Daily Market Report | January 10, 2022
US FINANCIAL MARKET
Tech Stocks Tumble, Extending Last Week’s Losses – Wall Street Journal, 1/10/2022
- Technology stocks tumbled on Monday as government bond yields continued to rise, signaling that investors expect the Federal Reserve to move quickly in raising interest rates.
- The tech-heavy Nasdaq Composite Index slid 2.6%. The benchmark last week posted its biggest one-week percentage decline since February, as rising bond yields punctured tech valuations.
- The S&P 500 was down 1.9% in Monday trading, while the Dow Jones Industrial Average fell 1.6%, or 578 points.
- Chip maker Nvidia, one of 2021’s best-performing stocks, slumped 5%.
- Google parent Alphabet, Apple and Microsoft all declined more than 2%.
- The tech losses came as the yield on benchmark 10-year Treasury notes—which moves inversely to their price—rose to 1.798% Monday from 1.769% Friday.
- Friday’s closing level was the highest since January 2020, before yields tumbled at the start of the pandemic.
- U.S. inflation data due Wednesday will be keenly watched as investors seek to predict when the Fed will begin to raise borrowing costs. Monthly consumer prices are expected to have risen more than 7% from a year earlier, for the first time since 1982.
- Earnings season kicks off at major U.S. financial firms later this week, with JPMorgan Chase, Citigroup, Wells Fargo and BlackRock due to file results for the final quarter of 2021.
- Many investors have been pushing money into bank stocks, figuring they stand to profit from a rise in interest rates.
- In individual stocks, Take-Two Interactive fell 14% after the videogame maker agreed to buy Zynga in an $11-billion deal. Zynga rose more than 40%. Lululemon declined 5.8% after saying fourth-quarter earnings would fall toward the low end of forecasts.
- GameStop, a favorite among individual traders, lost 14%, having jumped last week after The Wall Street Journal reported that it planned to enter the nonfungible tokens and cryptocurrency markets.
- In commodities, U.S. natural-gas prices rose 4.1% to $3.88 per million British thermal units. Cold weather in the Midwest and eastern U.S. early this week will likely boost demand for the fuel, according to analysts at NatGas Weather.
- Overseas stock markets were mixed. The Stoxx Europe 600 fell 1.4%, weighed down by shares of real estate and tech companies.
- In Asia, the Shanghai Composite Index added 0.4% and Hong Kong’s Hang Seng rose 1.1%. Japanese markets were closed for a public holiday.
Djokovic Lauds Visa Ruling; EU Eases Travel Ban: Virus Update – Bloomberg, 1/10/2022
- Tennis star Novak Djokovic may stay in Australia and vie for a record 21st Grand Slam victory after a court quashed the cancellation of his visa and ordered his immediate release from detention in a hotel.
- Baltimore said some 60 of its 155 schools shifted to virtual learning on Monday because of staffing shortages caused by the pandemic or the inability to conduct testing for the virus. Maryland is among the hardest hit states by the surge in omicron cases.
- The Bangladesh government has ordered people to show vaccine certificates to dine in restaurants and stay in hotels, starting Jan. 13, as virus cases surge. Buses and trains must operate at half capacity, according to a notice issued by the Cabinet Division on Monday. The government also banned all open-air social, political and religious events and made it compulsory to wear masks outdoors. Covid-19 cases rose by 2,231 in a day to about 1.6 million on Monday.
- Sweden will introduce new restrictions to curb an unprecedented surge in Covid infections, Prime Minister Magdalena Andersson said Monday.
- Uganda reopened schools Monday that were closed for nearly two years to slow the spread of Covid-19 as most educators have been partially inoculated against the virus and stringent safety measures have been put in place.
- With one of the youngest populations in the world, Uganda had at least 15.2 million learners in education institutions by March 2020, when they were shut due to the outbreak of the pandemic.
- Irish health officials are set to consider mandatory vaccination against Covid-19, with a paper being prepared on the legal and ethical aspects, the Irish Times reported, citing unidentified people familiar with the matter.
- Some ministers want to remove the current 8 p.m. limit on trading hours, according to the newspaper.
- Germany may need to tighten restrictions before the next scheduled pandemic-policy meeting on Jan. 24, according to a health expert from the Green party, a member of the ruling coalition. Test requirements for people who haven’t yet gotten booster shoots may need to be widened nationwide to fitness studios and other areas, Janosch Dahmen told Deutschlandfunk radio.
- On Monday, the country reported 375.7 cases per 100,000 people over the past seven days, the highest level in nearly a month.
- Given the controversy over a general vaccine mandate, the government should move ahead with making shots compulsory for more public-sector employees such as police and teachers, Dahmen said.
Supreme Court Shows Skepticism Over Biden’s Covid-19 Vaccinate-or-Test Mandate – Wall Street Journal, 1/10/2022
- A majority of Supreme Court justices expressed skepticism Friday of the Biden administration’s Covid-19 vaccine-or-testing plan for large employers but somewhat less concern about a vaccination mandate for healthcare workers, in a special session that examined the scope of the federal government’s powers during a fast-moving pandemic.
- The lengthy session, which took place in a sparsely populated courtroom closed to the public, saw the court’s six-justice conservative majority question how the Biden administration could impose regulations to protect Americans from Covid-19 that Congress hadn’t specifically contemplated when approving the Medicare and Medicaid programs and adopting the Occupational Safety and Health Act of 1970.
- Chief Justice John Roberts said it appeared to him that the administration had decided to use a variety of federal powers to encourage Americans to vaccinate against the novel coronavirus, rather than each agency independently deciding that such policies were appropriate.
- The three liberal justices, meanwhile, were unified in stating that the current public-health crisis, along with broadly written federal laws, gave the administration wide latitude to protect workers and patients.
- But particularly on the vaccine-and-testing requirements for large employers, they found little support from colleagues whose votes will determine whether the regulations can go into effect.
Hospitals Cut Beds as Nurses Call In Sick With Covid-19 – Wall Street Journal, 1/10/2022
- Rising numbers of nurses and other critical healthcare workers are calling in sick across the U.S. due to Covid-19, forcing hospitals to cut capacity just as the Omicron variant sends them more patients, industry officials say.
- The hospitals are leaving beds empty because the facilities don’t have enough staffers to safely care for the patients, and a tight labor market has made finding replacements difficult.
- Staff shortages prompted the Mass General Brigham hospital system in Boston to keep 83 beds empty on Friday.
- The University Hospitals system in Ohio has closed as many as 16% of its intensive-care beds recently, while Parkland Health & Hospital System in Dallas has shut 30 of 900 beds.
- The number of hospitals voluntarily reporting critical staffing shortages to the federal government climbed about 9% between New Year’s Eve day and Jan. 6, to 1,285 hospitals.
- Doctors and hospital officials interviewed by The Wall Street Journal said they have cut capacity between 3% and 10% recently because of staff shortages.
Novavax Says Covid Vaccine Shipments to Europe Have Started – Bloomberg, 1/10/2022
- Novavax has shipped the first doses of its Covid-19 vaccine to Europe, marking the drug company’s entry into a potentially large new market.
- Chief Executive Officer Stanley Erck announced the shipments during a presentation on Monday at the JPMorgan Healthcare Conference.
- The company also said in a statement that it and its partner Serum Institute of India had filed for an emergency-use authorization for the shot in South Africa.
- The company’s vaccine was authorized in Europe last month. The shot is also in use in several countries in Asia, including Indonesia, and it has also been granted emergency-use status by the World Health Organization.
- Novavax is now seeking clearance in the U.S., and Erck said the company expects feedback from regulators sometime in February.
Moderna Says It Has $18.5 Billion in Vaccine Orders for 2022 – Bloomberg, 1/10/2022
- Moderna said it has signed vaccine purchase agreements worth $18.5 billion for this year, along with options for another $3.5 billion, including booster shots.
- In a statement on Monday, the company also said 2021 product sales would be $17.5 billion, slightly higher than the average analyst estimate of $17 billion, according to data compiled by Bloomberg.
- Additionally, the company said that it shipped 807 million vaccine doses in 2021.
- Previously, it had said it would deliver between 700 million and 800 million doses.
- The advance purchase agreements for 2022 are up from $17 billion worth of commitments it had announced last year. Analysts were expecting $19.3 billion in Moderna Covid vaccine sales for 2022, according to a Bloomberg survey of analyst estimates.
SEC Pushes for More Transparency From Private Companies – Wall Street Journal, 1/10/2022
- The Securities and Exchange Commission is preparing to force more transparency from big private companies, as regulators grow concerned about the lack of oversight of the private fundraising that has fueled their rise.
- Private capital markets have become an increasingly popular way for companies to raise money in the U.S. in recent decades, allowing firms to acquire funding from institutions and wealthy individuals without the regulatory burdens of going public.
- The number of so-called unicorns—private companies valued at $1 billion or more—has continued to grow even amid the recent boom in initial public offerings.
- The SEC, Wall Street’s top regulator, has begun work on a plan to require more private companies to routinely disclose information about their finances and operations, according to a semiannual rule-making agenda and people familiar with the matter.
- It is also considering tightening the qualifications that investors must meet to access private markets, and increasing the amount of information that some nonpublic companies must file with the agency.
- “When they’re big firms, they can have a huge impact on thousands of people’s lives with absolutely no visibility for investors, employees and their unions, regulators, or the public,” said Democratic SEC Commissioner Allison Lee, who has called for the change. “I’m not interested in forcing medium- and small-sized companies into the reporting regime.”
Take-Two Interactive to Buy FarmVille Maker Zynga in $11 Billion Deal – Wall Street Journal, 1/10/2022
- Take-Two Interactive Software agreed to buy Zynga in a roughly $11 billion deal as the maker of “Grand Theft Auto” looks to expand its mobile portfolio with hits like “Words With Friends.”
- With the cash-and-stock deal, Zynga stockholders would receive $9.86 for each share they own, including $3.50 in cash and $6.36 of Take-Two stock. The companies said the deal had an enterprise value of $12.7 billion, which includes debt.
- The deal, which is expected to close by midyear, represents about a 64% premium to Zynga’s stock price of $6 as of Friday’s close. In morning trading Monday, Zynga shares rose 45% to $8.73, while Take-Two fell 11% to $146.91.
US ECONOMY & POLITICS
Richmond Fed’s Barkin Says a March Rate Rise Is Conceivable – Wall Street Journal, 1/10/2022
- Federal Reserve Bank of Richmond President Thomas Barkin said Friday he supports the central bank’s hawkish outlook for monetary policy and is open to raising interest rates when its bond buying stimulus effort winds down.
- “I’m very supportive of what we did in December,” Mr. Barkin said in a Wall Street Journal interview, referring to the decision at the Federal Open Market Committee meeting last month to accelerate the Fed’s draw down of its asset purchases.
- Several Fed officials have said the March FOMC meeting could be the time to raise short-term rates. Mr. Barkin, who had an FOMC vote last year but won’t this year due to the rotation of regional Fed bank presidents, said he agrees with that outlook.
- “If you’ve got an economy that continues the levels of unemployment that we’re living through now, which of course is very healthy, with price pressures elevated, I think according to our mandate and framework, we need to move toward normalization,” Mr. Barkin said.
U.S. to Spend $10 Billion to Boost Small Businesses – Wall Street Journal, 1/10/2022
- The U.S. is planning to hand out $10 billion to help upstart companies gain access to capital in a bid to rev up business in disadvantaged communities and spur a broader economic recovery from the pandemic.
- The State Small Business Credit Initiative will direct money to states, territories and tribal governments for programs that provide venture capital or encourage private lenders to issue loans to small firms.
- The program revives a policy put into place following the 2007-2009 recession, when banks cut back on lending to small firms.
- The $10 billion is more than six times as large the cost of the earlier program, in part because the administration and Congress wanted to dedicate funds to disadvantaged groups, said Adair Morse, the Treasury Department’s deputy assistant secretary of capital access.
- The groups include racial minorities, rural communities and veterans, according to program guidelines.
- Some Republicans have countered that the $10 billion program was unnecessary, given that more than $1 trillion in federal funding has already been directed toward small businesses over the course of the pandemic.
SALT Cap Limbo Threatens Suburban Swing District Democrats – Bloomberg, 1/10/2022
- Democrats risk losing their edge in key suburban districts amid a congressional stalemate over President Joe Biden’s economic agenda that threatens plans to expand a tax break for well-off homeowners.
- Many voters in affluent suburbs across the country from New Jersey to Washington state abandoned the Republican party in the 2018 congressional elections, helping to swing the House into Democratic control one year after the GOP set a $10,000 limit on the long-standing federal deduction for state and local taxes, or SALT.
- Those same districts are once again up for grabs as Democrats wrangle over the details of the tax and spending package, including the fate of SALT relief. Uncertainty over when — or if — a package containing SALT could pass threatens to jeopardize Democrats’ chances of maintaining their slim congressional majorities.
- Representative Sean Patrick Maloney, who leads House Democrats’ campaign arm, says delivering relief from the SALT cap is “essential” for the party’s election prospects.
- “We need to get that done. It’s not the only thing, but it’s a big thing,” said Maloney, whose district in New York’s suburban Westchester County is among those disproportionately hit by the SALT cap.
EUROPE & WORLD
U.S., Russia Talks Begin to Avert One of the Biggest Geopolitical Crises Since the Cold War – Wall Street Journal, 1/10/2022
- Russian and U.S. officials meet Monday to discuss the large-scale buildup of Russian troops at Ukraine’s border, as Washington seeks to avert an invasion of the country and defuse one of the most serious geopolitical crises between Moscow and the West since the end of the Cold War.
- Russia has amassed a force of about 100,000 troops near Ukraine, according to U.S. and European officials, in response to what it says is a threat to its own security from the West.
- The Kremlin has accused the North Atlantic Treaty Organization of trying to encroach into Russia’s backyard with military ties to Ukraine. It has demanded that NATO halt its outreach to eastern countries including Ukraine.
- The Biden administration has signaled it is unwilling to cede to Moscow’s demands and has threatened retaliation against Russia if it were to invade Ukraine. As a result, the likelihood of a breakthrough on Monday is low, according to officials.
- To encourage Russian President Vladimir Putin to de-escalate the situation, U.S. officials said the Biden administration is prepared to discuss limits on intermediate-range missiles in Europe as well as reciprocal restrictions on the scope of military exercises on the continent.
Tilray posts surprise profit on cost cuts, pledges more savings – Reuters, 1/10/2022
- Canadian cannabis producer Tilray on Monday reported a surprise quarterly profit helped by savings achieved from its reverse-merger with Aphria and pledged more cost cuts, pushing its shares more than 12% higher in premarket trading.
- Tilray also pledged an additional $20 million in cost cuts over the $80 million originally planned from the merger. Tilray and Aphria combined in May 2021, creating the world’s largest cannabis producer by sales.
- The company’s revenue grew 20% to $155 million, but fell short of analysts’ average estimate of $170.55 million.
- Chief Executive Officer Irwin Simon attributed the miss to market saturation and related competitive challenges in Canada.
- The company posted a net income of $6 million, compared with a loss of $89 million a year earlier.
China Names Former Xinjiang Commander to Lead Troops in Hong Kong – Wall Street Journal, 1/10/2022
- China has named a top internal security forces officer who helped lead Beijing’s crackdown in Xinjiang as the new chief of its army garrison in Hong Kong, the latest hard-line appointment by Beijing in the financial center.
- Major General Peng Jingtang, a deputy chief of staff of China’s People’s Armed Police, will head the People’s Liberation Army garrison in Hong Kong, China’s Xinhua News Agency reported late Sunday.
- He was previously chief of staff for the armed police in the far western region of Xinjiang, site of a yearslong crackdown on predominantly Muslim and Turkic-speaking Uyghurs and other minorities.
- There Mr. Peng was tasked with counterterrorism, helping train an elite squad known as the Mountain Eagles. In 2019, he told the state-run Global Times newspaper that the squad fired as many rounds of ammunition in 2018 as all other Xinjiang security forces combined had done over the previous three years.
- Last year, Chinese President Xi Jinping honored an unspecified antiterrorism squad in Xinjiang that officials said killed 91 terrorists.
Myanmar’s Aung San Suu Kyi Sentenced to Four Years in Prison in Second Verdict – Wall Street Journal, 1/10/2022
- Myanmar’s ousted leader, Aung San Suu Kyi, was sentenced to four years in prison after being found guilty of three charges, the most recent verdict in a number of criminal cases brought against her by the country’s military junta that overthrew her government in a coup last year.
- Ms. Suu Kyi, 76 years old, has been detained since the military seized power on Feb. 1. She has since been hit with a dozen charges that could see her imprisoned for the rest of her life and is serving a two-year sentence after a conviction in early December.
- Lawyers for Ms. Suu Kyi, along with human-rights advocates, have said the charges are politically motivated and intended to keep Ms. Suu Kyi, who led her country’s democracy movement, out of public life. Her trials have been held behind closed doors, and her legal team was banned by the junta from speaking to the press.
- U.S. Secretary of State Antony Blinken called her first conviction an affront to democracy and justice in the country and urged Myanmar authorities to release her and others who had been detained. The country’s former President Win Myint and other officials from Ms. Suu Kyi’s ousted civilian administration also remain imprisoned.
Factmonster – TODAY in HISTORY
- Thomas Paine’s Common Sense, which greatly influenced the authors of the Declaration of Independence, was published. (1776)
- The League of Nations came into existence. (1920)
- The first African-American senator elected by popular vote, Edward Brooke of Massachusetts, took his seat. (1967)
- North Korea announced that it was withdrawing from the Nuclear Non-Proliferation Treaty. (2003)
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