Daily Market Report | Jan. 20, 2021
Stocks Extend Climb Amid Big Earnings Day – Wall Street Journal, 1/20/2021
- U.S. stocks rose Wednesday, led by shares of Netflix and other communication companies.
- The S&P 500 added 1.1%, while the tech-heavy Nasdaq Composite advanced 1.7%.
- The Dow Jones Industrial Average was up 234 points to 31164.
- Netflix led Wednesday’s gains after the streaming giant reported that total subscribers topped 200 million at the end of last year, giving it enough cash to fund further growth without having to dip into more debt.
- The advance has so far solidified the stock market’s upbeat week ahead of the inauguration of Joe Biden, starting at noon Wednesday.
- Investors remain optimistic that fiscal stimulus is supporting businesses through the damage wrought by the Covid-19 pandemic, with expectations of further spending by Democrats to keep the economy on track.
- Still, investors remain willing to reward companies that top Wall Street’s forecasts.
- Besides Netflix, shares of Morgan Stanley added 1.5% after the bank reported a 51% increase in fourth-quarter profit from a year earlier,
- In Asia, stocks indexes were mixed. The Nikkei 225 ended the day down 0.4%, while the Shanghai Composite Index rose 0.5%.
- Chinese internet giant Alibaba jumped 8.5% in Hong Kong after the company’s embattled owner, Jack Ma, made his first public appearance in three months, ending concerns about his whereabouts.
Coronavirus Live Updates: Newly Reported Cases, Deaths Rise; Hospitalizations Decrease – Wall Street Journal, 1/20/2021
- Newly reported Covid-19 cases and deaths in the U.S. rose from a day earlier, while hospitalizations decreased slightly.
- The nation reported 174,589 new coronavirus cases Tuesday, according to data compiled by Johns Hopkins University, up from 141,999 cases Monday but down from 225,423 a week earlier.
- At least six states including Idaho, New Hampshire, North Carolina, Oregon, Rhode Island and Washington didn’t update their Covid-19 data dashboards for Monday, Johns Hopkins said. This could lead to a data backlog that skews numbers in the following days.
- Reported deaths were back above 2,500 Tuesday, at 2,727, according to Johns Hopkins data.
- That was up from 1,404 a day earlier, but down from a record 4,462 a week earlier.
- Tuesday’s hospitalizations were at 123,820, according to the Covid Tracking Project, down slightly from 123,848 on Monday. There were 23,029 people in intensive-care units.
- Amid a slow start to the nation’s Covid-19 vaccination drive, more than 15.7 million doses have been administered as of Tuesday morning, including more than 2 million second doses, according to the latest data from the U.S. Centers for Disease Control and Prevention.
- Countries across Europe are continuing their race to vaccinate larger numbers of people before new, more contagious strains of Covid-19 spread across the region.
- The biggest concern is a variant first detected in southeast England. It led to a sharp spike in new cases across the U.K. and Ireland shortly after Christmas and has prompted other countries to extend or impose new lockdowns to buy time for vaccinators to inoculate as many vulnerable people as possible before it takes hold.
- Hospital administrators in France warned that a strict lockdown there might be necessary to suppress the virus, instead of a 6 p.m. curfew. France could see a sharp rise in cases between mid-February and mid-March, Martin Hirsh, director of Paris’s hospital network, said Wednesday, putting the country’s medical facilities under severe pressure.
- On Tuesday, France’s seven-day moving average of new infections reached nearly 19,000, the highest since Nov. 23, while the number of Covid-19 patients in intensive care units has risen for 10 consecutive days.
- Germany might have to introduce restrictions on border crossings if its neighbors don’t do more to contain the spread of the virus, Chancellor Angela Merkel said Tuesday.
- The country extended its lockdown for a further two weeks on Tuesday, until mid-February.
Netflix Tops 200 Million Subscribers for the First Time – Wall Street Journal, 1/19/2021
- Netflix ended last year with more than 200 million subscribers, a milestone powered by consumers left homebound by the pandemic, eager for entertainment, and rising demand in international markets where the streaming giant has a head start over many rivals.
- The Los Gatos, Calif., company said it generated $6.64 billion in fourth-quarter revenue, up from $5.45 billion for the year earlier and thus exceeding forecasts from analysts.
- But profit decreased to $542 million, or $1.19 a share, from $587 million, or $1.30 a share, the year earlier.
- Analysts predicted $1.36 a share for the latest period, according to FactSet.
- For the quarter ended Dec. 31, Netflix added more than 8.5 million subscribers on a net basis, a gain that surpassed its forecast for the period.
- Netflix signed up what it said was a record 37 million subscribers in 2020 and had a total of 203.7 million users when the year ended—more than twice as many as it had a mere three years earlier.
- It added 860,000 subscriptions in the U.S. and Canada in the period, but gained two million subscribers in Asia, more than 1.2 million in Latin America and 4.5 million in the region covering Europe, the Middle East and Africa.
- Netflix also said Tuesday it expects to add another six million users in the current quarter, less than half of what it added for the same period a year ago, which saw a huge rise due to the pandemic lockdowns.
- The company currently anticipates 2021 cash flow at break-even, an upgrade from its earlier projection, which was minus $1 billion to break-even. Netflix said it is considering returning some cash to shareholders through stock buybacks.
Morgan Stanley profit races past estimates as trading shines – Reuters, 1/20/2021
- Morgan Stanley’s profits surged in the fourth quarter, blowing past estimates as the Wall Street bank’s trading business benefited from coronavirus-induced volatility in financial markets.
- Net revenue rose to $13.64 billion in the quarter, from $10.86 billion last year, while revenue from the company’s investment banking division rose to $2.30 billion from $1.58 billion.
- The bank’s revenue from sales and trading rose to $4.22 billion from $3.19 billion.
- Morgan Stanley’s equity underwriting revenue soared 81% from a year earlier, driven by high profile IPOs and follow-on offerings as clients continued to access capital markets.
- Morgan Stanley’s return on tangible equity, a measure of how well a bank uses shareholder money to produce profits, came in at 17.7%, compared with 13.0% last year and 15.0% in the third quarter.
- The bank reported net income applicable to common shareholders of $3.27 billion, or $1.81 per share, in the quarter ended Dec. 31, compared with $2.09 billion, or $1.30 per share, a year earlier.
- The Wall Street investment bank on Wednesday also confirmed plans to buy back $10 billion of shares this year, more than three times the figures announced by its retail banking peers, as it wrapped up results for U.S. lenders, which pointed to a modest rebound in the economy.
UnitedHealth’s Profit Slips as Health-Care Visits Return – Wall Street Journal, 1/20/2021
- UnitedHealth recorded a smaller profit for the last quarter of 2020 as the company had to pay more in medical costs to cover insured members who returned in greater numbers to doctors’ offices after putting off care earlier in the coronavirus pandemic.
- Fourth-quarter revenue for UnitedHealth climbed to $65.47 billion, up from $60.9 billion in the same quarter a year earlier.
- Analysts surveyed by FactSet had forecast revenue of $64.96 billion.
- UnitedHealth’s revenue from premiums grew to $50.58 billion, from $47.63 billion a year earlier.
- Revenue from Optum grew in the quarter as the number of customers served rose by 2.1% to 98 million and as revenue per customer jumped 29% year over year.
- Medical costs climbed to $42.08 billion, up from $39.28 billion in the year-ago period.
- Operating costs increased to $11.51 billion, from $9.3 billion in the previous year’s fourth quarter.
- UnitedHealth posted fourth-quarter net income of $2.21 billion, or $2.30 a share, compared with $3.54 billion, or $3.68 a share, in the same period a year earlier.
- UnitedHealth said it expects its full-year profit in 2021 to be between $16.90 a share and $17.40 a share, or $17.75 a share to $18.25 a share on an adjusted basis. That estimate includes a negative effect of $1.80 a share from coronavirus-related concerns, UnitedHealth said, such as testing and treatment costs, deferred care from last year and broader economic factors.
Procter & Gamble Gets Shoppers to Pay Up – Wall Street Journal, 1/20/2021
- Procter & Gamble sales surged in the most recent quarter, fueled in part by demand for high-end household products from pricey dish soap to a $300 electric toothbrush.
- The Cincinnati company’s organic sales increased 8% to $19.75 billion in the quarter ended Dec. 31.
- The strongest growth was in P&G’s fabric and home-care unit, which posted a 12% sales gain.
- Sales in P&G’s grooming unit, which includes Gillette razors, rose 5%.
- Sales in P&G’s health-care unit, which includes dental care as well as over-the-counter medications, rose 9%.
- For its fiscal second quarter, P&G generated net income of $3.9 billion, or $1.47 a share, up from $1.41 a share a year earlier.
- Analysts expected net income of $1.48 a share and sales of $19.98 billion, according to S&P Global Market Intelligence.
- P&G raised its estimates for full-year organic sales growth to between 5% and 6%, up from the previous range of 4% to 5%.
Moderna says possible allergic reactions to COVID-19 vaccine under investigation – Reuters, 1/19/2021
- Moderna said on Tuesday it had received a report from California’s health department that several people at a center in San Diego were treated for possible allergic reactions to its COVID-19 vaccine from a particular batch.
- The company’s comments come after California’s top epidemiologist on Sunday issued a statement recommending providers pause vaccination from lot no. 41L20A due to possible allergic reactions that are under investigation.
- The vaccine maker said it was unaware of comparable cases of adverse events from other vaccination centers which may have administered vaccines from the same lot or from other lots of its vaccine.
Big U.S. banks hunger for loans, capital relief as deposits pile up – Reuters, 1/20/2021
- A swell of deposits during the coronavirus pandemic has put big U.S. banks on the back foot, with executives saying they hope regulators provide relief on rules that punish bloated balance sheets until loan demand snaps back.
- JPMorgan Chase, Bank of America and Citigroup took in more than $1 trillion in deposits last year, compared with a $92 billion increase in 2019.
- But the stimulus payments and easy-money policies by the government that led to the inundation of deposits has also created a few problems for the banks: low interest rates that crimp lending profitability and stunted loan demand as customers and companies awash with cash spend less.
- Combined with rules that require more capital for bigger balance sheets, that makes deposits more expensive to hold, instead of profitable.
- Big banks will not shun deposits due to the dynamic, executives said, because doing so could hurt their franchises. However, they did push regulators to extend capital relief programs that expire March 31. Banks also want adjustments for holdings that are not high risk, like U.S. Treasury securities.
Mercedes unveils electric compact SUV in bid to outdo Tesla – Reuters, 1/20/2021
- Daimler’s Mercedes-Benz on Wednesday unveiled the EQA, a new electric compact SUV as part of plans to take on rival Tesla and offer more emission-free vehicles to consumers to meet targets in Europe and China.
- The EQA, the first of several electric models Mercedes-Benz plans to launch this year, will initially have a range of 426 kilometers (265 miles), with a 500km model coming later, the premium brand carmaker said in a video presentation.
- The SUV will go on sale in Europe on Feb 4 at what board of management Britta Seeger described as “very attractive price points”.
- Mercedes-Benz describes the EQA as an “urban entry model” and board member Seeger touted its “sustainability, versatility and fresh look”.
U.S. agency orders Ford to recall 3 million vehicles over air bags – Reuters, 1/20/2021
- Ford Motor must recall 3 million vehicles with potentially defective driver-side Takata air bags, the U.S. auto safety regulator said on Tuesday, rejecting a bid by the second-largest U.S. automaker to avoid a recall.
- The National Highway Traffic Safety Administration (NHTSA) said it was denying petitions filed by Ford and Mazda Motor in 2017 seeking to avoid recalling vehicles with potentially dangerous inflators.
- The decision also will require Mazda to recall and repair driver air bags in approximately 5,800 vehicles. The recalls will cover various vehicles from the 2006 through 2012 model years.
- The defect, which leads in rare instances to air bag inflators rupturing and sending potentially deadly metal fragments flying – especially after long-term exposure to high humidity – prompted the largest automotive recall in U.S. history of more than 67 million inflators.
US ECONOMY & POLITICS
U.S. homebuilders confidence slips in January – Reuters, 1/20/2021
- U.S. homebuilder confidence in the market for single family homes unexpectedly fell in January, pulled down by surging COVID-19 infections and more expensive lumber, though the housing market remains underpinned by record low mortgage rates.
- The NAHB/Wells Fargo Housing Market index slipped to a reading of 83 this month from 86.
- The survey’s measure of sales expectations in the next six months fell two points to a reading of 83 this month, while a gauge of current sales conditions decreased two points to 90. The prospective buyers index dropped five points to 68.
Yellen Makes Case for Sweeping Stimulus Package in Face of GOP Skepticism – Wall Street Journal, 1/20/2021
- Janet Yellen made the case for another sweeping economic aid package at her hearing to be the next U.S. Treasury secretary Tuesday, pushing back against Republican skepticism of the need for more deficit spending to bolster the recovery.
- If she is confirmed by the Senate as expected, Ms. Yellen will become the administration’s top economic-policy spokesperson responsible for selling President-elect Joe Biden’s $1.9 trillion proposal, which includes another round of stimulus payments, extended jobless benefits, grants for small businesses and a nationwide vaccination program.
- After that, Ms. Yellen said, long-term investments will be needed in areas such as infrastructure and workforce training to help make the U.S. economy more competitive and productive.
- Some Republicans on the committee balked at Ms. Yellen’s call for further spending on top of the trillions of dollars Congress authorized last year, including a $908 billion package enacted in December. And they questioned her about the limits and risks of additional government borrowing and the wisdom of tax increases while the economy remains weak.
- GOP senators also objected to what outgoing Finance Committee Chairman Chuck Grassley of Iowa called a “laundry list of liberal structural economic reforms” in Mr. Biden’s relief package.
- Such measures include a $15 minimum wage, as well as aid to state and local governments—a sticking point in recent talks in Congress.
PPP Covid-19 Small-Business Aid Reopens With 60,000 Loans – Wall Street Journal, 1/20/2021
- Roughly 60,000 borrowers were approved for more than $5 billion in forgivable loans during the first week of the reopened Paycheck Protection Program, the Small Business Administration said Tuesday.
- The average PPP loan size was below $20,000 for first-time borrowers and below $75,000 for second-time borrowers for applications processed through Jan. 17, according to an SBA spokesman, a sign the loans were being approved for smaller businesses. Loan amounts are based on the size of an applicant’s payroll.
- The average loan size was $206,000 during the program’s initial launch last April and was $101,000 at the program’s close last August.
- One-third of small businesses surveyed between Jan. 4 and Jan. 10 said they would need financial assistance or additional capital in the next six months, according to the Census Bureau, up from nearly 25% in mid-November.
Biden’s First-Day Orders Will Include Mask Mandate, Blocking Keystone Pipeline – Wall Street Journal, 1/20/2021
- President-elect Joe Biden on his first day in office will take a range of executive actions, including implementing a national mask mandate on federal property, revoking a permit for the Keystone XL oil pipeline and reversing a travel ban from several largely Muslim and African countries, officials said.
- The orders cover domestic and international matters, including ceasing Mr. Trump’s withdrawal from the World Health Organization and rejoining the Paris climate accord.
- Mr. Biden is ordering executive agencies to review 103 Trump-era actions on the environment and public health, a potential wholesale reversal of Mr. Trump’s effort to deregulate in ways that helped fossil-fuel companies and other sectors of heavy industry.
Filibuster Rule Snarls Senate Power-Sharing Deal – Wall Street Journal, 1/20/2021
- Negotiations over how to organize a Senate evenly divided along party lines have snagged on the fate of the legislative filibuster, a longstanding rule that empowers the minority party to block most bills.
- On Tuesday, as Senate Majority Leader Mitch McConnell (R., Ky.) and the chamber’s top Democrat, Sen. Chuck Schumer (D., N.Y.), met to iron out the details of a power-sharing agreement in a 50-50 Senate, Mr. McConnell wrote in an email to GOP colleagues that he intended to protect the legislative filibuster.
- “I believe the time is ripe to address this issue head on before the passions of one particular issue or another arise,” Mr. McConnell wrote.
- Mr. McConnell wants to address the issue pre-emptively and settle it so Democrats won’t later try to change the rules, said a person familiar with the matter.
- Messrs. McConnell and Schumer made progress on the issues of quickly confirming Mr. Biden’s nominees and conducting a fair impeachment trial, said Justin Goodman, a spokesman for Mr. Schumer.
U.S. Says China Is Committing Genocide Against Uighur Muslims – Wall Street Journal, 1/20/2021
- The Trump administration concluded that China has committed “genocide and crimes against humanity” against the Uighur ethnic group, delivering a forceful condemnation to Beijing over a mass repression campaign that has yet to prompt tough international action.
- The determination, which was announced in a statement Tuesday by Secretary of State Mike Pompeo, accuses China of imprisoning, torturing and carrying out forced sterilization against the Uighurs, a Muslim minority group.
- The genocide designation, which also applies to other minority groups in Xinjiang, doesn’t carry any automatic legal consequences, but it puts pressure on other nations, and U.S. allies in particular, to consider sanctions and take other steps to condemn Beijing’s policies.
- Antony Blinken, President-elect Joe Biden’s choice for secretary of state, told the Senate Foreign Relations Committee on Tuesday that he agreed that “forcing men, women and children into concentration camps” constituted genocide.
- The Biden campaign said in an August statement that the Chinese government’s actions constituted genocide and added that Mr. Biden “stands against it in the strongest terms.”
EUROPE & WORLD
China Escalates Efforts to Beat Back Its Worst Covid-19 Resurgence – Wall Street Journal, 1/20/20
- Chinese health authorities have ramped up their efforts to contain a resurgence of coronavirus cases, as the country faces its worst flare-up since the pandemic first exploded there early last year.
- Cities across the northern provinces of Hebei, Heilongjiang and Jilin have built temporary quarantine facilities, imposed lockdown measures on millions of residents and rolled out rounds of citywide testing.
- On Wednesday, Beijing city’s health officials said they had discovered the more-contagious U.K. variant of the virus in the samples of two patients who tested positive for Covid-19 on Sunday.
- On Wednesday, China’s National Health Commission reported 103 new symptomatic Covid-19 patients for the previous day, marking the eighth consecutive day of infections in the triple digits.
- Beijing, roughly 180 miles northeast of Shijiazhuang, has also been put on alert as 10 new symptomatic cases have been identified since Sunday. More than half a million people in a southern district of the capital will undergo testing in the coming days, while the residential communities of confirmed cases have been locked down, along with a nearby subway station.
WHO Criticized for Poor Pandemic Response by International Panel – Wall Street Journal, 1/20/20
- The World Health Organization was poorly prepared to prevent a disease like Covid-19 from becoming a pandemic, and wasn’t adapted for a globalized era of easy travel and extensive trade, an international panel said.
- Years of warnings that the United Nations agency’s international system wasn’t ready for a respiratory pandemic went unheeded, former New Zealand Prime Minister Helen Clark, a co-chairwoman of the Independent Panel for Pandemic Preparedness and Response, said.
- Ms. Clark is leading a panel that was set up last year, after a group of governments, organized by Australia, pushed for an investigation into how a virus first detected in the Chinese city of Wuhan managed to spread and claim two million lives.
- The panel’s preliminary findings, presented to the WHO on Tuesday, puts less blame on individual decisions taken by the agency’s leaders than on the weak international bureaucracy they inherited.
- Global health laws requiring countries rapidly share all pertinent information on an emerging threat “lacked teeth,” one of the panelists said.
- The findings are meant to guide what is likely to become a fraught debate over the future of the WHO, after the Covid-19 pandemic eventually fades.
- The agency has been criticized by leaders in Europe and the Americas—which have borne the brunt of the pandemic—for its early actions, especially its praise of China’s containment efforts and its decision to discourage travel bans that might have slowed the virus’s spread.
Jack Ma, Alibaba’s Billionaire Co-Founder, Resurfaces After Months of Lying Low – Wall Street Journal, 1/20/20
- Embattled billionaire Jack Ma made his first public appearance in nearly three months, speaking via a video link at a philanthropic event on Wednesday, easing speculation about his safety and whereabouts.
- Spokespersons for the Jack Ma Foundation and Ant Group, the financial-technology giant that Mr. Ma controls, confirmed a Chinese media report that said he gave a speech to a group of teachers from rural schools.
- “Jack Ma participated in the online ceremony of the annual Rural Teacher Initiative event on January 20,” the billionaire’s foundation said in a statement to The Wall Street Journal.
- The Hong Kong-listed shares of Alibaba, which Mr. Ma co-founded, jumped on the news and closed 8.5% higher Wednesday.
Factmonster – TODAY in HISTORY
- As a result of the First Opium War, Hong Kong was ceded to the British. (1841)
- The Beatles released their first album in the United States, Meet the Beatles. (1964)
- President Reagan became the oldest president to take office (69 years and 349 days). (1981)
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