Investors are focused on U.S. politics this morning, reacting to the Georgia Senate elections and bracing for today's Electoral College vote certification in Congress which could create some fireworks!
Several Republicans in both the House and Senate have announced plans to raise objections to the results from some states which will delay the certification by several hours.
Two hours of debate are allowed for each state being questioned so it could take some time to play out.
The media will be broadcasting early with the main event set to begin around 12 p.m. CST. Several big protests are planned in DC with tons of rally-goers already gathered near the White House. It could certainly get interesting.
On the coronavirus front, the South is now overtaking the West as the worst affected area but the situation is rough everywhere.
Daily cases, hospitalizations, and deaths are setting new records each day and the those numbers are expected to climb even higher following the holiday travel and gatherings.
The good news is that health officials expect that surge to begin easing within the next two to three weeks. At the same time, with more people getting the virus and more vaccines being put in play (over a half-million per day now and pushing higher) we should start making better progress towards some type of herd immunity.
I've learned through the years, at least from my perspective, when the Fed is in this stance the stock market likes to trade more on hope and growth acting more like a voting machine rather than a weighing machine based on current numbers, current valuations, and current reality.
The one thing that has me a bit concerned is the longer we delay and stretch things out the more chances and opportunity the virus has to mutate into a more difficult version. There just doesn't see to be any real clear solution for how to play it.
One of the problems with the rollout of the vaccine has been a shortage of medical staff as the healthcare system is being stretched by the virus itself. I also heard many hospitals were holding back the second doses to give to staff 21 to 28 days after they received their first dose. Obviously, they were holding back the inventory just in case there was delay in the distribution channel and they didn't get the second round.
Essentially, that meant the hospital was holding back half of its vaccine inventory to give the second shot to those who had received the first shot. I understand the argument, but in this case I think you have to take the risk and assume the second round of shots are going to show up. Just saying... Regardless, it seems like they powers that be are starting to iron out many of the early kinks and are getting the vaccines rolling.
I'm hearing that Johnson & Johnson probably will not release the results of their vaccine trials until later in the month and hopefully get approval sometime in February. With it being just one shot and easier to store I think we will see a lot swifter pace, let's hope it gets approved.
Turning to economic data, today brings ADP's Employment Report for December, which could provide a preview of what to expect from the government's official numbers that are due out on Friday. ADP's private payroll data is expected to show job gains of around +130,000, compared to +307,000 in November. The "minutes" from the last Federal Reserve policy meeting are due for release today.
Most on Wall Street are expecting the Fed commentary to backup current market thoughts that interest rates are going tot stay low for an extended period of time.
It's also worth noting, Saudi Arabia announced that it will cut -1 million barrels a day of crude oil production next month which was a big surprise. At the height of last year’s coronavirus outbreak, OPEC+ agreed to cut output by a record -9.7 million barrels a day and envisioned restoring it in increments of +2 million barrels a day assuming demand would return. In the summer, the group voted to add back an initial +2 million barrels, and last month agreed to add back a further +500,000 barrels a day in January. Now all of a sudden Saudi is making a sizable cut and the Kingdom seems more worried and concerned about more waves of coronavirus that could ultimately threatening and delay a global economic recovery.
0% Home Mortgage Loans: Customers at the Danish home-finance unit of Nordea Bank are being offered 20-Year mortgages at 0% interest. The once unthinkable notion of borrowing for two decades without paying interest is now happening. As rates have continued to sink, other banks in Denmark are said to be joining the game i.e., Totalkredit, a unit of Denmark’s largest mortgage lender, Nykredit Realkredit, Jyske Bank, and Danske Bank who is Denmark’s biggest bank has signaled it may soon follow suit. Wow! (Source: Bloomberg)
Macy's Closing 125 Locations: Macy’s is moving forward with plans to close about 45 of its department stores by the middle of this year. The plan by Macy’s is to shut 125 locations by 2023.
Brace for More China-Related Confusion: The new year has brought another case of China-oriented whiplash for U.S. investors, with the New York Stock Exchange reversing its decision late Monday to delist three Chinese telecom companies just days after it had decided to do so. Then yesterday, it was reported that the NYSE is reconsidering that decision. Add in questions about the future of Alibaba Group Holding—and even the whereabouts of its co-founder Jack Ma—amid heightened regulatory pressures inside China and there is reason for investors in Chinese stocks to brace for further volatility. Analysts have repeatedly noted that the impact of executive orders from the Trump administration will come down to enforcement. The exchange’s reversal, and its statement that it occurred after consulting with relevant U.S. government authorities, strongly suggests that the administration signaled it will issue a license to permit transactions in the three listed companies’ shares for the foreseeable future, says Paul Leder, formerly director of the SEC’s Office of International affairs and now of counsel at Miller & Chevalier. However, it was a phone call from Treasury Secretary Steve Mnuchin that prompted the NYSE to second-guess their decision. Also still unclear is how the new administration will handle some of the China-oriented moves that have been introduced in recent weeks. These moves come as many larger investors see reason to increase holdings of Chinese stocks, noting the growth prospects in an economy that is recovering ahead of others and as China invests aggressively domestically. But risks are likely to increase—and investing could get more complicated, especially for smaller investors trying to navigate individual securities amid other potential delistings. Among the other complications: fallout from recent legislation focused on auditing oversight, and potential sanctions or measures related to human rights concerns Source Barrons & Bloomberg
$36 Billion in Fraudulent Unemployment Payments: The U.S. has pumped billions of dollars into the unemployment system since the spring — a magnet for criminals that’s led to surging theft and fraud attacks. This has contributed to at least $36 billion being taken from out-of-work Americans. Now, the federal government and states are clamping down. The $900 billion Covid relief package signed last month adds steps for workers to prove their eligibility for benefits. But those rules may slow aid to those who need the money, according to labor officials and worker advocates. Most of the theft has focused on Pandemic Unemployment Assistance, a temporary program created by the federal CARES Act in March. It offers unemployment benefits to workers who don’t ordinarily qualify, like the self-employed, gig workers, freelancers, contractors and part-timers. By early November, at least $36 billion of the $360 billion in CARES Act unemployment benefits was lost to improper payments, mostly from fraud, according to a conservative estimate from the Office of the Inspector General for the Department of Labor. Source CNBC
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. TRADING FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS. THERE ARE NO GUARANTEES OF PROFIT NO MATTER WHO IS MANAGING YOUR MONEY. THERE IS AN UNLIMITED RISK OF LOSS IN SELLING OPTIONS. YOU SHOULD CAREFULLY CONSIDER WHETHER COMMODITY FUTURES AND OPTIONS IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION.