June 16, 2024

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Business is my step

Daily Markets: 2021 Begins on a Positive Note, But Issues Remain

8 min read

Today’s Big Picture

Equities in Asia finished the new year off mostly higher following regional manufacturing reports showing the eighth consecutive month of expansion in China and the highest reading in Japan since April 2019. China’s Shanghai Composite finished the day up 0.9%, as did Hong Kong’s Hang Seng, while Japan’s Nikkei fell 0.7%. By midday trading, European equities were higher across the board and U.S. futures point to a positive open later this morning.

Despite the feel-good start to 2021, this week brings a rash of data that will likely reflect the year-end surge in COVID-19 case counts that are currently pressuring hospitals. We’ll also have a handful of companies reporting their quarterly results in the coming days, and their comments about the last few months and what they see ahead will likely set the tone for the soon to be upon us December quarter earnings season. And Washington will once again be a focal point this week, given not only that leaked phone call by President Trump pressuring Georgia Secretary of State to overturn election results, but also the joint session of Congress that will count and declare the electoral votes on Wednesday, Jan. 6. It’s also the same day in which a pro-Trump protest is expected to happen, which is likely to raise concerns for another surge in COVID-19 cases and deaths in upcoming weeks.

On top of that, U.S.-China tension could once again bubble up this week following comments from China that it will take “necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises” after the NYSE started the process of delisting Chinese telco giants to comply with a U.S. executive order issued in November – see Stocks to Watch for more on that.

Data Download


More than 350,000 lives in the U.S. have been lost due to Covid-19 as the country ended 2020 with a record-setting month of new cases, hospitalizations, and deaths. As of yesterday, more than 23,000 Covid-19 patients are in ICUs and 123,614 are hospitalized, down slightly from over 125,000 the prior day. Worldwide, over 1.8 million people have died from Covid-19.

The U.S. ended the year having vaccinated far fewer people against coronavirus than hoped, with states having used only about a fifth of the doses they were given in the past three weeks. The plan was to distribute enough doses to vaccinate 20 million people by the end of the year, but officials recently admitted they were not likely to hit that target until early January after underestimating how long it would take to perform quality control checks on manufactured doses.

According to Dr. Fauci, only about 4 million people receive shots in 2020. President-elect Joe Biden sounded the alarm last week about the slow pace of vaccination, saying that at the current rate, it would take years to vaccinate everyone in the U.S. Federal officials admitted that the rollout of the vaccine in December was not what they’d hoped to see but predict that the pace of shots could soon surpass 1 million per day.

Also last week, the U.S. reported its first case of the new, more contagious strain of the coronavirus in a man from Colorado with no travel history.

U.S. air travel hit its highest level on Saturday, Jan. 2, since mid-March and that is raising concerns for another surge in Covid-19 cases and deaths in upcoming weeks.

Japanese Prime Minister Yoshihide Suga’s government is preparing to declare a state of emergency as early as this week, to curb rising COVID-19 cases in Tokyo and surrounding areas.

The U.K. gave the first shots of a Covid-19 vaccine from AstraZeneca Plc (AZN) and the University of Oxford.

International Economy

The UK and the EU managed to cobble together a trade agreement barely in time for the UK’s final exit from the trade union on December 31.

The Trump administration stepped up its long-running trade dispute with the EU over aircraft subsidies, saying last week that it will increase tariffs on aircraft parts and beverages from France and Germany. The tariff increase will apply from January 12 and “aircraft manufacturing parts” as well as “certain non-sparkling wine” and “certain cognac and other grape brandies” from Germany or France.

Today brought an onslaught of Manufacturing PMI data from around the world for December which in general posted month over month improvement, but not all geographies matched consensus expectations for the month:

  • Australia’s was relatively unchanged, falling to 55.7 from 55.8
  • Japan’s rose to 50 from 49, beating expectations for an increase to 49.7
  • South Korea remained at 52.9
  • Despite draconian lockdowns, Ireland saw its manufacturing jump from 52.2 to 57.2, a good sign for the Eurozone.
  • China was weaker than expected, slowing to 53.0 from 54.9, versus expectations for a decline to just 54.8.
  • Spain rose to 51.0 in December, up from 49.8 the prior month but missed expectations for an increase to 52.8.
  • Italy also rose to 52.8 from November’s 51.5 but missed expectations for an increase to 53.7.
  • France increased to 51.1, matching consensus expectations, vs. 49.6 in November.
  • Germany grew to 58.3 in December, up from 57.8 in November, but missed expectations for an increase to 58.6.
  • The Eurozone overall rose to 55.2 in December from 53.8 in November but fell short of the expected rise to 55.5.
  • The UK topped expectations rising to 57.5 in December vs. 55.6 in November and the 57.3 consensus.

Domestic Economy

Last Thursday’s initial unemployment claims fell to 787,000, down 19,000 from the week before and the lowest figure since November. This was the second consecutive drop in the number of initial jobless claims, but they remain historically elevated (pre-pandemic record high was 695,000 in 1982) and the true number out of work could be higher, as the Christmas holiday may have led some to wait to apply for benefits.

Later today, we’ll get Construction Spending data for November and the IHS Markit Final December Manufacturing PMI for the U.S.


All the major U.S. indices closed out December solidly in the green, making for a stunning year of returns amid an economic crisis, unlike anything the modern world has experienced. The big winner was the Nasdaq 100 which gained 47.6% in 2020, followed by the Nasdaq Composite at 43.6%. The small-cap Russell 2000 rose 18.4%, the S&P 500 16.3%, and the Dow 7.3%, with the broader NYSE Composite rising just 4.4%. The best strategy in 2020, on average, was to buy the most expensive stocks as those with the highest decile of P/E ratios performed the best in 2020. Adding to that little bit of trivia, 2020 was just the third time in over 40 years that the total return of the S&P 500 and of long-term U.S. treasuries were within one percentage point of each other.

Stocks to Watch

Shares of China Mobile (CHL), China Telecom (CHA), and China Unicom Hong Kong (CHU) will be suspended from trading Jan. 7-Jan. 11 as they face delisting from the NYSE.

If there was any question about electric vehicle deliveries, December data should put that to rest. Tesla (TSLA) delivered 180,570 vehicles in the December 2020 quarter, topping top consensus forecasts, resulting in the company delivering 499,550 vehicles for the year. Nio (NIO) reported monthly record deliveries of 7,007 units (+121% YoY) in December, which brought its total for 2020 to 43,728 units, up 113% YoY. Li Auto (LI) reported its December deliveries totaled 6,126 units (up 530% YoY) and total deliveries for the December quarter were 14,464 units. XPeng (XPEV) reported its vehicle delivery results for December rose 326% YoY to 5,700 vehicles, resulting in 12,964 deliveries for the quarter and 27,041 for 2020.

Airbus SE (EADSF) delivered close to 550 aircraft as of December 29, within striking range of the targeted 560 aircraft for 2020.

The Wall Street Journal reports an average price hike of 3.3% from about 70 drug manufacturers in the new year, citing the data from software maker from Rx Savings Solutions. Pfizer (PFE) and Sanofi (SNY) have announced price increases of 5% or less while GlaxoSmithKline (GSK) has introduced an average price increase of 2.6% across the portfolio.

The Macau Gaming Inspection and Coordination Bureau reported December gross revenue fell 65.6% YoY to HKD 6.8 billion vs. the 70.5% decline in November. Casino stocks with exposure to the Macau market include WYNN (WYNN), Las Vegas Sands (LVS), and MGM Resorts (MGM).

Reports suggest short-form streaming platform Quibi is in talks to sell its content catalog to Roku (ROKU).

Teledyne Technologies (TDY) and FLIR Systems (FLIR) announced they have entered into a definitive agreement under which Teledyne will acquire FLIR in a cash and stock transaction valued at approximately $8.0 billion. Under the terms of the agreement, FLIR stockholders will receive $28.00 per share in cash and 0.0718 shares of Teledyne common stock for each FLIR share, which implies a total purchase price of $56.00 per FLIR share based on Teledyne’s 5-day volume-weighted average price as of December 31, 2020. Teledyne also issued upside guidance for its December quarter with EPS of $3.16-$3.19 vs. the $2.77 consensus.

Entain plc (ENT:LN), which owns the British gambling brand Ladbrokes, received an £8.09 billion takeover proposal from MGM Resorts but also shared the offer significantly undervalues the company. MGM is likely looking to acquire the business to expand its online gambling business.

Dentsply Sirona (XRAY) announced it has acquired Byte in an all-cash deal for $1.04 billion, a move that will bolster its clear aligners business.

After today’s market close, no companies are expected to report their quarterly results. Investors looking to get a jump on such reports to be had in the coming days should visit Nasdaq’s earnings calendar page.

On the Horizon

  • January 5: ISM Manufacturing, API Crude Oil Stocks
  • January 6: Joint session of Congress counts electoral votes and declares results, ADP Employment, Markit Service PMI, Factory Orders, EIA Energy Stocks, FOMC Minutes
  • January 7: Balance of Trade, Jobless Claims, ISM Non-Manufacturing
  • January 8: Nonfarm Payrolls, Wholesale Inventories
  • January 11-14: CES 2021
  • January 12: JOLTs report, IBD/TIPP Economic Optimism, API Crude Oil stocks
  • January 13: Inflation Rate, EIA energy stocks, Monthly Budget Statement
  • January 14: Import Prices, Jobless claims, Export & Import Prices,
  • January 15: Retail Sales, PPI, Empire State Manufacturing, Industrial Production, Business Inventories, Michigan Consumer Sentiment
  • January 19 Overall Net Capital Flows, Foreign Bond Investment, Net Long-term TIC flows
  • January 20: Chief Justice Roberts swears in the President, NAHB Housing Marking Index, API Crude Oil Stocks
  • January 21: Building Permits, Housing Starts, Philly Fed Manufacturing, Weekly Jobless Claims
  • January 22: Markit Manufacturing and Services Flash PMIs, Existing Home Sales, Energy stocks

Thought for the Day

As we kick off the new and hopefully a lot better year, we thought this quote from Michael J. Fox was fitting: “I think the more unexpected something is, the more there is to learn from it.”


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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