Early Look

Thursday, December 31, 2020

U.S. futures are looking at a modestly higher open on this final day of trading of the year, looking to close out what has been an extraordinary stretch with unprecedented events. 2020 will go down in the record books as a year to forget given the impact of the Covid-19 virus, which to date has seen around 82.5M infected worldwide and over 1.8M have died from. The U.S. reported more than 220,000 new coronavirus cases for Wednesday, according to data compiled by Johns Hopkins University. The nation reported more than 3,700 deaths from Covid-19 for Wednesday, a single-day record, as the total exceeded 342,000. While the numbers are staggering and many nations remain in tight restrictions, the recent emergency use approval of several vaccines from Pfizer, AstraZeneca and Moderna have given markets hope for a bit of normalcy this year. While the overall year remains a negative mark for most, the financial markets tell a different story, as major averages have soared since the pandemic low in March, rebounding as the Federal Reserve jumped in with extreme monetary policy actions to ease investor concerns, along with two massive fiscal policy relief bills from the government to help ease the financial burdens for individuals and small businesses most impacted from the global shutdowns.

Coming into today, the Nasdaq is up 43% YTD (marking back-to-back 40% for the Nasdaq since 1999), the S&P 500 index up 15% YTD (lead by an astounding 700% YTD return from TSLA which was just recently added to the index), the SmallCap Russell 2000 index on track for an 18% YTD gain and the Dow Jones a modest 6.5% YTD advance. Other top stories this year in financial markets remains the EU, UK trade deal finalizing (Brexit), the meteoric rise of Bitcoin in the final months, leading it to a 300% YTD gain, and a record year for the IPO market as companies raised $167.2 billion through 454 offerings on U.S. exchanges this year through Dec. 24, compared with the previous full-year record of $107.9 billion at the height of the dot-com boom in 1999, according to Dealogic, dominated by a surprising surge in special-purpose acquisition companies, or SPACs. In Asian markets, The Nikkei Index fell -124 points to 27,444 (but remains near 30-year highs), the Shanghai Index jumped 58 points (1.7%) to settle the year at 3,473 and the Hang Seng Index gained 84 points to close out 2020 at 27,231. In Europe, the German DAX is while the FTSE 100 slides -70 points to 6,480.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 5.00 points, or 0.13%, to 3,732.04

·     The Dow Jones Industrial Average rose 73.89 points, or 0.24%, to 30,409.56

·     The Nasdaq Composite climbed 19.78 points, or 0.15%, to 12,870.00

·     The Russell 2000 Index advanced 20.63 points, or 1.05% to 1,979.99

Events Calendar for Today

·     8:30 AM ET         Weekly Jobless Claims/Continuing Claims

·     10:30 AM ET      Weekly EIA Natural Gas Inventory Data

World News

·     China’s factory activity expanded in December but at a slower pace, as the official manufacturing Purchasing Manager’s Index (PMI) fell to 51.9 in December from 52.1 in November, data from the National Bureau of Statistics (NBS) showed on Thursday

·     The official China PMI showed the sub-index for new export orders stood at 51.3 in December, easing from 51.5 a month earlier. A sub-index for small business activity stood at 48.8 in December, sharply down from November’s 50.1 and returning to contractionary territory

·     The official Chinese non-manufacturing Purchasing Managers’ Index (PMI) fell to 55.7 in December from 56.4 in November, data from the National Bureau of Statistics (NBS) showed. The official November composite PMI fell to 55.1 from November’s 55.7

·     France has resumed collecting what is known as its digital-services tax, while the U.S. is set on Jan. 6 to impose $1.3 billion in tariffs on French imports, including cosmetics and handbags – WSJ

Sector News Breakdown

Consumer

·     Capri Holdings (CPRI) to replace Enphase Energy in the S&P 400 at open on January 7

·     Celsius Holdings (CELH) to replace Capri Holdings in the S&P 600 at open on January 7

·     Sonesta International Hotels to acquire RLH (RLH) in an all-cash transaction valued at ~$90M. Each RLH’s common stock holder will receive $3.50 per share in cash, representing a 30% premium over today’s closing price prior to the transaction being announced. https://bit.ly/2WOBlCd

Energy, Industrials & Materials

·     Devon Energy (DVN) and WPX Energy (WPX) shareholders voted to approve all proposals needed to close the previously announce all-stock merger of equals between the two companies; merger is expected to close on Jan. 7, 2021

·     Enphase Energy (ENPH) to replace Tiffany in the S&P 500 at open on January 7

·     Exxon Mobil (XOM) discloses estimated considerations that may impact the company’s Q4 earnings; states that its Q4 income was boosted by up to $400M from change in liquids prices, up to $600M from change in gas prices, and by up to $400M from change in Chemical margins

·     The Association of American Railroads (AAR) reports total weekly US rail traffic up 8.4% to 405,111 carloads and intermodal units for the week ending Dec. 26, 2020. Total carloads down 3.4% to 185,029 compared with the same week in 2019, while U.S. weekly intermodal volume went up 20.8%% to 220,082 containers and trailers.

Financials

·     Chinese regulators are reviewing equity investments held by Ant Group Co Ltd in dozens of companies, three people with knowledge of the matter said, intensifying a crackdown on billionaire Jack Ma’s financial technology empire – Reuters

Healthcare

·     Axsome Therapeutics (AXSM) announced results from the long-term, open-label Phase 3 MOVEMENT trial of AXS-07, Axsome’s novel, oral, multi-mechanistic investigational medicine in the acute treatment of migraine. Treatment with AXS-07, rapidly, substantially, and durably relieved migraine pain and associated symptoms in this trial. AXS-07 was well tolerated over long-term treatment with a safety profile consistent with that observed in the previously reported controlled trials

Technology, Media & Telecom

·     Tribune Publishing Co. (TPCO) shares may be active after the WSJ reported hedge fund Alden Capital (already largest shareholder at 32% stake) is seeking to buy the newspaper chain behind titles including the Chicago Tribune and New York Daily News, according to people familiar with the matter. Tribune has a market value of roughly $470M https://on.wsj.com/3pEt9Ba

·     Brooks Automation (BRKS) to replace WPX Energy in the S&P 400 at open on January 7 (WPX being acquired by DVN)

·     Fox News Channel (FOXA) topped all news and basic cable ratings for the fifth straight year, averaging 1.9M viewers per day and 3.6M in primetime – record levels for cable news channels. While Fox was ahead in annual key metrics, AT&T’s (T) CNN beat the network in total day ratings for the 41 straight days following the election