and Raytheon (NYSE:RTX) for selling arms to Taiwan, the self-ruled island which Beijing claims as its sovereign territory.
What are rare earths? The minerals are a group of 17 chemical elements used in everything from high-tech consumer electronics like smartphones to military equipment. Despite the name, there are deposits of some of them all over the world, but it is unusual to find them in a pure form or in concentrated quantities, hence the title “rare.” The U.S. is highly dependent on them for its defense capabilities (i.e., a recent Congressional Research Service report found that each F-35 required 920 pounds of rare earth materials).
Outlook: Hopes of U.S. companies that looked to break into the industry have been dashed in the past due to strict environmental regulations on extracting and processing. China also undercut world prices in the 1990s, leading to additional barriers to entry. There is currently no refining capacity in the U.S. (ore mined here must even be sent to China), but that may be changing. The Pentagon recently signed contracts with American and Australian miners to boost their onshore refining capacity, awarding contracts to MP Materials (NYSE:MP) and Lynas Rare Earths (OTCPK:LYSCF) for facilities in California and Texas.
What else is happening…
Could a COVID vaccine passport be issued in the U.K.?
Electric aircraft demand is growing, especially for deliveries.
SEC’s ‘Crypto Mom’ demands clear rules for the industry.
Subscription growth? The New York Times (NYSE:NYT) has a culture crisis.
Biden calls for tougher gun laws on anniversary of Parkland shooting.
Latest from the iCar rumor mill… Apple (NASDAQ:AAPL) approached Nissan (OTCPK:NSANY).
Gigafactory 6? Tesla (NASDAQ:TSLA) setting up next plant in southern India.
Today’s Economic Calendar
8:30 Empire State Mfg Survey
2:00 PM Fed’s Daly Speech
4:00 PM Treasury International Capital