US FINANCIAL MARKET
Stocks Waver Ahead of Fed Minutes – Wall Street Journal, 1/5/2022
- U.S. stocks wavered in early trading Wednesday with investors looking ahead to minutes from the Federal Reserve’s recent policy meeting in the hope of gleaning fresh clues about plans to wean markets off pandemic-era stimulus measures.
- The S&P 500 hovered around the flatline a day after the broad index pulled back from a record high as technology shares fell.
- The tech-heavy Nasdaq Composite Index fell 0.5%, while the blue-chip Dow Jones Industrial Average—which set its own record Tuesday—rose 0.3%.
- In individual stocks, Beyond Meat shares rose 4.3% after the company said its plant-based alternative to fried chicken would be sold at KFC restaurants from next week.
- Energy stocks rallied, with Exxon and Hess rising around 1.7%. Brent crude, the international oil benchmark, advanced 1.4% to $81.15 a barrel.
- On Tuesday, oil prices surged after the Organization of the Petroleum Exporting Countries and a coalition of Russia-led oil producers agreed to continue pumping more crude.
- ADP’s December employment report, which measures the change in employees on private companies’ payrolls, said that 807,000 jobs were added last month, significantly above the 375,000 expected by economists.
- Minutes from the Fed’s December meeting are set to be released at 2 p.m. ET. Fed officials said in that meeting they would speed up the pace at which stimulus measures are withdrawn, and issued projections for three interest rate rises in 2022.
- The yield on the benchmark 10-Year U.S. Treasury note fell to 1.651% Wednesday from 1.666% Tuesday, but remained close to a six-week high. Bond yields rise as prices fall.
- Overseas, the pan-continental Stoxx Europe 600 index rose less than 0.1%. Asian stock markets were mostly lower, with the Shanghai Composite Index down 1%. In Japan, the Nikkei 225 edged up 0.1%.
- Hong Kong-listed Chinese tech firms fell again, with the Hang Seng Tech Index down 4.6% and the broader Hang Seng Index 1.6% lower.
- The drop came after Beijing passed new rules tightening controls on tech companies’ overseas listings and activities, and after Tencent sold a $3 billion stake in Sea, one of its highflying affiliates.
- U.S.-listed shares of Tencent fell 2.3% Wednesday, and other Tencent-backed businesses, such as food-delivery giant Meituan, posted sharp declines.
Rio Scraps Carnival Parades; H.K. Bans Flights: Virus Update – Bloomberg, 1/5/2022
- Rio de Janeiro canceled its world-renowned Carnival street parades for the second straight year as a new wave of infections spreads through the Brazilian city.
- As the omicron strain marches across the globe, Singapore’s infection rate rose at the fastest pace in nearly two months, cases in Israel and Switzerland hit daily records and almost one in three people tested in the Philippines returned a positive result.
- China’s central province of Henan, which reported four confirmed cases on Wednesday, locked down another city of 7.9 million people after it detected one patient who didn’t show symptoms.
- Municipal government of Shangqiu has asked all residents not to leave the city unless necessary, and tightened restrictions including shutting down indoor public venues, according to local authorities.
- The lockdown order came after the province shut Yuzhou city and its capital Zhengzhou earlier this week. A total of 41 domestically transmitted cases were reported across the country, according to the National Health Commission.
- Switzerland reported a record 31,109 new cases on Wednesday, 10,000 more than the previous day, according to the Federal Office of Public Health. Hospital capacity remains manageable, despite the rate of infections having surged since the new year. Last Wednesday, 17,636 people tested positive.
- Sweden may widen the use of vaccine certificates as the number of new infections hits records. The government has given the country’s Public Health Agency a mandate to require vaccine certificates at restaurants, shopping centers and other facilities from Jan. 12. The country of 10 million has seen omicron fuel an unprecedented spike in infections.
- Singapore says booster shots will be required to maintain a person’s vaccination status, as the city-state prepares to tackle an expected omicron wave.
- From Feb. 14, those aged 18 years and above will be considered fully vaccinated for 270 days after their second jab and should get their booster from around five months later to maintain that status, the health ministry said.
- Nearly one in three people checked for Covid in the Philippines tested positive, as infections surged. There’s a shortage of certain paracetamol brands in some areas, although alternative analgesics remain available, the pharmaceutical association said.
- Israel posted almost 12,000 new infections as omicron rampaged across the country, the highest tally for a single day since the beginning of the pandemic.
- The number of serious cases and deaths has not surged, however, corresponding to the experience of other countries. The burden on hospitals could become heavier if the new daily caseload reaches 50,000, Israeli Prime Minister Naftali Bennett has warned.
- Germany is poised to sharpen contact curbs to tackle an expected surge in infections in coming weeks, even as protests against pandemic measures spread.
- “A tightening will unfortunately be needed to face the powerful wave that is bearing down on us,” Health Minister Karl Lauterbach was quoted as saying late on Tuesday by the RND media group. He has repeatedly warned of the threat posed by the omicron strain.
Fourth Pfizer Dose Spurs Sharp Jump in Antibodies, Early Results From Israel Show – Wall Street Journal, 1/5/2022
- Early data from Israel suggests a fourth dose of the Covid-19 vaccine from Pfizer and BioNTech will provide safe and effective protection against infection and severe illness for those with waning immunity.
- There was a fivefold increase in antibodies of individuals one week after they got their fourth shot, according to data from Israel’s Sheba Medical Center, which provided the dose to 154 medical workers of various ages.
- Israel itself didn’t wait for the results of the trial. On Monday, after much debate within the country, Israel became the first nation to offer a fourth dose to people aged 60 years and older as well as medical workers who are four months past their third dose. Immunocompromised people began receiving a fourth dose last week.
- On Sunday, Sheba Medical Center said data from its trial showed side effects from the fourth dose were similar to previous rounds.
GM Reveals Electric Chevy Silverado to Counter Ford’s F-150 Lightning – Wall Street Journal, 1/5/2022
- General Motors plans to unveil a new electric Chevrolet Silverado pickup Wednesday, a much-anticipated introduction that comes as buzz is growing for the truck’s future rival: Ford Motor’s F-150 Lightning.
- The rollout of this new pickup—a model expected to hit dealerships in early 2023—is part of a broader push by GM to electrify its global vehicle lineup, moving away from the gas engines that have long powered its cars and trucks.
- The company has previously said that the electric Silverado will have more high-tech features and driving range—about 400 miles—than Ford’s truck and others in the nascent electric-pickup market. Ms. Barra has also emphasized these attributes.
- GM executives have touted the company’s so-called Ultium technology, a system of configurable battery modules and electric motors flexible enough to underpin dozens of models in coming years, from compact SUVs to brawny pickups.
- The first vehicle to use Ultium began hitting showrooms a few weeks ago: the GMC Hummer, a muscular luxury truck priced around $100,000. The electric Silverado also will use the system when it is released in early next year, GM executives have said, declining to disclose a price.
Ford posts 7% fall in 2021 U.S. auto sales – Reuters, 1/5/2022
- Ford Motor reported a 6.8% fall in 2021 U.S. vehicle sales on Wednesday, as the automaker struggled to deliver its cars and trucks due to lingering supply-chain bottlenecks and a global chip shortage.
- The Detroit automaker sold 1,905,955 vehicles in 2021, ending up behind new U.S. leader Toyota Motor and rival General Motors. Ford had sold 2,044,744 vehicles a year earlier.
- Sales of Ford’s Mustang Mach-E electric crossover were 27,140 for 2021. The company plans to triple annual production of the electric crossover to more than 200,000 by 2023, to meet better-than-anticipated demand.
- Ford has been focusing on its EV strategy and said on Tuesday it would nearly double annual production capacity for its red-hot F-150 Lightning electric pickup to 150,000 vehicles.
Amazon and Stellantis partner to deploy smarter cars, cleaner vans – Reuters, 1/5/2022
- Amazon.com and Stellantis said Wednesday they will collaborate to develop cars and trucks with Amazon software in the dashboards, and deploy electric vans made by Stellantis on Amazon’s delivery network.
- The agreements between Stellantis and Amazon, the online retailer and cloud computing power, announced in conjunction with the CES technology conference, are wide ranging, involving software and hardware.
- Amazon and Stellantis said they will work together to develop software for the “digital cockpit” infotainment systems of Stellantis vehicles that will start launching in 2024.
- Stellantis said it will use Amazon’s Alexa technology for voice controlled features, “navigation, vehicle maintenance, ecommerce marketplaces, and payment services.”
- Under what Stellantis said is a separate agreement, Amazon will be the first customer for Stellantis’ new line of electric delivery vans due to launch in 2023. The companies said they plan to put thousands of Stellantis Ram ProMaster electric vans on the road every year.
AT&T adds nearly 900,000 wireless subscribers in fourth quarter – Reuters, 1/5/2022
- U.S. telecom company AT&T said on Wednesday it added 880,000 monthly paying phone subscribers in the fourth quarter.
- The company also said it ended 2021 with 73.8 million global subscribers on its streaming services HBO and HBO Max.
Allegiant Air to Buy 50 Boeing 737 MAX Jets – Wall Street Journal, 1/5/2022
- Low-cost carrier Allegiant Air is ordering up to 100 Boeing 737 MAX jetliners, a win for the U.S. aerospace manufacturer that has suffered several setbacks in recent years.
- Allegiant Travel, the Las Vegas-based airline’s parent company, has placed an order for 50 aircraft with the option to buy 50 more. The deal includes 737-7 and 737-8 models.
- Allegiant’s purchase will see Boeing adding a U.S. customer, winning business from an airline whose current fleet comprises aircraft built by Airbus. Allegiant now exclusively flies Airbus A319s and A320s, models that have been a longtime rival to Boeing’s 737s.
- The deal also represents a strategic milestone for Allegiant, an airline that has previously focused on buying used aircraft to operate its point-to-point routes largely focused on bringing tourists to leisure destinations.
Companies Expect Funding to Stay Cheap, Despite Looming Rate Increases – Wall Street Journal, 1/5/2022
- Many U.S. finance chiefs secured cheap funding for their businesses in 2021 and anticipate similar conditions in 2022, although expected rate increases by the Federal Reserve are prompting companies to refinance some debt coming due over the next few years.
- In 2021, the volume of bond issuances by investment-grade-rated U.S. companies reached $1.079 trillion, down 28% from the record $1.491 trillion raised in 2020, though still higher than the $965.04 billion raised in 2019, according to Refinitiv, a data provider.
- U.S. companies sold $402.55 billion in junk bonds in 2021, up 11% from 2020 and almost double the amount they raised in 2019.
- Equity issues, at $377.38 billion, were up 4.2% in 2021 from 2020, Refinitiv said.
- U.S. investment-grade-rated companies have about $656 billion of bonds maturing in 2022, $698 billion in 2023 and $644 billion in 2024, according to Refinitiv.
- The average coupon rate for investment-grade debt sold by U.S. companies in 2021 was 2.396%, down from 2.849% in 2020 and from 3.277% in 2019, Refinitiv said. For junk bonds, the average coupon rate in 2021 was 5.277%, down from 5.995% in 2020 and 6.193% in 2019.
Scarce Labor Is Likely to Squeeze U.S. Business Long After Covid – Bloomberg, 1/5/2022
- The labor force is projected to grow by just 6.5 million workers through 2030, according to the Bureau of Labor Statistics.
- That’s down from almost 10 million for the ten years ending in 2019, and even bigger numbers in previous decades.
- A combination of slower population growth inside the country and fewer migrants arriving from outside -– both exacerbated by the pandemic, but also pre-dating it –- suggests that in periods of strong or even steady economic growth, companies could have trouble finding people for entry-level jobs.
- “Call it a crisis if you will, but it’s been building,” says William Emmons, an economist at the St. Louis Fed. “We have a problem. Where are the workers going to come from?”
- Tight labor markets can boost productivity, as companies work more efficiently and invest in better equipment and software. The current squeeze has brought advantages for workers too.
- Those with just a high-school degree enjoyed faster wage growth than other groups last year, according to the Atlanta Fed.
OPEC Output Boost Severely Limited as African Members Struggle – Bloomberg, 1/5/2022
- OPEC made only part of its planned production increase last month, with supplies hampered by disruptions in two of the group’s African members.
- The Organization of Petroleum Exporting Countries added just 90,000 barrels a day in December, as a boost by Saudi Arabia was offset by losses in Libya and Nigeria, according to a Bloomberg survey.
- The OPEC+ coalition led by Saudi Arabia and Russia has been restoring production halted during the pandemic, and on Tuesday agreed to press on with further increases at a rate of 400,000 barrels a day.
- The coalition’s travails are helping to support oil prices even as global markets tip back into oversupply, with Brent crude futures trading near $80 a barrel in London on Wednesday.
US ECONOMY & POLITICS
U.S. Companies Add Most Jobs in Seven Months, ADP Data Show – Bloomberg, 1/5/2022
- U.S. companies in December added the most jobs in seven months, indicating that more Americans are returning to the labor force and helping employers to fill a near-record number of open positions.
- Businesses’ payrolls grew by 807,000 last month, after a downwardly revised 505,000 gain in November, according to ADP Research Institute data released Wednesday.
- Service-provider employment rose by 669,000 in December, the most since June, led by leisure and hospitality.
- Payrolls at goods producers increased 138,000, the strongest since September 2020.
- Companies with more than 500 workers added 389,000, the most jobs since June 2020. Small businesses posted a gain of 204,000 in December, which was the most in six months.
- The data precede Friday’s monthly jobs report from the Labor Department, which is currently forecast to show that the U.S. added 384,000 private payrolls in December. ADP’s data don’t always align with those of the government because of different measurement techniques.
Build Back Better Takes Back Seat to Democrats’ Election-Law Push – Wall Street Journal, 1/5/2022
- Senate Democrats put the party’s marquee economic package on ice, shifting their attention to passing elections legislation as they consider how to overhaul the roughly $2 trillion education, healthcare and climate bill.
- Senate Majority Leader Chuck Schumer (D., N.Y.) said Tuesday that he touched on Build Back Better in discussions with Mr. Manchin over the break and that the Senate would hold a vote on the bill.
- Sen. Dick Durbin (D., Ill.), the No. 2 Senate Democrat, said the party would turn back to the economic package after working on the elections legislation—and possible rules changes for passing it.
- “We’re focused on voting rights, as we should be, and I think the White House is joining us in that effort, and clearly we’ll return to Build Back Better as soon as that is done,” he said.
Manchin Deflates Democrats’ Hopes of Changing Filibuster, Passing Election Bills – Wall Street Journal, 1/5/2022
- Sen. Joe Manchin (D., W.Va.) cast doubt on a Democratic push to change Senate procedures to weaken the minority party’s power, dealing a blow to party leaders’ effort to change the filibuster and advance their elections bills.
- In comments to reporters Tuesday, Mr. Manchin said he was engaged in talks about possible changes to the filibuster rule, which currently requires the votes of 60 senators to advance most bills. But, he said, any changes should have the buy-in of Republicans as well, and he was leery of Democrats going it alone.
- His comments came as many Senate Democrats have stepped up their calls for altering the filibuster to make it easier to pass legislation. On Monday, Senate Majority Leader Chuck Schumer (D., N.Y.) said that Democrats would put elections legislation on the floor and then would attempt to enact rules changes if Republicans again filibustered the legislation.
- Mr. Manchin also rejected the idea of making an exception to the filibuster for voting legislation. Some Democrats had floated that idea on the grounds that voting rights are the bedrock of all other rights.
- But Mr. Manchin said that making an exception for one bill would open the floodgates to exceptions for other legislation, ultimately rendering the filibuster meaningless.
U.S. Prevails Over Canada in Dairy Dispute Under New Trade Deal – Wall Street Journal, 1/5/2022
- Canada will be forced to end tariffs on U.S. dairy products under a milestone decision Tuesday that could allow American dairy farmers to increase sales to Canada by more than $200 million annually.
- The ruling came in the first-ever use of a new dispute resolution panel established by the U.S.-Mexico-Canada Agreement. The U.S. contended that Canada used a complex set of tariff-rate quotas to reserve a share of the dairy market exclusively for Canadian dairy processors in violation of the 2020 pact.
- Although Canada said aspects of the ruling were in its favor, the panel’s report contained only one ultimate finding—that Canada’s practices were inconsistent with its obligations in the trade deal.
- Canada’s dairy producers have long fought against opening their market. The country has around 11,000 commercial farms that hold substantial political sway because they are located in a politically important region: rural central Canada, especially French-speaking Quebec.
Inventory ‘Bullwhip’ Risk Emerges in Latest U.S. Logistics Index – Bloomberg, 1/4/2022
- The bigger-than-usual rush to stockpile products on U.S. retail shelves and in warehouses ahead of the holidays might give way to an economic hangover of sorts.
- That’s one of the interpretations from the latest Logistics Managers’ Index, a monthly survey-based gauge compiled by researchers at five U.S. universities that flirted with record highs last year amid unprecedented supply-chain stress caused by the pandemic.
- While the latest reading for the main measure released Tuesday fell in December, it stayed for an 11th straight month above the 70 level considered to reflect significant expansion.
- Unusually, inventories rose during the final month of the year, when most companies clear out merchandise during the holiday rush.
- The December reading for inventory levels was 61.6, compared with 56.8 a year earlier and well above the 42.3 registered in December 2019.
- When respondents were asked to predict inventory conditions 12 months from now, the average value was 81.7, a jump from November’s future prediction of 72 and well above the December level, “meaning inventory levels are expected to grow substantially over the next year.”
EUROPE & WORLD
Hong Kong Bans Flights, Shuts Nightlife After Omicron Bursts Pandemic-Free Bubble – Wall Street Journal, 1/5/2022
- Hong Kong is banning passenger flights from eight countries, including the U.S., for two weeks, closing bars and banning evening dine-in after the city’s first community Omicron infections punctured one of the world’s strictest and most effective border controls.
- Chief Executive Carrie Lam unveiled some of the toughest restrictions since the start of the Covid-19 pandemic in response to several cases of the Omicron variant tied to returning aircrew, a circuit breaker designed to try to prevent a major outbreak.
- City health officials have detected just one Omicron case that wasn’t related to imported cases so far, but the find sparked fears of invisible transmission chains in the community.
- Dining in restaurants after 6 p.m. is now banned, and museums, gyms and swimming pools were ordered to close for two weeks.
- The city will ban passenger flights from Australia, Canada, France, India, Pakistan, the Philippines, the U.K. and the U.S. for 14 days from midnight Friday. People who had stayed in those countries won’t be allowed to board flights to Hong Kong.
Lockdown of Chinese City Leaves 13 Million Stranded – Wall Street Journal, 1/4/2022
- A week and a half into one of the biggest pandemic lockdowns in China, residents of Xi’an voiced desperation online about challenges in getting food and medical care.
- Like in Wuhan in early 2020, no one is allowed to enter or leave Xi’an. Most of the city’s 13 million residents can leave their homes only for Covid-19 testing. Few vehicles are allowed in the streets except for those transporting essential workers and supplies, and many supermarkets and hospitals are closed.
- In recent days, local residents have circulated a document purporting to show that local officials are preparing to move anyone deemed to have been near an infected person—a vague definition that can mean someone in the same apartment complex—into quarantine centers outside the city.
- Xi’an officials said in a Monday briefing that the city was housing nearly 40,000 people in 387 quarantine centers.
- Almost all the new cases have been detected among quarantined residents. The city can only ease restrictions once community spread, meaning infections detected outside quarantine centers, is down to zero, a Xi’an health official told the Xinhua News Agency on Tuesday.
- In the past few days, about 90% of cases have been in Xi’an, the city of terracotta-warrior fame in China’s northwest, which has confirmed 1,758 total Covid-19 infections since Dec. 9, a high number for China.
- No deaths related to Covid-19 have been reported anywhere in China in the past 11 months, including Xi’an.
Tencent Divestment Sends Chinese Internet Stocks Tumbling – Wall Street Journal, 1/5/2022
- Shares of many Chinese internet companies tumbled again in Hong Kong on Wednesday, after industry giant Tencent Holdings sold a $3 billion stake in one of its highflying affiliates and Chinese regulators indicated their long-running crackdown on the sector is far from over.
- The Hang Seng Tech Index, which tracks the 30 biggest Hong Kong-listed technology companies, fell 4.6% on Wednesday to another closing low.
- The drop was led by Tencent-backed internet businesses such as food-delivery giant Meituan and short-video platform operator Kuaishou Technology, which lost 11% and 7.5% respectively.
- The broader Hang Seng Index ended 1.6% lower, after Hong Kong’s government reintroduced tighter social-distancing measures and said it would impose a two-week ban on passenger flights from eight countries.
Natural-Gas Crisis Pushes German Utilities Into Dash for Cash – Wall Street Journal, 1/5/2022
- European energy companies are racing to secure billions of euros in funds, a sign of the financial strains caused by dramatic moves in natural-gas and power prices this winter.
- Uniper, one of Europe’s largest energy companies, in recent weeks agreed to credit lines for €10 billion, equivalent to $11.3 billion, from its parent company and Germany’s state-owned lender.
- RWE, one of Germany’s largest utilities, said Wednesday it has also been affected by the price volatility and has had to make credit provisions, without elaborating on the size or timing.
- Gas prices in Europe are more than five times as high as they were a year ago. The crisis has claimed dozens of corporate victims in the U.K., where 28 small and midsize energy suppliers failed last year, according to regulators.
- Some of Uniper’s hedges are deep in the red. The Düsseldorf-based utility said in November it had sold 90% of its German power for 2022 forward at €49 a megawatt-hour.
- On Wednesday, German power futures for February traded at €269 a megawatt-hour.
Euro zone economic recovery stumbled in December as Omicron spread -PMI – Reuters, 1/5/2022
- The euro zone’s economic recovery stuttered in December as a renewed wave of COVID-19 infections curtailed growth in the bloc’s dominant service industry, a survey showed on Wednesday, and could weaken further if tighter restrictions are imposed.
- That meant IHS Markit’s Composite Purchasing Managers’ Index (PMI), a good gauge of overall economic health, sank to 53.3 in December from 55.4 in November, its lowest since March.
- With customers encouraged to stay at home the euro zone’s services industry saw growth wane. Its PMI dropped to an eight-month low of 53.1 from November’s 55.9, below a 53.3 preliminary reading.
- Weaker demand and the threat of further restrictions on the horizon meant services firms increased headcount at the slowest pace since May. The employment index fell to 53.6 from 55.4.
- But the composite input prices index stayed high at 74.1, albeit below November’s 76.0. The output prices index fell but remained elevated.
- Henry Ford introduced the $5-a-day minimum wage. (1914)
- President Nixon ordered the development of the space shuttle. (1972)
- INS Commissioner Doris Meissner ruled that 6-year-old Elian Gonzalez must be returned to Cuba. (2000)