Daily Market Report | Dec. 08, 2020

U.S. Stocks Slip Amid Gridlock on Stimulus – Wall Street Journal, 12/8/20

  • Major U.S. stock indexes edged lower Tuesday, leaving the rally in equities on pause while lawmakers continue haggling over another economic package to combat the latest surge in Covid-19 cases.
  • A multiweek spike in Covid-19 infections and hospitalizations has diminished investors’ prospects of a quick economic recovery. With cases rising across nearly every state in the U.S., several economists and investors say fresh fiscal stimulus from Congress is needed to keep the economy afloat.
  • Despite the rise in coronavirus cases, the U.S. stock market has managed to rally to new heights thanks to advances on the vaccine front, as well as brief signs of progress toward completing another economic aid package.
  • Investors remain bullish about next year, pinning their hopes for further gains on a rebound in corporate earnings, analysts have said. But if Covid-19 cases reach a tipping point, analysts say they will have to revise their forecasts.
  • Lawmakers struggled Monday to resolve one of two big stumbling blocks remaining in their efforts to strike a deal on the emergency-spending program. Congressional leaders said they plan to pass a one-week extension of the government’s current funding to buy more time for negotiations on both bills.
  • Overseas, the pan-continental Stoxx Europe 600 ticked down 0.1% as investors waited for developments on the Brexit trade-talks.
  • Across Asia, most major benchmarks closed down.
  • The Shanghai Composite Index declined 0.2% and Hong Kong’s Hang Seng Index slipped 0.8%.

Coronavirus Live Updates: U.S. Hospitalizations Stay at Record Highs – Wall Street Journal, 12/8/20

  • The number of people hospitalized in the U.S. hit another all-time high as the nation reported more than 192,000 new coronavirus cases.
  • More than 102,000 people were hospitalized due to Covid-19 around the country on Monday, according to the Covid Tracking Project. The number of people in intensive care units declined slightly from the record hit the previous day to 20,098.
  • In California, the number of newly reported coronavirus cases declined from the record reached on Sunday, but remained elevated at more than 24,000 in a single day, according to data compiled by Johns Hopkins University.
  • Regional stay-at-home orders, which affect the majority of the state’s residents, started over the weekend as the availability of hospital intensive-care units fell below 15% in Southern California.
  • New Hampshire and Maine both recorded their highest daily tallies since the pandemic began on Monday, and Virginia reported its second-highest total with more than 3,800 new cases.
  • Overall, the U.S. reported more than 1,400 new fatalities from Covid-19, pushing the nation’s death toll to more than 283,700.
  • The U.K. reported nearly 15,000 new coronavirus infections Monday, down from over 17,000 Sunday, but the total number of cases in the week-long period was 5% higher than the previous week, reviving concerns that people may drop their guard against the virus as the vaccine arrives.
  • Germany has warned that stiffer social distancing measures may need to be introduced to slow the spread of the virus there. Health Minister Jens Spahhn told German media that a short, sweeping lockdown might be needed to bring it under control before Christmas.
  • In Italy, meanwhile, authorities reported there were over 30,500 Covid patients in hospital on Monday, up by over 130 from the day before.

FDA Says Pfizer-BioNTech Vaccine Meets Success Criteria – Wall Street Journal, 12/8/20

  • The Food and Drug Administration concluded in a detailed analysis that the first Covid-19 vaccine being considered for U.S. distribution “met the prescribed success criteria” in a clinical study, paving the way for the agency to green-light distribution as early as this weekend.
  • An outside panel of scientific advisers will review the FDA report Thursday, along with a companion analysis from the vaccine’s manufacturers, Pfizer and German partner BioNTech.
  • A favorable recommendation from the panel is expected to be followed within a few days by the FDA granting emergency authorization for the vaccine.
  • Under known risks, the agency said the vaccine carried certain side effects in greater numbers than with patients taking a placebo. The most common were injection site reactions, fatigue, headache, muscle pain, chills, joint pain and fever.
  • Severe “adverse reactions” were rare, most frequent after the second dose, and generally less frequent in older adults greater than 55 years of age.

American expands preflight testing to all U.S. destinations with travel restrictions – Reuters, 12/8/20

  • American Airlines said on Tuesday it is expanding preflight COVID-19 testing for all U.S. destinations that have travel restrictions.
  • The test, priced at $129 which includes a medical professional virtually assisting and express shipping both ways, will be available for purchase for passengers traveling on or after Dec. 12.
  • In collaboration with at-home testing partner LetsGetChecked, American said it will provide testing for travel to cities, states and territories currently under COVID-19 travel restrictions, including Puerto Rico.

Miner Newmont forecasts higher 2021 gold production after pandemic demand surge – Reuters, 12/8/20

  • Top gold producer Newmont on Tuesday forecast higher production of the precious metal next year at lower costs, hoping to build on a surge in demand seen during the COVID-19 pandemic.
  • The company forecast 2021 gold output of 6.5 million ounces, compared with the 6 million ounces it expects to report this year.
  • While output was hit in some regions this year due to infections and governmental restrictions, Newmont said its forecast assumes operations will continue without major coronavirus-related interruptions next year and beyond.
  • Output through 2023 is expected to be between 6.2 and 6.7 million ounces and rise to as much as 7 million ounces through 2025.
  • The company’s all-in sustaining cost (AISC), a closely watched industry benchmark, is expected to be around $970 per ounce of gold mined next year, below this year’s forecast of $1015 per ounce.
  • The cost is expected to further decrease through 2025.

Kinder Morgan sees higher income in 2021, raises dividend – Reuters, 12/8/20

  • Kinder Morgan said on Tuesday it expects to generate higher income in 2021 and raised its annual dividend, as the pipeline operator cost cuts this year in the face of oil demand destruction.
  • Kinder Morgan, which expects net income to be just about $100 million this year due to large impairments, said it estimates to generate around $2.1 billion in profit attributable to it next year.
  • The company expects core earnings of around $6.8 billion next year and distributable cash flow of $4.4 billion, it said.
  • Kinder Morgan said it plans to invest about $800 million next year on expansion projects and joint ventures, which is lower than expected, according to Credit Suisse analysts.
  • The company raised its dividend by about 3% to $1.08 per share on an annualized basis, with $450 million set aside for share repurchases.

Enbridge forecasts higher 2021 core earnings on likely better volumes, rates – Reuters, 12/8/20

  • Canadian pipeline operator Enbridge on Tuesday forecast higher core earnings in 2021 and raised its annual dividend, saying it expects to see volume on its Liquids Mainline System improve next year.
  • The company forecast 2021 EBITDA (earnings before interest, taxes, depreciation, and amortization) to be in the range of C$13.9 billion ($10.86 billion) to C$14.3 billion, higher than 2020 forecast of about C$13.7 billion.
  • The Calgary, Alberta-based company also forecast 2021 distributable cash flow per share to be between C$4.70 and C$5.00 compared with its 2020 forecast of C$4.50 to C$4.80.
  • Enbridge raised its dividend by 3% to C$0.835/quarter or C$3.34 annually, effective March 1, 2021.

Goldman Sachs to Acquire 100% of China Securities Joint Venture – Wall Street Journal, 12/8/20

  • Goldman Sachs Group is moving to acquire 100% ownership of its securities joint venture in China, deepening its investment in the world’s second-largest economy after partnering with a domestic brokerage for 17 years.
  • The New York-based bank is applying with Chinese regulators to take full control of Goldman Sachs Gao Hua Securities and has signed an agreement to acquire the 49% share of the venture it doesn’t own, according to an internal memo seen by The Wall Street Journal.
  • U.S. investment banks, asset managers and credit-card companies have long coveted a bigger presence in China but were held back for decades by ownership restrictions on financial businesses in the country.
  • Wall Street has emerged as a big winner in the trade war between Washington and Beijing, after a pact signed in January promised greater access to China’s financial sector for American institutions.

Tesla launches second $5 billion share sale in three months – Reuters, 12/8/20

  • Tesla unveiled a $5 billion capital raise on Tuesday, its second such move in three months as the electric-car maker cashes in on a stellar rise in its shares this year.
  • The company’s shares touched a record high on Monday, pushing Tesla’s market value above $600 billion and further cementing its position as the most valuable auto company in the world despite production that is a fraction of rivals such as Toyota Motor, Volkswagen and General Motors.
  • Ten major banks, including Goldman Sachs, Citigroup Global Markets and Morgan Stanley, will conduct the sale, the carmaker said in a filing, giving no timeline for its completion.

Musk’s SpaceX to stage key high-altitude Starship test – Reuters, 12/8/20

  • Elon Musk’s SpaceX was set to launch a prototype of its Mars rocket Starship in its highest-altitude “hop” test from the space company’s Texas facilities on Tuesday, a key trial for a rocket system that Musk hopes will land humans on the moon and eventually Mars.
  • Musk sought to tamp down expectations for Starship’s first suborbital flight using three of its new Raptor rocket engines, predicting a 30% chance of success in reaching an altitude of more than 40,000 feet.
  • That would be vastly higher than the vehicle’s first two tests at altitudes of 500 feet.
  • Tuesday’s planned flight is a major advance for Starship, putting to the test the rocket’s aerodynamic design at altitudes higher than commercial airliners typically fly.
  • Such heights will test how Starship returns back to its landing pad, carrying out a “landing flip maneuver” mid-air before touching down.

Uber Sells Self-Driving-Car Unit to Autonomous-Driving Startup – Wall Street Journal, 12/8/20

  • Uber Technologies sold its self-driving-car unit to a Silicon Valley competitor, Aurora Innovation, in the latest business exit by the ride-hailing company as it aims to deliver on a promise to shareholders to become profitable.
  • The two companies on Monday said that as part of the deal for the self-driving-car unit, known as Advanced Technologies Group, or ATG, Uber will make a $400 million cash investment in Aurora.
  • Uber said it would hold a roughly 26% stake in Aurora on completion of the deal.
  • Uber said ATG, combined with other technology programs, incurred a $104 million loss in the third quarter on $25 million in revenue.

Apple to Sell AirPods Max Over-the-Ear Headphones for $549 – Wall Street Journal, 12/8/20

  • Apple on Tuesday revealed plans to sell AirPods-branded over-the-ear headphones, an expansion of its product lineup in a direct strike against companies like Bose and Sony.
  • Apple’s new AirPods Max will cost $549 and promise noise canceling, advanced acoustics and up to 20 hours of battery life, the company said.
  • The Cupertino, Calif., company also said it plans next week to begin selling a subscription fitness service around its Apple Watch costing $10 a month or $80 a year.

Apple could block apps that don’t comply with new privacy feature – Reuters, 12/8/20

  • Apple threatened on Tuesday to remove apps from its widely-used App Store if they don’t comply with an upcoming private feature allowing users to block advertisers from tracking them across different applications.
  • The new feature, dubbed App Tracking Transparency, was initially planned to debut this year, but was delayed to give developers more time to make changes to their apps and address privacy issues.
  • Some tech companies and advertisers, such as Facebook, have criticized the planned change, saying it could hurt smaller developers such as gaming companies disproportionately.
  • The new feature will require a pop-up notification saying the app “would like permission to track you across apps and websites owned by other companies.”
  • Digital advertising firms expect here most users will decline to grant that permission.

U.S. Steel to Buy Remaining Stake in New, Low-Cost Steel Mill – Wall Street Journal, 12/8/20

  • United States Steel has agreed to acquire the remaining 50.1% stake in Big River Steel LLC for $774 million, giving the steelmaker ownership of one of the newest, most advanced steel mills in the country.
  • Ownership of Big River’s Osceola, Ark., mill will give U.S. Steel X 11.40% access to the same production process used by competitors Nucor Corp. and Steel Dynamics Inc., two of the most profitable companies in the domestic steel industry.
  • U.S. Steel bought a 49.9% stake in Big River in October 2019 for $700 million with an option to acquire the rest of the company within four years.
  • Higher steel prices in recent months have helped U.S. Steel raise enough cash to complete the purchase sooner than expected, a person familiar with the matter said.

Long-Awaited 5G Auction Expected to Stretch Carriers’ Balance Sheets – Wall Street Journal, 12/8/20

  • Verizon Communications and other cellphone providers are expected to spend billions of dollars to secure prized spectrum for their 5G networks in a U.S. government sale that kicks off Tuesday.
  • The Federal Communications Commission is launching a new auction for C-band airwaves, a stretch of wireless frequencies especially valued by companies trying to offer the fifth-generation service.
  • Wall Street analysts expect the auction to raise tens of billions of dollars over the coming weeks, a reflection of high demand.
  • The frequencies sit in what telecom executives consider a “sweet spot” for 5G transmissions because they can move plenty of data quickly while still traveling long distances from a cellular tower.
  • New Street Research told its clients the licenses could fetch $52 billion if bidders use all the resources at their disposal, though the total could be much less if federal officials make a concerted effort to privatize nearby Defense Department spectrum, adding more potential supply to the mix.

US ECONOMY & POLITICS

U.S. third-quarter productivity pared; unit labor costs revised up – Reuters, 12/8/20

  • U.S. worker productivity increased strongly in the third quarter, though the pace of growth was likely overstated as the sharp rebound in output from the COVID-19 pandemic recession has far outpaced employment gains.
  • The Labor Department said on Tuesday nonfarm productivity, which measures hourly output per worker, increased at a 4.6% annualized rate last quarter.
  • The slight downward revision from the 4.9% pace estimated last month followed a 10.6% rate of growth in the second quarter, which was the fastest since the first quarter of 1971.
  • Compared to the third quarter of 2019, productivity increased at a 4.0% rate instead of the 4.1% pace reported last month.
  • Hours worked rebounded at a 37.1% rate, rather than the 36.8% rate estimated in November.
  • That followed a record 42.9% pace of decline in the second quarter.
  • Unit labor costs – the price of labor per single unit of output – plunged at a 6.6% rate instead of an 8.9% rate as previously reported. Unit labor costs rose at a 12.3% pace in the second quarter. They increased at a 4.0% rate from a year ago.
  • Hourly compensation fell at a 2.3% rate last quarter, instead of a 4.4% pace as previously reported. That followed a 24.3% rate of acceleration in the second quarter. Compensation increased at a 8.2% rate compared to the third quarter of 2019.

Covid-Aid Negotiators Grapple Over Liability Protections – Wall Street Journal, 12/8/20

  • Lawmakers struggled Monday to resolve a long-running dispute over what kind of liability protections to give businesses and other entities operating during the pandemic, one of two big stumbling blocks remaining in their efforts to strike a deal on an emergency relief package.
  • Lawmakers held hourslong phone calls over the weekend and said they came closer to a final agreement on many elements. They are still, however, hashing out the two most contentious portions: the liability protections, long a top GOP priority; and funding for state and local governments, sought by Democrats.
  • Sen. John Cornyn (R., Texas) said he suggested in a Monday night meeting leaving out both controversial items, but that his suggestion “went over like a lead balloon.”
  • Congressional leaders hope to attach the relief package to a full-year spending bill needed to keep the government running once its current funding expires at 12:01 a.m. Saturday.
  • But because lawmakers are still trying to reach agreements on both a spending bill and relief package, congressional leaders said Monday they would pass a one-week extension of the government’s current funding to buy more time for negotiations.
  • Lawmakers on both sides of the aisle also voiced concerns over the exclusion of another round of direct payments from the proposal being discussed. Sen. Josh Hawley (R., Mo.) said he urged President Trump to veto a coronavirus relief package without them.

As pandemic lifelines expire, Americans in housing free fall – Reuters, 12/8/20

  • America’s mom-and-pop landlords, along with their tenants, have been dangling by a thread for nine months. Now, with Congress still deadlocked over the contours of a second pandemic stimulus package, they are entering a new housing abyss, a perilous period of pandemic limbo as the last of the safety nets are set to expire.
  • The day after Christmas, the extended unemployment benefits that have kept 12 million people and their families afloat are scheduled to expire.
  • Then, mere days after that cliff, on New Year’s Day, a national ban on renter evictions from the Centers for Disease Control and Prevention is also set to lapse.
  • Overnight, an unprecedented bill of $70 billion in unpaid back rent and utilities will come due, according to estimates by Moody’s Analytics Chief Economist Mark Zandi.
  • In all, up to 40 million people could be threatened with eviction over the coming months, research from the Aspen Institute says.
  • Much of the focus has been on tenants. But Stacey Johnson-Cosby, president of the Kansas City Regional Housing Alliance, says more than 40% of the landlords surveyed in her coalition said that they expected to have to sell their units in the coming months due to rental income losses.

Covid-19, Remote Work Make Austin a Magnet for New Jobs – Wall Street Journal, 12/8/20

  • The pandemic and the prospect of working remotely have spawned an exodus from New York and San Francisco to sunnier, more-affordable cities. Few have benefited more than Austin.
  • Texas’ capital is attracting more corporate jobs and remote workers than ever before, lured by lower costs and lower taxes.
  • Business relocations to Austin announced this year are expected to create nearly 10,000 jobs.
  • That is the city’s highest figure on record for a single year, according to the Austin Chamber of Commerce, and is helping offset the hit from Covid-19 to the city’s tourist-dependent restaurants, bars and music venues.
  • The migration out of large cities isn’t new, but it has accelerated during the pandemic. While some are fleeing for the comforts of the suburbs, moving trucks are also rolling into cities such as Austin, Sacramento, Calif., Charlotte, N.C., Phoenix and Salt Lake City. These spots feature lively culinary, cultural and social scenes that appeal to younger crowds who enjoy an urban lifestyle but find New York, the Bay Area and other large metro areas too dense or expensive.
  • The recent growth of these midsize cities, with populations ranging from about 200,000 to more than one million, shows that the pandemic and work-from-home policies aren’t undermining all of urban America. But it also illustrates a reshaping of what many companies, families and individuals look for in a hometown: more affordability, more space and new job opportunities in tech and other hot industries, rather than a location near one of the country’s traditional economic centers.

EUROPE & WORLD

As deadline nears, Johnson says Britain could abandon Brexit trade talks – Reuters, 12/8/20

  • Prime Minister Boris Johnson said on Tuesday that Britain could abandon post-Brexit trade talks, a day after he agreed to meet the head of the European Commission in a last-ditch attempt to break the stalemate.
  • With just over three weeks before Britain finally completes its departure from the bloc, Johnson is due to meet European Commission President Ursula von der Leyen in the coming days after negotiators failed to close the gaps.
  • The language on both sides has hardened since the talks faltered again, with Johnson describing the situation as “very tricky” and the EU’s negotiator saying the bloc was fully united and would “never sacrifice our future for the present”.
  • Both sides have called on the other to compromise to get a deal over the line, and see the meeting as the last throw of the dice to see if there is a political way through to narrow the positions.

Indian doctors find lead, nickel in blood samples after hundreds suffer mystery illness – Reuters, 12/8/20

  • Indian authorities said on Tuesday they found traces of lead and nickel particles in blood samples, after hundreds of people were hospitalized due to an unknown illness in the southern state of Andhra Pradesh.
  • Teams of doctors, including those from New Delhi’s premier All-India Institute of Medical Sciences (AIIMS), are investigating the death of one person and hospitalization of more than 400 in the past few days.
  • Andhra Pradesh’s state government said on Tuesday the AIIMS team had found traces of lead and nickel in their samples, while a second hospital is also running similar tests.
  • Earlier on Tuesday, federal lawmaker GVL Narasimha Rao, who is from the state, said on Twitter that he had spoken with government medical experts and that the “most likely cause is poisonous organochlorine substances”.

Factmonster – TODAY in HISTORY

  • Congress declared war on Japan and the U.S. entered World War II. (1941)
  • Communist attacks forced the Chinese Nationalist government to flee to the island of Formosa (Taiwan). (1949)
  • John Lennon, former member of the Beatles, was shot and killed in New York City by a deranged fan. (1980)
  • President Bill Clinton signed The North American Free Trade Agreement (NAFTA) into law. (1993)

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