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Daily Market Report | December 21, 2021

US FINANCIAL MARKET

Stocks Rise, Recouping Some Losses After Selloff – Wall Street Journal, 12/21/2021

  • U.S. stocks climbed Tuesday, resuming the seesaw action that has become markets’ signature since the emergence of the Omicron Covid-19 variant.
  • Investors have a mix of concerns heading into the end of the year. The rise in Omicron cases could prolong the global supply-chain disruptions that have added to inflation. However, signs that vaccine boosters offer protection against Omicron have bolstered hopes that its impact on growth and travel can be mitigated.
  • President Joe Biden will provide details about the government’s plan to tackle rising cases during a press conference at 2:30 p.m. ET.
  • The S&P 500 advanced 0.7%, the Nasdaq Composite rose 0.6%, and the Dow Jones Industrial Average gained 0.8%.
  • All three indexes fell in the three previous trading sessions, pushed down by concerns over new Covid-19 lockdowns.
  • General Mills shares fell 4.5% after the food company reported a quarterly profit that missed expectations.
  • Micron Technology shares gained 8.3% after the memory-chip company posted strong results and provided better-than-expected forecasts.
  • Nike shares rose 5.9% after the sneaker maker posted earnings and sales that topped analysts’ expectations, despite persistent supply-chain challenges.
  • The yield on the benchmark 10-year Treasury note ticked up to 1.467% Tuesday from 1.418% Monday.
  • The Turkish lira leapt as much as 18% against the dollar Tuesday, after a monthslong collapse. President Recep Tayyip Erdogan announced a rescue plan to encourage Turks to put their money back into the currency.
  • But in a sign that relief was limited, Turkey’s stock market resumed its multiday slide after news of the plan, triggering two circuit breaker halts.
  • Front-month Brent crude futures, the benchmark in global oil markets, rose 2.3% to $73.12 a barrel.
  • Overseas, the Stoxx Europe 600 rose 1.3%. Asian indexes closed with gains. Japan’s Nikkei 225 added 2.1% and China’s Shanghai Composite gained 0.9%. South Korea’s Kospi added 0.4%.

As Omicron Takes Over in the U.S., More Curbs World-Wide – Wall Street Journal, 12/21/2021

  • New travel restrictions and other steps to curb the spread of the Omicron variant were put in place world-wide as further evidence emerged of just how rapidly the new strain spreads.
  • The Centers for Disease Control and Prevention said Monday that Omicron had overtaken the Delta variant of the coronavirus in the U.S., accounting for an estimated 73% of infections for the week ending Dec. 18.
  • The variant, first reported less than a month ago in southern Africa, has reached at least 89 nations around the world. It is also dominant in the U.K., and was estimated to be responsible for more than 87% of cases in London on Friday and Saturday.
  • Cases across the country have risen by more than 50% over the past week.
  • New York state reported a record number of Covid-19 infections for the fourth consecutive day Monday, when officials said 23,391 people had tested positive for the virus.
  • Just over 4,000 people were hospitalized around the state, compared with peak levels of almost 19,000 in April last year.
  • President Biden is due Tuesday to outline plans to distribute 500 million free at-home Covid-19 testing kits to Americans and take steps to deploy federal medical personnel to overburdened hospitals this winter.
  • An annual New Year’s Eve celebration in downtown Los Angeles was canceled Monday for in-person attendees amid fears over Omicron, following similar steps in other cities, including Paris and London.
  • Sweden announced fresh restrictions as it faces a surge in coronavirus cases. The government asked everyone to work from home and advised high schools and higher-education institutions to begin remote teaching from Dec. 23.
  • There are also fresh limitations on how many people can gather as the country prepares for Christmas: no more than 20 people at a table privately if everyone has a vaccine pass, and only eight if they don’t have proof of vaccination.
  • In Denmark, where new restrictions went into effect Sunday, daily coronavirus infections reached a new record. Omicron is now the predominant variant there, according to Health Minister Magnus Heunicke and the Danish Serum Institute.
  • Thailand, which relies heavily on tourism revenue, announced Tuesday that it would suspend a program that allows quarantine-free entry for visitors, citing a rising number of cases of the Omicron variant in the country.
  • New Zealand’s plan to gradually reopen its border has been delayed until March to slow the arrival of Omicron, the government said Tuesday.
  • Germany’s regional and federal governments are due to meet Tuesday to discuss fresh restrictions aimed at slowing the spread of the Omicron variant over the holiday.
  • The measures under discussion include restricting to a maximum of 10 the number of people who are allowed to meet in private if they are vaccinated or have recovered from Covid-19. Current and stricter restrictions for the unvaccinated would remain unchanged. Authorities are also considering shutting down nightclubs and banning all large public events.

Micron results beat forecasts, sees chip shortages easing in 2022 – Reuters, 12/21/2021

  • Micron Technology on Monday delivered stronger quarterly results than Wall Street expected as data centers and electric vehicle manufacturers drove demand for its chips, and it forecast second-quarter sales and profits will also beat estimates with chip shortages easing in 2022.
  • In the first quarter, Micron reported sales of $7.69 billion, above analyst expectations of $7.67 billion, according to Refinitiv data.
  • Micron earned $2.16 per share on an adjusted basis, beating expectations of $2.11 per share.
  • Micron said data center revenue grew 70% and that automotive revenue grew 25%, with the automotive growth coming from the increasing amount of memory required in cars with advanced driver safety systems.
  • The company expects revenue for the current fiscal second quarter to be $7.5 billion, plus or minus $200 million, compared with analysts’ average estimate of $7.27 billion, according to Refinitiv data.
  • The company forecast adjusted earnings per share of $1.95, plus or minus 10 cents, beating analyst estimates of $1.86, according to Refinitiv data.

Nike’s Supply Crunch Stunts Growth Again – Wall Street Journal, 12/21/2021

  • Global supply-chain constraints continue to hurt Nike’s sales. The sneaker giant reported for a second consecutive quarter that its growth was stunted by a slowdown in production and transportation of its goods around the world.
  • Nike posted revenue of $11.4 billion in the quarter ended Nov. 30, up 1% from the same period a year earlier.
  • Analysts expected revenue of $11.2 billion.
  • Direct sales rose 9% to $4.7 billion. Digital sales increased 12%.
  • Nike’s net income for the November quarter was $1.3 billion, up 7% from a year earlier.
  • Earnings per share were 83 cents, exceeding what analysts had projected.

General Mills misses quarterly profit estimates amid supply chain woes, inflation – Reuters, 12/21/2021

  • General Mills missed Wall Street estimates for quarterly profit on Tuesday, as the Cheerios cereal maker grappled with soaring prices of raw materials and higher costs of freight and labor.
  • Second-quarter net sales of $5.02 billion topped estimates of $4.84 billion, according to Refinitiv IBES.
  • Excluding items, General Mills earned 99 cents per share in the three months ended Nov. 28, missing analysts’ estimate of $1.05 per share.
  • The company said it has taken further pricing actions that will go into effect in the current quarter, adding it expects more price increases in the back half of the year.
  • The Pillsbury dough maker also raised its full-year sales forecast, betting on strong demand for its cereals and baking products as well as pet foods, which helped drive net sales 6% higher in the reported quarter.
  • The company now expects organic net sales to rise between 4% and 5% in fiscal 2022.
  • It had earlier forecast annual organic sales to be towards the higher end of a 1% to 3% decline range.

Nikola to Pay $125 Million in SEC Settlement – Wall Street Journal, 12/21/2021

  • Nikola has agreed to pay $125 million to the U.S. Securities Exchange Commission to settle an investigation into allegedly misleading statements made by its founder and former executive chairman.
  • The payment would be made in five installments over the next two years, with the first coming at the end of this year.
  • Nikola didn’t admit or deny wrongdoing.
  • It said it is still seeking reimbursement from founder Trevor Milton for costs and damages related to the government and regulatory investigations.

McDonald’s to Sell Digital Startup Dynamic Yield to Mastercard – Wall Street Journal, 12/21/2021

  • McDonald’s said it will sell a digital startup it acquired nearly three years ago in a bid to boost sales at drive-throughs and digital kiosks, to Mastercard.
  • Dynamic Yield, which helps retailers provide personalized digital promotions to consumers using streams of customer data, has operated as a stand-alone company within the chain since its acquisition. For McDonald’s, it provides personalized offers for customers of its stores. It also works with other retailers to boost online sales.
  • McDonald’s said it would continue to work with Dynamic Yield and Mastercard to bring the technology to additional markets. McDonald’s has worked with Mastercard on several of the fast food-chain’s digital initiatives, it said.

AT&T Sells Xandr to Microsoft in Retreat From Digital Ad Market – Bloomberg, 12/21/2021

  • AT&T agreed to sell its Xandr division to Microsoft, a long-anticipated divestiture after the carrier decided digital advertising wasn’t central to its operations.
  • The deal gives advertising customers on Microsoft’s properties, such as MSN, access to Xandr’s marketplace for automated online advertising, the companies said Tuesday in a statement. Financial terms of the deal, which is subject to regulatory review, weren’t disclosed.
  • The sale is part of a broader portfolio reshuffling after AT&T shifted its DirecTV operations to a joint venture with TPG, and its WarnerMedia unit is slated to merge with Discovery and become a new independent company.
  • Xandr, whose name was inspired by Alexander Graham Bell, was formed in 2018 from AT&T’s ad businesses including AppNexus and AdWorks. The company said at the time that it hoped it would become a multibillion-dollar business.

Battery Storage Soars on U.S. Electric Grid – Wall Street Journal, 12/21/2021

  • Companies are poised to install record amounts of batteries on America’s electric grid this year, as government mandates and a steep decline in costs fuel rapid growth in power storage.
  • The U.S., which had less than a gigawatt of large battery installations in 2020—roughly enough to power 350,000 homes for a handful of hours—is on pace to add six gigawatts this year and another nine gigawatts in 2022, according to S&P Global Market Intelligence.
  • Giant batteries, often paired with solar farms, can charge when sunshine is plentiful, then send electricity to the grid later when the sun goes down or demand otherwise spikes and power is more valuable.
  • The installations, most of which currently use lithium-ion batteries like the ones found in electric vehicles and laptops, resemble rows of boxy shipping containers, and usually provide up to four hours of backup power.

US ECONOMY & POLITICS

U.S. current account deficit jumps to 15-year high in third quarter – Reuters, 12/21/2021

  • The U.S. current account deficit surged to a 15-year high in the third quarter amid a record increase in imports as businesses rushed to replenish depleted inventories to meet strong demand.
  • The Commerce Department said on Tuesday that the current account deficit, which measures the flow of goods, services and investments into and out of the country, accelerated 8.3% to $214.8 billion last quarter. That was the largest shortfall since the third quarter of 2006.
  • Data for the second quarter was revised to show a $198.3 billion deficit, instead of $190.3 billion as previously reported.
  • Economists polled by Reuters had forecast a $205.0 billion deficit last quarter.
  • The current account gap represented 3.7% of gross domestic product.
  • That was the largest share since the fourth quarter of 2008 and was up from 3.5% in the April-June quarter.
  • Imports of goods increased $10.0 billion to a record $716.4 billion, boosted by petroleum products and chemicals. Services imports rose $12.6 billion to $141.0 billion, mostly reflecting personal travel as well as sea freight and air passenger transport.
  • Exports of goods advanced $4.8 billion to $441.6 billion, also a record high, driven by natural gas and petroleum products.
  • Primary income receipts increased $17.9 billion to $281.9 billion, lifted by direct investment income as well as portfolio investment income amid a surge in equity prices. Payments of primary income rose $8.6 billion to $233.7 billion, reflecting higher interest rates on long-dated debt securities.

Biden Administration to Distribute 500 Million At-Home Covid-19 Test Kits  – Wall Street Journal, 12/21/2021

  • The Biden administration will distribute 500 million free at-home Covid-19 testing kits to Americans and take steps to deploy federal medical personnel to overburdened hospitals this winter, as the Omicron variant spreads around the country.
  • President Biden will outline the plan during a speech at the White House on Tuesday. His administration is grappling with how to publicly underscore the urgency surrounding the highly transmissible variant, while seeking to convey that the U.S. is better prepared to battle the pandemic than it was a year ago.
  • Even as parts of Europe have returned to previous pandemic-related restrictions including lockdowns and tightening border controls, Mr. Biden is expected to once again rule out the need for shutdowns or other tough measures.

EUROPE & WORLD

Omicron Set to Halve Fourth Quarter Global Economic Growth – Bloomberg, 12/21/2021

  • Omicron is dealing a blow to the world economy just as the pandemic enters its third year as a drag on growth and driver of inflation.
  • According to the latest Bloomberg nowcasts, the global economy is expanding just 0.7% in the final three months of the year, half the pace of the previous quarter and below the rate of around 1% witnessed right before the crisis.
  • The euro-area is on pace for a 0.8% expansion in the fourth quarter from the previous three months, which is 0.3 percentage point less than what was projected in November. The U.S. has strengthened slightly and is now registering a 1.2% pace.

Europe’s Energy Crunch Threatens Recovery as Prices Hit Records – Bloomberg, 12/21/2021

  • This year’s energy crunch is threatening to derail Europe’s economic recovery as gas and electricity costs soar to fresh records.
  • Prices surged more than 20% on Tuesday after Russia curbed gas flows to Europe and France, usually a power exporter, was forced to boost electricity imports and burn oil to keep the lights on. Higher costs have forced some companies to shut down or curb output, while inflation in the euro-zone climbed to an all-time high last month.
  • Futures surged as much as 25% as Russian gas flows into Germany via a key route dropped to zero, and were instead moving eastward to Poland, according to network operator Gascade.
  • German power for next year jumped as much 25%, while the French contract gained 26% as nuclear outages bite, forcing six oil-fired units to be turned on in France on Tuesday morning, according to filing with Entsoe.
  • Electricite de France said last week it would halt four reactors accounting for 10% of the nation’s nuclear capacity, straining power grids already coping with freezing weather.
  • About 30% of France’s nuclear capacity will be offline at the beginning of January, and to make matters worse, Germany is closing 50% of its reactors before the end of the year.

Turkey Rolls Out Economic Rescue Plan, Reversing Lira Spiral – Wall Street Journal, 12/21/2021

  • Turkey’s currency mounted a dramatic, partial reversal from a monthslong collapse Tuesday after President Recep Tayyip Erdogan announced a rescue plan to encourage Turks to put their money back into the lira.
  • In a televised speech late on Monday, Mr. Erdogan said the government will guarantee returns on lira deposits at a rate similar to those on foreign currency, making up for any further depreciation in the lira. The Finance Ministry released details of the policy on Tuesday.
  • The move generated an instant, powerful burst of demand for the lira, sending it up as much as 18% against the dollar Tuesday, a startling move in foreign exchange markets where most currencies move less than a percentage point a day.
  • The new instrument will consist of special “currency rate protected” accounts with a minimum of three months, the finance ministry said. The government plans to compensate for any depreciation in the lira between the time the account is open and when it is closed, the statement said.

Factmonster – TODAY in HISTORY

  • The Pilgrims landed at Plymouth, Massachusetts. (1620)
  • Pierre and Marie Curie discovered radium. (1898)
  • Disney’s Snow White, the first feature length color and sound cartoon, premiered. (1937)

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