Good morning. Happy Friday.
The Asian/Pacific markets posted big losses. Japan, China, Hong Kong, South Korea, Australia, Malaysia – all down big. Singapore and Indonesia did well. Europe, Africa and the Middle East are currently down big. Denmark, Poland, France, Turkey, Germany, Russia, Greece, South Africa, Finland, Hungary, the Netherlands, Italy and Portugal are all down big. Futures in the States point towards a big gap down open for the cash market.
————— VIDEO: SPX Full Year Performance as a Function of the First 5 Days —————
The dollar is flat. Oil is up; copper is down. Gold is up; silver is down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
Big bank bucks
Investors this morning will get a better picture on the financial standing of the economy as the biggest U.S. banks publish their quarterly results. Reports from JPMorgan (JPM), Citigroup (C) and Wells Fargo (WFC) will mark the unofficial start to the fourth-quarter earnings season as banks take much of the spotlight over the next week. The sector has also recently benefited from equity inflows as a rising rate environment triggers a rotation out of growth and into value stocks.
On watch: Pandemic stimulus has been good for Wall Street’s biggest banks, with profits for 2021 set to hit record highs. For example, JPMorgan has seen its deposits swell by more than 50% to $2.5T over the last two years, which can be used to make loans and other interest earning products. Stay on the lookout for expectations about loan growth for the coming year, which could profit from rising rates (as long as they don’t rise too rapidly). Total U.S. loans reached $10.8T at the end of December, up 2.8% from the end of September, and close to the high notched shortly after the pandemic began in 2020.
A booming stock market has also helped fuel robust trading activity, as well as more demand for mergers and IPOs (and the lucrative investment banking fees that come with them). It will be interesting to watch compensation, and how much of the big bucks and bonuses will be returned to investment banking dealmakers. Meanwhile, corporate lending also took a backseat with companies able to raise money easily during the pandemic, but analysts think that may change in 2022.
Some caution: Keeping an eye on the coming year, investors are curious what the banks have to say about the Omicron economy. Consumer spending weakened as the variant emerged toward the end of 2021, and those trends could impact the markets and economy for the rest of 2022. Banks also built up their reserves when they were expecting big pandemic loan losses, and while recent releases have boosted their bottom lines, those are anticipated to be much smaller going forward.
Federal board
Reports suggest that the Fed may be getting a diverse makeover as President Biden fills out the ranks of a seven-member panel that wields much influence over the world’s largest economy. Biden came into office with one vacancy on the Fed’s Board of Governors (from Janet Yellen), but saw the subsequent retirement of Richard Clarida and Randal Quarles due to trading scandals. Governors are appointed by the president and confirmed by the Senate for staggered 14-year terms, while the Fed Chair and Vice Chair serve four-year terms. Meet the new candidates:
Sarah Bloom Raskin: She served as a Fed governor from 2010 to 2014 before moving on to become former President Barack Obama’s deputy Treasury Secretary. She’s also the wife of U.S. Rep. Jamie Raskin (D-Md) and is a notable climate change advocate who argues that financial regulators should use their powers to mitigate the risks of climate-related events. If confirmed, she would become the central bank’s vice chairwoman of supervision (i.e. the government’s most influential overseer of the American banking system).
Lisa Cook: She currently serves as a Michigan State economics and international-relations professor and formerly worked as a senior economist on Obama’s Council of Economic Advisers. If approved, Cook would become the first Black female to serve on the Fed’s board. She has also written extensively about the economic consequences of racial disparities and gender inequality, as well as wages, poverty and income distribution.
Philip Jefferson: He is a former Fed economist who currently serves as dean of faculty and academic-affairs vice president at North Carolina’s Davidson College. If confirmed, Jefferson would be only the fourth Black man to sit on the panel and the first in more than 15 years. For some or all of the nominees, prepare for opposition during confirmation hearings in the Senate, where Democrats and Republicans each hold 50 votes. Vice President Kamala Harris can provide a 51st Democratic vote to break ties in party-line disagreements, but only if all Democrats approve of someone the entire GOP opposes.
Vaccine mandates
The verdict is in on the Biden administration’s vaccine mandates, with separate rulings for two of the orders. In a vote of 6-3, the Supreme Court blocked a mandate that required businesses with more than 100 employees to have them vaccinated or tested weekly, calling the requirement an “encroachment into the lives” of two-thirds of the private sector. In a separate 5-4 ruling, the High Court let stand another mandate that would require vaccinations for more than 10M healthcare workers whose facilities participate in Medicare and Medicaid.
The decision: “Although Congress has indisputably given OSHA the power to regulate occupational dangers, it has not given that agency the power to regulate public health more broadly,” the court wrote. “COVID-19 is also spread at home, in schools, during sporting events, and everywhere else that people gather… The Act empowers the Secretary [of labor] to set workplace safety standards, not broad public health measures. Requiring the vaccination of 84M Americans, selected simply because they work for employers with more than 100 employees, certainly falls in the latter category.”
Responding to the decision, President Biden said he was disappointed the court blocked “common-sense life-saving requirements for employees at large businesses that were grounded squarely in both science and the law.” While the cases have sown tension between federal and state governments, Biden went on to say that “it is now up to states and individual employers to determine whether to make their workplaces as safe as possible for employees, and whether their businesses will be safe for consumers during this pandemic by requiring employees to take the simple and effective step of getting vaccinated.”
Healthcare ruling: “COVID–19 is a highly contagious, dangerous, and – especially for Medicare and Medicaid patients – deadly disease,” the majority opinion wrote. “Indeed, their [healthcare industry] support suggests that a vaccination requirement under these circumstances is a straightforward and predictable example of the health and safety regulations that Congress has authorized the Secretary to impose. After all, ensuring that providers take steps to avoid transmitting a dangerous virus to their patients is consistent with the fundamental principle of the medical profession: first, do no harm.”
#futureofwork
While some companies like Robinhood (HOOD) and Twitter (TWTR) are planning for a remote-first future, others are making big bets on employees coming back to work. Google (GOOG, GOOGL) is shelling out $1B to acquire the rest of London’s colorful Central Saint Giles building, where it already occupies a number of floors. That’s beside a new 11-story U.K. headquarters that it is building nearby, which sits on a plot behind in the recently gentrified King’s Cross neighborhood.
Quote: “We believe that the future of work is flexibility,” wrote Ronan Harris, VP of Google U.K. and Ireland. “Whilst the majority of our UK employees want to be on-site some of the time, they also want the flexibility of working from home a couple of days a week. Some of our people will want to be fully remote. Our future UK workplace has room for all of those possibilities.”
“We’ll [also] be introducing new types of collaboration spaces for in-person teamwork [at Central Saint Giles], as well as creating more overall space to improve well-being. We’ll introduce team pods, which are flexible new space types that can be reconfigured in multiple ways, supporting focused work, collaboration or both, based on team needs. The new refurbishment will also feature outdoor covered working spaces to enable work in the fresh air.”
Outlook: At the beginning of 2021, Google said it would spend $7B over the course of the year to expand its footprint of offices and data centers across the U.S. It seems to now be executing a similar strategy abroad, adding 700 employees to its current roster of 6,400 employees in the U.K. Once the construction of its new London complexes is complete, Google will have the capacity for a 10,000-strong workforce in the city.
Today’s Economic Calendar
8:30 Retail Sales
8:30 Import/Export Prices
9:15 Industrial Production
10:00 Business Inventories
10:00 Consumer Sentiment
10:00 Fed’s Harker: Economic Outlook
11:00 Fed’s Williams Speech
1:00 PM Baker-Hughes Rig Count
What else is happening…
China to launch blockchain infrastructure to support NFT deployment.
Fortnite is back on iOS – thanks to Nvidia’s (NASDAQ:NVDA) loophole.
Congressional Jan. 6 committee subpoenas Big Tech and Reddit.
Navient (NASDAQ:NAVI) settlement cancels $1.7B in private student loans.
Delta (NYSE:DAL) CEO: We believe worst of Omicron is behind us.
Ford (NYSE:F) is a $100B stock and General Motors (NYSE:GM) is not far behind.
Tesla’s (NASDAQ:TSLA) Cybertruck arrival might be pushed out to 2023.
Private equity firm TPG (NASDAQ:TPG) makes market debut, raising over $1B.
Citigroup (NYSE:C) exits more Asian consumer banking ops with $3.7B deal.
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Good morning. Happy Thursday.
The Asian/Pacific markets leaned down. The Philippines did well, but Japan, China and South Korea were mixed. Europe, Africa and the Middle East currently lean up. Turkey, the UAE, Greece, Portugal, Israel and Saudi Arabia are up; Russia and Hungary are down. Futures in the States point towards a positive open for the cash market.
————— VIDEO: SPX Full Year Performance as a Function of the First 5 Days —————
The dollar is down. Oil and copper are down. Gold is down; silver is unchanged. Bonds are mixed. Bitcoin is up.
Stories/News from Seeking Alpha…
End-demic
How and when will the pandemic be over? Many are asking that question as the Omicron variant sweeps across the U.S., with infection numbers continuing to surge and hospitals strained due to a shortage of healthcare workers. New Jersey just reinstated a public health emergency due to the situation, while California has even ordered COVID-positive medical staff (that are asymptomatic) to stay on the job. Hospitalizations are also climbing higher than last winter’s peak – before the widespread distribution of vaccines – due to Omicron’s extraordinary spread in absolute numbers (meaning more people will experience severe disease).
Snapshot: Despite the toll on the healthcare system and other essential services, Omicron patients are 74% less likely to end up in ICUs and 91% less likely to die than Delta patients, according to the Kaiser Permanente in Southern California. Other studies also indicate that Omicron is less severe than other variants, and many are hoping that this will herald a new era of the virus becoming an endemic illness, or comparable to the flu. Spanish Prime Minister Pedro Sanchez became the latest European leader this week to suggest that possibility, while the U.K. government already told the public it must “to learn to live with the virus.”
Similar sentiment is starting to appear among top ranks in the U.S. “I think it’s hard to process what’s actually happening right now, which is: Most people are going to get COVID,” Janet Woodcock, acting head of the FDA, told a Senate hearing on Tuesday. “What we need to do is make sure the hospitals can still function – transportation, other essential services are not disrupted while this happens. I think after that will be a good time to reassess how we’re approaching this pandemic.”
Other comments: “There’s no way we’re going to eradicate this [virus],” added White House chief medical advisor Dr. Anthony Fauci. “As Omicron goes up and down,” the U.S. will enter a new phase “where there will be enough protection in [the] community, enough drugs available so that when someone does get infected and is in a high-risk group, it will be very easy to treat that person. When we get there, there’s that transition, and we may be on the threshold of that right now.”
Coronavirus vaccine and treatment stocks: AbbVie (NYSE:ABBV), Amgen (NASDAQ:AMGN), BioNTech (NASDAQ:BNTX), Johnson & Johnson (NYSE:JNJ), Eli Lilly (NYSE:LLY), Gilead Sciences (NASDAQ:GILD), GlaxoSmithKline (NYSE:GSK), Merck (NYSE:MRK), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX), Pfizer (NYSE:PFE), Regeneron (NASDAQ:REGN) and Sorrento Therapeutics (NASDAQ:SRNE).
Brainard on deck
Following the confirmation hearing of Fed Chair Jay Powell on Tuesday, Lael Brainard is heading over to Capitol Hill this morning for her hearing in front of the Senate Banking Committee. As nominee for Vice Chair of the Federal Reserve, Brainard will tell Congress that the fight against inflation is the central bank’s “most important task” as it shifts gears towards tighter monetary policy. Brainard has been in the economic policymaking field for years, serving as a senior Treasury official for international affairs under President Obama and working her way up to the Fed’s Board of Governors.
Prepared remarks: “Inflation is too high, and working people around the country are concerned about how far their paychecks will go. In some foreign countries, I saw up close how high inflation hurts workers and families, especially the most vulnerable. Our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone.”
Inflation data on Wednesday showed the Consumer Price Index jumping by 7% Y/Y in December, marking the largest increase since June 1982. The core CPI, which excludes food and energy and is the Fed’s preferred gauge of inflation, also topped expectations, coming in at 5.5% for the highest reading since 1991. As a result, many expect the central bank to begin a cycle of interest rate hikes in March and to start the process of winding down its nearly $9T balance sheet later in the year.
Go deeper: While Brainard is aligned with Powell and other FOMC officials on issues linked to monetary policy, she has opposed them on other occasions, like supervisory matters and big bank oversight. She has even dissented more than 20 times on board votes connected to easing regulations on the largest U.S. financial institutions. Brainard has also advocated for making the financial system more inclusive and found a path to address climate change through the Fed’s financial stability mission.
Permanent shift
As many companies rethink their return to the office, some firms are looking to make changes permanent. Stock trading app Robinhood (HOOD), which has about 3,400 employees, just approved plans to let most of its employees work remotely on a permanent basis, meaning no location or regular in-office requirements. While some top tech players have opted for WFH for the time being, or unveiled hybrid arrangements, Robinhood says the new policy will make it a “remote first company.”
Quote: “In the last two years, we’ve seen how flexibility and trust allow teams to do their best work, attract top talent, and create a workplace that’s more inclusive and equitable,” the company wrote in a blog post. “Our teams have done amazing work and built a strong workplace community during these uncertain and challenging times, and we’re excited to continue to offer them the flexibility they’ve asked for by staying primarily remote.”
Twitter (TWTR) unveiled similar working arrangements in 2020, but others trying to get employees back in the office have suffered repeated setbacks. Facebook parent Meta Platforms (FB) just delayed plans to return workers until March (and will require booster shots for those that do), while Apple (AAPL) canceled its Feb. 1 return deadline without setting a new date. It really depends on the business, but the pandemic has forced many companies to rethink the necessity of expensive fixed costs like offices.
Fine print: “Some [Robinhood] teams will need to live within a commutable distance to an office location due to regulatory and business reasons, and a small segment will still need to come into the office. All employees will have access to our offices located across the country with Safety First protocols in place. As we move forward, we’re committed to continue learning, listening and creating a flexible, accessible and great workplace for everyone.”
Commodity boom
A broad rally continues to take shape across commodity markets, with WTI crude oil topping $82 a barrel on Wednesday, as well as copper trading above $10,000 a ton for the first time since October. Joining the rally are nickel and lithium stocks as demand for electric vehicles hits fresh records. The price of nickel even notched a 10-year high, climbing to $23,000 a ton as stockpiles continue to dwindle across the globe.
Snapshot: Nickel is one of the most widely used minerals for EV batteries, though supply does not seem to be keeping up with demand. “With China’s policy response gathering steam at a moment of severely depleted inventories, micro and macro conditions are beginning to align, driving a repricing of metals toward scarcity,” explained Nicholas Snowdon, analyst at Goldman Sachs. “We are starting to see consumers wake up and recognize the problems that exist,” added Jeremy Weir, CEO of Trafigura, one of the world’s largest commodity traders.
EV makers are scrambling for the metal, prompting Tesla (TSLA) this week to ink its first U.S. supply deal. Under the arrangement, the company agreed to purchase 75,000 tons of nickel from Talon Metals’ (OTCPK:TLOFF) Tamarack mine project in Minnesota. BHP (BHP) also announced it would invest as much as $90M in Kabanga Nickel, which owns a nickel project in Tanzania, as the miner aims to boost its exposure to metals needed for a low-carbon economy.
Outlook: Growth of electric vehicle sales topped that of the global car market in 2021, up 26% over the previous year, led by the U.K and Europe. In the U.S., over 310K EVs were sold in the first six months of the year, compared to the 322K sold over the entire 2020, though the segment still only reflects 4% of the market. Besides offering some hot cars, tougher standards over emissions and fuel economy are in the mix as America drives toward a goal of 50% all-electric and plug-in hybrid sales by 2030.
Today’s Economic Calendar
8:00 Fed’s Harker Speech
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Fed’s Brainard testifies before Senate Banking Committee
10:30 EIA Natural Gas Inventory
12:00 PM Fed’s Barkin: “The Economy: What We’ve Learned”
1:00 PM Fed’s Evans: U.S. Economic and Monetary Policy
1:00 PM Results of $22B, 30-Year Note Auction
4:30 PM Fed Balance Sheet
What else is happening…
EU medicines regulator warns on COVID booster shot frequency.
Solar standard bearer bleeds cash as investors turn cold.
Premarket: Taiwan Semiconductor (NYSE:TSM) rises on revenue figures.
Apple’s (NASDAQ:AAPL) Macs grow twice the rate of PCs in Q4.
AMC (NYSE:AMC) chief is ‘in’ after selling latest $7M in company stock.
On tap… Asset management firm TPG (NASDAQ:TPG) prices IPO at $29.50.
Shiba Inu (SHIB-USD) climbs 17% on Robinhood listing rumor.
Coinbase (NASDAQ:COIN) to acquire regulated derivatives exchange FairX.
Block (NYSE:SQ) CEO Jack Dorsey forms The Bitcoin Defense Fund.
Heightened tensions: IEA blames Russia for Europe’s energy crunch.
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Good morning. Happy Wednesday.
The Asian/Pacific markets posted big gains. Japan, Hong Kong, South Korea and the Philippines led with moves well above 1%. Europe, Africa and the Middle East are currently up solidly. The UK, Denmark, Poland, France, Russia, Greece, South Africa, Norway, Hungary, the Netherlands, Israel, Sweden, and Saudi Arabia are leading. Futures in the States point towards a moderate gap up open for the cash market.
————— VIDEO: SPX Full Year Performance as a Function of the First 5 Days —————
The dollar is down. Oil and copper are up. Gold and silver are up. Bonds are up. Bitcoin is up.
Stories/News from Seeking Alpha…
Another 40-year high?
Another bad inflation report is on tap this morning, with consumer prices expected to have jumped 7% in December from a year ago. That would be the eighth straight month of a figure higher than 5%, and the third consecutive month above 6%. It would also represent the biggest annual increase since February 1982, while core CPI, which excludes food and energy and is the Fed’s preferred gauge of inflation, is even forecast to rise 5.4% Y/Y.
Eyes on Powell: In his confirmation hearing on Capitol Hill on Tuesday, the Fed Chair emphasized that he will use all the tools of the central bank to get inflation back on track. “If we have to raise interest rates more over time, we will,” Powell told the Senate Banking Committee. “The economy no longer needs or wants the very accommodative policies we have had in place.” He also expressed hope that the alleviation of supply chain bottlenecks would bring inflation down, as the economy returns to “normal supply conditions,” but admitted that it has taken much longer than expected to get the problems under control.
The price pressures could also impact the other side of the Fed’s dual mandate, or “maximum sustainable employment.” “To get the kind of very strong labor market that we want with participation, it’s going to take a long expansion. To get a long expansion, we’re going to need price stability,” Powell explained. “In a way, high inflation is a severe threat to the achievement of maximum employment and to achieving a long expansion that can give us that.”
Take a look: Investors will be analyzing the CPI industry breakdown, parsing the report for evidence that inflation is picking up in broader swathes of the economy like the services sector, and not just areas affected by supply chain issues. “Today, economists test their ability to forecast the price of a used 2000 Honda Civic,” noted UBS chief economist Paul Donovan. “There are other prices in the U.S. economy, but if you want to understand U.S. CPI, it helps to know what used car prices are doing.” Other notable categories of the report to watch include rent and shelter costs, transportation, and medical care.
Is there a bubble out there?
An interesting dynamic played out in the market yesterday as Powell delivered his testimony to the Senate Banking Committee. Many of the expensive tech names recharged, with the Nasdaq closing the day up 1.4%, as investors heard comments that inflation would probably ease by the middle of this year. Others discounted the outlook, citing Powell’s infamous “transitory” call from 2021, and said traders were rushing in to buy the dip despite the Fed taking away the punch bowl.
Analyst commentary: “The pullback in risk assets in reaction to the Fed minutes is arguably overdone,” J.P. Morgan’s Marko Kolanovic wrote in a note to clients. “Policy tightening is likely to be gradual and at a pace that risk assets should be able to handle, and is occurring in an environment of strong cyclical recovery.”
Also sticking to the gradual stance was Ian Lyngen of BMO Capital Markets. “Powell noted that the balance sheet runoff will occur later in 2022 and that ‘it’s a long road back to normal.’ On net, the Chair’s comments are consistent with a willingness to deliver the liftoff hike in March assuming there isn’t a dramatic reversal in the pace of consumer price gains.”
The other camp: Those that are more gloomy on risk assets are calling the comeback a dead cat bounce, or that outsized leverage can produce strange reactions (little jumps can be magnified by the covering of short positions, etc.). Those subscribing to the most dire of bubble forecasts also point out that the burst happens in stages, like the dotcom bubble, which saw many session rallies as the Nasdaq dropped from 5,000 to below 1,000 between 2000-02. “The things that performed the best since March of 2020 are going to probably perform the worst in this tightening cycle,” declared billionaire hedge fund manager Paul Tudor Jones.
Crude rally
Weekly oil stockpiles data from the Energy Information Administration are set to be released at 10:30 a.m. today, and if they confirm a drop, it would be the seventh straight fall in inventories. What’s happening is that U.S. consumption, as well as production, is making a sharp reversal from the pandemic economic downturn, and is now expected to break pre-COVID records next year, according to the EIA. Output is estimated to rise to a fresh annual high of 12.4M barrels per day in 2023, topping the previous record volume of 12.3M bpd set in 2019, and U.S. is even poised to become the world’s largest exporter of liquefied natural gas.
Snapshot: Many U.S. energy giants, like ConocoPhillips (COP) and Pioneer Natural Resources (PXD), have recently pivoted from a strategy of maximizing output and exploration towards pleasing shareholders with dividends, buybacks and diversifying their businesses. They’re under a lot more pressure on the regulatory and environmental side than smaller producers, which are expected to lead the next wave of production. West Texas Intermediate is now trading above $81/bbl after rising 3.8% yesterday for its biggest daily surge this year.
“There are a lot of supply factors and omicron fears are ebbing,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “The market will remain tight for a while. Wherever the market is right now has just started to reflect oil’s fair value and there is still more to run.”
Go green? The latest figures come despite a promise from the Biden administration to shift away from fossil fuels. It has even leaned on the domestic oil sector to lift output to help tame energy prices, which rose last year to their highest levels since 2014. Moreover, emissions soared 6.2% in 2021 and are forecast to rise by another 1.8% and 0.5% over the next two years to 4.97M metric tons, though total emissions still sit below 2019 levels.
Another chance
As unionization drives heat up across the nation, one important battle is getting a do-over. A second high-stakes election has been set for Amazon’s (NASDAQ:AMZN) warehouse in Bessemer, Alabama, known as BHM1, after 71% of workers there voted against joining the Retail, Wholesale and Department Store Union (RWDSU) last April. While union supporters have sought better work conditions and benefits, many voters didn’t feel a union would improve that situation, according to interviews.
At play: The National Labor Relations Board (NLRB) ordered another vote after finding Amazon improperly interfered and broke labor laws in the first election. Among the violations was the improper polling of workers’ support for the union during mandatory company meetings, as well as a decision to install a mailbox at the facility, which gave a false impression that Amazon was conducting the election and could have intimidated workers.
Ballots for the coming election will be sent to workers on Feb. 4, and the votes will be tallied on March 28. While both Amazon and the RWDSU don’t like the idea of a mail-in election, NLRB Region 10 Director Lisa Henderson said that such a ballot is “the safest and most appropriate method of conducting a prompt election in view of the extraordinary circumstances presented by the pandemic.” Both sides will also be prohibited from putting up a tent, banner or sign around the ballot drop box or make any kind of “statement to voters concerning use of the box for the purposes of this election.”
Go deeper: While labor unions have organized some of Amazon’s workforce in Europe, no American facility has yet successfully formed or joined a union. Amazon is concerned that a union win – similar to the first victory seen at Starbucks (SBUX) in December – would disrupt the company’s control over employees, like the pace of work and hourly wages. The campaign resurgence in Alabama could also advance existing union drives in the U.S., with Amazon workers filing for an election in Staten Island, as well as other efforts like Amazonians United Chicagoland.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Fed’s Kashkari: U.S. Economic Outlook
1:00 PM Results of $36B, 10-Year Note Auction
2:00 PM Treasury Budget
2:00 PM Fed’s Beige Book
What else is happening…
Facebook (NASDAQ:FB) loses bid (again) to throw out FTC’s antitrust case.
Germany’s new tool for 2030 climate goals: Stop using energy.
FDA amends J&J (NYSE:JNJ) vaccine fact sheet to include rare bleeding risk.
S.Korea approves Novavax (NASDAQ:NVAX) vaccine, adds Pfizer (NYSE:PFE) pills.
Merger talks between DISH Network (NASDAQ:DISH) and DirecTV (NYSE:T)?
Apple’s (NASDAQ:AAPL) oft-criticized $19 polishing cloth is now back in stock.
Boeing (NYSE:BA) beats Airbus (OTCPK:EADSY) on orders, lags on deliveries.
Virgin Orbit’s (NASDAQ:VORB) third commercial flight is scheduled for today.
Bank of America (NYSE:BAC) cuts overdraft fees, ends non-sufficient fund fees.
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Good morning. Happy Tuesday.
The Asian/Pacific markets were mixed. South Korea, Taiwan, Malaysia, Singapore and Thailand did well; China, Japan, Australia, Indonesia and the Philippines were weak. Europe, Africa and the Middle East are currently up big. Denmark, Poland, France, Turkey, Germany, Russia, Greece, Switzerland, Hungary, the Netherlands, Italy, Portugal, Israel, Austria and Saudi Arabia are posting solid gains. Futures in the States point towards a moderate gap up open for the cash market.
————— VIDEO: State of the Market —————
The dollar is unchanged. Oil and copper are up. Gold and silver are up. Bonds are up. Bitcoin is down.
Stories/News from Seeking Alpha…
The Great Resignation
New era of transplants?
In a last-ditch effort to save his life, doctors at the University of Maryland Medical Center have transplanted a genetically modified pig heart into patient David Bennett, a 57-year-old handyman from Maryland. He’s doing well three days after the highly experimental surgery, and is being monitored for immune system problems and other complications, but it’s still too early to tell if the operation will work. Due to his condition, Bennett had also received a pig heart valve about a decade ago, which (along with pig skin grafts) are routinely used in humans.
Snapshot: “It was either die or do this transplant. I want to live. I know it’s a shot in the dark, but it’s my last choice,” Bennett said a day before the nine-hour surgery. While he knew there was no guarantee the experiment would be effective, Bennett was ineligible for a human heart transplant or pump due to a heart failure condition and an irregular heartbeat. The FDA, which oversees such experiments, allowed the xenotransplantation surgery under “compassionate use” emergency authorization, which is available when a patient with a life-threatening condition has no other options.
“If this works, there will be an endless supply of these organs for patients who are suffering,” said Dr. Muhammad Mohiuddin, scientific director of the University of Maryland’s animal-to-human transplant program. A total of 106,657 people are currently on the U.S. transplant waiting list, and more than 6,200 patients die each year before getting one. In 2021, more than 40,000 organ transplants were conducted nationwide, including a record 3,800 heart transplants.
Gene editing tools: Several biotech companies are developing pig organs for human transplant, with the heart used in the most recent operation coming from Revivicor, a subsidiary of United Therapeutics (NASDAQ:UTHR). The organ was modified to make it more acceptable to a human, including removing and inserting 10 genes to keep the heart from growing after the transplant. The team at the University of Maryland Medical Center also used a new drug made by Kiniksa Pharmaceuticals (NASDAQ:KNSA) to help prevent the organ from being rejected by the patient’s body. Premarket: UTHR +8%; KNSA +5.8%.
Vaccine developments
A third booster? A fourth booster? An Omicron-specific booster? As the pandemic continues to drag out with the emergence of new variants, vaccine hesitancy is being seen among the population. The latest Omicron wave is even dividing the vaccinated, especially given that the strain appears to be having more mild effects. Add to that some confusing guidance from authorities, such as the CDC, which recommends that all U.S. adults receive a booster despite still classifying fully vaxxed as two shots, as well as a statement from White House chief medical adviser Dr. Anthony Fauci last week, that read “we’re using the terminology now ‘keeping your vaccinations up to date,’ rather than what ‘fully vaccinated’ means.”
By the numbers: Figures from the CDC continue to show declining vaccine uptake in the U.S. as more shots are added to the COVID regimen. 74.4% of the American population is vaccinated with one dose of a COVID vaccine, but that figure drops to 62.6% for the fully vaccinated (included J&J’s (JNJ) single dose). Meanwhile, only 36.5% of the nation has taken up advice to receive a vaccine booster, while Pfizer (PFE) and Moderna (MRNA) are already planning an Omicron-specific jab that should be ready this year.
“I don’t know if we need it. I don’t know how it will be used. But it will be ready [by March],” Pfizer CEO Albert Bourla declared. “The two doses, they’re not enough for Omicron. The third dose of the current vaccine is providing quite good protection against deaths, and decent protection against hospitalizations.” He also commented on the possibility of a fourth regular dose, saying that is “something that needs to be tested, and I know Israel has already started some of these experiments and we will also conduct some of these experiments to make sure that if needed, we use it.”
On the way up: Moderna was the best performer in the S&P 500 on Monday, closing the session 9% higher, as investors propelled the beaten-down biotech. CEO Stephane Bancel announced $18.5B worth of advance purchase agreements for the mRNA-based jab in 2022, up from $17B in November, and said the company plans to unveil an Omicron-specific booster vaccine in the fall of 2022. A short while ago, Bloomberg quoted him as saying that the Omicron booster would enter the clinical trials in weeks, adding to the upbeat outlook for its blockbuster COVID-19 vaccine.
Powell on the Hill
Get ready for the latest appearance by Fed Chair Jerome Powell, who will visit Capitol Hill today for his confirmation before the Senate Banking Committee. Back in November, he was nominated by President Biden to serve a second term in leading the central bank, along with Lael Brainard, who was nominated as Vice Chair of the Fed (her hearing will take place on Thursday). Expect questions and commentary on inflation, rate hikes, the labor market and the speed of the economic recovery.
Prepared remarks: “We know that high inflation exacts a toll, particularly for those less able to meet the higher costs of essentials like food, housing, and transportation. Both the initial shutdown and the subsequent reopening of the economy were without precedent and have led to persistent supply and demand imbalances and bottlenecks and thus to elevated inflation. We will use our tools to support the economy and a strong labor market and to prevent higher inflation from becoming entrenched.”
Inflationary risks and tighter monetary policy have already led to increased volatility for risk assets. Following a big selloff last week, stocks whipsawed on Monday, starting the day deep in the red, only to see a strong intraday rebound of highly-valued growth stocks. Expectations of the Fed hiking cycle are causing some convulsions, and it remains to be seen how committed traders will be to the recent reflation rotation.
Analyst commentary: “It’s that delicate tightrope that he [Powell] has to walk,” said Kathy Bostjancic, Director of U.S. Macro Investors Services at Oxford Economics. “He really doesn’t want to leave an impression that they’re massively behind the curve.”
Big gaming deal
In one of the largest acquisitions to hit the videogame industry, Take-Two Interactive (TTWO) said it would acquire Zynga (ZNGA) in a cash-and-stock deal that would be valued at $12.7B. The key to the acquisition is mobile gaming, which has been Zynga’s focus for years. The company is known for such titles as FarmVille, CSR Racing, Empires & Puzzles, and probably most of all, Words with Friends, while Take-Two is best-known for its console franchises, such as Grand Theft Auto, NBA 2K, BioShock and others.
Market movement: The news led to Zynga’s best day ever, with the stock closing the day up 40% to $8.44, basically near even with its price from last August. That was before it got hit hard in an earnings report reflecting the harsh effects of Apple’s (AAPL) iOS 14 privacy changes (which makes it harder to sell targeted advertising), and suggests Zynga may realize that its own Apple situation may not be improving anytime soon. Take-Two went in the opposite direction, ending the day down 13%, though CEO Strauss Zelnick wasn’t swayed by the investor reaction, noting “the math is the math.”
Speaking to CNBC, Zelnick reported that the deal would mean 50% of Take-Two’s net bookings will come from mobile and free-play offerings, the fastest-growing segments of the gaming industry. He also noted that Zynga will bring with it additional intellectual property, including what it terms as “forever franchises.” “We think it’s extraordinarily exciting,” Zelnick declared, calling the deal a “transformative” opportunity to drive further into mobile gaming.
Go deeper: The transaction raised some eyebrows because it came without a competitive sale process, however, it does include a provision that allows Zynga to seek other potential suitors over a 45-day period. Asked whether another bidder will arise during the process, Zelnick answered “it is very hard for me to say,” but added that the company is protected by a breakup fee if another suitor should step in. “We wanted to be as friendly as possible and we believe that this deal will come to fruition because we think this deal makes the most sense for shareholders.”
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
9:30 Fed’s George: U.S. Economic and Monetary Policy
10:00 Powell testifies before Senate Banking Committee
1:00 PM Results of $52B, 3-Year Note Auction
What else is happening…
Airbus (OTCPK:EADSY) keeps crown as top planemaker for third year in row.
Apple (NASDAQ:AAPL) in talks to cover Major League Baseball – NY Post.
Peer-to-peer car sharing company Turo (TURO) files for IPO.
Clarida to step down from Federal Reserve Board two weeks early.
Microsoft (NASDAQ:MSFT) losing AR talent to Meta (NYSEARCA:META) – WSJ.
Meta Platforms (META) delays office opening to March, requires boosters.
Bill Miller’s Bitcoin (BTC-USD) investments reach 50% of his net worth.
Nvidia (NASDAQ:NVDA) falls 5% as chipmaker touts Arm deal benefits.
Musical chairs: Micron (NASDAQ:MU) CFO leaves for Intel (NASDAQ:INTC).
Tesla (NASDAQ:TSLA) signs landmark nickel supply deal with Talon Metals.
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Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets leaned to the upside. China, Hong Kong, India, Singapore and the Philippines are leading while South Korea and New Zealand are weak. Europe, Africa and the Middle East currently lean down. Turkey, Greece, Hungary and Saudi Arabia are up; Denmark, France, Finland, Sweden, the Netherlands, Austria and Switzerland are down. Futures in the States point towards a moderate gap down open for the S&P and a big gap down for the Nasdaq.
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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are down. Bitcoin is down.
Stories/News from Seeking Alpha…
The Great Resignation
What’s in store for the labor market in 2022? The “Great Resignation,” according to a new survey by ResumeBuilder.com. Roughly one-quarter of 1,250 employed American adults declared their intentions of finding a new job in 2022, setting the stage for yet another year of turmoil in the labor market (9% of workers have already secured a new job for the new year).
More findings: a) Turnover will be highest among workers in retail, food & hospitality, education, and office & administrative support, b) 1 in 2 workers are seeking better pay and benefits, c) 52% of job-seekers anticipate quitting in the first half of 2022; 26% plan to quit by March.
“Workers often make shifts in employment after the new year,” said career strategist Carolyn Kleiman. “Employees may wait for end-of-the-year bonuses to make a change or see what new opportunities arise in the new year. Plus, as the pandemic continues, people continue to evaluate their lives, and work is a large part of that.”
The employment landscape: According to the latest JOLTS survey, there are now almost 11M job openings across the U.S., a near-record high level. The number of workers voluntarily quitting their jobs also surpassed 4.5M in November, which was even above the prior record of 4.4M reached in September, driven by better pay, more flexibility and remote work. Data from the Atlanta Fed’s Wage Growth Tracker further shows that Americans have almost always achieved higher wages from switching jobs as opposed to staying at their current ones since the Great Recession in 2007-09.
Everybody’s sick
Following the winter holidays, employees were supposed to return to work in the first week of 2022. Instead, many called out sick, with a wave of omicron and the flu knocking out 3% of the U.S. workforce. The situation is being compounded by a severe labor shortage hitting the country, leading to series of economic disruptions that are most pronounced in the essential healthcare and education industries.
Snapshot: The seven-day average of U.S. daily cases has surpassed 500K for the first time since the pandemic began in March 2020. Despite an increase in public testing, many are also testing positive at home (and some are avoiding tests altogether), meaning the infected figure could be a whole lot higher. More than 5M Americans could even be stuck at home isolating over the coming days, which could “deal a significant hit to the economy over the next month or two,” wrote Andrew Hunter, senior U.S. economist at Capital Economics.
“Hiring temporary is not an option,” said Loycent Gordon, owner of Neir’s Tavern, a small historic bar in Queens, New York. “Who’s going to train them?”
More issues: Big business is also having a rough time navigating the shortages. Over the weekend, Amazon (NASDAQ:AMZN) confirmed that it is cutting its paid leave in half, down to a week, or 40 hours, for workers who test positive for COVID-19 or need to quarantine following exposure, following updated guidance from the CDC. Walmart (NYSE:WMT), the largest private employer in the U.S. with about 1.6M workers, is also taking similar measures.
Not good for Cathie Wood
Some are saying the recent tech selloff may be an opportunity to buy the dip, but other trend watchers are more skeptical. The Nasdaq Composite fell 4.5% last week for its biggest weekly slump since February 2021 and ended 3 percentage points away from correction territory. The pressure comes as Treasury yields continue to rise ahead of key inflation reports this week, including the consumer price and producer price indices.
Trouble brewing: Cathie Wood’s ARK Innovation ETF (NYSEARCA:ARKK) just touched a 52-week low of $84.42/share, levels it has not witnessed since September 2020. Moreover, the ETF is down over 10% in 2022, falling precipitously in the first week of trading. Woods’ highly leveraged “disruptive innovation” strategies are proving risky if she doesn’t diversify to other sectors, and she has even doubled down on her forecast, predicting that ARKK could now deliver a five-year compounded annual growth rate of up to 40%.
“Cathie Wood remains firmly in the Grinch camp, and the outflows are starting to show,” remarked Mark Taylor, sales trader at Mirabaud. In fact, founders and senior managers of companies held by ARKK have recently conducted an unprecedented bout of stock selling. According to calculations from financial services network StoneX, company insiders sold $13.5B of stock owned by ARKK, and bought just $11M, in the six months to December.
Analyst commentary: “The spike in insider sales and the lack of buying interest is worrying,” noted Vincent Deluard, global macro strategist at StoneX. “The median ARKK holding has lost 55% since its 52-week high… if insiders are not buying now, why should investors?” Deluard also noted that “flows in ARK ETFs may have spurred research and innovation,” but they also “allowed insiders and founders to cash out at absurd valuation.” “Time will tell whether ARK Investment Management funded the next industrial revolution or organized a historical transfer of wealth from the public to insiders and early investors.”
Four rate hikes?
The Federal Reserve’s most-recent dot plot, which signals the central bank’s outlook for the path of interest rates, currently shows a median forecast for three hikes in 2022, though several market participants are expecting more. Goldman Sachs is out with a fresh research note indicating that the Fed will raise rates four times this year, given rapid progress in the U.S. labor market and hawkish signals that signal faster normalization. The forecast comes after last week’s release of FOMC minutes, which laid out a triple play for policy tightening: Rate hikes, tapering and a balance sheet runoff.
Bigger picture: Goldman is also predicting an expedited runoff process, which would begin in July, if not earlier. The move would see the Fed shrink its nearly $9T balance sheet by allowing holdings of its Treasurys and mortgage-backed securities to mature. Fed officials have cautioned that they remain data-dependent and would communicate their intentions clearly to the public, but many are flagging the central bank’s “transitory” forecast that never came to fruition.
“With inflation probably still far above target at that point, we no longer think that the start to runoff will substitute for a quarterly rate hike,” said Jan Hatzius, chief economist at Goldman. “We continue to see hikes in March, June, and September, and have now added a hike in December. Even with four hikes, our path for the funds rate is only modestly above market pricing for 2022, but the gap grows significantly in subsequent years.”
Go deeper: As markets price in the liftoff of U.S. interest rates, yields have been ripping higher. The 10-year Treasury yield has climbed over a quarter of a point since the beginning of the year, soaring 30 bps to 1.81% since Jan. 1. Real yields, which are inflation-adjusted, have also risen at a pace not seen since the height of pandemic fears in March 2020, eating into the positive backdrop for risk assets and threatening equity valuations.
Today’s Economic Calendar
10:00 Wholesale Inventories (Preliminary)
12:00 PM Fed’s Bostic: “Building an Inclusive Economy”
12:30 PM Investor Movement Index
What else is happening…
Tesla (NASDAQ:TSLA) raises price of ‘Full Self-Driving’ software to $12,000.
Mattress Firm (MFRM) files for IPO six years after going private.
FedEx (NYSE:FDX) flags shipment delays as reduced staffing hits deliveries.
Roblox (NYSE:RBLX) and Starbucks (NASDAQ:SBUX) make BTIG’s top picks list.
Despite BTC slump, crypto miners wrap up Q4 with robust mining growth.
U.S. becomes the world’s largest LNG exporter for the first time in history.
EV buy? GM (NYSE:GM) is in sync with California on emission rules.
Adobe (NASDAQ:ADBE) Metaverse? Jefferies lists 11 tech predictions for 2022.
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