Before the Open (Dec 20 – 24)

Good morning. Happy Thursday.

The Asian/Pacific markets did well. Japan, China, South Korea, India, Taiwan, Malaysia, Thailand and the Philippines posted solid gains. Europe, Africa and the Middle East are mostly up. Poland, Germany, the UAE, Greece, South Africa, Finland, Hungary, Spain the Netherlands, Israel, Sweden and Saudi Arabia are doing well; only Russia is down much. Futures in the States point towards a positive open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up. Oil is up; copper is down. Gold and silver are up. Bonds are down. Bitcoin is up.

Stories/News from Seeking Alpha…

Options takeover

With the pandemic limiting many choices this year, investors dove into options. Bad pun, but the statistics are astounding. Check out the following few data points:

• Around 39M options contracts have traded daily on average this year, rising 35% from 2020 and the highest level ever – Options Clearing Corp.

• Retail investors represent more than 25% of total options trading activity due to access via commission-free brokers – Alphacution Research Conservatory.

• The average daily notional value (volume multiplied by spot price) of traded single-stock options climbed to more than $450B in 2021, compared with $405B for stocks – Cboe Global Markets.

What’s fueling the surge? Hot trading apps and social media hype has seen retail crowd pour into the market since competition between brokerages eliminated trading fees in 2019. While stocks were the initial focus, much of the attention today centers around options, which allow traders to notch big returns (or losses) without having to actually purchase shares. Besides the leverage, many investors are also using derivatives as a hedge, such as protecting their portfolios against sentiment changes – a good example of this was the recent Fed meeting.

It’s also been a big win for the brokerages, which are scoring some big bucks off the options rage. Popular brokerage Robinhood (NASDAQ:HOOD) even generated $164M from options trading in the third quarter, more than triple its transaction-based revenue from traditional stock trading. Activity has also been prominent in the so-called meme stocks, which initially created massive short squeezes in names like GameStop (GME) and AMC (AMC), but eventually created a swarm trading strategy of its own.

Some caution: The increased engagement is attracting the attention of regulators like the Financial Industry Regulatory Authority. Wall Street’s self-regulatory arm is considering whether changes to the options rules may be warranted, including regulations around options account approvals, supervision and margin requirements. FINRA’s request for comment will be published in the coming weeks to solicit insight from exchanges and brokers about options trading and the risks involved.

Student loans

In the wake of the Omicron variant spreading rapidly across the globe, the White House is extending the pause on federal student loan repayments by an additional 90 days until May 1, 2022. “We know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” President Biden said in a statement, despite the unemployment falling to 4.2%. It’s even less among college graduates with a bachelor’s degree, with the rate tumbling to 2.9% in November.

Backdrop: The moratorium began in March 2020, when former President Trump signed the CARES Act into law, pausing payments through September 2020 and eliminating interest rates for the about 42M borrowers. Trump later took executive action to extend the deferral period through January 2021, while Biden signed another order when he came into office, continuing it through Sept. 30, and then eventually Jan. 31, 2022. At the time, the Education Department said that it would be the “final extension,” while a “definitive end date” would reduce the risk of delinquency and defaults once the payments restart.

Meanwhile, Congressional Democrats like Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren have been pressuring Biden to take executive action to wipe out up to $50K in student loan debt for all borrowers. While he has gone on record saying he doesn’t believe a president has the authority to cancel student debt unilaterally, Biden would support Congress passing a bill to cancel $10K in debt for each borrower. About 62% of voters support some form of student loan forgiveness, according to a recent poll by Morning Consult, but ideas differ about how much debt should be forgiven and for whom.

Outlook: The Federal Reserve estimated that Americans owed $1.75T in student loans in the third quarter of 2021, with the average debt around $40,000 per borrower. Related student loan stocks include Sallie Mae (NASDAQ:SLM), Navient (NASDAQ:NAVI) and Nelnet (NYSE:NNI)

Unwinding portfolio (JD) is having a rough morning, with shares of the Chinese e-commerce giant skidding 7% in premarket trade. Prompting the slide was news from technology conglomerate Tencent (OTCPK:TCEHY), which said it would give away most of the shares it holds in the company to its shareholders. The plan will come in the form of a special dividend, where it will dole out 457M shares of, worth roughly $16.4B.

By the numbers: Tencent currently holds a strategic stake of nearly 17% in and the distribution will leave it with a 2.3% stake in the company.

In an accompanying filing, Tencent said part of its strategy includes early investment in companies to support development, but to exit them when they become “consistently capable of self-financing their future initiatives.” Some are still pointing to China’s domestic tech sector crackdown, which has impacted firms like Alibaba (BABA) and Meituan (OTCPK:MPNGY) over the past year. It might be worth offloading a massive tech stake before the CCP comes knocking.

Analyst commentary: “I think that basically it’s Tencent’s choice, right, to gradually reduce those shares and try to show to the public that you know… ‘we’re not that big as you think,'” said Blue Lotus Capital Advisors’ Shawn Yang. “That probably can reduce some of the concerns of its size and influence.”

Final challenge

The Supreme Court has agreed to hear legal challenges to two of the Biden administration’s COVID-19 vaccine mandates, but will leave lower court orders in place until the oral arguments begin on Jan. 7. The first order, which is estimated to cover two-thirds of the private sector, would compel businesses with 100 or more employees to ensure their staff is vaccinated against COVID or is tested weekly for the virus. A separate healthcare worker mandate, which would require vaccinations for workers at facilities that treat federally funded Medicare and Medicaid patients, is already blocked in half of the 50 U.S. states.

Snapshot: Last week, the 6th Circuit U.S. Court of Appeals reinstated the mandate for large businesses, though parties challenging the rule asked the Supreme Court to review the case. The group includes 27 states with Republican attorneys general or governors, private businesses, religious groups, and national industry associations like the National Retail Federation and the American Trucking Associations. Employers who don’t adhere to the requirements could face penalties of up to $13,653 for each reported violation, while the Occupational Safety and Health Administration will check on compliance through company record-keeping and some in-person inspections.

“Especially as the U.S. faces the highly transmissible Omicron variant, it is critical to protect workers with vaccination requirements and testing protocols that are urgently needed,” White House Press Secretary Jen Psaki said in a statement. “At a critical moment for the nation’s health, the OSHA vaccination or testing rule ensures that employers are protecting their employees and the CMS health care vaccination requirement ensures that providers are protecting their patients.”

How dangerous is Omicron? There are still many mixed signals out there, but newly released results from the U.K. indicate that patients infected with the variant are less likely to be admitted to hospitals compared to the Delta strain. That adds to earlier findings showing that South Africans are 80% less likely to be hospitalized if they catch Omicron. In the case that they are hospitalized, however, the risk of serious disease is the same.

Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Durable Goods
8:30 Personal Income and Outlays
10:00 New Home Sales
10:00 Consumer Sentiment
10:30 EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
4:30 PM Fed Balance Sheet

What else is happening…

First oral antiviral: Pfizer (NYSE:PFE) COVID pill granted FDA authorization.

Novavax (NASDAQ:NVAX) rises 5% on positive early COVID vaccine data.

U.S. Army develops vaccine effective against all variants, including Omicron.

AWS (NASDAQ:AMZN) said to see antitrust scrutiny from FTC’s Lina Khan.

Apple (NASDAQ:AAPL) can grow in 2022 despite supply challenges – Citigroup.

Tesla (NASDAQ:TSLA) rips higher as Musk share sale puts risk in rear-view mirror.

Unfazed by natural gas prices, Dutch announce cut to coal power as of Jan. 1.

Twitter spat: Jack Dorsey spars with VCs about the future of Web 3.0.


Good morning. Happy Wednesday.

The Asian/Pacific markets were mixed. Hong Kong, India and Malaysia did well; Indonesia and the Philippines were weak. Europe, Africa and the Middle East are mixed and little changed. Denmark, Russia and Israel are up ; Turkey and the UAE are down. Futures in the States point towards a down open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is down. Oil is flat; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

A fourth dose?

Israel is set to become the first country in the world to administer a fourth COVID-19 vaccine, which would give “greater protection in the face of Omicron.” The first eligible group to receive the vaccine will be people aged 60 and older, as well as the immunocompromised and medical personnel. As for the time frame, the fourth shot will be recommended after waiting at least four months from the third dose, with the formal green light from the Health Ministry director general expected within days.

Backdrop: Israel was one of the first nations to vaccinate its population early this year and then carried out the world’s first booster campaign over the summer when Delta raged across the country. To date, about 63% of the population of 9.3M has had two doses (a similar percentage seen in the U.S.), while more than 4.1M Israelis have received three doses of a coronavirus vaccine. Note that about a third of Israel’s population is under the age of 14 (compared to 18% in the U.S.), with most of the group not eligible for a vaccine until it was approved for 5-11 year-olds last month. “The world will follow in our footsteps,” Prime Minister Naftali Bennett tweeted about the fourth booster campaign.

The government’s ministerial committee tasked with driving policy on the pandemic also decided on a number of new measures in the wake of the new wave of Omicron infections. The rules will mostly target crowd sizes in shopping centers, as well as proof of full vaccination for entry to stores that are more than 100 square meters (1,076 square feet). Israel is also quickly expanding its list of “red countries,” or high-risk travel destinations, to vast swaths of Africa, Europe and North America, with the latest government data showing 341 confirmed cases of Omicron in the country.

Over in the U.S.: In late October, the CDC issued guidance that said immunocompromised people may receive a fourth COVID vaccine dose starting next year, but that could be a harbinger for the rest of the population. While the fourth jab for the immunocompromised should come at least six months after the third dose, the demographic is encouraged to talk to their doctors to determine if it is necessary. According to the CDC, about 9M Americans (2% of the population), fall into the category of “moderately and severely immunocompromised,” like those who are in active cancer treatment, certain organ transplant and stem cell recipients, people with advanced or untreated HIV, and those who take high-dose corticosteroids or drugs suppress their immune systems. Keep in mind that the CDC’s definition of fully vaccinated is still two doses, though it highly recommends a booster for anyone over the age of 18.

News roundup

Covid address: Overnight, President Biden outlined the U.S. plan to combat Omicron, while stressing that getting fully vaccinated is a “patriotic duty” and “an obligation to your country.” The administration will deploy 1,000 military doctors and nurses to overburdened hospitals this winter, open more free testing sites, while purchasing 500M at-home COVID tests that Americans can order for free through a website starting in January. While the government is still finalizing details, coronavirus testing stocks include Quidel (NASDAQ:QDEL), Abbott (NYSE:ABT), Becton, Dickinson (NYSE:BDX) and Quest Diagnostics (NYSE:DGX).

More mandates: Biden also pointed to a federal court ruling from last week that reinstated his workplace mandate, which will require businesses with 100 or more employees to ensure their workers are fully vaccinated by Jan. 4 or submit a negative COVID test weekly to enter the workplace. Some cities are going a step further. Chicago just announced it will require proof of coronavirus vaccination at restaurants, bars, gyms and other indoor venues from Jan. 3, while Boston unveiled similar measures.

Quarantine guidelines: Delta Air Lines (NYSE:DAL) has asked the CDC to halve its current 10-day recommended quarantine for vaccinated people who contract COVID-19, noting that about 90% of its staff are fully vaccinated and all airline personnel are required to wear masks on planes. “Our employees represent an essential workforce to enable Americans who need to travel domestically and internationally. With the rapid spread of the Omicron variant, the 10-day isolation for those who are fully vaccinated may significantly impact our workforce and operations.”

Therapy milestone: The FDA could authorize a pair of pills from Pfizer (NYSE:PFE) and Merck (NYSE:MRK) to treat COVID-19 as soon as today. The treatments, called Paxlovid and molnupiravir, are taken over several days and could ease the burden on the stretched hospital system this winter. “It’s the biggest thing to happen in the pandemic after vaccines,” said Eric Topol, director of the Scripps Research Translational Institute.

Strike ends

Snap, crackle, pop… One of the longest-running strikes of the year has come to an end as 1,400 union workers at Kellogg (K) approved a new tentative labor contract. The nearly three months long strike was conducted across four of the company’s plants in Michigan, Tennessee, Nebraska and Pennsylvania. Employees were asking for better benefits and pay after working longer hours during the pandemic, and had taken issue with a tiered system that saw veteran employees make more money than newer hires (who also had to pay more for health insurance).

New contract: The collective bargaining agreement provides staff with cost of living adjustments and a $1.10 per hour raise. Additionally, it allows all workers with four years of experience to move up to a higher legacy pay level. New employees will also get a new dental benefit, while all employees will get a new vision benefit offering.

“This agreement makes gains and does not include any concessions,” said Anthony Shelton, international president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. In many ways, power has shifted to workers during the pandemic, due to a nationwide labor shortage that has left businesses scrambling to find employees. High-profile strikes have also hit other areas of Corporate America, including Deere & Co. (DE) and Mondelez International (MDLZ).

Market movement: Shares of Kellogg are down roughly 2% since the strike began on October 5.

Shipping deals

Chaotic conditions along the global supply chain may be opening up some M&A opportunities as ocean freight rates rise to record levels amid backlogs at U.S. ports. In the latest deal in the sector, A.P. Moeller-Maersk (OTCPK:AMKBY) is buying Asian warehouse specialist LF Logistics, an arm of Hong Kong supply chain manager Li & Fung Ltd. (OTCPK:LFUGY), in a transaction worth $3.6B (with up to another $160M linked to future financial performance). Earlier this year, Copenhagen-based Maersk announced plans to buy air freight company Senator International as it seeks a presence in all parts of the transport netwoek.

Snapshot: Companies have been willing to pay a premium for more reliable and integrated freight solutions as supply chains continue to get rattled. Maersk, which transports about a fifth of the globe’s containers at sea, sees that as an opening to expand into land-based logistics, where there’s more potential for growth and profit margins are higher than its traditional sea-container business. With a network of more than 200 warehouses and around 10K employees across 14 Asian countries, LF Logistics provides land-based logistic services such as warehousing and trucking to over 250 global customers.

Digging deeper into the numbers, Maersk announced a profit of $5.4B for Q3, more than five times the earnings it reported a year ago. However, while Maersk has around 70K ocean customers, less than a quarter of them use the company to move their goods from ports to warehouses and distribution centers. Maersk hopes the LF deal and expansion to inland logistics will eventually bring in half the group’s earnings (with around 80% of revenue currently coming from ocean operations).

Outlook: The latest deal comes six months after Maersk bought two e-commerce logistics firms in August, one located in the U.S. and one in Europe, for almost $1B. Meanwhile, Maersk’s top competitor, Geneva-based Mediterranean Shipping Co. is also trying to get in on the M&A game. On Monday, the world’s second-largest container ship operator made a $6.4B offer to buy the African logistics assets of French-based conglomerate Bollore SE (OTCPK:BOIVF).

Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 GDP Q3
8:30 Chicago Fed National Activity Index
8:30 Corporate profits
10:00 Consumer Confidence
10:00 Existing Home Sales
10:30 EIA Petroleum Inventories

What else is happening…

Biden says U.S. ‘not going back to March 2020’ COVID-19 closures.

Walmart (NYSE:WMT) limits at-home COVID test sales amid surge in Omicron.

AstraZeneca (NASDAQ:AZN), Oxford start work on Omicron-specific COVID vaccine.

WHO issues recommendations for administering Novavax (NASDAQ:NVAX) shot.

S&P 500 buybacks hit new record high in third quarter, could be higher in Q4.

Nikola (NASDAQ:NKLA) moves past Trevor Milton era with SEC settlement.

Another day, another European energy cost record shattered.

BlackBerry (NYSE:BB) edges lower following earnings beat, soft outlook.

GSK-Pfizer’s (GSK, PFE) Apretude approves first HIV prevention injection.


Good morning. Happy Tuesday.

The Asian/Pacific markets did great. The Philippines were weak, but Japan, China, Hong Kong, India, Australia, and New Zealand posted big gains. Europe, Africa and the Middle East are currently up big. The UK, Denmark, France, Germany, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Portugal, Israel, Austria, Sweden and the Czech Republic are up 1% or more. Turkey is down big. Futures in the States point towards a big gap up open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are down. Bitcoin is up big.

Stories/News from Seeking Alpha…

Tougher standards

The battle over auto industry emissions is back on after the Biden administration raised fuel-efficiency standards for passenger cars and light-duty trucks to a fleetwide average of 55 miles per gallon by model year 2026. That’s a mark up from the 43 mpg standard set by the Trump administration for that year and well above the current 2021 model year average of 40 mpg. The standards will curb pollution from the transportation sector, which is the country’s No. 1 source of greenhouse emissions.

Estimates: The EPA forecasts the new rules will save U.S. drivers between $210B and $420B in fuel costs through 2050. It will also save each buyer about $1,000 over the lifetime of their vehicle from model year 2026, even after factoring in higher purchase prices for cleaner vehicles.

“For automakers, this is the future,” said Ramón Cruz, president of the environmental organization Sierra Club. “If you want to remain competitive you have to do this.”

Outlook: EV startups have been the rage this year as the industry transitions to electric vehicles. Mainstream players are also joining the movement, with Ford (NYSE:F) planning for 40% of global vehicle sales volume to be electric by 2030. While the EPA feels the industry will be able to comply with its new standards without more federal funding from Congress, it would go a long way to help. New funding for a national EV charging network was included in the $1T infrastructure bill passed this fall, though the $20B in tax credits for EV buyers – included in the Build Back Better Plan – may have a harder time getting past the Senate.

Biden speech

Many were fearful that the strong measures against Omicron seen in Europe could resurface in the U.S., but the country is not trending in that direction (at least on the federal level). A speech from President Biden today won’t be “about locking the country down,” according to White House Press Secretary Jen Psaki, but will rather outline the “benefits of being vaccinated and the steps we are going to take to increase access and testing.” For those who choose to remain unvaccinated, “he’ll issue a stark warning and make clear that unvaccinated individuals will continue to drive hospitalizations and deaths.”

Quote: “The President will restate that while vaccinated individuals get COVID-19 due to the highly-transmissible nature of Omicron, their cases will likely be milder or asymptomatic,” Psaki told reporters. “You are 14 times more likely to die of COVID if you have not been vaccinated. More importantly, he’ll restate that we’re prepared and that fully vaccinated individuals have the tools they need to protect themselves with a booster shot and masking.”

Omicron is spreading like wildfire across the globe, and now represents 73% of sequenced cases in the U.S., up from 13% last week, according to data from the CDC. It’s even higher in other areas of the country. Omicron is responsible for an estimated 90% or more of new infections in the New York area, the Southeast, the Midwest and the Pacific Northwest, while the national rate suggests more than 650K Omicron infections occurred in America last week alone.

Interview highlights: “We have had reported deaths of Omicron around the world, although there has been a minority of them, with fewer than we’ve seen for other variants,” CDC Director Rochelle Walensky told CNBC’s Shepard Smith. In response to a question about why vaccinated individuals shouldn’t live normal lives, Walensky responded, “there are still Omicron studies coming in, and we don’t know the long-term manifestations of Omicron – like the long COVID that we’ve seen with other variants – as well as the fact that you could transmit it to other people.”

Just Do It.

Nike (NKE) reported a double beat for the fiscal second quarter after the close on Monday, prompting shares to advance 3.5% to $162.50. Strength was seen in North America, Nike’s biggest market, where sales climbed 12% and represented the highest growth of all geographies. Gross margin also increased 280 bps to 45.9%, led by margin expansion in the Nike Direct business, which was driven by lower markdowns, a higher mix of full-price sales and changes in foreign exchange rates.

Some challenges: Sales in Greater China fell 20%, though the region has recently taken on a bigger focus for investors and remains key to the sneaker giant’s future growth. There was also lost production from Vietnam factory closures due to COVID-19 and higher macro input costs. Supply chain expenses for the fiscal year are expected to be higher than Nike had anticipated three months ago, but the company did not disclose a specific estimate.

Nike continues to expect revenue to grow mid-single digits vs. the prior year, in line with its previous outlook. For Q3, the firm anticipates revenue to grow low-single digits (consensus growth of 2.29%) vs. the prior year. “We are raising our gross margin guidance to expand 150 basis points versus the prior year. We expect to continue benefiting from exceptional demand against the backdrop of lean marketplace inventory”.

Into the Metaverse: “We’ll invest… to deliver next-generation experiences,” CEO John Donahoe said on a post-earnings conference call. He was referring to last week’s acquisition of the virtual sneaker company RTFKT (pronounced “artefact”), with which it plans to “extend Nike’s digital footprint and capabilities.” According to its website, RTFKT makes “NFT collectibles and memes, while merging realities in fashion and gaming.”

Chile turns left

The iShares MSCI Chile Capped ETF (BATS:ECH) plunged 11% on Monday after the country voted 35-year-old leftist politician Gabriel Boric into office. It’s a big pivot for one of Latin America’s richest nations, with analysts fearing he could dismantle some of the pillars of the free market-oriented economy. Meanwhile, the peso fell 3.5% against the U.S. dollar on the news, notching an all-time low, while Santiago’s stock exchange slid 6%.

Bigger picture: Boric is a former student protest leader – who took down ultra-conservative rival José Antonio Kast – and will take the reins from Sebastián Piñera, a conservative billionaire whose ratings plunged following the uprisings over social inequality in 2019. Boric’s supporters hope he will implement a transition to a social-democratic nation along European lines, with public pensions, higher taxes, scrapping student debt and expanded healthcare. Expectations have also risen significantly as the country becomes wealthier, with bigger social aspirations especially among millennials and the younger generation.

In the weeks leading to the election, Boric toned down his earlier calls for a radical economic overhaul, though investors still fear the leftist influence within the new leader’s coalition. The President-elect has already promised to halt the $2.5B Dominga mining project, the controversial iron and copper mine approved by a regional environmental commission earlier in the year. That could weigh heavily on Chile, which is the world’s largest producer of copper, and also begs questions over the new administration’s green goals given that copper is a key piece of the energy transition (batteries, powerlines, etc.).

Risks ahead: Pandemic aid and early withdrawals from the private pension system have driven Chile’s GDP growth to 12% this year, though that’s expected to pull back to around 2% in 2022. Boric has also supported the withdrawals, which have depleted local capital markets and forced Chile to borrow more abroad. Over $50B has already left the country since social protests erupted in 2019, and more could follow if Boric goes through with a radical overhaul.

Today’s Economic Calendar
8:30 Current Account
8:55 Redbook Chain Store Sales
1:00 PM Results of $200B, 20-Year Bond Auction

What else is happening…

Turkish lira rebounds from all-time low after Erdogan lays out rescue plan.

Oil & gas industry set to deliver worst exploration year since 1946.

Micron Technology (NASDAQ:MU) surges as results beat analysts’ forecasts.

EV stocks pull back after Sen. Manchin rejects Build Back Better Plan.

Carnival (NYSE:CCL) CEO: Cruising among safest forms of travel amid Omicron.

Nordstrom (NYSE:JWN) reportedly hires AlixPartners to review possible Rack spinoff.

Biogen (NASDAQ:BIIB) halves price of Alzheimer’s drug in U.S. to $28,200.

Moderna (NASDAQ:MRNA) hopes to begin developing Omicron booster in weeks – CEO.


Good morning. Happy Monday. Hope you had a good weekend.

The Asian/Pacific market suffered big losses. Japan, China, Hong Kong, South Korea, India, Singapore and Thailand got hit hard. Europe, Africa and the Middle East are currently down big. The UK, Denmark, France, Turkey, Germany, Russia, Greece, South Africa, Finland, Norway, Spain, the Netherlands, Italy, Portugal, Israel and Austria are down 1% or more. Futures in the States point towards a big gap down open for the cash market.

————— Masterclass Overview –>> here —————

The dollar is up slightly. Oil is down; copper is up. Gold and silver are up. Bonds are up. Bitcoin is down.

Stories/News from Seeking Alpha…

Casting a shadow

Risk-off sentiment is taking the upper hand this morning as Omicron headlines fill up trading screens across the globe. The selloff began during the session in Asia, where the Hang Seng Index fell 2%, and then extended to Europe, where the EURO STOXX 50 slid nearly 3% by mid-morning trade. While things have since pulled off their lows, U.S., stock futures were off 2% at one point, and oil got hammered, with WTI crude futures slumping as much as 5.5% to $66.80/bbl.

Bigger picture: Traders are taking notice as Omicron fears and restrictions begin weighing on the economy. The Netherlands reimposed a strict lockdown on Sunday (see below), other European countries unveiled tough holiday restrictions, while China’s central bank cut rates to counter a loss of economic momentum. Over in the U.S., schools across the country are once again transitioning to virtual instruction, businesses are feeling the drag of a massive labor/supply shortage exacerbated by the variant, and intensive care units in many cities are at or close to full capacity. President Biden is set to deliver remarks tomorrow on new steps to combat the country’s fight against the Omicron wave.

The latest developments come after the Federal Reserve, the Bank of England and the ECB all moved towards tighter monetary policy last week in response to inflation concerns. The hawkish pivot leaves them without a full toolbox to handle Omicron’s negative impacts on the economy, compounding fears for investors. Outbreaks, quarantines and possible lockdowns also have the potential to worsen the business environment, ranging from transportation logjams to factory closures.

Go deeper: “On the one hand, corners of the market are oversold,” said Adam Crisafulli, founder of Vital Knowledge, though “the aggressive ‘buy the dip’ mentality, which proved so profitable for the last 1.5+ years, especially in the high-multiple corners of the market, was underwritten by a tidal wave of stimulus that is now receding.” (10 comments)

With great power…

Omicron fears were not seen at the box office this weekend as Spider-Man came to the rescue. No Way Home, the latest movie in the web-slinging hero’s franchise, drew a record-setting $253M in ticket sales domestically to notch the third-best opening weekend of all time. Remember, COVID-19 has cratered the theatrical industry in the pandemic era and the highest estimates for the film were pegged at around $150M.

By the numbers: While the movie is distributed by Sony (SONY) as part of that studio’s deal for Spider-Man property, it shows the staying power of Marvel (DIS) content: The only two films that opened bigger domestically were Marvel’s Avengers: Endgame ($357.1M) and Avengers: Infinity War ($257.7M). No Way Home’s worldwide total was a stunning $587.2M, again third of all-time behind the two Avengers films. It only took one weekend for the movie to become the top grossing picture of 2021, while meme-stock AMC (AMC) soared 19% this past Friday amid strong early box office totals.

The new Spider-Man is benefiting from critical as well as monetary success, with strong reviews and the rare “A+” audience grade from industry tracker CinemaScore. Hardcore fans are also desperately afraid of spoilers, leading to an outsized effect on the opening weekend. A tweet from Sony Pictures even warned audiences that, “if you want to be extra safe, stop reading comments, mute keywords, and start staying off social media today!”

What to watch: More studios may reserve exclusive theatrical releases for only their biggest films in 2022, meaning theaters – and their investors – could see sluggish periods between tentpole films. Another emerging trend is the demographics at the box office, which is skewing towards younger audiences due to COVID concerns. Examples: More than 60% of the opening-weekend audience for Spider-Man: No Way Home were under the age of 34, while older moviegoers didn’t show up for the recent release of Steven Spielberg’s West Side Story, which underwhelmed at the box office despite two years’ worth of anticipation. (7 comments)

That’s all folks

President Biden has been dealt a severe blow to his economic agenda after West Virginia Senator Joe Manchin outright rejected the nearly $2T Build Back Better Plan. Negotiations had been underway for much of the past six months, but the latest disagreement means the bill is likely doomed unless his demands are met for a smaller, less sweeping package. The social and environment measure would extend the expanded child tax credit, create free preschool and provide $550B for tax breaks and spending aimed at curbing carbon emissions, among other initiatives.

Quote: “My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country more vulnerable to the threats we face,” Manchin told Fox News Sunday. “I cannot take that risk with a staggering debt of more than $29T and inflation taxes that are real and harmful to every hard-working American at the gasoline pumps, grocery stores and utility bills with no end in sight.”

Investors are watching how the political drama will spill into the markets, with many eyeing the Treasury landscape. The killing of the bill could lead to lower yields and a flatter curve, given slower growth and more moderate inflation expectations. Last month, economists at the White House forecast that the U.S. economy could lose 9% of GDP in 2022 if emergency programs aren’t replaced with BBB or the separate $1T bipartisan infrastructure bill (which has since been passed and was signed by Biden on Nov. 15).

Analyst commentary: “We had already expected a negative fiscal impulse for 2022 as a result of the fading support from COVID-relief legislation enacted in 2020 and 2021, and without BBB enactment, this fiscal impulse will become somewhat more negative than we had expected,” said Goldman Sachs chief U.S. economist Jan Hatzius. Specifically, the expiration of the child tax credit and no other new spending would cut the U.S. GDP growth forecast to 2% from 3% for the first quarter of 2022, to 3% from 3.5% in Q2 and to 2.75% from 3% in Q3. There is “still a good chance” Congress enacts a much smaller set of fiscal proposals, added Hatzius, or “retroactively extends the expanded child tax credit.” (11 comments)

Dutch streets deserted

The Netherlands is heading into Christmas and the New Year under lockdown after the government imposed some of the toughest measures seen since 2020. The sudden shutdown was announced on Saturday evening as a “failure to act now [against Omicron] would likely lead to an unmanageable situation in hospitals,” Prime Minister Mark Rutte said in a statement. “We have previously proven that we can handle a lot together. Together we will also overcome this period. I am absolutely convinced of that.”

New restrictions: Restaurants, theaters, hairdressers, gyms, museums and other public places will be shuttered until at least Jan. 14. Households are recommended to receive no more than two visitors at home – from 13 years of age – per day, while gatherings outside are also limited to a maximum of two. Citizens should also stay 1.5 meters apart from each other and not visit more than one other household per day.

Meanwhile, primary schools, secondary schools, vocational schools, higher education, and after-school care are physically closed until at least January 9. There are some exceptions for emergency care for parents whose children are in crucial professions, while daycare will remain open for children up to 4 years old. There is also currently no ban on foreign travel, though warnings and advisories can change quickly, which can affect rules for those returning to the country.

Outlook: COVID-19 infections in the Netherlands dropped from record levels in recent weeks following a night-time lockdown that was put in place late last month. However, Omicron cases are spreading rapidly and officials believe it will become the dominant variant by the end of the year. While more than 85% of the Dutch adult population is vaccinated, less than 9% of adults have a booster shot (one of the lowest rates in Europe). (188 comments)

Today’s Economic Calendar
10:00 Leading Indicators

What else is happening…

U.S. appeals court revives Biden’s vaccine mandate for businesses.

New Zealand links young man’s death to Pfizer (NYSE:PFE) COVID shot.

Disney (NYSE:DIS) and YouTube (GOOG) reach deal after licensing stand-off.

Oracle (NYSE:ORCL) plans to buy Cerner (NASDAQ:CERN) for ‘mid 90’s’ per share.

BofA picks a stock for every sector for 2022 – Sector Watch.

GM (NYSE:GM) begins delivering electric Hummers and EV delivery vans.

Travel tech firm Mondee nears SPAC deal with ITHAX Acquisition (NASDAQ:ITHX).

JPMorgan (NYSE:JPM) to pay $200M to settle probes on employee communications.

BNP Paribas (OTCQX:BNPQY) sells U.S. unit Bank of the West for $16.3B.

Will cannabis multi-state operators perform better next year? Ask Congress.


Leave a Reply