Mid-Morning Look

Wednesday, December 30, 2020

U.S. stocks open higher on Tuesday amid latest vaccine optimism, as stocks partially offset some of Tuesday’s modest losses. Momentum remains firmly to the upside heading into year-end as major averages are either at or near record all-time highs with the biggest gains this year coming for Tech (Nasdaq up over 44% YTD) and Small Caps as Russell 2000 up about 17% YTD. Investors again looking to add to positions into year end, overlooking a few items today including reports that the new strain of coronavirus was found in Colorado, while vaccination remains slow and Congress fails to approve higher stimulus checks after U.S. Senate Majority Leader Mitch McConnell yesterday blocked immediate consideration of the measure calling for an increase in stimulus payments from $600 to $2,000. In politics, Georgia is holding runoff elections for both U.S. Senate seats on Jan. 5, and the outcome will determine control of the Senate (Republicans currently hold the majority at 50-48). The surging Covid cases across the U.S. and other parts of the world have failed to dent any optimism about the global economic recovery expectations, as accommodative central banks, coupled with fiscal stimulus measures have boosted hopes for a strong 2021. Gold prices edge higher along with oil, while the dollar extends its losses for the year and Treasury yields remain in a tight range.

Economic Data

·     Chicago PMI for December rises to 59.5 vs. 56.0 consensus and 58.2 prior. New orders slipped two points in December as demand eased, while production ticked up 1.1 points as business activity picked up. Order backlogs rose for the second consecutive month in December, by 3.6 points compared with the previous month. Employment saw the largest gain in December and rose to a one-year high but is still in contraction territory.

·     November advance international goods trade balance widened to (-$84.82B) vs. -$82.0B consensus and -$80.4B prior (revised); Advance Retail Inventories rose +0.7% in November to $616.9B vs. +0.8% prior, while Advance Wholesale Inventories fell -0.1% to $649B vs. +0.6% estimate and +0.9% prior

·     Pending Home Sales Index fell -2.6% in November vs. est. decline of -0.3%, marking the third straight month of declines, following four months of extended gains and reaching in August the highest level in the historical series. Pending home sales were up 16.4% in November compared with the same month a year earlier.

Stock MOVERS

·     ACHC +3%; reached an agreement to sell its U.K. operations to Waterland Private Equity for about 1.078 billion pounds ($1.47 billion) as expects net proceeds of about $1.350 billion net of transaction costs and the settlement of currency hedging liabilities

·     ALT +4%; begins multinational phase 2 clinical trial of heptcelltm, a novel immunotherapeutic for the treatment of chronic hepatitis b

·     AZN +1%; after announcing that its COVID-19 vaccine has been approved for emergency supply in the U.K., with the first doses being released today so vaccinations may begin early in New Year

·     CAT +2%; among top gainers in the Dow after being named top 2021 idea at Baird as sees setup like 2010, 2017 where stock outperformed by 50%

·     FCX +7%; as metals names outperform early (X, AA)

·     FTIV +9%; as Boutique investment bank Perella Weinberg Partners agrees to go public through a merger with FTIV, backed by banking entrepreneur Betsy Cohen, in a deal valued at $975 mln

·     FUBO -5%; shares fall a 5^th day ahead of lock-up expiry today, as well as recent cautious sell-side related research calls (Lightshed and Hedgeye)

·     OSMT -16%; after saying the U.S. FDA declined to approve its arbaclofen ER tablets to treat spasticity in multiple sclerosis patients

·     TWOU +6%; named best idea in online education for 2021 at Needham replacing (CHGG)