Daily Market Report | Jan. 19, 2021
Stocks Rise as Earnings Season Ramps Up – Wall Street Journal, 1/19/2021
- U.S. stocks climbed amid a slew of earnings reports and testimony by Janet Yellen in which she is expected to support higher coronavirus relief spending.
- The early gains came as U.S. markets reopened after a long holiday weekend and followed a decline in the three major indexes last week.
- Earnings season kicked into high gear. Shares of Bank of America were roughly flat after it reported a 22% decline in quarterly profit. Goldman Sachs slumped 0.7% despite releasing earnings that significantly beat expectations.
- Netflix is expected to report results after markets close.
- President-elect Joe Biden unveiled a plan for a $1.9 trillion fiscal stimulus package last week, which would include direct payments of $1,400 to most households and spending on vaccine distribution.
- Passing it through Congress is one of the first major tests for the incoming leader, who will be inaugurated Wednesday.
- Overseas, the pan-continental Stoxx Europe 600 declined 0.2%. Jeep-owner Stellantis, the recently combined business of Fiat Chrysler and PSA Group, gained 3.6%, extending Monday’s pop after it made its debut on French and Italian exchanges.
- In Asia, most major benchmarks rose. Hong Kong’s Hang Seng Index advanced 2.7% and Japan’s Nikkei 225 index added 1.4%, led by shares of tech and car companies. The Shanghai Composite Index slipped 0.8%.
- In U.S. bond markets, the yield on the benchmark 10-year Treasury note rose to 1.116% from 1.097% Friday, with the market closed Monday for Martin Luther King Jr. Day.
Coronavirus Live Updates: U.S. Infections Fall for a Third Day – Wall Street Journal, 1/19/2021
- Newly reported Covid-19 cases in the U.S. were down again from a day earlier, as were deaths and hospitalizations, as the nation ended a three-day weekend.
- The U.S. reported more than 137,000 new infections for Monday, taking the total to more than 24 million cases, according to data compiled by Johns Hopkins University and made public early Tuesday morning.
- That represented a decline from the 177,918 cases reported a day earlier and was the third day in a row to register a day-over-day decrease. Monday’s figure was down from a week-earlier 213,304.
- Daily figures for newly reported cases and deaths tend to be lower toward the beginning of the week, as fewer people are tested over the weekend. The Martin Luther King Jr. holiday on Monday likely contributed to underreporting.
- The U.S. reported more than 1,300 Covid-19-related deaths for Monday, according to Johns Hopkins data, a number that was down from a day-earlier 1,749 and week-earlier 2,006.
- Hospitalizations were at 123,848 on Monday, the lowest level since Jan. 2, according to the Covid Tracking Project. There were 23,226 patients in intensive-care units.
- An estimated one-in-eight people in England have had coronavirus, a new survey by the U.K.’s national statistical agency showed Tuesday.
- Across the U.K., which has been in a national lockdown since early in the year, case loads are falling. The number of people testing positive for currently having the coronavirus fell 22.2% in the week to Monday, compared with the previous week, with the latest daily recorded tally at 37,535 cases.
- New hospitalizations have begun to flatten out, while deaths have yet to display the same trend. New Covid-related deaths recorded on Monday were 599, with the death rate in the week to Monday 21.8% up on the week before.
- In Brussels, the European Commission is expected to back the idea of vaccination passports on Tuesday, in a nod to Greece, which is largely dependent on summer tourism income and whose government proposed the idea of facilitating travel—while not limiting it—to those who have already been inoculated.
- Several countries—including Poland, Cyprus and Romania—have already eased travel restrictions for people who can prove they have had the vaccine.
- But others, notably France—where a large proportion of the population is vaccine-skeptic—are less keen on the idea.
More Than a Quarter of New Yorkers Don’t Want Covid-19 Vaccine – Wall Street Journal, 1/19/2021
- More than a quarter of New York state residents don’t plan to get vaccinated against the coronavirus, according to a poll released Tuesday.
- A Siena College Research Institute survey of 804 state voters found that Black, Latino and younger New Yorkers were the most likely to say they don’t plan to get a shot, which first became available on Dec. 14.
- Seven percent of poll respondents said they had already been vaccinated. Of the remaining voters surveyed, 69% said they planned to get vaccinated, 27% said they didn’t plan to get a shot and 4% refused to answer.
- The poll showed 35% of both self-identified Republicans and political independents said they wouldn’t get vaccinated. Thirty-nine percent of Latino respondents said they wouldn’t take the vaccine, and 36% of Black respondents as well as people between ages 18 and 34 said they wouldn’t take the shot.
Goldman Sachs profit more than doubles on underwriting, trading boost – Reuters, 1/19/2021
- Goldman Sachs dwarfed Wall Street estimates as its fourth-quarter profit more than doubled, powered by another blowout performance at its trading business and a surge in fees from underwriting a series of blockbuster IPOs.
- Total revenue climbed 18% to $11.74 billion.
- Trading, Goldman’s main revenue-generating engine, surged 43% annually.
- On a quarterly basis, revenue from the unit jumped 23% to $4.27 billion.
- Investment banking revenue jumped 27% to $2.61 billion during the quarter, driven mainly by equity underwriting, which was up 195% from the same period last year.
- Goldman’s asset management businesses also benefited from higher lending and debt investments, rising 7% to $3.21 billion.
- Consumer banking revenue rose 52% in the quarter to $347 million and jumped 40% to $1.21 billion on an annual basis.
- The bank’s net earnings applicable to common shareholders rose to $4.36 billion, or $12.08 per share, in the quarter ended Dec. 31. Analysts had expected a profit of $7.47 per share on average, according to IBES data from Refinitiv.
- Full-year provision for credit losses jumped to $3.1 billion, compared to $1.07 billion last year, as the bank set aside additional reserves due to the impact of the COVID-19 pandemic.
- Goldman on Tuesday re-affirmed a target to grow consumer deposits to over $125 billion over five years.
- Goldman Sachs reiterated the three-year targets it set for profitability and expense savings last January, as it stayed on track with its long-term cost-cutting and returns initiatives.
Bank of America Earnings Weighed Down by Low Rates – Wall Street Journal, 1/19/2021
- Bank of America’s revenue totaled $20.1 billion in the fourth quarter, down 10% from the fourth quarter of 2019.
- That missed the $20.58 billion expected by analysts polled by FactSet.
- The investment-banking division posted fee growth of 26% from a year ago, fueled by underwriting of initial public offerings.
- Total fees of $1.86 billion compared with $1.47 billion a year earlier.
- Adjusted trading revenue of $3.06 billion in the fourth quarter was up 7% from $2.86 billion a year ago.
- The bank’s fixed-income traders brought in less revenue than a year earlier, though its equity trading revenue was up.
- Noninterest income fell 4% to $9.85 billion and noninterest expenses were 5% higher than a year earlier, totaling $13.93 billion.
- Bank of America’s net interest income fell 16% from a year earlier to $10.25 billion, though it was up slightly from the third quarter.
- The second-largest bank in the U.S. said Tuesday that its profit totaled $5.47 billion in the final three months of the year, versus $6.99 billion a year earlier.
- The bank’s book of outstanding loans and leases, which had initially grown at the beginning of the pandemic, shrunk to $927.86 billion at year-end, its smallest in more than three years.
- The bank charged off $881 million of its loans in the quarter, down about 8% from a year earlier, though net charge-offs increased in its commercial banking arm from a year earlier.
Halliburton profit beats estimates on cost cuts, demand recovery – Reuters, 1/19/2021
- Halliburton posted a better-than-expected fourth-quarter profit on Tuesday, buoyed by cost cuts and a recovery in demand for oilfield equipment and services after last year’s industry slump.
- Total revenue of $3.24 billion in the quarter ended Dec. 31 beat analysts’ estimates of $3.21 billion, according to Refinitiv IBES data.
- Halliburton, which kicked off fourth-quarter earnings for service providers, said revenue from North America rose 25.8%, while international revenue grew 0.4%.
- Revenue from Halliburton’s completion and production business was $1.81 billion in the fourth quarter, 15% higher than in the third quarter, while its drilling and evaluation revenue rose 1.9%.
- Adjusted net income was 18 cents per share, 3 cents above estimates.
- However, the company’s profit was down 43.9% and revenue fell 37.6% from the fourth quarter of 2019 as activity levels were still well below a year earlier.
Exclusive: Trump admin slams China’s Huawei, halting shipments from Intel, others – sources – Reuters, 1/17/2021
- The Trump administration notified Huawei suppliers, including chipmaker Intel, that it is revoking certain licenses to sell to the Chinese company and intends to reject dozens of other applications to supply the telecommunications firm, people familiar with the matter told Reuters.
- Huawei and Intel declined to comment. Commerce said it could not comment on specific licensing decisions, but said the department continues to work with other agencies to “consistently” apply licensing policies in a way that “protects U.S. national security and foreign policy interests.”
- Sources familiar with the situation, who spoke on condition of anonymity, said there was more than one revocation.
- One of the sources said eight licenses were yanked from four companies.
- Japanese flash memory chip maker Kioxia had at least one license revoked, two of the sources said. The company, formerly known as Toshiba Memory, said it does not “disclose business details regarding specific products or customers.”
Microsoft Bets Bigger on Driverless-Car Space with Investment in GM’s Cruise – Wall Street Journal, 1/19/2021
- Microsoft is investing in General Motors’s driverless-car startup Cruise as part of a strategic tie-up, another sign of renewed interest in the autonomous-technology space after a relatively quiet period.
- Microsoft is among a group of companies that will invest more than $2 billion in San Francisco-based Cruise, which has been majority-owned by GM since early 2016.
- The financing brings Cruise’s valuation to $30 billion, Cruise said Tuesday, up from an estimated $19 billion in spring 2019.
- GM is adding to its Cruise investment as part of the funding round and will retain a majority stake, a Cruise spokesman said.
- Under terms of Tuesday’s deal, Cruise will use Microsoft’s Azure cloud-computing service to help it roll out autonomous-vehicle services.
- Cruise for years has been testing driverless cars in San Francisco and plans an eventual robot-taxi service. It is also exploring commercial delivery.
Lumentum to Buy Laser Maker Coherent for $5.7 Billion – Wall Street Journal, 1/19/2021
- Lumentum Holdings agreed to buy laser maker Coherent for $5.7 billion, in a deal that would combine two companies whose products are used in everything from laser eye surgery to semiconductor manufacturing.
- Under the terms of the cash-and-stock deal announced Tuesday, Coherent shareholders would receive $100 and 1.1851 shares of Lumentum stock for each Coherent share.
- Coherent had a market value of $3.7 billion as of Friday’s close, while Lumentum’s was $8 billion.
- Santa Clara, Calif.-based Coherent makes lasers and related products used in medical and scientific equipment, industrial applications and semiconductor manufacturing. It was founded in 1966.
Office Depot Rebuffs Takeover Offer From Staples – Wall Street Journal, 1/19/2021
- Office Depot rebuffed an unsolicited takeover offer from Staples but indicated it is open to an alternative deal, the latest twist in a yearslong dance between the office-supply retailers.
- Staples on Jan. 11 proposed to buy Office Depot’s parent, ODP, for more than $2 billion or $40 a share. Staples said it would pursue a public tender offer for ODP’s shares in March if the companies don’t reach agreement on a deal.
- ODP has concluded that a sale of its retail and consumer-facing e-commerce operations to Staples or a joint venture is preferable to a full takeover, according to a letter sent by ODP’s chairman to an official of the private-equity firm that controls Staples.
- It said in the letter, seen by The Wall Street Journal, that such a deal would afford the same cost savings as a full-company sale but be less likely to attract prolonged regulatory scrutiny.
China Clears Cisco-Acacia Deal with Conditions – Wall Street Journal, 1/19/2021
- China’s antitrust regulator approved Cisco Systems’ acquisition of Acacia Communications, clearing the deal for completion under several conditions aimed to protect supply to the companies’ Chinese customers.
- The State Administration for Market Regulation said that the U.S. telecom-equipment companies and subsequent merged entity must fulfill existing contracts with Chinese clients and keep commercial terms unchanged.
- The conditions, stipulated in a statement on SAMR’s website posted Tuesday, also required that Cisco and Acacia continue supplying certain products without discrimination and unreasonable terms.
Tesla Starts Delivering China-Made Model Y Crossover – Wall Street Journal, 1/19/2021
- Tesla delivered its first made-in-China Model Y compact crossover vehicles on Monday, the latest milestone in the American company’s drive into the world’s largest market for electric cars.
- The Model Y is the second Tesla vehicle that the EV maker is producing at Shanghai after the Model 3 sedan, which the company started delivering a year ago in China—which was marked with a visit to the plant by Chief Executive Elon Musk.
- As it ramped up production of the sedan last year, it was also building the assembly line in Shanghai for the Model Y.
- The Model 3 was the bestselling electric vehicle in China last year, with more than 138,000 sold, according to the China Passenger Car Association—an eighth of the 1.11 million EVs sold nationwide.
- It is of “great concern” that Indian users have not been given the choice to opt out of this data sharing with Facebook companies and are being given less choice compared to the app’s European users, the tech ministry letter said.
- The demand creates a new headache for WhatsApp and its U.S. parent Facebook, which have placed big bets on the South Asian nation to expand their payments and other businesses.
- California-based Facebook invested $5.7 billion last year in the digital unit of Indian conglomerate Reliance with a huge part of that aimed at drawing in tens of millions of traditional shop owners to use digital payments via WhatsApp.
ViacomCBS to launch streaming service Paramount+ in March – Reuters, 1/19/2021
- Media company ViacomCBS said on Tuesday it will launch its streaming service, Paramount+, in the United States on March 4.
- The company said Paramount+, previously CBS All Access, will debut in Latin America and Canada on the same day, in the Nordics on March 25, and in Australia during mid 2021.
- Joining other media companies’ streaming services such as Walt Disney’s Disney+, Netflix and AT&T’s HBO Max, Paramount+ will compete for space in the rapidly growing market spurred by the COVID-19 pandemic.
- Paramount+ will include episodes and movies from ViacomCBS-owned BET, CBS, Comedy Central, MTV, Nickelodeon and Paramount Pictures, including original series such as “The Twilight Zone” and “The Good Fight”.
US ECONOMY & POLITICS
Yellen Will Urge Lawmakers to ‘Act Big’ to Avert a Protracted Downturn – Wall Street Journal, 1/19/2021
- Janet Yellen, President-elect Joe Biden’s choice for Treasury secretary, will urge lawmakers in her confirmation hearing Tuesday to “act big” to avert a protracted economic downturn and put aside concerns about the mounting national debt.
- “Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later,” Ms. Yellen says in the text of remarks to the Senate Finance Committee as reviewed by The Wall Street Journal.
- Mr. Biden’s $1.9 trillion coronavirus relief package, unveiled last week, provides for another round of direct stimulus payments, extended and enhanced jobless benefits, funding for schools and first responders and the creation of a nationwide vaccination program.
- Republicans have decried the size and scope of the measure, arguing it would spend more than the economy needs.
- Some Republicans and Democrats have also expressed concern about the growing national debt, which at $21.6 trillion exceeds the annual output of the U.S. economy.
Outlook darkens for Wall Street as Biden’s regulators take shape – Reuters, 1/19/2021
- Wall Street may be facing an uncomfortable four years after President-elect Joe Biden’s team confirmed on Monday it planned to nominate two consumer champions to lead top financial agencies, signaling a tougher stance on the industry than many had anticipated.
- Gary Gensler will serve as chair of the Securities and Exchange Commission (SEC) and Federal Trade Commission member Rohit Chopra will head the Consumer Financial Protection Bureau (CFPB).
- The chair of the derivatives regulator from 2009 to 2014, Gensler implemented new swaps trading rules created by Congress after the financial crisis, developing a reputation as a tough operator willing to stand up to powerful Wall Street interests.
- Chopra helped set up the CFPB after the crisis and served as its first student loan ombudsman. At the FTC, he campaigned for tougher rules for big tech companies on consumer privacy and competition, and for stricter enforcement penalties.
EUROPE & WORLD
China Is the Only Major Economy to Report Economic Growth for 2020 – Wall Street Journal, 1/19/2021
- China’s economy expanded by 2.3% in 2020, roaring back from a historic contraction in the early months of the year to become the only major world economy to grow in what was a pandemic-ravaged year.
- China’s economy, the world’s second largest, finished the year on a high note.
- Gross domestic product rose 6.5% in the fourth quarter from a year earlier, according to data released by the National Bureau of Statistics on Monday, marking China’s best quarter of year-over-year growth in two years.
- On Monday, China’s statistics bureau said retail sales rose by just 4.6% in December from a year earlier, lower than November’s 5% increase and a 5.5% expansion expected by economists.
- For the full year, retail sales fell 3.9% in 2020 from a year earlier, compared with 2019’s 8% growth.
- China’s headline measure of joblessness, the official urban surveyed unemployment rate, held steady at 5.2% in December, on par with the pre-virus level a year earlier, according to the statistics bureau.
- Industrial output rose 7.3% in December from a year earlier, accelerating from 7% growth in November and beating expectations for a 6.8% increase among economists polled by The Wall Street Journal.
- For the full year, industrial production increased 2.8% from a year earlier in 2020, weaker than 2019’s 5.7% increase.
- China’s growth makes it an outlier among large economies. The World Bank expects the U.S. economy to have contracted by 3.6% and the eurozone’s to have shrunk by 7.4% in 2020, contributing to a global economic pullback of 4.3%.
Europe, Struggling to Exit the Pandemic, Faces Bleak 2021 – Wall Street Journal, 1/19/2021
- Covid-19 infections and deaths remain stubbornly high across much of Europe while vaccination efforts are moving so slowly that widespread immunity is unlikely in the region before the fall, raising the prospect of a bleak 2021 for hundreds of millions of Europeans.
- Germany is on Tuesday set to extend its lockdown, in force since November, while adding further measures, including pressing companies to allow most employees to work from home.
- Slovakia will allow commuting to work only with a negative coronavirus test.
- France has imposed a nationwide curfew of 6 p.m.
- Italians are barred from traveling outside their home region for at least another month.
- The tightening restrictions are fueling frustration in many countries, and compliance is dwindling.
- Since Friday night, thousands of Italian restaurant and bar owners have kept their businesses open in defiance of the rules as a protest.
Boeing 737 MAX to get EU flight clearance next week – Reuters, 1/19/2021
- Boeing’s 737 MAX airliner will receive final clearance to resume flying in Europe next week, the head of the EU’s air safety watchdog said on Tuesday.
- The EU Aviation Safety Agency (EASA) is one of the last major regulators to approve changes to the MAX and its anti-stall software, blamed for two deadly crashes that grounded the jet in March 2019.
- The U.S. Federal Aviation Administration (FAA) and Brazilian authorities both cleared the MAX for flight in November. Canada is expected to follow suit on Wednesday.
Factmonster – TODAY in HISTORY
- Lucy Ricardo gave birth to baby Ricky on I Love Lucy. More people tuned in to watch the show than the inauguration of President Eisenhower. (1953)
- President Eisenhower okayed the first filming of a news conference for television. (1955)
- President Clinton admitted he made false statements under oath about Monica Lewinsky. (2001)
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