Daily Market Report | Jan. 22, 2021

Stocks Drop, on Track to End Strong Week on Muted Note – Wall Street Journal, 1/22/2021

  • U.S. stocks declined Friday, signaling a muted end to a strong week on Wall Street as investors awaited data on how the economy performed at the start of 2021.
  • Markets appeared to be pausing after rallying for much of January, with money managers saying there was no clear catalyst for the decline. Investors have been cheered in recent days by a solid start to earnings season, though some are concerned that high valuations in corners of the market will leave stocks vulnerable in the coming months.
  • Shares of International Business Machines (IBM) fell 11% after the company said it expected to return to revenue growth this year, following a 4.6% decline in 2020
  • Intel fell 5.6% after the chip maker posted net income for 2020 of $20.9 billion, down from $21.1 billion a year earlier.
  • Earnings have mostly impressed so far this year. Of the 62 companies in the S&P 500 that had reported results by the end of Thursday, 89% have beaten analysts’ expectations, according to FactSet.
  • In Asia, Hong Kong’s Hang Seng Index ended 1.6% lower after a local newspaper reported that the city would place tens of thousands of people in lockdown to control Covid-19. China’s Shanghai Composite fell 0.4%.

Coronavirus Live Updates: New U.S. Cases Rise; Deaths, Hospitalizations Decline – Wall Street Journal, 1/22/2021

  • Newly reported Covid-19 cases in the U.S. edged upward from a day earlier, but deaths and hospitalizations both decreased, as President Biden sought to jump-start the U.S. response to the pandemic.
  • The nation reported more than 188,000 new cases for Thursday, according to data compiled by Johns Hopkins University.
  • That was up from 182,695 a day earlier, but down from 235,561 a week earlier.
  • The seven-day moving average of daily new cases was 194,252 as of Wednesday, according to a Wall Street Journal analysis of Johns Hopkins data. The 14-day average was 219,808.
  • When the seven-day average is lower than the 14-day average, as it has been since last Friday, it suggests cases are decreasing.
  • Daily deaths related to Covid-19 remain high, with more than 3,900 reported for Thursday, according to Johns Hopkins data. But the number was down from 4,377 reported a day earlier. It about matched the week-earlier 3,929.
  • Hospitalizations continued their downward trend, according to the Covid Tracking Project, with 119,927 reported for Thursday—below 120,000 for the first time since Dec. 27.
  • There were 22,304 people in intensive-care units, also representing a downward trend.
  • European Union leaders raised the possibility of internal EU border closures for all but nonessential travel as governments struggle to slow the spread of new, more aggressive strains of the coronavirus.
  • European Commission President Ursula von der Leyen said the EU’s executive would circulate ideas on Monday on discouraging travel into and within the bloc from countries and regions with the highest infection rates.
  • French President Emmanuel Macron told his counterparts his country will, from Sunday, demand proof of a negative Covid-19 test within the previous 72 hours, to allow EU citizens into the country.
  • German Chancellor Angela Merkel said this week that stricter rules at the EU’s internal borders are inevitable if the virus’s spread isn’t slowed.
  • The U.K. continues to record higher levels of new infections than many other countries, although new cases fell to just under 38,000 on Thursday, with nearly 1,300 deaths.
  • France recorded nearly 23,000 new cases as its seven-day average continued to climb, reaching 19,400 on Thursday.
  • New coronavirus cases continued to fall in Germany this week as they have since late December. On Thursday, the country registered 17,862 cases, down 20% from the same day last week.

Studies of South African Coronavirus Strain Raise Concerns About Immune Response – Wall Street Journal, 1/22/2021

  • Three new laboratory studies are raising concerns that the immune response triggered by a Covid-19 infection or vaccination may be less effective at protecting against the new strain of the coronavirus that first emerged in South Africa.
  • The findings may mean that variants such as the South African one could infect people for a second time “and may foreshadow reduced efficacy of current spike-based vaccines,” the study concluded.
  • More definitive data will come from human trials of Covid-19 vaccines under way in South Africa and in the U.K. and whose results are expected within weeks. Those results will give a better indication of how vaccines perform against the new strains.
  • If confirmed by additional research, the studies’ findings would suggest that winning the global fight against the coronavirus pandemic could require repeated inoculations and updates to existing vaccines, similar to what is done for flu shots every year.
  • The South African variant has been found in 22 other countries, including Canada, China and Germany, but not the U.S. Labs in the U.K., Belgium, Botswana and Zambia have found it in people with no travel history, indicating that it is already spreading in those countries.
  • A fourth study, conducted by scientists at BioNTech and Pfizer and published by the companies, showed that their vaccine successfully neutralized a variant that was initially detected in the U.K. That study didn’t include the South African strain.
  • external foundries for certain technologies and products.”

IBM revenue disappoints as software sales mark rare decline – Reuters, 1/21/2021

  • IBM missed Wall Street estimates for quarterly revenue on Thursday, hurt by a rare sales decline in its software unit as clients shied away from longer-term deals due to pandemic-induced economic uncertainty.
  • Total revenue fell 6.5% to $20.37 billion, missing analysts’ average estimate of $20.67 billion, according to IBES data from Refinitiv.
  • Revenue from its cloud-computing business rose 10% to a record $7.5 billion in the fourth quarter, with IBM saying it is confident of returning to sales growth in 2021 and expected revenue to grow in mid-single digits after the separation.
  • Sales from cloud and cognitive, which houses IBM’s software offerings and its biggest unit, declined 4.5% to $6.8 billion after two years of growth.
  • Excluding items, IBM earned $2.07 per share, above estimates of $1.79.
  • Still, Chief Financial Officer James Kavanaugh told Reuters an accelerated move to cloud by businesses, a sales rebound in the global business services unit and a weaker dollar make the company confident of returning to revenue growth this year.

Schlumberger echoes rivals’ oil recovery predictions after results beat – Reuters, 1/22/2021

  • Schlumberger on Friday joined rivals in predicting a steady recovery in the oil industry this year after the world’s top oilfield services provider’s fourth-quarter results beat estimates, aided partly by growing drilling demand.
  • Schlumberger posted total fourth-quarter revenue of $5.53 billion, beating analysts’ estimates of $5.25 billion.
  • It’s the first quarter-over-quarter increase in revenue for the company since the third quarter of 2019.
  • Net income excluding charges and credits came in at 22 cents per share in the quarter ended Dec. 31, which also beat estimates of 17 cents, according to Refinitiv IBES data, aided in part by a massive cost cutting program.
  • The stage is set “for oil demand to recover to 2019 levels no later than 2023, or earlier as per recent industry analysts’ reports,” Schlumberger Chief Executive Officer Olivier Le Peuch said.
  • In light of the demand recovery, the company forecast capital investments this year of between $1.5 billion and $1.7 billion, a slight improvement at the midpoint of the range from last year’s $1.5 billion.

Google Escalates Dispute with Australia by Threatening Search Shutdown – Wall Street Journal, 1/22/2021

  • Google threatened to shut down its search engine in Australia if a proposed law requiring tech giants to pay publishers for news isn’t changed.
  • The warning escalates the long-running battle pitting the Alphabet unit and Facebook against the Australian government, whose efforts to compel tech companies to pay publishers is being widely watched globally and could offer a model for other countries.
  • Last year, Facebook said it would restrict Australian users from sharing news articles on its platforms if the proposal became law.
  • The Australian code would require binding arbitration if publishers and the tech companies can’t reach a deal on compensation.

Long road for Tesla in India with infrastructure, supply chain woes – Reuters, 1/22/2021

  • Tesla is gearing up for an India launch but the U.S. electric carmaker is likely to remain a niche player for years, catering only to the rich and affluent in the world’s second-most populous nation.
  • India’s fledgling electric vehicle (EV) market accounted for only 5,000 out of a total 2.4 million cars sold in the country last year.
  • A lack of local production of components and batteries, negligible charging infrastructure and the high cost of EVs mean there have been few takers in the price-conscious market.
  • Ammar Master, a forecaster at consultancy LMC Automotive, said he expects Tesla to annually sell only 50-100 of its Model 3 electric sedans in India, at least in the first five years.
  • Tesla plans to import and sell the Model 3 in India for around $65,000-$75,000 – roughly double the price in the U.S. market, sources familiar with the plans said.

Companies Are Selling Stock at Record Pace to Start the Year – Wall Street Journal, 1/22/2021

  • Public companies have been taking advantage of a hot stock market by issuing shares at record pace in January.
  • U.S.-listed companies have conducted 57 follow-on stock offerings this year through Wednesday, raising $12.35 billion.
  • Both numbers are records for this point in the year, according to Dealogic data going back to 1995.
  • On Tuesday afternoon alone, 18 U.S.-listed companies unveiled plans for secondary or follow-on offerings, according to the financial-news organization StreetInsider.com.
  • The strong start to the year for follow-on stock offerings builds on a record-setting 2020. U.S.-listed companies conducted 862 such offerings last year, raising $257.23 billion, the most in a year by either measure in records dating to 1995, according to Dealogic.
  • Investors crowded into initial public offerings at a record rate in 2020.
  • Companies raised $167.2 billion through 454 offerings on U.S. exchanges through Dec. 24, surpassing the previous full-year record for money raised that was set during the dot-com boom in 1999.
  • U.S.-listed SPACs raised $82 billion in 2020, a more-than-sixfold increase from the year earlier.

US ECONOMY & POLITICS

U.S. Existing-Home Sales Reach Highest Level in 14 Years – Wall Street Journal, 1/22/2021

  • Sales of previously owned homes rose in 2020 to the highest level since 2006, as ultralow interest rates and remote work during the pandemic increased homebuying demand.
  • Existing-home sales rose 0.7% in December from November to a seasonally adjusted annual rate of 6.76 million, the National Association of Realtors said Friday. The December sales marked a 22% increase from a year earlier.
  • Existing-home sales totaled 5.64 million in 2020, up 5.6% from 2019 and the highest level since the 2006 pace of 6.48 million, NAR said.
  • There were 1.07 million homes for sale at the end of December, down 16.4% from November and down 23% from December 2019, according to NAR.
  • At the current sales pace, there was a 1.9-month supply of homes on the market at the end of December, a record low.
  • For the week ended Thursday, the average rate on a 30-year fixed rate mortgage was 2.77%, down from 3.6% a year earlier, said Freddie Mac.

U.S. factory activity races to more than 13-1/2-year high in early January: IHS Markit -0 Reuters, 1/22/2021

  • U.S. manufacturing activity surged to its highest level in more than 13-1/2-years in early January amid strong growth in new orders, but bottlenecks in the supply chain caused by the COVID-19 pandemic are driving up prices and signaling a rise in inflation in the months ahead.
  • Data firm IHS Markit said on Friday its flash U.S. manufacturing PMI accelerated to a reading of 59.1 in the first half of this month, the highest since May 2007, from 57.1 in December. Economists had forecast the index slipping to 56.5 in early January.
  • The IHS Markit survey’s measure of new orders received by factories raced to its highest level since September 2014. The surge in demand reflected both existing and new customers, “with some clients reportedly committing to orders previously placed on hold.”
  • Manufacturers are also raising prices for their products.
  • The survey’s gauge of prices received by factories vaulted to its highest level since July 2008.
  • With orders soaring, manufacturers hired more workers early this month.
  • The survey’s factory employment index increased to 54.8 from 52.2 in December.

Surging Grain Prices Fuel Surprise Farm Recovery – Wall Street Journal, 1/22/2021

  • A crop glut that battered American farmers is subsiding, fueling an unexpected recovery in the U.S. Farm Belt following a yearslong agricultural recession.
  • Prices for corn, soybeans and wheat have soared to their highest levels in more than six years as dry weather and strong export demand from China drain U.S. stockpiles.
  • The rising commodity prices are rippling through the food chain, helping drive a sharp increase in U.S. farm income and lifting the prospects for a swath of rural businesses, from grain traders to equipment manufacturers and fertilizer suppliers.
  • At the same time, the revival in the grain sector is boosting costs and pressuring profit margins for producers of food and fuel that soak up vast quantities of U.S. corn and soybeans each year, and likely will drive increases in food prices for consumers, some food executives say.

Biden to Sign Executive Orders to Boost Covid-19 Aid, Expand Worker Protections – Wall Street Journal, 1/22/2021

  • President Biden will sign a pair of executive orders Friday to strengthen the federal safety net, boost economic relief and enhance worker protections, as the U.S. continues to recover from the pandemic-induced recession.
  • Mr. Biden will direct agencies across the government to take immediate steps to enhance federal benefits, such as expanding food assistance, improving distribution of stimulus checks and clarifying that workers may refuse jobs with unsafe working conditions and still qualify for unemployment benefits, administration officials said Thursday.
  • Mr. Biden also intends to issue a second order that would advance Democratic priorities favorable to workers.
  • It would restore collective bargaining power for federal workers, revoke an order from former President Donald Trump that exempted some federal positions from competitive hiring procedures and civil-service protections, and direct agencies to start planning for a $15 minimum wage for federal workers and contractors.

Yellen Approved for Treasury Chief by Senate Panel – Wall Street Journal, 1/22/2021

  • A Senate panel voted Friday to approve Janet Yellen’s nomination to be the next U.S. Treasury secretary, sending her nomination to the full Senate, which could vote to confirm her as soon as Friday.
  • The Senate Finance Committee approved Ms. Yellen’s confirmation unanimously, suggesting the former Federal Reserve chairwoman will garner strong support to win confirmation.

Lloyd Austin Receives Waiver Allowing Him to Become Defense Chief – Wall Street Journal, 1/22/2021

  • Lawmakers approved a resolution on Thursday allowing Lloyd Austin, a retired Army general, to hold the civilian post of defense secretary, clearing the way for his confirmation to the job.
  • If confirmed by senators as expected on Friday, Mr. Austin, 67 years old, will become the Defense Department’s first Black secretary.
  • The House approved the waiver on a 326 to 78 vote. The Senate waiver vote was 69 to 27.

Impeachment Article Against Trump to Be Delivered to Senate Monday – Wall Street Journal, 1/22/2021

  • Senate Majority Leader Chuck Schumer (D., N.Y.) said House Speaker Nancy Pelosi (D., Calif.) has told him the article of impeachment against former President Donald Trump will be delivered to the Senate Monday, triggering a second impeachment trial.
  • Mr. Schumer gave no details on how the trial will be conducted. “It will be a full trial; it will be a fair trial,” he said Friday.
  • Mr. Schumer’s remarks came after Senate Minority Leader Mitch McConnell (R., Ky.) proposed Thursday that the article be sent over Jan. 28 and both impeachment managers and Mr. Trump’s defense team be given two weeks to complete pretrial briefs and responses.
  • Mr. McConnell and some other Republicans have said they are considering whether to vote to convict Mr. Trump during his second impeachment trial. A two-thirds supermajority is needed to convict in a presidential impeachment trial, meaning 17 Republicans would need to support conviction for it to succeed, if all Democrats also voted to convict.

Buttigieg Pledges to Support Biden’s $2 Trillion Infrastructure Plan – Wall Street Journal, 1/22/2021

  • Former South Bend, Ind. Mayor Pete Buttigieg pledged Thursday his support for President Biden’s $2 trillion infrastructure-rebuilding plan during a confirmation hearing before a Senate panel.
  • The $2 trillion target is tied to Mr. Biden’s goal to use climate change as a wedge for economic development, focused on rebuilding roads and bridges and expanding zero-emission mass transit and electric-car infrastructure.
  • In all, the administration seeks to spend $7 trillion over a decade to combat climate change, his campaign and third-party experts have said.
  • Mr. Buttigieg, Mr. Biden’s nominee to lead the Transportation Department, told the Senate Commerce Committee that he would pursue the administration’s goals to drive federal spending on roads, rails and bridges.

EUROPE & WORLD

Eurozone on Brink of Recession Amid Covid-19 Wave, Slow Vaccine Rollout – Wall Street Journal, 1/22/2021

  • The eurozone economy has suffered a weak start to the year, with high coronavirus infection rates and government restrictions increasing the risk of a second recession since the pandemic first struck last year.
  • Data firm IHS Markit said its composite Purchasing Managers Index, which measures activity in the manufacturing and services sectors, for the eurozone fell to 47.5 in January from 49.1 in December. A reading below 50.0 points to a decline in activity.
  • The eurozone PMI has pointed to a contraction in the economy for three straight months, and there seems little prospect of a significant easing in the pandemic over the remaining months of the first quarter, which will end in March.
  • The tightest lockdown since April had a particularly chilling effect on the U.K.’s economy, which saw the largest drop in its PMI of those released Friday.
  • The measure for the services sector slumped to 38.8 from 49.4 in December, reaching its lowest level since June.
  • The ECB on Friday said that 20 economists at banks and research institutes it had surveyed between Jan. 7 and 11 estimated that the eurozone economy shrank 2.5% in the final three months of 2020, and would likely stagnate in the first three months of this year.

Taiwan says realistic about U.S. trade deal, but one will happen eventually – Reuters, 1/22/2021

  • Taiwan is under no illusions it can quickly sign a long hoped for free trade deal with the United States but feels when the time is right “success will flow naturally”, the island’s chief trade negotiator said on Friday.
  • Taiwan has long sought a bilateral trade deal with the United States, the Chinese-claimed island’s most important international backer and supplier of arms.
  • Minister without portfolio John Deng, who leads trade talks, told Reuters Taiwan’s government well knew that for the United States to sign free trade agreements with anyone was a major issue, especially with a new government in office.
  • But Deng said he was confident a deal would happen eventually, pointing to the pork decision and support for an agreement among U.S. lawmakers.
  • While Taiwan is a member of the World Trade Organization, many countries are wary of signing trade deals with the tech-powerhouse fearing objections from China, though Taiwan does have free trade deals with Singapore and New Zealand.

Airbus slows A320 ramp-up on weaker market outlook – Reuters, 1/22/2021

  • Airbus has slowed a planned ramp-up of A320 aircraft production, the European planemaker said, as the coronavirus travel slump takes a growing toll on its airline clients.
  • Output of the single-aisle A320 jet family will increase from 40 a month to 43 in the third quarter and 45 in the last three months of 2021, Airbus said on Thursday, scaling back a previous July target rate of 47 “in response to the market environment.”
  • Production plans for widebody aircraft remain unchanged, Airbus said. The decision to maintain stable output of five A350s and two A330s per month “postpones a potential rate increase for the A350”, the company added – in a sign that it aims to avoid a production cut.
  • Assembly of the smaller A220 jet will increase from four to five aircraft per month at the end of the first quarter as previously announced, Airbus said.

KLM to cut 1,000 more jobs, says mandatory COVID-19 testing will ground planes  – Reuters, 1/22/2021

  • KLM said it would cut an additional 1,000 jobs in 2021 and warned on Thursday that government plans to require all passengers and crew to pass a COVID-19 test before flying to the Netherlands would ground its long-haul flights.
  • KLM, which already cut 5,000 jobs last year, joined other airlines operating in the Netherlands to criticise a proposed requirement for all inbound passengers to show a negative result from a “fast” COVID-19 test taken within four hours of boarding a plane.
  • KLM said that the new rule, proposed by the Dutch government on Wednesday, would force it to halt all 270 of its current long-haul flights from Friday, due to the risk of continually having crew members grounded and quarantined in foreign countries.

Factmonster – TODAY in HISTORY

  • 500 workers were killed by the Czar’s troops in “Bloody Sunday” in St. Petersburg. (1905)
  • The U.S. Senate confirmed Madeleine Albright as the first female secretary of state. (1997)

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial.

Prior to making any investment decision please consult your financial advisor regarding your specific situation.

Follow us on Facebook

Recent Tweets

Categories

Subscribe to Our Blog | Newsletter

Please complete to receive our insights and newsletters.