Daily Market Report | Dec. 23, 2020

Stocks Edge Up as Data Points to Uneven Economic Rebound – Wall Street Journal, 12/23/20

  • The S&P 500 and Dow Jones Industrial Average edged higher Wednesday, despite a string of data suggesting the economic rebound remains uneven amid the recent surge in coronavirus hospitalizations.
  • U.S. household spending fell in November for the first time since April, and incomes also dropped, signs the virus is weighing on economic growth. Jobless claims fell to 803,000 last week, a retreat from a three-month high.
  • Concerns about rising Covid-19 infections and a new variant of the virus have weighed on stocks in recent days. But markets have largely remained buoyant as investors bet that vaccines will help propel the global economic recovery next year.
  • Investors shrugged off President Trump’s request for lawmakers to amend the roughly $900 billion coronavirus relief deal to increase direct payments to American families.
  • Mr. Trump’s aides said they view his comments more as the president voicing his displeasure with the bill passed Monday than an actual veto threat.
  • Mr. Trump’s resistance to the relief legislation adds to the uncertainties for investors heading into 2021, which also include the continuing Brexit negotiations and soaring Covid-19 hospitalizations in the U.S.
  • Bond markets were also broadly unmoved by Mr. Trump’s request to alter the package.
  • Yields on 10-year Treasury notes ticked up to 0.940%, from 0.917% Tuesday.

Covid-19 Live Updates: U.S. Hospitalizations Continue to Surge, Hitting New Records – Wall Street Journal, 12/23/20

  • The number of newly reported Covid-19 infections in the U.S. was higher than a day earlier, but remained below 200,000, while hospitalizations surged again to a new record.
  • The U.S. reported more than 195,000 new cases for Tuesday, according to data compiled by Johns Hopkins University, up from 190,519 a day earlier but below last Friday’s record of 249,709.
  • Daily new case numbers tend to be lower toward the beginning of the week as fewer people are tested on weekends.
  • The nation also reported its second-highest number of Covid-19-related deaths in a day, with 3,410, according to Johns Hopkins data. The U.S. first reported more than 3,000 deaths in a day on Dec. 9, and has now had five such days.
  • Hospitalizations in the U.S. shot up to a record 117,777 for Tuesday, according to the Covid Tracking Project, up from a day-earlier record of 115,351. Tuesday’s hospitalizations also include a record 22,213 people in intensive care units.
  • The surge in new cases and hospitalizations is hitting California especially hard. Field hospitals are popping up and emergency rooms are being commandeered as Covid-19 wards as counties try to deal with the overflow.
  • However, health professionals warn that doctors may soon have to decide which patients get access to limited resources.
  • Statewide, ICU availability is at 2.5%.
  • In two regions—the agricultural San Joaquin Valley and Southern California, which includes Los Angeles, San Diego, Orange and San Bernardino, the state’s most populous counties—ICU availability has dropped to 0%.
  • Italians on Wednesday hurried to buy last-minute Christmas gifts and provisions before stores close Thursday for a holiday lockdown, with queues forming outside bakeries, wine shops and supermarkets.
  • The lockdown will run from Dec. 24 to Jan. 6. During that time, all restaurants and bars must stay shut and Italians can’t leave their home regions.
  • Germany’s center for disease control, the Robert Koch Institute, reported 962 deaths—a new daily record for deaths linked to Covid-19—and 24,740 infections in the last 24 hours. The country now has 0.73 daily deaths per 100,000 residents related to the virus, a jump from 0.27 slightly more than one month ago.
  • In the Netherlands, hospital and intensive-care unit admissions continued a recent rise, as the pace at which the virus is spreading increased, the Dutch government said.

Pfizer, U.S. strike 100 million COVID-19 vaccine deal with 70 million due by June – Reuters, 12/23/20

  • The U.S. government will pay Pfizer nearly $2 billion for 100 million additional doses of its COVID-19 vaccine to bolster its supply as the country grapples with a nationwide spike in infections.
  • Under the new agreement, Pfizer will deliver at least 70 million doses by June 30 and the rest no later than July 31, the company said on Wednesday, bringing the total number of doses to 200 million for a total price of about $4 billion.
  • Pfizer and BioNTech have said they expect to produce 1.3 billion doses in 2021, but executives at the German biotech have said they were trying to boost manufacturing.
  • Americans in “essential” jobs and those over 75 will likely start to receive vaccines in January while general population vaccinations will start in a few months.

Covid-19 Reaches Antarctica, the Last Continent Hit by the Pandemic – Wall Street Journal, 12/23/20

  • Covid-19 has finally reached Antarctica, making it the last continent to be affected by the pandemic.
  • Some 36 civilian and army personnel at a Chilean research station on the continent tested positive for coronavirus, according to Chile’s army and health ministry officials in the southern Chilean province of Magallanes.
  • Chilean officials are investigating how the virus reached the Base General Bernardo O’Higgins Riquelme, said a spokesman for the Health Ministry in Magallanes, Chile’s southernmost region.

U.S. Sues Walmart, Alleging Role in Fueling Opioid Crisis – Wall Street Journal, 12/23/20

  • The Trump administration sued Walmart Tuesday, accusing the retail giant of helping to fuel the nation’s opioid crisis by inadequately screening for questionable prescriptions despite repeated warnings from its own pharmacists.
  • The Justice Department’s lawsuit claims Walmart sought to boost profits by understaffing its pharmacies and pressuring employees to fill prescriptions quickly. That made it difficult for pharmacists to reject invalid prescriptions, enabling widespread drug abuse nationwide, the suit alleges.
  • The country’s largest retailer by revenue, Walmart has been expecting this complaint and sued the federal government in October to fight the allegations pre-emptively.

Nikola, Republic Services End Collaboration on Garbage-Truck Development – Wall Street Journal, 12/23/20

  • Nikola said the company and Republic Services have stopped collaborating on the development of zero-emissions garbage trucks, a move that will result in the termination of Republic’s order for potentially several thousand vehicles.
  • In August, Republic said that it would collaborate with Nikola on developing zero-emissions trucks for waste and recycling services and purchase at least 2,500 or as many as 5,000 of them.
  • Republic also said it expected to begin integrating the trucks, which were meant to have a range of 150 miles, into its fleet beginning in 2023.

SEC Approves NYSE’s Plan for New IPO Alternative – Wall Street Journal, 12/23/20

  • The Securities and Exchange Commission will allow companies to raise capital through direct listings, opening the door to a new alternative to the traditional initial public offering.
  • The SEC approved the new kind of direct listing—which could help startups save on bank fees and capture more of the gains in their share price when they go public—in an order posted on its website Tuesday.
  • In a direct listing, a company floats its shares on a stock exchange, but without hiring banks to underwrite the transaction like in an IPO.
  • Until now, companies have only been allowed to use direct listings to sell existing shares, which means their founders and early investors could cash out of their stakes, but the company couldn’t raise new capital.

Two lawmakers urge U.S. to further tighten restrictions on China’s SMIC – Reuters, 12/23/20

  • Two key Republican lawmakers on Tuesday urged the Trump administration to strengthen new rules adopted Friday aimed at preventing China’s biggest chipmaker SMIC from getting access to advanced U.S. technology.
  • Senator Marco Rubio and Representative Michael McCaul said the Entity List designation by the U.S. Commerce Department was not strict enough and should be rewritten to close “dangerous loopholes that would allow nearly all sales to SMIC to continue without restriction and support the (Chinese Communist Party’s) stated goal of military preeminence.”
  • The letter said they were concerned that without changes the rules would be “utterly ineffective in addressing this growing national security threat.”
  • The lawmakers are concerned because the restrictions apply only to technology “uniquely” required to produce semiconductors at 10 nanometers and below.
  • The administration “seems to be allowing SMIC access to nearly all semiconductor manufacturing equipment,” they wrote.

5G Auction Shatters Record as Bidding Tops $66 Billion – Wall Street Journal, 12/23/20

  • The Federal Communications Commission’s ongoing sale of wireless licenses has fetched more than $66.4 billion after three weeks of bidding, a record sum that could alter cellphone carriers’ prospects for the next decade.
  • The auction proceeds have already topped the $44.9 billion raised in 2015 by an earlier sale of midrange cellular licenses, which U.S. cellphone carriers used at the time to enhance their 4G service.
  • The recent bids have blown past Wall Street’s highest forecasts, suggesting that several companies are fighting over the most valuable wireless rights.
  • The 5G auction kicked off Dec. 8 and will pause for the holidays until Jan. 4, when total bids could move even higher.

US ECONOMY & POLITICS

Trump Asks Congress to Amend Covid-19 Package, Boost Direct Payments – Wall Street Journal, 12/23/20

  • President Trump on Tuesday criticized the roughly $900 billion coronavirus relief deal passed by Congress, saying the bill has “almost nothing to do with Covid” and called on lawmakers to increase direct payments to Americans to $2,000 from $600.
  • “I am asking Congress to amend this bill and increase the ridiculously low $600 to $2,000 or $4,000 for a couple,” he said in a tweeted video.
  • Hours before he posted his video, White House director of social media Dan Scavino on Facebook called the bill a “TOTAL DISGRACE, INSULT, and EMBARRASSMENT!!!”
  • The legislation, which includes $900 billion in coronavirus relief and a $1.4 trillion spending bill that funds the government through September, passed both chambers by wide margins—92-6 in the Senate and 359-53 in the House—and had been expected to be signed by the president.
  • If he vetoes it, lawmakers would need to either pass new legislation meeting his demand for larger stimulus checks or vote to override his veto—which requires a two-thirds threshold for passage in each chamber.
  • House Speaker Nancy Pelosi (D., Calif.) said on Twitter she would try to pass a bill with unanimous consent to approve $2,000 direct checks. That vote is expected Thursday, an aide said.
  • Most lawmakers have already left Washington for the holidays following the bill’s passage.

U.S. weekly jobless claims fall; consumers cutting back on spending – Reuters, 12/23/20

  • The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week, though remaining elevated as more businesses face restrictions and consumers hunker down amid an explosion of new COVID-19 cases.
  • Initial claims for state unemployment benefits fell 89,000 to a seasonally adjusted 803,000 for the week ended Dec. 19, the Labor Department said. Economists polled by Reuters had forecast 885,000 applications in the latest week.
  • Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.3 million people filed claims last week.
  • There were at least 20.3 million people collecting unemployment benefits in early December.
  • A second report from the Commerce Department on Wednesday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, declined 0.4% in November after increasing 0.3% in October.
  • Personal income decreased 1.1% in November, pulled down by the expiration of a government loan program for businesses hit by COVID-19.
  • There were also decreases in coronavirus-related government payments to farmers and ranchers, as well as unemployment subsidies. Income fell 0.6% in October.
  • With incomes dwindling, Americans are dipping into savings.
  • The saving rate fell to a still-high 12.9% from 13.6% in October. It peaked at record 33.6% in April.
  • Inflation remained muted in November. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components was unchanged for a second straight month.
  • In the 12 months through November, the so-called core PCE price index increased 1.4%, matching October’s gain.

U.S. core capital goods orders, shipments rise in November – Reuters, 12/23/20

  • New orders for key U.S.-made capital goods increased for a seventh straight month in November, suggesting business investment could offset slowing consumer spending and keep the economy on a moderate growth path in the fourth quarter.
  • Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.4% last month. These so-called core capital goods orders jumped 1.6% in October.
  • Core capital goods orders increased 0.8% year-on-year in November.
  • Shipments of core capital goods increased 0.4% last month. They surged 2.6% in October.
  • Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, rose 0.9% in November after advancing 1.8% in October.

Despite ‘three martini’ tax break, COVID-19 bill leaves struggling U.S. restaurants cold – Reuters, 12/23/20

  • The $900 billion coronavirus relief package passed by the U.S. Congress here on Monday contains a high-profile tax loophole for business meals, but not the one thing most requested by independent U.S. restaurants which have been devastated by the pandemic: cash.
  • The Republican-backed “three-martini lunch deduction” doubles an existing tax break, allowing companies to write off 100% of business dining expenses through 2022.
  • However, it has been derided by economists, Democrats, and even the staunchly conservative Wall Street Journal op-ed page as politically tone deaf, given the millions of sick and out-of-work Americans.
  • The tax break will cost taxpayers $6.3 billion through 2023, analysis by a congressional committee shows here.
  • It will also fail to boost the restaurant industry in a big way, at least initially.
  • “When less than 10% of workers have returned to their offices in Midtown and Lower Manhattan, and indoor dining is closed and it’s freezing outside, this deduction doesn’t do much,” said Andrew Rigie, director of the New York City Hospitality Alliance.
  • The coronavirus relief bill does include loans and tax breaks the restaurant industry could tap, but not the dedicated grants trade groups had spent months lobbying for, arguing that the restaurant industry deserved similar subsidies to airlines and farms.
  • The National Restaurant Association (NRA) believes 17% of all U.S. restaurants – about 110,000 – have already closed permanently or long-term.

Hunter Biden’s Family Name Aided Deals with Foreign Tycoons – Wall Street Journal, 12/23/20

  • Hunter Biden ramped up business activities with European and Chinese tycoons as his father exited the vice presidency four years ago. For him it was a potential path to income; for the tycoons, the Biden family name promised to burnish their reputations.
  • These arrangements now loom over President-elect Joe Biden.
  • A federal criminal tax investigation into Hunter Biden’s business dealings is under way, with findings potentially trickling out in coming months.
  • His business ties to well-connected people in China and other places could add to scrutiny of foreign-policy decisions taken by the Biden administration over possible conflicts of interest.
  • All are likely to provide ammunition to Republicans.
  • Sen. Chuck Grassley (R., Iowa), who has led the Senate Finance Committee whose Republican staff helped investigate Hunter Biden, has said he would continue to look into what he says are possible counterintelligence and criminal concerns related to Mr. Biden’s business dealings.
  • None of the Journal’s reporting found that Joe Biden was involved in his son’s business activities.
  • The tax investigation doesn’t implicate the president-elect, according to people familiar with the matter.

New Population Data Suggest Which States Will Win and Lose Seats in Congress – Wall Street Journal, 12/23/20

  • New population estimates show how Southern and Western states are poised to gain political power when the U.S. reshuffles congressional seats and Electoral College votes next year.
  • The Census Bureau on Tuesday released annual state population estimates as of July 1. That data was gathered separately from decennial census responses pegged to April 1, which lawmakers will use in early 2021 to redistribute seats in the House of Representatives.
  • Tuesday’s census estimates show that many midwestern and northeastern states continue to see their populations shrink while large southern states draw in residents.
  • In a separate development, California’s population declined for what appears to be the first time since at least 1900, according to Brookings Institution demographer William Frey, as the state lost nearly 70,000 residents since the annual estimate released last year.
  • The new population estimates suggest that 10 states are likely to lose one congressional seat each: Alabama, California, Illinois, Michigan, Minnesota, New York, Ohio, Pennsylvania, Rhode Island and West Virginia.
  • Texas is expected to gain three seats, and Florida is expected to pick up two.
  • Five others are expected to gain one seat: Arizona, Colorado, Montana, North Carolina and Oregon.

EUROPE & WORLD

Brexit Deal Negotiations Narrow to One Sensitive Subject: Fish – Wall Street Journal, 12/23/20

  • A dispute over fish worth just tens of millions of dollars annually is holding up a new trade accord between the U.K. and the European Union, but officials on both sides say a deal could still come before Christmas.
  • The two teams continued negotiations Wednesday in Brussels, with eight days left to reach a deal covering post-Brexit economic, trade and security ties between the U.K. and the EU.
  • Failure to reach a deal would mean from Jan. 1, tariffs would be applied for the first time in almost a half-century on some trade between the U.K. and the EU. The U.K. sends 43% of its exports to the bloc.
  • At the Brexit negotiating table, the rights of EU fishing boats to access U.K. waters from 2021 have dominated the latest phase of talks.
  • While fishing has minor economic significance—affecting overall some 600 million euros, equivalent to $730 million, annually of fish caught by EU boats in British waters—it is politically hugely sensitive in the U.K. and EU coastal states including France, Belgium and the Netherlands.

Israel Faces Fourth Election in Two Years After Parliament Is Dissolved – Wall Street Journal, 12/23/20

  • Israel’s Parliament was dissolved after the short-lived unity government led by Prime Minister Benjamin Netanyahu failed to pass a new budget, sending the country to a fourth election in less than two years.
  • The parties making up Mr. Netanyahu’s coalition—which have been squabbling over senior judicial appointments and power-sharing since the government’s inception this past spring—failed to agree on a new budget in time for a midnight deadline on Tuesday.
  • The result was the automatic dissolution of the Knesset, Israel’s parliament, which triggered fresh national elections that are set to be held on March 23, according to the parliament’s speaker.
  • The collapse brings to an end a government that was established only in May, when Benny Gantz, leader of the centrist Blue and White party, set aside his opposition to joining a Netanyahu government and agreed to form a unity coalition that would guide the country through the twin coronavirus and economic crises.

France to Reopen Border to Trucks from England, but Says Drivers Must Take Covid-19 Test – Wall Street Journal, 12/23/20

  • The British and French governments said on Tuesday they would reopen their border to trucks from the U.K. after the busy frontier was closed for 48 hours in an effort to keep out a new strain of the coronavirus that is spreading rapidly in England.
  • Around a quarter of British goods trade takes place from the port of Dover, along with the nearby Channel Tunnel, and its usual speed means it is the preferred route for fresh produce, such as fish, vegetables and fruit.
  • Rail, air and sea services will resume Wednesday, with all people traveling to France from the U.K. required to show proof of a negative coronavirus test taken within the previous 72 hours, the U.K. Department for Transport said Tuesday.

Factmonster – TODAY in HISTORY

  • President Woodrow Wilson signed the act creating the Federal Reserve System. (1913)
  • The transistor was unveiled by American physicists John Bardeen, Walter H. Brattain, and William Shockley. (1947)
  • Hideki Tojo and six other Japanese war leaders were executed. (1948)

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