Daily Market Report | Jan. 06, 2021
- The Dow rose, while U.S. technology stocks underperformed Wednesday as investors bet that the Democrats were poised to take control of the Senate following early results from Georgia’s runoff elections.
- The tech-heavy Nasdaq Composite edged down 0.2% shortly after the opening bell on expectations that a Democrat-controlled Congress would lead to higher taxes and tighter regulations on tech giants.
- The Dow Jones Industrial Average, in contrast, rose 1.1%, or roughly 325 points, and the S&P 500 added 0.6%.
- The Russell 2000, which tracks smaller stocks, jumped 2.4%.
- Both indexes are comprised of companies beaten down by the coronavirus pandemic that stand to benefit from higher fiscal spending.
- Meanwhile, stocks hit hard by the pandemic such as banks, industrials and small companies jumped.
- Bank of America, Wells Fargo and Citigroup all surged more than 5%.
- In the elections in Georgia, two races that will determine which party has control of the Senate, the Democrats flipped one Republican seat and maintained a narrow lead in the second race, which was too close to call.
- Investors are closely following the results, betting that a “blue sweep,” Democratic control of both the Senate and the House of Representatives, would make it easier for President-elect Joe Biden’s administration to pass new legislation.
- Such an outcome could scramble investors’ expectations for government policy. It would increase Mr. Biden’s chances of pushing through higher corporate and capital-gains taxes. He has promised greater scrutiny of tech giants that have powered the stock-market rally in recent years and an expansion of health-care benefits.
Coronavirus Live Updates: U.S. Cases Surpass 21 Million – Wall Street Journal, 1/6/2021
- Newly reported Covid-19 cases in the U.S. were back above 200,000, putting the nation’s total reported infections above 21 million, as hospitalizations hit another record.
- The nation reported more than 230,000 new cases for Tuesday, according to data compiled by Johns Hopkins University, up from 180,477 reported for Monday.
- Tuesday’s figure was also up from the 202,145 reported a week earlier.
- Hospitalizations jumped again, to a record 131,195, according to the Covid Tracking Project.
- It was the first time the number has risen past 130,000, and the 10th day in a row it has been above 120,000.
- There were 23,509 people in intensive care, according to the project, also a record.
- The percentage of Covid-19 tests returning positive results has significantly increased in a number of states in recent days, raising concerns among health officials who see it as a sign that the virus is spreading more broadly and accelerating in communities.
- The U.S. seven-day average positivity rate stood at 13.3% on Tuesday, according to Johns Hopkins data.
- Alabama, Idaho, Iowa, Pennsylvania and South Dakota all have seven-day average positivity rates above 40%, according to data compiled by Johns Hopkins University.
- The positivity rate in South Carolina is currently at a seven-day average of 16.6%. In early November, it was 6.1%. In Virginia, the average hit 14.8% on Tuesday.
- From early June to the end of November, the state never exceeded 10% and fell as low as 4% in October.
- Health officials in Georgia said Tuesday that a highly contagious strain of Covid-19 first found in the U.K. has been detected in the state.
- The new strain, which is thought to spread 70% faster than earlier forms of the virus, was found in an 18-year-old man who had no history of travel.
- A new lockdown went into effect in England and Scotland to combat the spread of the new strain. Colorado was the first state in the U.S. to discover the variant in one of its residents last week.
- Additional cases were subsequently found in California, Florida and New York.
Moderna’s Covid-19 Vaccine Is Cleared in Europe – Wall Street Journal, 1/6/2021
- The European Union’s main drug regulator on Wednesday cleared Moderna’s Covid-19 vaccine for use, offering the region a second shot to fight the coronavirus at a time when it is already struggling to distribute the doses it has.
- The decision, which is expected to be formalized by the European Commission within 24 hours, comes more than two weeks after Moderna’s shot received emergency-use authorization in the U.S. and U.K., a timeline that shows how the EU’s regulators have struggled to assess vaccines as quickly as their Western counterparts.
- The agency said the vaccine should be administered in two doses, the second 28 days after the first, as intended by the manufacturer.
- The recommendation comes after public-health institutions elsewhere have explored the possibility of delaying second doses so that more people can receive their first.
U.S. 10-Year Treasury Yield Hits 1% for First Time Since March – Wall Street Journal, 1/6/2021
- The yield on the benchmark 10-year U.S. Treasury note rose above 1% for the first time since March, after returns from Georgia’s closely watched runoff elections fueled bets that Democrats could win narrow control of the Senate.
- By late morning in Europe on Wednesday, the yield on the benchmark 10-year U.S. Treasury note was 1.033%, according to Tradeweb, up from 0.955% at its 3 p.m. ET close on Tuesday.
- Democrat Raphael Warnock defeated incumbent Kelly Loeffler in one of the Georgia runoffs, according to the Associated Press, while a second race remained too close to call.
- Other U.S. debt also sold off, with the yield on the 30-year Treasury bond rising 0.088 percentage point to 1.792%, also the highest since March.
- The dollar weakened slightly, with the WSJ Dollar Index dropping 0.21% to 84.43, its lowest reading since April 2018.
NYSE Reverses Course Again, Will Delist Three Chinese Telecom Stocks – Wall Street Journal, 1/6/2021
- The New York Stock Exchange will move forward with delisting three Chinese telecommunications companies targeted by an executive order from President Trump, reversing course yet again after the NYSE said earlier this week that it wouldn’t delist them.
- The NYSE said Wednesday that trading of the U.S.-listed shares of China Mobile, China Telecom and China Unicom (Hong Kong) would be suspended at 4 a.m. ET on Monday.
- The NYSE said its latest action came after it received “new specific guidance” from the Treasury Department’s Office of Foreign Assets Control on Tuesday, which listed the three companies’ American depositary receipts as being covered by Mr. Trump’s order.
- Last week, the NYSE said it would delist the three companies to comply with Mr. Trump’s order, only to reverse course on Monday and say that it wasn’t delisting them.
- A person familiar with the matter said the NYSE backtracked due to ambiguity in whether the three companies were covered by the order.
- The new guidance from the Treasury Department appears to have resolved that issue.
Trump Issues New Ban on Alipay and Other Chinese Apps – Wall Street Journal, 1/6/2021
- President Trump signed an executive order Tuesday banning transactions with eight Chinese-connected apps, including the Alipay payment platform owned by Chinese billionaire Jack Ma’s Ant Group and apps owned by Chinese tech giant Tencent.
- Mr. Trump said the apps can access private information from their users. It could be used by the Chinese government to “track the locations of Federal employees and contractors, and build dossiers of personal information,” he added.
- Alipay, a payment and lifestyle app with more than 1 billion users, is owned by Ant Group, the Chinese financial-technology giant controlled by Mr. Ma. An Ant representative had no immediate comment.
- The executive order also applies to three apps owned by Tencent— WeChat Pay, QQWallet and Tencent QQ.
- A Tencent representative had no immediate comment.
- In addition to the apps owned by Ant and Tencent, the order applies to Camscanner, a scanning app owned by INTSIG Information Co. in Shanghai.
- The ban also applies to Chinese-connected apps known as SHAREit, Vmate and WPS Office.
Ford fourth-quarter U.S. sales fall 9.8% – Reuters, 1/6/2021
- Ford on Wednesday posted a 9.8% fall in quarterly U.S. auto sales, as a fall in sales of its profitable trucks outweighed higher demand for sport utility vehicles.
- The No. 2 U.S. automaker sold 542,749 vehicles in the fourth quarter, down from 601,862 a year earlier.
- The automaker posted a 12.5% decline in truck sales as well as a 41.1% fall in passenger cars as it continues to phase out traditional sedan models in North America that have become increasingly unpopular with consumers.
- Sales of its SUVs, however, rose 4% to 216,732 units.
Apple will modify executive bonuses based on environmental values in 2021 – Reuters, 1/6/2021
- Apple said in its annual proxy filing on Tuesday that it will modify executive cash bonuses based on whether the executives act within the company’s social and environmental values.
- But the iPhone maker did not specify how it would evaluate progress toward the company’s publicly stated targets such as removing carbon from its supply chain.
- Apple lists six values that include environmental practices such as using recycled materials in products, diversity and inclusion among its workforce and the privacy and security of its devices.
UnitedHealth to Purchase Change Healthcare for $8 Billion– Bloomberg, 1/6/2021
- UnitedHealth Group agreed to purchase Change Healthcare Inc. in a deal that values the health technology company at about $8 billion.
- UnitedHealth will pay $25.75 per share in cash, the companies said Wednesday, a 41% premium over Change Healthcare’s closing price Tuesday of $18.24.
- Including more than $5 billion in debt owed by Change Healthcare, the deal amounts to $13 billion.
- The deal will combine Change Healthcare with UnitedHealth’s OptumInsight unit to offer software, data analytics, technology and other services to the health-care industry.
- The acquisition is one of UnitedHealth’s largest and is another step in expanding the company’s health services business under its Optum division. The companies said the combination would help simplify services around medical care to improve health outcomes and lower costs.
- Walgreens Boots Alliance said it agreed to sell the majority of its pharmacy wholesale unit to AmerisourceBergen, a move it said would help the drugstore chain to better focus on its retail pharmacy business and health offerings.
- AmerisourceBergen, a distributor of pharmaceutical products, will pay $6.5 billion for the wholesale business, Alliance Healthcare, including about $6.3 billion in cash and two million of its shares, the companies said Wednesday.
- The planned deal would expand Walgreens’ nearly 30% stake in AmerisourceBergen, which makes it the largest shareholder of the latter company, according to both firms.
US ECONOMY & POLITICS
- Democrat Raphael Warnock won one of Georgia’s hotly contested runoffs, while the other race between Democrat Jon Ossoff and Republican David Perdue was too close to call Wednesday morning, as control of the U.S. Senate hung in the balance.
- The Associated Press declared Rev. Warnock the winner early Wednesday morning. By mid-morning, Rev. Warnock led Ms. Loeffler by about 53,000 votes out of nearly 4.4 million counted, or a margin of 1.2 percentage points, the AP said. The margin was greater than the 0.5% of the vote necessary for a campaign to request a recount, according to the secretary of state’s office.
- Mr. Ossoff led Mr. Perdue by about 15,000 votes, or a margin of just under 0.4 percentage points, within the range for a recount.
- The campaigns of Messrs. Ossoff and Perdue released dueling statements early Wednesday jockeying over the remaining Senate seat.
- Each campaign maintained that once all the results were counted, each candidate believed they would be declared the winner
U.S. factory orders beat expectations in November – Reuters, 1/6/21
- New orders for U.S.-made goods increased more than expected in November and business investment on equipment was solid, pointing to sustained recovery in manufacturing.
- The Commerce Department said on Wednesday that factory orders rose 1.0% after increasing 1.3% in October. Orders fell 7.3% year-on-year.
- The Commerce Department also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, advanced 0.5% in November instead of 0.4% as reported last month.
- Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.5%. They were previously reported to have increased 0.4%.
U.S. private payrolls post first decline in eight months as COVID-19 cases soar – Reuters, 1/6/2021
- U.S. private companies shed workers in December for the first time in eight months as out-of-control COVID-19 infections unleashed a fresh wave of business restrictions, setting the tone for what is likely to be a brutal winter for the economy.
- Private payrolls decreased by 123,000 jobs last month, the first decline since April, after increasing 304,000 in November. Economists polled by Reuters had forecast private payrolls would rise by 88,000 in December.
- Manufacturing shed 21,000 jobs in December, while payrolls in the private services industry dropped by 105,000.
- There were 13,000 job losses among small companies. Large companies payrolls decreased by 147,000. Medium-sized companied hired 37,000 workers last month.
U.S. bankruptcy filings hit 35-year low thanks to government pandemic aid – Reuters, 1/5/21
- U.S. bankruptcy filings for 2020 hit their lowest level since 1986 as a flood of government support programs offset at least temporarily the full brunt of the coronavirus pandemic and a related recession, Epiq AACER reported on Friday.
- The firm’s compilation of bankruptcy cases showed the Chapter 11 filings used to reorganize larger businesses still jumped 29% in 2020 to 7,128, compared to 5,158 in 2019, a tally that included major retailers like J.C. Penney driven under by the biggest economic downturn in a century.
- But overall filings, including all personal and other business bankruptcies, for the year were 529,068, compared to nearly 800,000 annually in recent years, and triple that in 2010 at the end of the last recession.
- But Epiq AACER Senior Vice President Chris Kruse said in a press release he expects household and other non-commercial filings “to grow substantially in the second half of 2021,” as government programs end and debts from the last few months come due.
EUROPE & WORLD
Germany introduces tougher restrictions in pandemic battle – Reuters, 1/5/21
- Germany is extending its nationwide lockdown until the end of the month and introducing tougher restrictions in an effort to curb a surge in coronavirus infections, Chancellor Angela Merkel said on Tuesday.
- The new rules will restrict for the first time non-essential travel for residents of hard-hit areas all over Germany.
- They limit movement to a 15-kilometre (nine-mile) radius in towns and districts where the number of new coronavirus cases is above 200 per 100,000 residents over a seven-day period.
- The rules also include the strictest limit on gatherings since the first lockdown in the spring, with members of any one household being allowed to meet only one other person.
- Shops and restaurants will remain shut until the end of January. Schools are also to remain closed, with classes to be held online, until at least the end of the month.
- The World Health Organization took the rare step of criticizing China on Tuesday, using its first press conference of the new year to express disappointment that Beijing has still not given permission to United Nations investigators to probe the origins of the coronavirus pandemic.
- WHO Director-General Tedros Adhanom Ghebreyesus told reporters that several scientists on the U.N. agency’s team researching the pandemic’s source had left their home countries on Monday and Tuesday, after the Chinese government had agreed to allow their entry.
- But while team members were en route, Tuesday, the WHO was told that Chinese officials had not yet finalized the necessary permissions for their arrival, Dr. Tedros said.
- For nearly a year, the WHO has been negotiating with China’s government to get information on how the disease may have first crossed into the human population, as well as access to key sites in Wuhan.
- The WHO rarely criticizes the national governments that fund its budget and elect its leaders. For its top official to call out China shows how the agency has struggled to get Beijing’s cooperation on important issues.
- China said on Wednesday it would take necessary measures to safeguard the legitimate rights of companies, after U.S. President Donald Trump signed an order banning U.S. transactions with eight Chinese apps.
- Foreign ministry spokeswoman Hua Chunying was speaking at a regular news briefing.
- Trump on Tuesday signed an executive order banning transactions with eight Chinese software applications, including Ant Group’s Alipay mobile payment app, the White House said, escalating tensions with Beijing two weeks before President-elect Joe Biden takes office.
- China’s regulators are trying to get Jack Ma to do something the beleaguered billionaire has long resisted: share the troves of consumer-credit data collected by his financial-technology behemoth.
- Central to the crackdown on Ant Group is what regulators view as the unfair competitive advantage the company has over small lenders or even big banks through swaths of personal data harnessed from its payment and lifestyle app Alipay.
- The app, used by more than a billion people, has voluminous data on consumers’ spending habits, borrowing behaviors and bill- and loan-payment histories.
- Not only are authorities set to regulate Ant’s lending business like a bank, which would cause it to supply more of its own funds when making loans, they are also planning to break what they see as the company’s monopoly over data, according to officials and government advisers with knowledge of the regulatory matter.
- One plan being considered would require Ant to feed its data into a nationwide credit-reporting system run by the central bank, the People’s Bank of China, the people familiar with the matter say.
- Police arrested more than 50 pro-democracy figures they accused of plotting to paralyze the Hong Kong government through the city’s legislature, targeting much of the opposition camp’s leadership in the biggest sweep using a national security law since it was imposed by China six months ago.
- Those detained on suspicion of subversion early Wednesday included most of the pro-democracy politicians who had sought to run for the city’s aborted legislative council elections last year, as well as other high-profile activists and academics.
- The allegations related to primaries held by the opposition bloc in July to select candidates as part of an effort to win a majority in the lawmaking body and so be able to block government policies.
- Rounding up opposition figures in large numbers signals Beijing’s determination to quash opposition in the city despite a chorus of international condemnation.
Factmonster – TODAY in HISTORY
- King Henry VIII of England married his 4th wife, Anne of Cleves. (1540)
- Samuel Morse gave the first public demonstration of the telegraph. (1838)
- University of California astronomers first witnessed the birth of a galaxy that contained 1 billion stars. (1987)
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