Closing Recap

Tuesday, December 29, 2020

Equity Market Recap

·     U.S. stocks slip from record levels as additional Covid stimulus relief remains uncertain. Stocks started the day higher after the House of Representatives passed a bill overnight that would replace the $600 stimulus checks in the newly enacted relief bill with $2,000 payments, as Democrats try to pass a proposal suggested by President Trump. The measure to amend the relief bill that Trump signed today passed on a 275 to 134 vote, meeting the two-thirds majority required for an expedited procedure. However, stocks turned lower midday after Senate Republicans, led by Majority Leader Mitch McConnell, blocked an attempt by Democrats to increase stimulus payments in the Covid-19 relief bill which pushed stocks lower. The S&P 500 and Dow Jones Industrials each touched intraday highs on Tuesday before fading, while the Nasdaq Composite Index came up short of the 13,000 level a day after hitting its 55th record close of the year. Investors have continued to pour money into markets the last few weeks amid an accommodative Fed, additional Covid relief stimulus, and the ongoing rollout of emergency use authorization for vaccines to fight the Covid-19 virus, raising hopes of an economic recovery. Tech was mixed as large cap leaders AMZN, NFLX, FB jumped again, while semiconductors fell for the 6th trading day out of the last seven despite a jump midday by Intel (INTC) after Reuters noted shareholder Third Point urged the chip maker to explore strategic alternatives.

·     The Federal Reserve said it had extended the termination date for its Main Street Lending Program to Jan. 8, 2021, from Dec. 31, 2020, to allow more time to process and fund loans submitted to the program’s lender portal on or before Dec. 14. The extension was approved by U.S. Treasury Secretary Steven Mnuchin, the Fed said in a statement.

·     Markets overseas were strong as Europe’s Stoxx 600 up 0.9% to an over 10-month high, while Britain’s FTSE 100 up 1.6% to a near 10-month closing high while Germany’s Dax down 0.1% after touching record highs the day prior after the UK/EU Brexit trade deal was reached. EU leaders, UK prime minister will sign Brexit trade deal Wednesday morning as trade deal will be provisionally applied from Jan. 1. In Asia, the Nikkei surged 700 points to close at a 30-year high.

Economic Data

·     Home-price growth accelerated in October, as strong demand pushed home sales to a 14-year high. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 8.4% in the year that ended in October, up from a 7% annual rate the prior month. October marked the highest annual rate of price growth since March 2014.The Case-Shiller 10-city index gained 7.5% over the year ended in October, compared with a 6.2% increase in September

·     The Dallas Fed Texas service sector index of general business activity outlook -4.3 in December vs -2.6 in November and service sector revenue index 4.2 in December vs -0.7 in November

Commodities, Currencies and Treasury’s

·     Oil prices rise ahead of weekly inventory data, as WTI crude gains 38c or 0.8% to settle at $48.00 per barrel. Gold prices edged higher, rising $2.50 to $1,882.90 an ounce as the dollar weakened again (looking to end 2020 at lows) after the approval of larger coronavirus relief checks by the House of Representatives, while improved risk appetite kept it below last session’s one-week high. There also remains some concern heading into the New Year with markets hitting record highs again today, and ahead of tight Senate seat races the first week of January. Gold, seen as a hedge against inflation, has risen about 23% this year. Treasury yields end little changed on the day as the 10-year remains in a narrow trading range (0.9%-0.95%).

Sector News Breakdown

Consumer

·     Auto sector; FCAU said it plans to build hybrid and electric cars at its Polish plant starting in H2 2022; China’s Sichuan Yahua Industrial Group signs a deal to supply battery-grade lithium hydroxide to Tesla (TSLA) for the next five years, Yahua said; KNDI rises after announcing credit agreement with Hangzhou Branch of the Agricultural Bank of China; BLNK active as Lion Electric to offer co’s full line of charging stations to school systems & bus fleets that utilize co’s electric school buses

Healthcare

·     Pharma movers; ARCT shares fall after provided the clinical and preclinical data for its COVID-19 vaccine candidate, ARCT-021. Arcturus also announced that the Singapore Health Sciences Authority has signed off its Phase 2 clinical study backed by favorable Phase 1/2 study results, as well as supportive preclinical data; BHC said it is planning to pay down another $275 million of senior secured term loans, using cash on hand and cash generated from operations; ALKS said the FDA has acknowledged receipt of its New Drug Application resubmission for ALKS 3831 for the treatment of adults with schizophrenia and adults with bipolar I disorder; MNOV said its experimental drug, MN-166, along with immunomodulators to treat progressive multiple sclerosis, gets a new patent from the U.S. Patent and Trademark office; AMPH said the FDA has approved the generic version of Glucagon for Injection Emergency Kit, 1 mg for the treatment of severe hypoglycemia – the co said it plans to launch their generic version within two months

·     Covid-19 vaccine related news: The European Medicines Authority (EMA) will most likely not be able to approve the COVID-19 vaccine developed by drug maker AZN and the University of Oxford in January, the watchdog’s Deputy Executive Director Noel Wathion said in an interview reported by Reuters; Indonesia is poised to secure coronavirus vaccines from PFE and AZN, the health minister said on Tuesday, as it awaits authorization to begin its inoculation program

·     MedTech, Healthcare services and providers; CERN tgt raised to $88 from $77 at Argus saying while the pandemic has led to slower sales, and delayed the deployment of certain electronic health records systems, management believes that the company’s sales opportunities will simply be spread out over a longer period, rather than lost altogether; NVRO submitted a pre-market approval supplement to the FDA seeking approval of its Senza System for the treatment of chronic pain associated with Painful Diabetic Neuropathy (PDN); FLGT extends partnership with New York City Test; awarded contract for 2021 school year

Industrials & Materials

·     Materials, Transports & Aerospace; Dow Transports slip modestly, outperforming broader market averages (but notable that well off recent record highs – sliding over the last week or so); AAL restarted the Boeing (BA) 737 MAX commercial flights on Tuesday morning with its first flight to be between Miami and New York’s LaGuardia. Recall the MAX was given the go-ahead by Federal Aviation Administration last month after BA agreed to software upgrades and new safeguards on a key flight control system linked to both fatal crashes. Aluminum prices touched their lowest level in a month as investors worried that rising production would add to surpluses, while copper rose on hopes a U.S. aid package would boost economic activity.

Technology, Media & Telecom

·     Internet; SNAP tgt was raised to Street high $70 (from $42) at Goldman Sachs noting the company has announced a number of tech innovations and product partnerships that, along with the favorable macro backdrop for online advertising that has increased the likelihood of revenue growth acceleration well beyond consensus forecasts in Q4; the WSJ reported that State attorneys general said in a lawsuit earlier this month that a 2018 business agreement between two digital advertising giants, FB and GOOGL, was an illegal price-fixing deal. Lawmakers are calling for further investigation – the companies said it was above board.

·     Semiconductors, Software and Hardware movers; Philly semi-index (SOX) quietly slides for the 6th trading day out of the last 7, down about 100 points off early December record highs of 2,825, underperforms broader tech space; software names were generally lower with more “selling the winners” into year-end; INTC shares spiked midday after Reuters reported Third Point LLC called on the company to explore strategic alternatives