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Daily Market Report | December 30, 2021

US FINANCIAL MARKET

Stocks Drift Higher as Investors Weigh Jobs Data – Wall Street Journal, 12/30/2021

  • U.S. stocks edged higher Thursday as fresh data indicated that a recent uptick in Covid-19 infections hasn’t led to a surge in layoffs.
  • The S&P 500 ticked up 0.2% after the broad-market index climbed to a record a day earlier. The Nasdaq Composite rose less than 0.1%, and the Dow Jones Industrial Average gained 0.4%.
  • Stocks have often risen during the last five trading days of the year and the first two trading days of the new year—a phenomenon known as the “Santa Claus rally.”
  • Since 1950, the S&P 500 has ended higher about 77% of the time during the period, according to Dow Jones Market Data, with an average gain of 1.3%.
  • Despite Covid-19 cases hitting a record in the U.S., some investors expect that high vaccination rates and signs of milder symptoms caused by the Omicron variant mean the economy will avoid a repeat of the disruption seen at the start of the pandemic.
  • Many decision makers are more focused on hospitalizations than cases and are seeking to avoid stricter measures.
  • Shares of Biogen fell 6.6% after Samsung Biologics called a media report that it was about to buy the company “not true.”
  • U.S.-listed shares of Didi Global rose 1.5% after the ride-hailing firm said its third-quarter revenue dropped.
  • In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 1.543% from 1.542% Wednesday. Yields and prices move inversely.
  • The Turkish lira fell 3.5% against the dollar. The currency has resumed its decline in recent days despite the Turkish government’s experimental plan to stabilize it.
  • Investors and economists expect the lira to depreciate further due to high inflation and recently lowered interest rates.
  • Overseas, the Stoxx Europe 600 edged 0.3% higher. Indexes in Asia closed with mixed performances.
  • China’s Shanghai Composite added 0.6%, and Hong Kong’s Hang Seng ticked up 0.1%. South Korea’s Kospi fell 0.5%, and Japan’s Nikkei 225 declined 0.4%.

U.S. Hit With Record Number of New Covid-19 Cases – Wall Street Journal, 12/30/2021

  • Covid-19 cases in the U.S. have continued to climb, reaching a pandemic record on Tuesday of 265,427 cases a day on average, according to a Wall Street Journal analysis of Johns Hopkins University data.
  • The average for Tuesday was about 13,400 greater than the previous high set on Jan. 11, 2021, although there was less testing during the earlier stages of the pandemic.
  • Covid-19 cases in the U.S. increased roughly 60% this week, largely because of the Omicron variant, Centers for Disease Control and Prevention Director Rochelle Walensky said Wednesday at a White House Covid-19 briefing. Wednesday’s seven-day daily average of Covid-19 cases in the U.S. hit about 240,400 cases a day, according to the CDC.
  • As of Wednesday, the seven-day average of hospitalizations for confirmed and suspected Covid-19 was 77,840, according to data from the U.S. Department of Health and Human Services. That’s an increase of about 14% over the past two weeks.
  • The seven-day average of hospitalizations, though increasing, is below both the pandemic peak of 137,510 on Jan. 10, 2021, and the smaller peak of 102,967 on Sept. 4, 2021, during the Delta surge.
  • In France, a record high of nearly 180,000 daily infections were reported on Tuesday, but hospitalization rates remained far below earlier outbreaks, reaching 3,400 people in intensive-care units compared with highs of more than 7,000 in the spring.
  • A similar pattern is playing out in England, which reported around 117,000 new infections on Tuesday. The latest hospitalization data showed there were just over 9,500 people in the hospital, far below the 34,000-plus figures seen in January.
  • In China, the northern city of Xian is extending a lockdown for a seventh day on Wednesday after a cluster of Covid-19 infections. No cases of Omicron have been detected in the city so far, city authorities said.

U.S. Airlines Cancel Over 1,000 Flights on Day Before New Year’s Eve – Bloomberg, 12/30/2021

  • Airline cancellations are already piling up in the U.S., with more than 1,000 flights scrubbed the day before New Year’s Eve as coronavirus cases climbed and heavy snow brewed in the West.
  • JetBlue Airways scratched 175 flights, accounting for 17% of its schedule, by 9:39 a.m. Thursday in New York, according to FlightAware.com.
  • Allegiant canceled 89 flights, or 18% of its service. United Airlines Holdings scrubbed 190 flights, representing 8% of its schedule.
  • The disruptions come after thousands of flights were canceled over the Christmas holiday weekend and into early this week as winter storms combined with staffing shortages caused by the spread of coronavirus cases from the omicron variant.
  • The Transportation Security Administration said it screened 2.02 million people around the U.S. on Wednesday.

Tesla Recalls Over 475,000 U.S. Cars on Camera, Trunk Issues – Bloomberg, 12/30/2021

  • Tesla recalled some 475,000 cars in the U.S. — nearly equivalent to its global deliveries last year — because of technical defects that may increase the risk of accidents.
  • The company plans to recall all Model 3 vehicles made between 2017 and 2020 — that’s as many as 356,309 cars. The cable harness for the rear-view camera may be damaged by opening and closing the trunk and prevent the image from displaying, it told the National Highway Traffic Safety Administration.
  • Tesla is also recalling as many as 119,009 Model S cars assembled from 2014 because of a faulty front-trunk latch that could cause the hood to open unexpectedly, according to a separate NHTSA statement also posted on its website Thursday.
  • The company said it will fix both issues free of charge.
  • While the scope of the recall is large for Tesla, such callbacks are increasingly routine in the auto industry.
  • In 2020, recalls involved more than 300 auto models and affected almost 28 million vehicles, excluding Takata airbag-related recalls, according to Chicago-based consulting firm Stout.

Only 26% of World GDP to Come From Free Economies in 2050 – Bloomberg, 12/30/2021

  • For the last 40 years, with the Reagan revolution sweeping the world — markets were in the ascendant and the state in retreat — but with the rise of China, that trend is swinging into reverse.
  • Marrying Bloomberg Economics’ forecasts for long-term growth with the Heritage Foundation’s economy classifications of “free” and “unfree” we can chart the evolution.
  • In 1990, about 66% of global GDP came from “free” and “mostly free” economies; by 2020, that share had fallen to 45%; by 2050, it will likely have declined to 26%.

Hedge Funds Salvage 2021 Gains as Private Investments Shine – Bloomberg, 12/30/2021

  • For some of the world’s largest hedge funds, private equity ended up making — or saving — the year, and they’re betting that will be the case again in 2022.
  • Those with big holdings in non-public enterprises were rewarded in 2021 as a record number of companies debuted on U.S. exchanges, allowing the asset managers to realize gains.
  • Dan Sundheim’s D1 Capital returned 17% through November in a fund that can invest as much as 35% of its assets in private companies. It would have struggled without them.
  • That private investments made such a difference for so many managers might be surprising given how well public markets performed this year, with the S&P 500 climbing 28% through Wednesday.
  • Yet surging stock prices were little help to managers who backed the wrong companies or were ensnared in violent short-squeezes.

Samsung, Micron warn Xian lockdown may disrupt memory chip manufacturing – Reuters, 12/30/2021

  • Samsung Electronics and Micron Technology, two of the world’s largest memory chip makers, warned that strict COVID-19 curbs in the Chinese city of Xian could disrupt their chip manufacturing bases in the area.
  • The lockdown in the city puts further pressure on global supply chains and adds to a torturous year for exporters facing sharply higher freight costs even as prices for raw materials including semiconductors skyrocket amid the two-year long pandemic.
  • The curbs could cause delays in the supply of DRAM memory chips, widely used in data centres, Micron said on Wednesday.
  • Samsung’s memory chip operation in Xian is one of the largest foreign projects in China. The tech giant has two production lines in Xian making advanced NAND Flash products, which account for 42.5% of its total NAND flash memory production capacity and 15.3% of the overall global output capacity, according to TrendForce.

Royal Caribbean bookings take a hit as Omicron fears worsen – Reuters, 12/30/2021

  • Royal Caribbean said on Thursday it was grappling with a drop in bookings and a rise in cancellations as COVID-19 cases surge in the United States, driven by the Omicron variant.
  • Still, the cruise operator said the disruption was not as severe as that experienced during the Delta variant wave earlier this year.
  • The company said while sailings for the second half of 2022 continue to be booked within historical ranges, load factors in the first half of 2022 remain below historical levels.
  • Royal Caribbean also said it was experiencing service disruptions at some destinations and to date had canceled or “significantly modified” 16 destination calls out of 331.
  • Since Royal Caribbean restarted its U.S. cruise operations in June, the company’s cruise lines have ferried 1.1 million passengers, with 1,745 people testing positive for COVID-19 and 41 being hospitalized.

US ECONOMY & POLITICS

Jobless Claims in U.S. Unexpectedly Declined in Latest Week – Bloomberg, 12/30/2021

  • Applications for U.S. state unemployment benefits unexpectedly fell last week, illustrating still-solid labor demand despite the latest wave of coronavirus infections.
  • Initial unemployment claims totaled 198,000 in the week ended Dec. 25, down 8,000 from the prior period’s revised level, Labor Department data showed Thursday.
  • Economists had expected 206,000 applications, according to the median estimate in a Bloomberg survey.
  • Continuing claims for state benefits fell to 1.72 million in the week ended Dec. 18, the lowest since March of last year. The S&P 500 rose on light volumes, while the yield on the 10-year Treasury note eased.
  • On an unadjusted basis, claims rose slightly to 256,146 last week. California, Texas and Virginia were states with the biggest decreases in unadjusted claims. New Jersey and Pennsylvania registered the largest increases in applications.

Ghislaine Maxwell Found Guilty in Epstein Sex-Abuse Case – Wall Street Journal, 12/30/2021

  • British socialite Ghislaine Maxwell was found guilty Wednesday on five of six criminal counts in her sex-trafficking case, capping federal prosecutors’ push to bring the longtime confidante of disgraced financier Jeffrey Epstein to justice.
  • After five days of deliberations, a federal jury in New York convicted Ms. Maxwell on Wednesday for what prosecutors said was her role in helping Epstein sexually abuse underage teens.
  • On the most serious count, sex trafficking of minors, the jury found Ms. Maxwell guilty. That count carries a maximum sentence of 40 years in prison. A sentencing date hasn’t been scheduled yet.

EUROPE & WORLD

Didi’s Revenue Falls After Beijing’s Crackdown Hurts Its China Business – Wall Street Journal, 12/30/2021

  • Didi Global said Wednesday its third-quarter revenues dropped 11.5% from the preceding three months, after Chinese regulators launched a cybersecurity probe into the ride-hailing firm and forced many of its apps to be taken down.
  • Didi reported the equivalent of $6.7 billion in revenues for the three months ended Sept. 30 at current exchange rates, versus $7.6 billion in the three months ended June 30. Its China mobility business—which includes its core ride-hailing operations—was the main cause of the decline.
  • The company also posted a net loss equivalent to $4.8 billion for the third quarter.
  • For the nine months ended Sept. 30, Didi posted revenues equivalent to $20.9 billion, up 40% from the same period a year ago, showing how much growth momentum it had earlier in the year.
  • The company’s September quarter revenues were slightly lower than in the third quarter of 2020.

Biden, Putin Plan Call at What U.S. Says Is a ‘Moment of Crisis’ Over Ukraine – Wall Street Journal, 12/30/2021

  • President Biden and Russian President Vladimir Putin plan to talk Thursday ahead of high-level negotiations to deal with what one senior U.S. official described as a “moment of crisis” over Russia’s military buildup near Ukraine.
  • The Biden-Putin call was requested by the Russian side, a senior Biden administration official said Wednesday.
  • It takes place as Moscow has pressed the U.S. to rule out the possible expansion of the North Atlantic Treaty Organization to include Ukraine and Georgia and cut the alliance’s military ties with those countries and other former Soviet republics.
  • After weeks of diplomacy, the U.S. and Russia this week scheduled security talks in Geneva on Jan. 10. Even so, the Russian military has continued to maintain an intimidating military presence near Ukraine despite repeated U.S. appeals to de-escalate, U.S. officials said.
  • Some former officials see the planned Thursday call as part of a broader Russian push to rewrite the terms of the post-Cold War security arrangements in Europe and establish a sphere of influence near its periphery.

China Evergrande shares fall after missing new coupon payments – Reuters, 12/30/2021

  • Shares of China Evergrande Group tumbled on Thursday after the embattled real estate developer did not pay offshore coupons due earlier this week.
  • Evergrande, whose $19 billion in international bonds are in cross-default after missing a deadline to pay coupons earlier this month, had new coupon payments worth $255 million due on Tuesday for its June 2023 and 2025 notes. ,
  • At least some investors holding the two bonds have not yet received the coupons, according to three sources with knowledge of the matter. Both the payments have a 30-day grace period.
  • Evergrande has more than $300 billion in liabilities and is scrambling to raise cash by selling assets and shares to repay suppliers and creditors.

Germany to pull the plug on three of its last six nuclear plants – Reuters, 12/30/2021

  • Germany will pull the plug on three of its last six nuclear power stations on Friday, another step towards completing its withdrawal from nuclear power as it turns its focus to renewables.
  • The government decided to speed up its phasing out of nuclear power following Japan’s Fukushima reactor meltdown in 2011 when an earthquake and tsunami destroyed the coastal plant in the world’s worst nuclear disaster since Chernobyl 25 years earlier.
  • The reactors of Brokdorf, Grohnde and Gundremmingen C, run by utilities E.ON and RWE, will be shut down on Friday after three and half decades in operation.
  • The last three nuclear power plants – Isar 2, Emsland and Neckarwestheim II – will be turned off by the end of 2022.
  • The phase-out of an energy deemed clean and cheap by some is an irreversible step for Europe’s biggest economy, facing ambitious climate targets and rising power prices.

Factmonster – TODAY in HISTORY

  • The United States bought some 45,000 sq mi of land from Mexico in the Gadsden Purchase. (1853)
  • The Union of the Soviet Socialist Republics was established through the confederation of Russia, Byelorussia, Ukraine, and Transcaucasian Federation. (1922)
  • California’s first freeway opened. (1940)
  • President Nixon halted the heavy bombing on North Vietnam. (1972)
  • Israel and the Vatican signed an agreement of mutual recognition to put an end to Jewish-Christian hostilities. (1993)

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