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Daily Market Report | January 4, 2021

US FINANCIAL MARKET

S&P 500, Dow Industrials Higher – Wall Street Journal, 1/4/2022

  • The S&P 500 and Dow Jones Industrial Average pushed higher Tuesday after ending the first trading day of 2022 at records.
  • The broad U.S. stock index rose 0.2%, while the Dow industrials climbed 0.8%, with both indexes building on records set Monday. The tech-heavy Nasdaq Composite fell 0.7%.
  • Most sectors of the S&P 500 rose in morning trading, though the healthcare group dropped 1.3% and the technology group edged slightly lower.
  • Among individual stocks, Apple shares were little changed after the company on Monday briefly touched $3 trillion in market value before closing below that threshold. Tesla shares slipped 1.3% after jumping 14% on Monday.
  • In bond markets, the yield on the benchmark 10-year U.S. Treasury note ticked up to 1.666% from 1.628% on Monday.
  • Oil prices rose after OPEC and a group of Russia-led oil producers agreed to keep pumping more crude in a bet that the global surge in Covid-19 cases won’t depress demand like earlier waves of the virus.
  • Global benchmark Brent crude climbed 1.4% to $80.11 a barrel.
  • Overseas, the pan-continental Stoxx Europe 600 added 0.9%.
  • In Asia, major benchmarks were mixed. The Shanghai Composite Index slipped 0.2% after fresh data showed that Chinese exports were broadly stagnant last month due to lackluster foreign demand, even as manufacturing activity rebounded.
  • Hong Kong’s Hang Seng Index edged up 0.1%. Japan’s Nikkei 225 closed up 1.8% as the weaker yen drew investors to the country’s stock market.

U.S. Covid-19 Infections Top One Million After Holiday Backlog – Wall Street Journal, 1/4/2022

  • More than one million new Covid-19 infections were reported in the U.S. as global health officials scrambled to increase measures to counter the fast-spreading Omicron variant.
  • The U.S. reported a record 1.08 million Covid-19 infections on Monday as most states worked to clear backlogs after pausing during the New Year’s holiday. The reports pushed the seven-day average of daily reported infections to 480,273, according to a Wall Street Journal analysis of Johns Hopkins University data. That level is nearly double the peak reached at the height of last winter’s case surge.
  • Hospitalizations for confirmed or suspected Covid-19 cases reached a seven-day average of 97,855 on Monday, according to data posted by the U.S. Department of Health & Human Services. That is up 41% in the past two weeks but below both the pandemic peak of 137,510 on Jan. 10, 2021, and the smaller peak of 102,967 on Sept. 4, 2021, during the Delta-variant surge.
  • The U.S. seven-day average of daily reported Covid-19 deaths was 1,236 on Monday, according to Johns Hopkins data. That average has remained relatively unchanged in recent weeks. Reports of deaths tend to lag three to five weeks behind cases, so many deaths that result from the Omicron surge will likely not appear in reports until later in January.
  • Italy has seen infections more than double compared with the previous week. Hospitalizations, including in intensive-care units, are rising as a result, although they are still considered manageable in most parts of the country.
  • In Belgium, Covid-19 cases soared as the Omicron variant spread. Case numbers rose 69% over the seven days through Dec. 29, the most recent period for which data was available. But in a hopeful sign, hospitalizations rose only 15% over the same period and deaths were down 34%.
  • Australia recorded nearly 48,000 cases on Tuesday, a new daily record. The country relaxed restrictions on international travel in November and has dialed back other measures, including those concerning the movement of unvaccinated people.

Ford Surges on EV Optimism Over F-150 Pickup, U.S. Market Growth – Bloomberg, 1/4/2022

  • Ford Motor believes electric vehicles could grow to represent 10% of the U.S. market — if the auto industry can build enough of them.
  • The carmaker is capitalizing on soaring demand by doubling factory capacity of its battery powered F-150 Lightning pickup to 150,000 trucks a year, the company said Tuesday in a statement.
  • Ford plans to start taking orders on Jan. 6 for the model going on sale this spring. This is the second time Ford has doubled production of the plug-in pickup that received nearly 200,000 nonbinding reservations.
  • The company will be able to build 600,000 EVs annually by 2024 and will have more factory capacity coming on line in 2025 as it opens battery plants and an assembly plant in Tennessee and Kentucky.
  • Chief Executive Officer Jim Farley is accelerating Ford’s push into EVs and also is doubling capacity at the Mexican plant building the electric Mustang Mach-E.

Apple Briefly Tops $3 Trillion Market Cap – Wall Street Journal, 1/4/2022

  • Apple briefly touched $3 trillion in market value, making it the first U.S. company to do so.
  • The move marked the latest milestone in a pandemic-era surge that carried shares of Apple and other large technology companies to unprecedented highs. Its share price has more than tripled since the pandemic lows of March 2020, adding around $2 trillion in market capitalization.
  • Apple is a staple in retail and institutional investors’ portfolios. The milestone marked a 41% rise for Apple’s shares since the beginning of 2021, among the biggest gains in the Dow Jones Industrial Average.

Private Equity Backs Record Volume of Tech Deals – Wall Street Journal, 1/4/2022

  • As of mid-December, private-equity firms had announced backing U.S. technology deals totaling $401.71 billion, including new purchases, asset sales and add-on deals, according to data provider Dealogic.
  • That accounted for 41% of a record $990.25 billion in overall private-equity deals through mid-December, Dealogic said.
  • The tech-deal value for 2021, which more than doubled from the 2020 level of $196.34 billion, was the highest since Dealogic began tracking the data in 1995.
  • In 2020, tech transactions also represented 41% of overall private-equity deals, which totaled $474.06 billion.
  • Though many investors remain bullish about prospects for tech investing in 2022, some are raising concerns that elevated valuations could make it tougher to generate strong returns on certain technology investments.

Tesla Opens Showroom in China’s Xinjiang, Region at Center of U.S. Genocide Allegations – Wall Street Journal, 1/4/2022

  • Tesla has opened a new showroom in Xinjiang, the remote region where Chinese authorities are carrying out a campaign of forcible assimilation against religious minorities that has become a public-relations quagmire for Western brands.
  • The Austin, Texas-based electric car maker started operations at the new showroom in Urumqi, the capital of Xinjiang, the company said in a Friday post on its official account on China’s popular Twitter-like social-media platform Weibo.
  • Researchers say authorities in Xinjiang have detained as many as a million Uyghurs and members of other Turkic Muslim minority groups in a network of internment camps as part of the government’s assimilation campaign, which they say also includes mass surveillance, forced labor and stringent birth controls.
  • The U.S. government, along with some lawmakers from other Western countries, have said those policies amount to a form of genocide.

Flight Cancellations Pile Up as Snowstorm Pounds U.S. Capital – Bloomberg, 1/4/2022

  • Airline cancellations spilled into a second day after a winter storm slammed the Washington, D.C., area with its biggest snowfall since 2019.
  • Some 21% of flights at Baltimore/Washington International Thurgood Marshall Airport were grounded Tuesday morning, according to FlightAware.com. At Ronald Reagan Washington National Airport, 18% of flights were scrubbed.
  • More than 1,200 flights were dropped nationwide, marking the ninth straight day with more than 1,000 cancellations, many of them as coronavirus infections caused staffing shortages.
  • More than 3,200 flights were canceled in the U.S. on Monday, the most in more than a month. Nearly 18,000 flights were parked in the U.S. from Dec. 24 through Monday, according to FlightAware, while more than 67,500 were delayed.

Carmakers Close Rough Year as Issues Linger: Auto Sales Update – Bloomberg, 1/4/2022

  • Carmakers likely sold a seasonally adjusted annual rate of about 12.5 million new vehicles in December, down 23% from a year earlier, according to the average forecast of six market researchers surveyed by Bloomberg.
  • For the full year, auto sales likely came to 14.9 million vehicles, a 2.5% jump from the coronavirus-stricken days of 2020, according to Cox Automotive.
  • The year wasn’t without its bright spots. The inventory challenges helped push some buyers to more-profitable, option-laden models, while the mainstream embrace of electric vehicles accelerated.
  • Indeed, Tesla on Sunday blew past Wall Street’s expectations with a record for quarterly global deliveries.

General Motors fourth-quarter U.S. auto sales drop 43% – Reuters, 1/4/2022

  • General Motors reported a second straight drop in quarterly U.S. auto sales on Tuesday, as semiconductor shortages and supply chain snarls hit production amid high pent-up demand in the country.
  • The U.S. automaker said fourth-quarter sales fell 43% to 440,745 vehicles, compared with 771,323 vehicles a year earlier.
  • General Motors said 2021 sales were at 2,218,228 vehicles, below Toyota’s annual sales of 2,332,262 vehicles.

US ECONOMY & POLITICS

Job Openings on Track for New High Ahead of Omicron Wave – Wall Street Journal, 1/4/2022

  • U.S. job openings are on track to have ended last year at a record high in a strong labor market where the gap between available positions and workers continues to widen.
  • There were 12 million job openings in the U.S. at the end of December, according to estimates from job-search site Indeed, based on an analysis of online job postings and government data sources.
  • That would be an increase of 1 million openings since the end of October when the Labor Department reported 11 million open positions, marking an increase in demand for workers ahead of disruptions from the Omicron variant of Covid-19.
  • In November, 6.9 million people were unemployed but say they want work, meaning there were roughly two workers for every three openings.

A record 4.5 million workers quit their jobs in November – CNBC, 1/4/2022

  • Workers quit their jobs in record numbers in November while the total employment openings pulled back a bit, the Labor Department reported Tuesday.
  • The so-called quits level surged to 4.53 million for the month, according to the department’s Job Openings and Labor Turnover Survey. That represented a 9% increase from October and broke September’s high-water mark of 4.36 million.
  • As a percentage of the workforce, the quits rate of 3% matched September’s mark.
  • For November, the number of job openings totaled 10.56 million, lower than the 11 million estimate from FactSet and a decline from 11.09 million in October.
  • The level, however, was well ahead of the 6.88 million total of those out of work and looking for jobs in November, according to the government’s nonfarm payrolls report for that month.
  • The job openings rate was 6.6%, down from about 7% in October but well ahead of the 4.5% from the prior year.

Fed Weighs Proposals for Eventual Reduction in Bond Holdings – Wall Street Journal, 1/4/2022

  • Federal Reserve officials are beginning to map out how and when they could shrink their $8.76 trillion portfolio of Treasury and mortgage securities, which more than doubled amid efforts to stabilize the economy over the past two years.
  • At their policy meeting last month, officials agreed to wind down their bond-purchase stimulus program more quickly amid growing concerns about high inflation, setting it on track to end in March.
  • Officials began discussing at that meeting what should happen to the bondholdings after that point, and some are pushing to start shrinking them sooner and faster than they did after an earlier asset-purchase program.
  • Once the Fed stops buying assets, it could keep the holdings steady by reinvesting the proceeds of maturing securities into new ones, which should have an economically neutral effect.
  • Alternatively, the Fed could allow its holdings to shrink by allowing bonds to mature, or run off.
  • Fed Chairman Jerome Powell said last month that he and his colleagues hadn’t made any decisions on the matter and were likely to continue their discussion at their Jan. 25-26 meeting.
  • But he hinted that the central bank wasn’t preparing to follow the path taken between 2014 and 2019.

Chuck Schumer Sets Mid-January Deadline for Possible Filibuster Changes – Wall Street Journal, 1/4/2022

  • Senate Majority Leader Chuck Schumer (D., N.Y.) set a mid-January deadline for trying to change the chamber’s procedures on passing legislation if Republicans again block Democrats’ proposed changes to the nation’s election systems.
  • Democrats argue that many Republican-led states’ changes to their voting laws were designed to restrict voters’ access to the ballot, and that new federal legislation is required to protect voting rights.
  • In his letter Monday, Mr. Schumer said there was a direct connection between Mr. Trump’s false claims that the election was stolen, the Jan. 6 attack and the changes made in Republican states, which he termed voter suppression and election nullification laws.
  • Republicans say the Democrats’ elections proposal would wrest power from the states and glosses over the need to better safeguard elections.
  • They paint calls to change the Senate’s filibuster rules, which give the minority power by requiring 60 out of 100 votes to advance most legislation, as a power grab.
  • A simple majority in the 50-50 Senate is required to change or eliminate the filibuster, but Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona have raised objections, leaving the fate of any changes uncertain.

U.S. Manufacturing Gauge Falls While Price Pressures Ease – Bloomberg, 1/4/2022

  • A measure of U.S. manufacturing fell short of expectations at the end of 2021, reflecting declines in gauges of delivery times and prices that belie an otherwise solid demand picture.
  • The Institute for Supply Management’s gauge of December factory activity fell to 58.7, the lowest level since January 2021, from 61.1 in the prior month, according to data released Tuesday.
  • The ISM employment gauge rose to an eight-month high, and the new orders index eased just slightly to a healthy 60.4.
  • The ISM’s factory production measure slipped to 59.2, the lowest since July but robust by historical standards.

Biden disapproval hits new high as voters give him bad grades on economy, new CNBC/Change poll says – CNBC, 1/4/2022

  • President Joe Biden’s disapproval rating hit a new high in December as more voters signaled their unhappiness with his administration’s supervision of the economy and the Covid-19 pandemic.
  • Fifty-six percent of voters now say they disapprove of the job Biden is doing, the worst such reading of his presidency as he approaches the end of his first year in office, according to new CNBC/Change Research polls.
  • Prior polls in the series showed Biden’s disapproval rating at 54% in early September and 49% in April.
  • Biden’s approval rating is now at 44%, down from 46% in September and 51% in April.
  • Sixty percent of the survey’s 1,895 respondents said they disapprove of Biden’s handling of the economy, marking a six-point decline in approval from September.
  • On personal economic issues, voters are even more likely to criticize the president. Some 72% disapprove of his handling of the price of everyday goods, while 66% disapprove of his efforts to help their wallets.
  • Asked to give the Biden administration a letter grade on both how it’s handled health-care costs and raising wages, Democrats gave the president two Cs, but a B on the economy overall.
  • Independents gave Biden a D on every issue, while Republicans gave the president a failing grade across the board minus the stock market, where they gave him a D.
  • What’s more, a 55% majority of survey respondents said they disapprove of the president’s handling of the coronavirus pandemic, a sign Biden is struggling in an area where he previously excelled.
  • When it comes to how the Biden administration is handling the virus, 50% of respondents say the White House has gone too far, 24% say it hasn’t gone far enough and 26% believe it’s done a good job.

EUROPE & WORLD

Evergrande Is Told to Tear Down 39 Buildings on Man-Made Island – Wall Street Journal, 1/4/2022

  • The crisis engulfing China Evergrande Group deepened, as the embattled property developer said it had been ordered to tear down dozens of buildings on an extravagant man-made island in southern China.
  • At the same time, Evergrande released data showing its much-publicized financial stress had largely halted sales of new homes, depriving it of an important source of cash.
  • Contracted sales dwindled to about 720 million yuan, the equivalent of just $113 million, between mid-October and year-end, the company’s figures showed.
  • The buildings were part of an ambitious project known as “Ocean Flower Island,” an artificial archipelago that the developer has compared to Dubai’s Palm Jumeirah.
  • The Ocean Flower development encompasses houses, hotels and other features, including a roughly 1.1 million square foot convention center built to resemble giant blooming peonies.
  • In a statement Tuesday, Evergrande confirmed the order to demolish 39 buildings. The notice, issued by local authorities in the island province of Hainan along China’s southern coast, had previously circulated on social media and been covered by Chinese media.

Canadian Factory Prices Rise at Fastest Yearly Clip Since 1974 – Bloomberg, 1/4/2022

  • Canadian industrial product prices continued their run-up in November, bringing annual gains to the highest in almost five decades.
  • Prices charged by industrial producers rose 0.8% in November, with year-over-year gains accelerating to 18.1%. That’s the highest since 1974, when annual price increases briefly surpassed 20%.

Factmonster – TODAY in HISTORY

  • Utah was admitted as 45th state in the United States. (1896)
  • Burma (Myanmar) gained independence from Great Britain. (1948)
  • During the Korean War, North Korean and Communist Chinese forces captured the city of Seoul. (1951)
  • President Johnson outlined his “Great Society” in his State of the Union address. (1965)
  • California Democrat Nancy Pelosi becomes the first woman U.S. Speaker of the House of Representatives. (2007)

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