Daily Market Report | Dec. 16, 2020

U.S. Stocks Waver as Investors Await Stimulus Deal – Wall Street Journal, 12/16/20

  • U.S. stocks swung between small gains and losses Wednesday as investors scrutinized progress toward a stimulus package after new data showed a pullback in retail sales.
  • Fresh data Wednesday showed that U.S. retail sales fell more than expected in November, declining 1.1%.
  • The decline marked the first month-over-month drop since April.
  • The weak report may intensify attention on negotiations in Washington over another coronavirus relief package. Congressional leaders were closing in on a deal Wednesday that was expected to include another round of direct payments to households, The Wall Street Journal reported.
  • The market is largely overlooking immediate challenges to the economy, including rising coronavirus cases and fresh lockdown measures, investors said. The rollout of Covid-19 vaccines this month and the prospects of more shots being widely distributed next year have fueled bets that restrictions will be lifted, leading to a sharp economic rebound.
  • Investors will get more insights into the state of the economy when the Federal Reserve issues its latest policy statement and economic projections Wednesday afternoon. Money managers will be watching for any new guidance about how long policy makers expect to continue their current asset-purchase program, and at what pace.

Covid-19 Live Updates: Nearly 200,000 New Cases Reported in the U.S. – Wall Street Journal, 12/16/20

  • The U.S. added nearly 200,000 newly reported Covid-19 cases, and set a record for hospitalizations for the 10th day in a row, as the rollout of one vaccine expanded across the country and another looked set for approval.
  • The nation reported more than 198,000 new cases for Tuesday, according to data compiled by Johns Hopkins University, up from Monday’s 192,805 but down from the record 233,133 reported for Friday.
  • It was also lower than the 219,772 cases reported a week earlier on Dec. 8.
  • The number of cases reported each day tends to be lower at the beginning of the week and rise toward the end of the week, as fewer people are tested over the weekend.
  • There were 112,816 people hospitalized with the disease on Tuesday, according to the Covid Tracking Project, the 10th record-high day in a row. That included a record-high 21,897 in intensive care.
  • California, which has logged more than 1.65 million cases in total, the most of any state, reported 33,249 for Tuesday, according to Johns Hopkins data. It reported its second-highest number of deaths in a day, with 276, just lower than the record-high 278 deaths reported for Aug. 14,
  • California Gov. Gavin Newsom said Tuesday that the state was preparing for a surge in deaths. Among other measures, Mr. Newsom said the state has stockpiled 5,000 more body bags, stationed 60 refrigerated storage containers and activated a mutual aid system for the county coroners.

MSCI Drops Chinese Stocks on U.S. Blacklist – Wall Street Journal, 12/16/20

  • MSCI will strip its indexes of stocks in seven Chinese companies that the U.S. government says help China’s military, including the country’s largest chip maker and a major producer of surveillance equipment.
  • The move, which will take effect by the close of business on Jan. 5, follows similar actions by other benchmark providers including FTSE Russell and S&P Dow Jones Indices.
  • In a statement after U.S. markets closed Tuesday, MSCI said its list only includes securities issued by companies explicitly named in the order, but not those from subsidiaries or affiliated companies.
  • That means some of the largest stocks that could potentially have been affected by the order—such as China Mobile, which has a roughly $117 billion market value—have been spared, and the overall impact on indexes will be limited.
  • FTSE Russell and S&P Dow Jones took a similar approach.

E-Commerce to Total a Quarter of Global Retail by 2024, GroupM Forecasts – Wall Street Journal, 12/16/20

  • Online retail sales are expected to reach new heights in 2020, as the global coronavirus pandemic has forced many homebound consumers to shop online. That is not changing anytime soon.
  • Global retail e-commerce will amount to $3.9 trillion in 2020, or 17% of global retail sales, according to GroupM’s report.
  • The figures exclude food and delivery services to ensure consistency across markets, GroupM said.
  • GroupM anticipates that sum will rise to $7 trillion by 2024, or 25% of retail sales, and reach $10 trillion globally by 2027.

Massachusetts Regulators to File Complaint Against Robinhood – Wall Street Journal, 12/16/20

  • Massachusetts securities regulators are expected to file a complaint Wednesday against the wildly popular trading platform operated by Robinhood Financial, alleging the company aggressively marketed to inexperienced investors and failed to implement controls to protect them.
  • In a final draft of a more than 20-page administrative complaint reviewed by The Wall Street Journal, the enforcement arm of the Massachusetts Securities Division said Robinhood failed to protect its customers and their assets, violating state laws and regulations.
  • Robinhood exposed Massachusetts investors to “unnecessary trading risks” by “falling far short of the fiduciary standard” adopted this year that requires broker-dealers to act in their clients’ best interest, the state said.
  • Since it was founded less than a decade ago, Robinhood has exploded in popularity, amassing more than 13 million customer accounts. Traders tend to be drawn to the user-friendly platform that allows customers to trade securities like stocks for free.

Southwest to take delivery of 35 737 MAX jets through end-2021 – Reuters, 12/16/20

  • Southwest Airlines said it expects to take delivery of 35 737 MAX aircraft from Boeing through the end of 2021.
  • The deliveries include 16 leased aircraft, the U.S. carrier said, adding that it expects the MAX to return to revenue service in March after all active pilots have received updated, MAX-related training.
  • Southwest now expects average daily core cash burn to be about $12 million in the fourth quarter, up from a previous estimate of between $10 million and $11 million.

Samsung ties up with IBM to combine private 5G with “edge computing” – Reuters, 12/16/20

  • Samsung Electronics on Wednesday signed a partnership with IBM to combine “edge computing” with private 5G networks, the latest tie-up among big technology firms trying to help customers automate production.
  • “Edge computing” uses augmented reality and machine learning to analyze bulk data where it was gathered – whether factory floor, oil rig or office space – before moving it to remote servers in the “cloud”.
  • To work, it needs fast data transfers of the kind that 5G signals provide.
  • Samsung’s 5G equipment, covering several bands on the 5G spectrum, will work with IBM’s cloud technologies, including its edge platform, integration services and Artificial Intelligence products.

US ECONOMY & POLITICS

U.S. business activity cools in mid-December amid COVID-19 resurgence -IHS Markit – Reuters, 12/16/20

  • U.S. business activity slowed in the first half of December as renewed restrictions to slow a resurgence in new COVID-19 infections hurt the services sector.
  • Data firm IHS Markit said on Wednesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to a reading of 55.7 early this month from 58.6 in November.
  • A reading above 50 indicates growth in private sector output.
  • The survey’s flash composite new orders index fell to 55.1 this month from a reading of 57.5 in November.
  • Its flash services sector PMI dropped to a reading of 55.3 this month from 58.4 in November.
  • The survey’s flash manufacturing PMI dipped to a reading of 56.5 from 56.7 in November. Economists had forecast the index for the sector, which accounts for 11.3% of the economy, declining to 55.7 in December.
  • A measure of new orders received by factories fell to a reading of 55.7 from 57.4 in November. But a gauge of factory employment rose to 52.1 from a reading of 51.7 in November.

U.S. Shoppers Pull Back Spending at Start of Holiday Season – Wall Street Journal, 12/16/20

  • U.S. retail sales, a measure of purchases at stores, restaurants and online, dropped a seasonally adjusted 1.1% in November from the prior month, the Commerce Department said Wednesday, amid a surge in coronavirus cases and new business restrictions in some states.
  • Sales were up by 4.1% when compared with the same month a year ago.
  • Retail sales for October were revised to a decline of 0.1% from an earlier estimate of a 0.3% increase.
  • Other data show that spending has continued to lag since the Thanksgiving holiday.
  • JPMorgan Chase’s tracker of 30 million credit and debit cardholders recorded a 4.1% decline in spending from a year earlier in the week through Dec. 11.
  • Credit- and debit-card data collected by research firm Affinity Solutions and research group Opportunity Insights showed that overall spending was down 11.6% in the week ended Nov. 29 compared with January levels.

Congressional Leaders Discussing Adding a Second Round of Stimulus Checks – Wall Street Journal, 12/16/20

  • Congressional leaders were closing in on a coronavirus relief deal Wednesday expected to include another round of direct payments to households feeling the pain of the pandemic’s battering of the global economy, according to people familiar with the negotiations.
  • The package under discussion was expected to exclude the two thorniest issues: funding for state and local governments and liability protections for businesses and other entities operating during the pandemic, according to people familiar with the talks.
  • But congressional leaders were discussing adding a second round of direct checks, potentially of a smaller size than the initial round of checks, which directed $1,200 to individuals and $500 per dependent.
  • Sens. Bernie Sanders (I., Vt.) and Josh Hawley (R., Mo.) have been among the loudest proponents of adding a second round of direct payments, which are also broadly popular with the public.
  • The overall cost of the package under discussion Wednesday was slightly under $900 billion, according to people familiar with the talks.
  • White House press secretary Kayleigh McEnany said Tuesday that President Trump, who has called for a new round of checks to most Americans, would wait and see what a possible deal looks like.

Biden Visits Georgia to Rally Support for Democrats in Senate Runoffs – Wall Street Journal, 12/15/20

  • President-elect Joe Biden sought Tuesday to galvanize early voting in Georgia’s pivotal Senate runoff elections, imploring Democrats to help give him a working majority at the start of his administration.
  • “Don’t wait!” Mr. Biden said at a drive-in event in Atlanta, urging people to make a plan to vote early, prompting honks from the assembled vehicles. “I think Georgia is going to shock the nation with the number of people who vote on Jan. 5.”
  • The president, who has claimed voter fraud in Georgia’s November election, has been feuding with state Republican leaders in the weeks before the runoff.
  • Mr. Trump retweeted a tweet from Atlanta attorney Lin Wood earlier in the day suggesting that Gov. Brian Kemp and Secretary of State Brad Raffensperger, both Republicans, “will soon be going to jail.”

Biden to Pick Jennifer Granholm, Gina McCarthy for Energy, Climate Roles – Wall Street Journal, 12/15/20

  • President-elect Joe Biden is planning to tap former Obama administration Environmental Protection Agency chief Gina McCarthy as national climate adviser and former Michigan Gov. Jennifer Granholm as Energy secretary, according to people familiar with the matter.
  • In Ms. McCarthy’s role, she will lead a newly formed White House Office of Domestic Climate Policy.
  • Ali Zaidi, New York’s deputy secretary for energy and environment, will serve as Ms. McCarthy’s deputy, people familiar with the matter said.
  • Mr. Biden’s top advisers also have expressed increased interest in picking Rep. Deb Haaland (D., N.M.) to lead the Interior Department.
  • But House Democrats have pushed back, telling transition officials that they can’t afford to lose another lawmaker to the administration because of the party’s slim majority, people familiar with the discussions said.

Biden Selects Pete Buttigieg as Transportation Secretary – Wall Street Journal, 12/15/20

  • President-elect Joe Biden has selected former South Bend, Ind., Mayor Pete Buttigieg, his former Democratic primary rival, to lead the Transportation Department, Mr. Biden said Tuesday.
  • Mr. Buttigieg dropped out of the race in March and endorsed Mr. Biden along with other moderate Democrats.
  • Leading the Transportation Department, he is expected to play a prominent role in the incoming Biden administration’s push to rebuild the nation’s roads and bridges.
  • Mr. Buttigieg, who represented a city of about 100,000 people, beat out several others with experience dealing with much larger transportation systems, including Los Angeles Mayor Eric Garcetti and Sarah Feinberg, the acting president of New York City’s transit system, people familiar with the matter said.

White House National Security Adviser O’Brien Cuts Trip Short to Address SolarWinds Hack – Wall Street Journal, 12/15/20

  • White House national security adviser Robert O’Brien has cut short a multicountry trip to Europe to return to the U.S. to address the suspected Russian hack of government agencies, signaling growing alarm within the Trump administration about a cyber espionage campaign considered potentially one of the most damaging in years.
  • The hack continued for months, largely undetected by the Trump administration and cybersecurity firms, until the past week, according to people familiar with the matter.
  • Current and former officials and cybersecurity experts have described the hack as an espionage operation rather than one aimed at damaging computer networks, and said it represents a significant counterintelligence failure.

Texas’ Tax Advantage Is All About Individuals, Not Business Taxes – Wall Street Journal, 12/16/20

  • Moves by high-profile companies to Texas from California are likely to improve the personal finances of executives and offer employees more affordable housing—but make little difference to the firms’ tax bills.
  • Oracle and Hewlett-Packard Enterprise are the latest big corporations to announce moves to the Lone Star State.
  • Elon Musk, the chief executive of Tesla, is also moving to Texas, and the electric car company is expanding there.
  • The announcements have highlighted the vastly different tax and regulatory systems in the country’s two most populous states. The biggest difference: High-paid executives who move can see their state income-tax bills go from 13.3% to nothing.
  • The Tax Foundation, a conservative-leaning Washington group, puts Texas 11th in its ranking of state business-tax climates, with California 49th.

EUROPE & WORLD

Brexit Negotiations Inch Forward—With One Key Obstacle – Wall Street Journal, 12/16/20

  • Negotiators moved closer to an agreement on the future relationship between the U.K. and European Union, officials from both sides said, though they remained far apart on a major stumbling block: access by EU boats to British waters.
  • With just over two weeks to reach and ratify a deal covering economic, trade and security arrangements, European Commission President Ursula von der Leyen told EU lawmakers it remains impossible to say with certainty whether an agreement is coming together.
  • But in comments that echoed views of people involved in the negotiations, Mrs. von der Leyen checked off a series of issues where the two sides have narrowed or resolved differences linked to a central EU demand: that the U.K. commit to standards on issues such as state aid, labor and environmental regulation, that will ensure fair competition once Britain leaves the bloc.
  • However, Mrs. Von der Leyen, who has been increasingly drawn into negotiations in recent weeks, warned that on fisheries, the divisions were still stark.

BMW eyes upper end of 2020 margin target for automotive division – CFO – Reuters, 12/16/20

  • German luxury carmaker BMW expects the operating profit margin at its automotive segment to come in at the upper end of its guidance in 2020, finance chief Nicolas Peter said, adding that business had recovered faster than expected.
  • The group now expects the segment’s margin on earnings before interest and tax (EBIT) to come in at 2%-3%, having previously expected 0%-3%, Peter said.
  • The group last month said Chinese demand for luxury cars had helped third-quarter profits rise nearly 10%, though it warned a new wave of coronavirus infections sweeping Europe and the United States posed a “considerable” risk to business.
  • “We can see it in our order intake, but it’s definitely not of the same magnitude we saw in spring.”

Cathay Pacific sees H2 loss ‘significantly higher’ than H1 – Reuters, 12/16/20

  • Hong Kong’s Cathay Pacific Airways expects a “significantly higher” second-half loss than its record first-half loss, driven by low demand, restructuring charges and impairments on its fleet of planes, it said on Wednesday.
  • The airline reported a HK$9.87 billion ($1.27 billion) loss in the first half due to the pandemic. Analysts had on average forecast a full-year loss of HK$18.3 billion before the announcement, according to 13 polled by Refinitiv.
  • The airline reported a 98.6% fall in passenger numbers in November, though a smaller 26.2% decline in cargo carriage.
  • Cathay said in October it would cut 5,900 jobs to help it weather the pandemic, including nearly all of the positions at its regional airline Cathay Dragon, which it shut down.
  • The airline expects to operate less than 50% of its normal passenger capacity in 2021 due to border closures.
  • In the first half, it plans to operate well below 25%, but it forecasts a possible recovery in the second half as COVID-19 vaccines are rolled out more widely.

Huawei Gets Conditional Green Light in Germany as Government Approves Security Bill – Wall Street Journal, 12/16/20

  • The German government on Wednesday moved to allow the use of Huawei’s technology in 5G mobile networks in exchange for assurances by the Chinese vendor about the safety of its gear, in a rebuke to the Trump administration.
  • The bill, which still requires parliamentary approval, marks a setback for the outgoing U.S. administration, which has long lobbied European allies to reject Huawei’s technology.
  • In light of German industry’s dependence on China—the country is Germany’s largest trade partner and the biggest market for many German companies—Berlin has been reluctant to saddle up with Washington, instead seeking a middle ground that would allow Huawei to do business in Germany but with sufficient monitoring to appease its wary U.S. ally.
  • Under the bill, networking-equipment vendors would have to give assurances that their gear is safe to use, making them financially liable for any breach. The legislation would also require vendors and operators to give German security agencies far-reaching technical and legal means to monitor the network’s integrity.

Factmonster – TODAY in HISTORY

  • The Boston Tea Party took place. (1773)
  • Grigori Rasputin assassinated by a group of noble Russian conspirators. (1916)
  • The Battle of the Bulge during World War II began in Belgium. (1944)
  • Colin Powell was selected to become the first African-American secretary of state. (2000)

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