Early Look

Monday, January 4, 2021

After stocks closed out the year in strong fashion, surging into the bell on Friday and closing at the highs after registering big gains for the week, month and year…major averages are looking at a higher open as momentum continues into the New Year. Global stock markets continue to build on optimism, based on fiscal and monetary policy from global central banks, vaccine rollouts (despite surging cases), and a plunging dollar, which ended lower by about 7% in 2020. Markets are keeping an eye on Georgia as the state prepares for a Senate runoff election tomorrow as Democrats try and take control. In Asian markets, The Nikkei Index fell -185 points to 27,258, the Shanghai Index rises 29 points to move above the 2,500 level and the Hang Seng Index gains 241 points to 27,472. In Europe, the German DAX gains 170 points (1.25%) to 13,890, while the FTSE 100 soaring over 170 points (2.6%) to 6,630.

For the week, the S&P rose 1.43%, the Dow added 1.35%, and the Nasdaq gained 0.65%. For the month, the S&P 500 rose 3.71%, the Dow added 3.27%, and the Nasdaq gained 5.65%. For the quarter, the S&P rose 11.69%, the Dow added 10.17%, and the Nasdaq unofficially gained 15.41%. Lastly, for the year, the S&P 500 finished with a 16.26% gain for 2020, while the Dow gained over 7% for the year, both closing at record highs. The Nasdaq Composite registered its best annual gain since 2009, up 43.6%, but settled just shy of its record close. The Russell 2000 SmallCap Index advanced 18.36% for the year.

Bitcoin grabbing headlines again this weekend, with prices soaring nearly 15% to highs above $34,000 before paring back, after having tripled in value during 2020 and the latest leg higher added more than 50% to its value since crossing $20,000 just two weeks ago. Among key calendar items to watch in the next few days include: Macau gross gaming revenue, U.S. auto sales, discount broker DARTs, Class 8 truck orders and FBI NICS firearm background checks. Also, later this week, the monthly nonfarm payroll report on Friday. Electric vehicle stocks (TSLA, LI, XPEV, NIO) all looking higher after delivery updates.

Market Closing Prices Yesterday

·     The S&P 500 Index gained 24.03 points, or 0.64%, to 3,756.07

·     The Dow Jones Industrial Average rose 196.92 points, or 0.65%, to 30,606.48

·     The Nasdaq Composite climbed 18.28 points, or 0.14%, to 12,888.28

·     The Russell 2000 Index slipped -5.14 points, or 0.26% to 1,974.86

Events Calendar for Today

·     9:45 AM EST      Markit Manufacturing PMI, Dec-F

·     10:00 AM EST    Construction Spending for November

World News

·     On Wednesday, Georgia will hold two U.S. Senate runoff elections. If Democrats win both seats, that will mean control of the House, Senate and White House, making it easier for Democrats to pass bills without challenge. If incumbent Georgia Republicans David Perdue and Kelly Loeffler hold their seats, the GOP will have majority control and greater ability to block President-elect Joe Biden’s agenda and proposals from the Democratic-controlled House. If challengers Jon Ossoff and Raphael Warnock win, Democrats would gain control of the Senate

·     Nancy Pelosi was narrowly re-elected speaker of the U.S. House of Representatives on Sunday, as a new Congress took office amid political uncertainty, with Senate control undecided and a Republican fight looming over presidential election results.

·     Dow Jones reports Iran returns to pre-nuclear deal levels of uranium enrichment, heightening tensions with the West as begins enriching uranium to 20% purity, citing State Media

Sector News Breakdown

Autos:

·     Tesla (TSLA) reported 499,550 deliveries for 2020, slightly missing the 500K target as delivered 180,570 electric vehicles in Q4 and produced 179,757 vehicles total; in Q4, Tesla delivered 18,920 and produced 16,670 Model S/X vehicles, and delivered 161,650 and produced 163,660 Model 3/Y vehicles. Announced that it delivered 57,039 and produced 54,850 Model S/X vehicles in 2020, and delivered 442,511 and produced 454,932 Model 3/Y vehicles this year

·     Li Auto (LI) delivered 6,126 Li ONEs in December 2020, representing an increase of 31.9% MoM and up 529.6% YoY; Q4 deliveries reached 14,464, 67% higher than those for the third quarter and 20.5% above the top end of the company’s guidance

·     NIO (NIO) delivered 7,007 vehicles in December 2020, rising 121.0% YoY which consisted of 2,009 ES8s, the company’s 6-seater and 7-seater flagship premium smart electric SUV, 2,493 ES6s, the company’s 5-seater high-performance premium smart electric SUV, and 2,505 EC6s, the company’s 5-seater premium electric coupe SUV. NIO delivered 17,353 vehicles in the fourth quarter of 2020, representing an increase of 111.0% YoY and topping the high end of guidance.

·     Xpeng (XPEV) said it reached a record monthly delivery of 5,700 Smart EVs in December 2020, consisting of a record high 3,691 P7s, the company’s sports smart sedan, and 2,009 G3s, its smart compact SUV. December deliveries represent a 326% YoY increase and a 35% increase from November. The company delivered a total of 12,964 Smart EVs in Q4, a record quarterly delivery representing a 303% increase year-over-year and 51% increase from the third quarter of 2020.

Consumer

·     Carl Icahn sold over half his stake in Herbalife (HLF) and is relinquishing his seats on the company’s board, the Wall Street Journal reported. Icahn sold about $600M of his 16% Herbalife stake back to the company https://on.wsj.com/3b5lvvx

·     MGM Resorts (MGM) recently made a second offer to acquire British gaming company Entain after an initial all-cash offer of roughly $10B was rebuffed – WSJ https://on.wsj.com/3nbYZnc

·     Nordstrom (JWN) positively mentioned in Barron’s saying it may be department store survivor, thanks to reduced competition and its investments in an online platform. The stock has more than doubled from its low, but is still below a February high of $41. It has fewer traditional stores than competitors, and provides in-person perks like free tailoring

·     Costco Wholesale (COST) and Williams-Sonoma (WSM) are two pandemic winners that won’t lose their gains according to a portfolio manager in Barron’s. Costco has a strong brand and tends to perform regardless of market conditions. Cooking equipment and home accessories retailer William-Sonoma isn’t as vulnerable to capital reallocation as rivals who are trading richly

·     Wynn Resorts (WYNN), Las Vegas Sands (LVS), and Melco (MLCO) active after gross gaming revenue in Macau fell 65.8% in December to 7.83B patacas ($980M) as the slow pace of recovery continued (ests were to fall about 68.3% during the month). Macau GGR for the full year was down 79.3% to 60.44 patacas ($7.57B) as COVID-19 shutdowns and restrictions decimated traffic.

Energy, Industrials and Materials

·     Barron’s ranked income investment categories for 2021 from first to worst: energy pipelines, U.S. dividend stocks, overseas dividend stocks, electric utilities, REITs, telecoms, convertibles, junk bonds, tax-exempt munis, taxable munis, preferred stock, treasuries. Top 2021 income ideas include: Enterprise Products Partners (EPD), Salient Midstream & MLP (SMM), Eletrobras (EBR), Gazprom (OGZPY), Dominion Energy (D), Consolidated Edison ED), in energy

·     OPEC sees plenty of downside risks for oil markets in the first half of 2021, its secretary general said on Sunday, a day before meeting allies led by Russia to discuss output levels for February – Reuters reported Sunday

·     The Senate voted Friday to overturn President Trump’s veto of the annual defense bill. It is the first veto override by Congress in the Trump presidency. Publicly traded defense contractors include General Dynamics (GD), Lockheed Martin (LMT), and Raytheon Technologies (RTX)

Healthcare

·     AstraZeneca (AZN) and the Oxford University said India has granted the emergency use approval for their COVID-19 vaccine, a day after an advisory panel in the country issued its recommendation.

·     Bristol Myers Squibb (BMY) said with no FDA decision on liso-cel before December 31, the Contingent Value Rights Agreement that followed its acquisition of Celgene, automatically terminated. The Biologics License Application for isocabtagene maraleucel (liso-cel) in adults with relapsed or refractory large B-cell lymphoma after at least two prior therapies remains under the FDA review with no new action date. As a result, one of the three required milestones for payment was not met, and, therefore, CVRs would no longer trade on the NYSE from January 01

·     According to Bloomberg, nearly 715 million BMY Contingent Value Rights (BMY.RT) were outstanding, with a potential all-or-nothing payout of $6.4 billion in total, or $9 a share, if three drug candidates from Celgene won regulatory approval before key deadlines.

·     The U.S. government is considering giving some people half the dose of Moderna’s (MRNA) COVID-19 vaccine in order to speed vaccinations. Moncef Slaoui, head of Operation Warp Speed, the federal vaccine program, said that officials were in talks with Moderna and the FDA about the idea. Moderna’s vaccine requires two injections

·     Magellan Health (MGLN) announced it will be acquired by Centene (CNC) for $95.00 per share in cash for a total enterprise value of $2.2B https://on.mktw.net/3ohFZ84 

·     Icon (ICLR) announced it provided clinical trial services to the Pfizer (PFE) and BioNTech SE (BNTX) investigational COVID-19 vaccine program

Technology

·     In the semiconductor chip sector, Barron’s said consider Broadcom (AVGO) for a blend of growth and value, says Intel (INTC) is cheap but looks challenged given Apple’s (AAPL) shift to make its own chips and says Nvidia (NVDA) has good exposure to video games, cloud computing and AI, but its shares are expensive

·     Liberty Braves Group (BATRK) and Madison Square Garden Sports (MSGS) are two rare examples of publicly traded sports teams Baron’s noted that may see higher rates for television rights renewal and should be valued by what a potential acquirer would pay

·     Quibi is in advanced talks to sell its content catalog to Roku Inc. (ROKU), the WSJ reports according to people familiar with the matter, as the short-form streaming service winds down its operations following an unsuccessful run https://on.wsj.com/358gBKr

·     TEGNA (TGNA) and NBC announces a comprehensive, multi-year deal that renews station affiliation agreements for 20 TEGNA markets nationwide, including 10 of the top 25 markets for NBC.

·     Chinese billionaire Jack Ma, who hasn’t been seen in public for several weeks after criticizing China’s financial regulatory system late October, has now disappeared as a judge on a TV talent show that he created. In a speech in Shanghai, he called for reform of the regulatory system, which he said was stifling innovation. About a week later, the Shanghai Stock Exchange ordered a US$37 billion initial public offering of Ant Group, a financial technology firm co-founded by Mr. Ma, to be suspended. Mr. Ma reportedly hasn’t been seen in public since then.