Daily Market Report | Jan. 15, 2021

Stocks Fall After Joe Biden Plan, Weak Retail Sales  – Wall Street Journal, 1/15/2021

  • U.S. stocks fell after President-elect Joe Biden unveiled a $1.9 trillion Covid-19 relief plan and the December retail-sales report came in weaker than expected, underscoring the coronavirus pandemic’s continued effect on the economy.
  • The size of Mr. Biden’s plan, even if Congress eventually shrinks it, took some by surprise.
  • Markets have for weeks cheered Democrats’ plans to expand government spending and bolster the economic rebound, and Friday’s retail-sales report underscored the need.
  • U.S. consumers cut back on spending in December, the peak of the holiday season, as the country confronted a surge in coronavirus infections.
  • In corporate news, JPMorgan Chase fell 2% after the bank reported its highest-ever quarterly profit, though its full-year earnings fell 20%. Shares of Wells Fargo fell 7% after its revenue fell more than forecast, with lower interest rates weighing on net interest income. Citigroup slid 4% as it reported fourth-quarter results.
  • In bond markets, the yield on the 10-year Treasury note ticked lower to 1.103% from 1.128% Thursday.
  • Yields fall when bond prices rise.
  • Trading in Asia ended on a mixed note.
  • China’s Shanghai Composite was largely flat, while Hong Kong’s Hang Seng gained 0.3% and South Korea’s Kospi slid 2%.
  • In Hong Kong, shares in Xiaomi, a consumer electronics company that focuses on mobile phones and household appliances, closed 10% lower after the U.S. Department of Defense added Xiaomi to a list of companies it says support China’s military.

Coronavirus Live Updates: U.S. Hospitalizations Decrease – Wall Street Journal, 1/15/2021

  • The number of people hospitalized in the U.S. because of Covid-19 fell below 130,000 for the first time in days, while newly reported coronavirus cases remained above 200,000.
  • Hospitalizations were at 128,947 as of Thursday, the lowest level since Jan. 4, according to the Covid Tracking Project. Intensive-care units, though, remain under stress, with 23,891 patients. The number of Covid-19 patients in ICUs across the country has surpassed 23,000 every day since Dec. 29, according to the Covid Tracking Project.
  • The U.S. reported more than 229,000 new coronavirus cases for Thursday, the 10th consecutive day the figure has topped 200,000, according to data compiled by Johns Hopkins University.
  • The U.S. death toll again surpassed 3,000 on Thursday, with more than 3,700 fatalities recorded, according to Johns Hopkins.
  • The nation’s total death toll is more than 388,000.
  • Reported vaccinations appear to be picking up speed, with 11.1 million total doses administered as of Thursday morning, including 1.3 million second doses, according to the Centers for Disease Control.
  • Arizona has the highest Covid-19 infection rate in the U.S. and is on the brink of running out of space in crowded hospitals, according to public-health and hospital officials.
  • The state hit a record for new infections last week, with 11,324 in a single day. It has the highest per capita rate of new Covid-19 infections in the U.S., according to the Centers for Disease Control and Prevention, and the highest rate of Covid-19 hospitalizations, according to the Covid tracking project.
  • As of Wednesday, 7% of Arizona’s ICU beds were available, according to state data. Nearly 60% of all people hospitalized in Arizona have Covid-19 and close to 65% of ICU beds are being used for Covid-19 patients.
  • A steady increase in coronavirus cases has pushed France to bring forward its national curfew and tighten travel restrictions.
  • French authorities late Thursday announced a 6 p.m. curfew across the nation starting Saturday. Much of France has been subject to an 8 p.m. curfew, except for particularly hard-hit areas, where the curfew was already 6 p.m.
  • France will also require all foreign travelers from a non-European Union country to have a negative coronavirus test that is less than 72 hours old before getting on a plane or a boat bound for France.
  • In Germany, the number of confirmed coronavirus infections since the start of the pandemic reached two million on Thursday, according to the Robert Koch Institute for infectious diseases.
  • Chancellor Angela Merkel will meet state leaders next week, a week ahead of schedule, to discuss a further tightening of restrictions amid concerns about the spread of the more contagious U.K. variant.

Wells Fargo records rare profit beat as credit costs fall – Reuters, 1/15/2021

  • Wells Fargo posted a small rise in quarterly profit on Friday that beat Wall Street estimates, as stabilizing credit costs helped offset the hit from low-interest rates meant to prop up the ailing economy during the COVID-19 pandemic.
  • Total revenue fell 10% to $17.93 billion. Net-interest income at Wells Fargo fell 17% to $9.28 billion.
  • Wells Fargo paid $321 million in customer remediation costs in the quarter, despite bank executives repeatedly signaling that the worst of the fallout, which has cost it billions, is in the past.
  • The company also booked $781 million in restructuring charges as Chief Executive Officer Charlie Scharf takes tough measures to shift fortunes at the bank that he joined in 2019.
  • Costs associated with bad loans, however, were a bright spot, falling $823 million compared to last year and remained far below the level seen in the first half of the year when the bank racked up more than $14 billion in provision expenses.
  • The San Francisco-based bank reported net income of $2.99 billion, or 64 cents per share, for the quarter ended Dec. 31, compared with $2.87 billion, or 60 cents per share a year earlier.

JPMorgan profit surges on lower loss reserves, investment banking strength – Reuters, 1/15/2021

  • JPMorgan Chase reported a much better-than- expected jump in fourth-quarter profit on Friday as it released some of the cash it had built up against coronavirus-driven loan losses and benefited from continued strength in its trading and investment banking units.
  • Revenue rose 3% to $30.2 billion.
  • Investment banking revenue surged 37% to $2.5 billion, driven by higher advisory fees across all its products.
  • Three of JPMorgan’s four operating units reported higher revenue, with the consumer & community banking unit recording an 8% decline.
  • JPMorgan’s net interest income fell 7% to $13.4 billion.
  • JPMorgan’s net income rose 42% to $12.1 billion, or $3.79 per share, in the quarter ended Dec. 31, from $8.5 billion, or $2.57 per share, a year earlier.
  • During the quarter, it released credit reserves of $2.9 billion, adding 72 cents to its earnings per share.

Higher costs, weak revenue cloud Citi’s quarterly profit beat – Reuters, 1/15/2021

  • Citigroup reported fourth-quarter profit that beat market expectations on Friday, but that failed to impress Wall Street as higher costs and a fall in revenue across its consumer business weighed on the results.
  • Overall, the bank’s revenue fell 10%, while expenses rose 2%.
  • Revenue from its global consumer banking fell 14% as growth in deposits and wealth management were more than offset by weak card volumes and lower interest rates across all its regions.
  • Fees in the North American branded cards business, once the growth engine of the consumer bank, tumbled 13% on lower purchase sales and higher payments.
  • Total loans fell 3% to $676 billion, while deposits rose 20% to $1.3 trillion as customers, faced with economic uncertainties, borrowed less and saved more.
  • The New York-based bank reported profit of $4.63 billion, or $2.08 a share, down from $5 billion, or $2.15 a share, a year earlier.
  • Analysts on average had expected profit of $1.34 per share, according to Refinitiv data.

U.S. Moves to Block Telecom Tech from China and Others Deemed Foes – Wall Street Journal, 1/15/2021

  • With its days in power numbered, the Trump administration’s Commerce Department moved ahead Thursday with rules to let the U.S. block purchases of communications technology from China and five other countries deemed foreign adversaries.
  • The rules wouldn’t take effect for 60 days, leaving a decision on how and whether to go ahead with the effort to President-elect Joe Biden’s administration.
  • Along with China, Commerce named Russia, Iran, North Korea, Cuba and the Maduro government of Venezuela as foreign adversaries.
  • Shipments of communications hardware, software and other gear from those nations could be blocked under the new rules as posing a national-security risk.
  • The Trump administration, for instance, also said it would add a subsidiary of Chinese oil company Cnooc to its blacklist. U.S. companies need to get a waiver to ship to firms on what is known as the entity list, and such waivers are rarely granted.

Americans Banned from Investing in Xiaomi as U.S. Expands Blacklist – Wall Street Journal, 1/15/202

  • Smartphone giant Xiaomi became the latest Chinese technology group to be targeted by the Trump administration, with its surprise addition to a U.S. investment blacklist sending its shares sharply lower.
  • On Thursday, the U.S. Defense Department added Xiaomi to a list of companies it says support China’s military.
  • Under the terms of an executive order issued by President Trump, the designation means that after 60 days, U.S. investors won’t be able to buy Xiaomi stock, and they have a year to sell existing holdings.
  • Xiaomi’s Hong Kong-listed shares fell almost 14% Friday before closing 10% lower.
  • In addition to Xiaomi, Shanghai-listed Advanced Micro-Fabrication Equipment, state-owned passenger-jet maker Commercial Aircraft Corp. of China, or Comac, and six other companies were added to the list Thursday.

Walmart E-commerce Boss Marc Lore to Leave – Wall Street Journal, 1/15/202

  • Marc Lore, the e-commerce entrepreneur who ran Walmart’s counter attack against Amazon.com, is leaving the retail giant after much of the online operations had been absorbed into the rest of its business.
  • Mr. Lore, who founded Jet.com and joined Walmart in 2016 after it bought his startup, pushed the bricks-and-mortar giant to increase its online offerings, including adding more web inventory and distribution centers.
  • Walmart said Mr. Lore, its U.S. e-commerce chief, will retire on Jan. 31 and stay as a consultant through September.
  • The company said it unified its U.S. store and e-commerce operations in 2020.
  • Following Mr. Lore’s exit, the business will continue to report to John Furner, the company’s U.S. chief executive.

Tesla asks U.S. safety agency to declare speed display issue inconsequential – Reuters, 1/15/2021

  • Tesla filed a petition with U.S. auto safety regulators saying that 612,000 vehicles produced since 2012 do not fully comply with federal safety standards because displays can be switched from miles per hour to only metric measurements, documents released on Friday show.
  • The automaker asked the National Highway Traffic Safety Administration (NHTSA) to declare the noncompliance issue inconsequential to safety, according to the agency’s filing.
  • Tesla said it corrected the issue in production in September and that more than 75% percent of the affected U.S. vehicles have accepted the firmware update released in September.


Biden Proposes $1.9 Trillion Covid-19 Relief Package – Wall Street Journal, 1/15/2021

  • President-elect Joe Biden is calling for a $1.9 trillion Covid-19 relief plan to help Americans weather the economic shock of the pandemic and pump more money into testing and vaccine distribution.
  • His plan calls for a round of $1,400-per-person direct payments to most households, a $400-a-week unemployment insurance supplement through September, expanded paid leave and increases in the child tax credit.
  • Aid for households makes up about half of the plan’s cost, with much of the rest going to vaccine distribution and state and local governments.
  • The plan includes some ideas previously floated by congressional Democrats and Mr. Biden’s campaign that Republicans have rejected—including raising the minimum wage to $15 an hour—and it isn’t clear which pieces can become law and how soon lawmakers will act.
  • The president-elect won’t offer spending-cut or tax-increase offsets for his plan and will instead rely on federal borrowing, according to a Biden official.
  • Now, because they won both Senate seats in Georgia this month, Democrats could use special fast-track rules known as budget reconciliation to advance a more partisan bill, which would require just 51 votes in the Senate.
  • But that path comes with restrictions, including a limited number of times Democrats can use it this year and rules that confine reconciliation bills to tax and fiscal matters rather than broader policies.

U.S. Retail Sales Fell 0.7% in December as Covid-19 Cases Rose – Wall Street Journal, 1/15/2021

  • U.S. consumers cut back on retail spending during the December peak of the holiday season as the country confronted a surge in coronavirus infections.
  • The seasonally adjusted 0.7% month-over-month drop marked the third straight decline in the Commerce Department’s measure of spending at stores, vehicle dealerships, restaurants and online, after a stretch of growth last spring and summer.
  • Excluding motor vehicles and gasoline, retail spending fell by 2.1% during the month.
  • Real-time data shows that weakness in spending continued at the start of this year. JPMorgan Chase’s tracker of 30 million credit and debit cardholders recorded a 1.1% decline in spending from a year earlier in the week through Jan. 10.

U.S. consumer sentiment slips in early January – Reuters, 1/15/2021

  • U.S. consumer sentiment dipped in early January as Americans reacted to the assault on the Capitol building in Washington and a relentless surge in COVID-19 infections and deaths, weighing on the economic outlook, the University of Michigan said on Friday.
  • The University of Michigan’s consumer sentiment index dropped to 79.2 early this month from a final reading of 80.7 in December.
  • Economists polled by Reuters had forecast the index would be little changed at 80.
  • The survey period covered the earliest days in January, including Jan. 6, when thousands of angry supporters of Donald Trump stormed the Capitol as lawmakers were certifying Democrat Joe Biden’s victory over the Republican president in the Nov. 3, 2020, election.

Industrial Production in U.S. Rose a Solid 1.6% in December – Wall Street Journal, 1/15/2021

  • U.S. industrial production increased solidly in December, providing a source of strength for the U.S. economy as consumer spending and employment gains slow.
  • Industrial production, a measure of factory, mining and utility output, increased a seasonally adjusted 1.6% in December, the Federal Reserve said Friday. Economists surveyed by The Wall Street Journal expected a 0.5% rise.
  • Utilities output increased 6.2% in December from the previous month.
  • Manufacturing, which has regained much of the ground lost earlier in the pandemic, saw production end the year down 2.8%.
  • Mining output rose 1.6% over the month, driven by drilling and extraction in the oil-and-gas sector.
  • Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, increased to 74.5% in December from 73.4% in November.

U.S. producer prices increase moderately in December – Reuters, 1/15/2021

  • U.S. producer prices rose moderately in December, suggesting that an anticipated pickup in inflation in the coming months will probably not be worrisome.
  • The producer price index for final demand increased 0.3% last month after nudging up 0.1% in November, the Labor Department said on Friday.
  • In the 12 months through December, the PPI rose 0.8%, matching November’s gain.
  • A 1.1% increase in the cost of goods accounted for last month’s rise in the PPI.
  • Prices for services dipped 0.1%.
  • Excluding the volatile food, energy and trade services components, producer prices increased 0.4%.
  • The so-called core PPI inched up 0.1% in November.
  • In the 12 months through November, the core PPI gained 1.1% after rising 0.9% in November.

U.S. business inventories rise in November – Reuters, 1/15/2021

  • U.S. business inventories increased in November, supporting expectations that inventory investment was likely the main driver of economic growth in the fourth quarter.
  • Business inventories rose 0.5% in November after increasing 0.8% in October, the Commerce Department said on Friday.
  • Inventories fell 3.2% on a year-on-year basis in November.
  • Retail inventories rose 0.7% in November as estimated in an advance report published last month. That followed a 0.9% increase in October.
  • Motor vehicle inventories jumped 1.9% instead of 1.5% as previously reported.
  • Retail inventories excluding autos, which go into the calculation of GDP, gained 0.2% instead of 0.3% as estimated last month.
  • Business sales slipped 0.1% in November after accelerating 0.9% in October. At November’s sales pace, it would take 1.32 months for businesses to clear shelves, unchanged from October.

Democrats in Senate to Juggle Trump Impeachment Trial, Biden Agenda – Wall Street Journal, 1/15/2021

  • Democrats are wrestling with when to start the Senate impeachment trial for President Trump, with some pressing for the party to move immediately as others call for a delay to gather more evidence and clear the calendar for confirming cabinet nominees and passing Covid-19 aid.
  • The trial is set to overlap with the beginning of Joe Biden’s term as president, complicating the already-busy agenda that Democrats plan to tackle in coming weeks, though the exact timing will depend on when House Speaker Nancy Pelosi (D., Calif.) formally sends over the article of impeachment.
  • A person familiar with Democratic leadership discussions in Congress said that, barring further provocations from Mr. Trump, the party might hold on to the article for some time, allowing more evidence to accumulate and giving Mr. Biden full access to the Senate schedule early in his term.
  • But others have said Democrats should move forward with the process soon, arguing that the Senate could handle both the impeachment trial and other matters simultaneously.

A Year On, China Falls Short on Trade-Deal Targets – Wall Street Journal, 1/15/2021

  • The U.S.-China trade pact signed a year ago is being credited for improving business conditions for some American companies, even if a cornerstone of the deal—China’s commitment to greatly increase purchases of U.S. goods—has fallen short.
  • Under the deal brokered by the Trump administration, China agreed to purchase about $159 billion in U.S. goods by the end of 2020.
  • Through November, China’s actual purchases were about $82 billion, or about 52% of the target goal, according to an analysis by Chad Bown, a senior fellow at Peterson Institute for International Economics.
  • “I do think that the Chinese have lived up to all their commitments on the structural side. They have not been able to on the quantitative side,” said Craig Allen, president of U.S.-China Business Council, which represents large U.S. companies doing business in China. “Overall the U.S. has lost a lot of jobs in the process.”
  • Mr. Allen’s group and Oxford Economics jointly released a report Thursday that estimated that the U.S. tariffs on Chinese imports—and Beijing’s retaliatory duties—have together caused the loss of as many as 245,000 American jobs, partly because costs rose for U.S. companies that depend on imported parts and other products from China.


TSMC to Spend Up to Record $28 Billion on Advanced Chips, Capacity – Wall Street Journal, 1/15/2021

  • Taiwan Semiconductor Manufacturing, a key chip supplier to Apple, plans to spend more than ever on developing advanced chips and building plant capacity, capitalizing on a surge in semiconductor demand that has led to a shortfall in global supplies.
  • The world’s largest contract chip maker will raise capital expenditures to between $25 billion and $28 billion in 2021, executives said on a Thursday earnings call, at least a 47% year-over-year increase.
  • TSMC also reported record quarterly revenue and net profit Thursday, bolstered by high demand from 5G phones as well as the expanding use of electronics required for remote work during the Covid-19 pandemic.
  • Net profit increased to 142.77 billion New Taiwan dollars, the equivalent of $5.1 billion, up 23% compared with the same period a year earlier, and exceeded expectations from S&P Global Market Intelligence for NT$136.69 billion in net profit.
  • For the current quarter, TSMC said it expects to post between $12.7 billion and $13 billion in revenue. The company’s January-March 2020 revenue was $10.3 billion.

Factmonster – TODAY in HISTORY

  • Queen Elizabeth I was crowned in Westminster Abbey. (1559)
  • The British Museum opened. (1759)
  • The donkey was first used as symbol of the Democratic Party in Harper’s Weekly. (1870)

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