Daily Market Report | Jan. 21, 2021

Stocks Waver After Jobless Claims Data – Wall Street Journal, 1/21/2021

  • U.S. stocks wobbled Thursday after jobless claims data remained high, indicating the labor market was struggling to recover amid the coronavirus pandemic.
  • All three major indexes notched new all-time-highs Wednesday, but investor enthusiasm seemed to slow after fresh data showed Thursday that 900,000 Americans filed first-time claims for unemployment benefits for the week ended Jan. 16, as companies continued to lay off workers amid a surge in Covid-19 cases.
  • Meanwhile, the U.S. reported 4,200 deaths for Wednesday, the second-highest daily number ever.
  • Still, many investors are betting on an economic recovery this year as Covid-19 vaccinations ramp up, increasing prospects for future earnings. Traders are watching earnings closely to see if they support the strong run across markets in recent months.
  • Regional bank KeyCorp rose 2.2% after it recorded higher revenue and a larger profit, with increased activity in its consumer-mortgage and investment-banking businesses driving fees.
  • Shares of United Airlines fell 5.4% after the airliner said on Wednesday it expected the coronavirus to continue to weigh on travel demand this year.
  • Chip giant Intel and International Business Machines are slated to report results after markets close.
  • The yield on the benchmark 10-year Treasury note ticked up to 1.106% Thursday, from 1.089% Wednesday. Yields rise when bond prices fall.

Coronavirus Live Updates: U.S. Reports Second-Highest Number of Deaths in a Day – Wall Street Journal, 1/21/2021

  • The number of Covid-19-related deaths reported in a day in the U.S. reached its second-highest level yet, even as hospitalizations continued to edge downward and the number of newly reported cases rose only slightly.
  • More than 4,200 deaths were reported in the U.S. for Wednesday, according to data compiled by Johns Hopkins University and reported early Thursday morning in Baltimore, up from 2,769 a day earlier and 3,963 a week earlier. It was the third time the number has exceeded 4,000, after doing so on Jan. 8 and again on Jan. 12.
  • The country reported more than 178,000 cases for Wednesday, according to Johns Hopkins data released early Thursday. The data may update later in the morning, Johns Hopkins said.
  • That figure was up from 177,256 a day earlier but down from 230,166 a week earlier.
  • Hospitalizations continued to edge downward, with 122,700 reported for Wednesday, according to the Covid Tracking Project. It was the eighth day in a row the number declined. There were 22,809 people in intensive-care units, the project reported.
  • Europe broadcast mixed signals on the pandemic this week, as parts of the region saw steady falls in new cases, hospitalizations and deaths, while others registered a post-holiday spike in infections.
  • Germany saw falling new cases, hospitalizations and positive Covid-19 test rates for several weeks, although the overall numbers remained high. The country recorded 20,398 new cases on Wednesday, according to the Robert Koch Institute for infectious diseases, down from 25,164 a week ago.
  • Authorities extended Germany’s lockdown this week, largely over concerns about the more infectious variant of the virus that has been spreading from the U.K. It remains unclear how much of an inroad it has made into the continent.
  • From Friday, the Netherlands will join France and Belgium in imposing a curfew and further restricting social interactions to curb rising infections.

EU leaders weigh travel curbs over virus variant fears – Reuters, 1/21/2021

  • European Union leaders were seeking on Thursday to address the coronavirus pandemic’s mounting challenges, including increased calls to limit travel and tighten border controls to contain more infectious variants of the disease.
  • German Chancellor Angela Merkel said before an evening leaders’ video conference that European countries needed to take the new mutation found in Britain seriously to avoid a third wave.
  • Alexander De Croo, prime minister of Belgium, where cases per capita are lower than in its neighbors, said he would ask fellow EU leaders to halt non-essential travel, such as tourism.
  • European Commission President Ursula von der Leyen said on Wednesday that blanket border closures made no sense and were not as effective as targeted measures.

New COVID-19 variant defeats plasma treatment, may reduce vaccine efficacy – Reuters, 1/20/2021

  • The new COVID-19 variant identified in South Africa can evade the antibodies that attack it in treatments using blood plasma from previously recovered patients, and may reduce the efficacy of the current line of vaccines, scientists said on Wednesday.
  • “This lineage exhibits complete escape from three classes of therapeutically relevant monoclonal antibodies,” the team of scientists from three South African universities working with the National Institute for Communicable Diseases (NICD) wrote in a paper published in the bioRxiv journal.
  • “Furthermore, 501Y.V2 shows substantial or complete escape from neutralizing antibodies in COVID-19 convalescent plasma,” they wrote, adding that their conclusions “highlight the prospect of reinfection … and may foreshadow reduced efficacy of current spike-based vaccines.”
  • The paper said it remained to be seen how effective current vaccines were against 501Y.V2, which would only be determined by large-scale clinical trials. But results showed the need for new vaccines to be designed to tackle the evolving threat, it said.

Lilly Antibody Drug Prevents Covid-19 in Nursing Homes, Study Finds – Wall Street Journal, 1/21/2021

  • Eli Lilly said its antibody-based drug prevented Covid-19 among many residents and staff of nursing homes and assisted-living facilities, results that point to the drug complementing vaccines while inoculations increase.
  • The drug, called bamlanivimab, reduced the risk of both staff and residents getting sick with Covid-19 by about 57% compared with a placebo, Lilly said Thursday.
  • The effect was more pronounced among residents, the company said, an 80% reduction in risk of Covid-19.
  • The findings signal the potential for a new preventive weapon that could augment the fledgling Covid-19 vaccination effort to stem the pandemic.
  • The partial results were from a last-stage, or Phase 3, study conducted in partnership with the National Institutes of Health. Lilly disclosed the data in a news release and said it plans to publish full results in a peer-reviewed medical journal.

United Airlines pledges more cost cuts after pandemic-driven quarterly loss – Reuters, 1/20/2021

  • United Airlines said on Wednesday it aims to cut about $2 billion of annual costs through 2023 as it charts a recovery from the coronavirus pandemic that drove its fourth straight quarterly loss.
  • Total operating revenue fell 69% to $3.4 billion, in line with forecasts.
  • United’s adjusted net loss was $2.1 billion, or a loss of $7 per share, in the fourth quarter ended Dec. 31, compared with a profit of $676 million a year earlier.
  • The company burned an average of $33 million per day in the fourth quarter, including about $10 million of severance and debt payments, even as it continued to slash costs.
  • In the current quarter, United said it expects revenue to fall by 65% to 70% from a year ago and its flight capacity to shrink by at least 51%.

Union Pacific quarterly profit beats on higher shipment volumes – Reuters, 1/21/2021

  • Union Pacific on Thursday beat Wall Street estimates for quarterly profit, as the U.S. railroad operator benefited from higher volumes of grain and intermodal shipments.
  • Total operating revenue fell to $5.14 billion from $5.21 billion.
  • Volumes, as measured by total revenue carloads, rose 3% in the fourth quarter from a year earlier.
  • Freight revenue, however, fell 1% to $4.80 billion.
  • The company’s net income fell to $1.38 billion, or $2.05 per share, in the quarter ended Dec. 31, from $1.40 billion, or $2.02 per share, a year earlier.

Baker Hughes says energy downturn to bottom out this year – Reuters, 1/21/2021

  • Oilfield equipment and services provider Baker Hughes on Thursday joined larger rival Halliburton in saying the energy industry’s worst downturn in decades would turn a corner this year.
  • Total revenue for the reported quarter rose nearly 9% to $5.5 billion, compared with the third, and also beat estimates of $5.42 billion, according to Refinitiv IBES data.
  • The total revenue was down 13.4% and adjusted operating profit 15.4% lower from a year earlier, as drilling activity was well below last year’s levels.
  • Baker Hughes’ adjusted operating profit nearly doubled to $462 million in the fourth quarter ended Dec. 31, compared with the third.
  • Halliburton on Tuesday predicted a recovery in the global oil and gas industry from the second quarter of this year.

Kinder Morgan beats estimates, flags concerns on spending by shale producers – Reuters, 1/21/2021

  • Pipeline operator Kinder Morgan on Wednesday raised concerns over the pace of ramp-up in spending in top U.S. shale basins following a rebound in oil prices after beating Wall Street estimates for quarterly results.
  • Revenue also rose sequentially to $3.12 billion, above analysts’ estimates of $3.05 billion.
  • Kinder Morgan, which transports nearly 40% of the natural gas consumed in the United States, said natgas shipment volumes rose more than 6% sequentially, while total refined product volumes fell marginally.
  • Excluding items, Kinder Morgan earned 27 cents per share, versus estimates of 24 cents, according to Refinitiv IBES data.
  • “By our calculations, you’re getting close to a rig level in the Permian that could get you back to flat volumes to where we were pre-pandemic,” Kim Dang, president at Kinder Morgan said at a post-earnings call.

Tesla fourth-quarter registrations in California jump 63%: data – Reuters, 1/21/2021

  • Tesla’s vehicle registrations in the U.S. state of California jumped nearly 63% during the fourth quarter compared with last year, largely due to the success of the company’s Model Y, according to data from Cross-Sell here, a research firm that collates title and registration data.
  • The report released on Wednesday showed registrations in California, a bellwether for the electric carmaker and its largest U.S. market, recovered from a third-quarter low of about 16,200 vehicles to around 22,117 vehicles in the three months ended December.
  • At about 11,417, registrations in the state for Tesla’s Model Y compact crossover utility vehicle surpassed those for the Model 3.
  • California registrations for Tesla’s Model 3 mass-market sedan fell 34% on a yearly basis to 7,044.
  • Total fourth-quarter vehicle registrations in the 23 states, where data was collected, stood at 44,749, with Model Y accounting for nearly half the registrations.

Chinese Telecom Carriers Ask NYSE to Make Another U-Turn on Delisting – Wall Street Journal, 1/21/2021

  • China’s big telecom carriers asked the New York Stock Exchange to rethink their planned delisting, the latest twist in a to-and-fro about whether they should be allowed to trade in U.S. markets.
  • In separate filings Thursday morning in Hong Kong, China Mobile, China Unicom (Hong Kong) and China Telecom said they had filed requests asking the NYSE to reverse its decision to delist their American depositary receipts.
  • They said they had asked if a trading halt on their ADRs could be lifted in the meantime.
  • The requests came hours after Joe Biden was sworn in as the new U.S. president. Mr. Biden signed 15 executive orders and two executive actions on his first day in office, reversing some of former President Trump’s key policies.
  • The blacklist now includes 44 Chinese companies in sectors such as energy, aviation, transportation and technology. Treasury has also said it would add subsidiaries linked to the companies to the list.

TC Energy to cut 1,000 construction jobs, halt Keystone XL work – Reuters, 1/21/2021

  • TC Energy will eliminate more than 1,000 construction jobs in coming weeks and halt work on the Keystone XL oil pipeline after U.S. President Joe Biden revoked the project’s presidential permit, the company said in an email to employees.
  • The line was already under construction in Canada.
  • It would have carried 830,000 barrels of oil per day through the United States to Nebraska.
  • Calgary-based TC Energy separately confirmed the authenticity of the email, sent by KXL President Richard Prior on Wednesday and seen by Reuters.
  • Prior, in his email, said they will start to shut down construction at U.S. pump station sites and the Canadian portion of the project in coming weeks.

US ECONOMY & POLITICS

U.S. housing starts, building permits accelerate – Reuters, 1/21/2021

  • U.S. homebuilding and permits surged in December as historically low mortgage rates supported the housing market, but momentum could slow amid surging lumber prices and a shortage of labor.
  • Housing starts jumped 5.8% to a seasonally adjusted annual rate of 1.669 million units last month, the Commerce Department said on Thursday. Homebuilding increased 5.2% on a year-on-year basis.
  • Starts totaled 1.380 million in 2020, up 7.0% from 2019.
  • Single-family homebuilding, the largest share of the housing market, soared 12.0% to a seasonally adjusted annual rate of 1.338 million units. Single-family starts have increased for eight straight months.
  • Permits for future homebuilding accelerated 4.5% to a rate of 1.709 million units in December.
  • Permits, which typically lead starts by one to two months, totaled 1.452 million last year, a 4.8% increase from 2019.
  • Single-family building permits raced 7.8% to a rate of 1.226 million units in December.
  • Homebuilding is being supported by lean inventories, especially for previously owned homes.
  • Softwood lumber prices surged 52.2% on a year-on-year basis in December, according to data from the Labor Department.

Biden Signs Executive Orders on Face-Mask Mandate, Keystone Pipeline, Paris Accord – Wall Street Journal, 1/21/2021

  • President Biden on his first day in office took 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.
  • Mr. Biden signed 15 executive orders and two executive actions on his first day in office, far more than any of his modern predecessors, none of whom signed more than one.
  • Mr. Biden’s orders cover domestic and international matters, including ceasing Mr. Trump’s withdrawal from the World Health Organization and rejoining the Paris climate accord.

Biden Extends Student Loan Payments Pause, Moratorium on Evictions – Wall Street Journal, 1/21/2021

  • On his first day in office, President Biden signed a range of executive actions including two that will affect the financial lives of millions of Americans.
  • One directs the Education Department to extend the pause on federal student loan payments, and the other directs the Centers for Disease Control and Prevention to extend the federal eviction moratorium.
  • The executive order for federal student loans directs the Education Department to extend the pause on principal payments and interest accrual for direct federal loans until at least Sept. 30, 2021.
  • The federal eviction moratorium will be extended to March 31, 2021. Mr. Biden is also asking the Department of Housing and Urban Development to consider extending the foreclosure moratorium and continuing forbearance applications for federally guaranteed mortgages.
  • As of early January, an estimated 2.7 million mortgages are in forbearance according to the Mortgage Bankers Association.

Biden Faces Early Hurdles on Nominees, Covid-19 Relief – Wall Street Journal, 1/21/2021

  • While Mr. Biden delivered a message of unity during his inaugural address, lawmakers said this week it was unclear how quickly his cabinet nominees would be confirmed, and Senate leaders were battling behind the scenes about a power-sharing agreement needed to proceed with the president’s legislative priorities.
  • Earlier this month, Mr. Biden proposed a $1.9 trillion Covid-19 relief plan that 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.
  • Mr. Biden faces an unclear path to passing additional coronavirus relief this year—at least with bipartisan support. The new administration has made clear it plans to attempt first to pass new stimulus measures with GOP votes before switching to other strategies that require a lower threshold and could be passed with just Democrats.
  • “We just passed a program with over $900 billion in it,” said Sen. Mitt Romney (R., Utah), who was involved in bipartisan talks that helped fuel passage of the most recent relief package. “I’m not looking for a new program in the immediate future.” Members of that group have said they plan to continue their discussions among themselves and with the Biden administration.
  • Mr. Biden will need to secure the support of more centrist GOP senators, including Messrs. Romney and Portman, as well as Sens. Lisa Murkowski of Alaska and Susan Collins of Maine, to have any shot at reaching the 60-vote threshold.
  • If Democrats and Republicans can’t coalesce around a broader stimulus package, one option for Democrats is to try to pass it through reconciliation. That process allows legislation tied to the budget to pass with a simple majority—still no easy feat with just 50 Democratic senators.
  • Sen. Joe Manchin (D., W.Va.) has signaled some skepticism, for example, about topping up the last round of $600 direct checks by $1,400 per person.

Biden Sends Important Foreign-Policy Signal with Taiwan Inauguration Invite – Wall Street Journal, 1/21/2021

  • Taiwan’s de facto ambassador to the U.S. overcame four decades of precedent when she accepted a formal invitation to attend President Joe Biden’s inauguration, calming fears on the self-ruled island that U.S. support would erode in the post-Trump era.
  •  Bi-khim Hsiao, Taipei’s top representative in the U.S., tweeted a video of herself standing in front of the U.S. Capitol building ahead of Mr. Biden’s inauguration on Tuesday, saying she was honored to attend the ceremony.
  • Ms. Hsiao’s attendance at the behest of the Biden administration marked the first time Taiwan was officially represented at a presidential swearing in since Washington transferred diplomatic recognition from Taipei to Beijing in 1979, according to Taiwan’s Foreign Ministry.

Liz Cheney Challenged Over Impeachment Stance – Wall Street Journal, 1/21/2021

  • Last week, Rep. Liz Cheney broke with most of her party to vote to impeach then-President Donald Trump.
  • Now the top-ranking House Republican is contending with the consequences, both in Washington and at home in Wyoming.
  • Mr. Trump’s allies in the House GOP are circulating a petition aimed at setting up a vote calling on Ms. Cheney to resign her leadership position as GOP conference chairwoman.
  • Meanwhile in Wyoming—where Mr. Trump had his biggest victories of any state both in 2016 and 2020—Ms. Cheney drew her first primary opponent on Wednesday, when state Sen. Anthony Bouchard said he would challenge her.
  • As the Republican Party grapples with its future after Mr. Trump’s departure Wednesday, Ms. Cheney’s fate will be an early indicator of which direction GOP lawmakers plan to go. Many House Republicans represent solidly-red districts and have largely remained unified behind Mr. Trump, even in his final, tumultuous weeks in office.

EUROPE & WORLD

ECB Holds Rates, Stimulus Steady as Economic Outlook Darkens – Wall Street Journal, 1/21/2021

  • The European Central Bank kept its large monetary stimulus unchanged on Thursday, pledging to continue backstopping the region’s governments via large-scale debt purchases as a stubborn wave of Covid-19 infections darkened the economic outlook.
  • In a statement, the ECB said it would continue to buy up to 1.85 trillion euros, equivalent to $2.24 trillion, of eurozone bonds through March 2022, as planned, meaning that it will continue to absorb the bulk of the debt issued by eurozone countries this year.
  • The ECB left its key interest rate unchanged at minus 0.5%.

BMW targets higher margins while investing in electric cars – Reuters, 1/21/2021

  • BMW aims to return to its pre-pandemic operating margin target as the global economy recovers, but big investments in electric cars mean the automaker will have to simplify its vehicle portfolio, its finance chief told Reuters.
  • Nicolas Peter said orders had fallen because of the latest pandemic-related lockdowns, but added: “if activity starts again after the middle of February, we should be able to deliver a reasonable first quarter.”
  • Improving market conditions, a Brexit deal and the German company’s plans to increase its share in its Chinese joint venture to 75% from 50% in 2022 should all help push BMW back to its pre-pandemic operating margin target of 8% to 10%.
  • A surge in premium car sales in China, the world’s largest autos market, provided much-needed help for BMW’s business – it also boosted German rivals Daimler and Volkswagen – and it should report a 2020 operating margin of between 2% and 3%, Peter said.

Eclipsed by Chinese Rivals, LG Ponders Smartphone Future – Wall Street Journal, 1/21/2021

  • China’s increasingly dominant smartphone makers are forcing a once-formidable rival to rethink its future in handsets.
  • South Korea’s LG Electronics, still one of the biggest phone sellers in the U.S., said Wednesday that the company is “leaving all possibilities open” for its beleaguered mobile division amid slumping sales.
  • In a memo to employees, LG Chief Executive Kwon Bong-seok noted the division “has been in the red for 23 consecutive quarters…It’s time to make the best choice by judging our current and future competitiveness calmly.”
  • HTC, once the second largest Android smartphone maker after Samsung, found itself similarly squeezed out of the market, eventually agreeing to a $1.1 billion deal in 2017 with Alphabet’s Google for most of its hardware business.

Factmonster – TODAY in HISTORY

  • King Louis XVI was guillotined for treason. (1793)
  • George Orwell died in London. (1950)
  • President Carter pardoned most Vietnam War draft evaders. (1977)
  • In a 5-4 decision, the U.S. Supreme Court rules in Citizens United v. Federal Election Commission that the government cannot restrict the spending of corporations for political campaigns, maintaining that it’s their First Amendment right to support candidates as they choose. This decision upsets two previous precedents on the free-speech rights of corporations. (2010)

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