Daily Markets: December Jobs Report to Set The Tone for Today’s Trading

Today’s Big Picture

Equities in Asia finished trading today mostly higher, with Japan’s Nikkei closing the day up 2.4% and Hong Kong’s Hang Seng up 1.2% while China’s Shanghai Composite slipped 0.2%. While Japan’s state of emergency officially began and will last through February 7, five days longer than previously expected, equites in the region were bolstered by news Hyundai (005385:KS) is reportedly in talks with Apple (AAPL) for autonomous vehicles and Samsung sharing its preliminary results for the December quarter included a 2% YoY increase in consolidated sales.

By mid-day trading, equities in Europe were mostly higher and U.S. futures point to further gains following yesterday’s record-breaking session that included the Nasdaq Composite Index closing above 13,000 for the first time. Before U.S. equity markets open, we’ll receive the December Employment Report and it’s rather likely the tone of today’s trading will be set by that report. While the consensus forecast calls for job gains, the December ADP Employment Change surprised with job losses for the month as the U.S. economy implemented restrictions to curb the spread of the coronavirus. Should the December Employment Report reveal net job losses for the month, we suspect it will lead to louder calls for pandemic related relief as President-elect Biden soon takes office.

Data Download

Coronavirus

Yesterday the U.S. experienced its deadliest pandemic day, with more than 4,000 lives lost to Covid-19. The number of people hospitalized dropped slightly from Wednesday’s peak by 94 to 132,370 according to data from the Covid Tracking Project. New York, Florida, and North Carolina saw record-high numbers of new cases as the nation overall saw 266,197 new cases, the second-highest one-day increase. Over the past seven days nearly 20,000 people have died from Covid-19, yet another record high.

The World Health Organization (WHO) yesterday warned that Europe is facing a tipping point in its fight against the virus. More than 230 million people in European countries are living under full national lockdown with further restrictions expected in the coming week.

Laboratory Corp (LH) has been awarded a contract from the Centers for Disease Control and Prevention (CDC) to provide genomic sequencing of samples of SARS-CoV-2, the virus that causes COVID-19.

Pfizer (PFE) and BioNTech SE (BNTX) announced results from an in vitro study conducted by Pfizer and the University of Texas Medical Branch (UTMB) that shows the antibodies from people who have received the Pfizer-BioNTech COVID-19 vaccine effectively neutralize SARS-CoV-2.

International Economy

Germany’s Industrial Production rose 0.9% MoM in November, following an upwardly revised 3.4 percent increase in October and beating the November forecast of 0.7% growth.

France’s Industrial Production fell 0.9%, a tad better than the expected 1.0% decline, but was still down compared to the 1.6% increase in October. We’d note it marks the return of the efforts to curb the spread of the coronavirus and was the first month of output contraction since April’s record slump.

The Unemployment Rate in the Eurozone inched lower to 8.3% in November from 8.4% in October instead of inching higher to 8.5% as expected.

Oil prices hit 11-month highs earlier today, putting them on track for a strong weekly gain, supported by Saudi Arabia’s pledge to voluntary cut oil output by one million barrels per day (bpd) in February and March.

Domestic Economy

This week the U.S. Treasury and the IRS started sending Economic Impact Payments out by prepaid debit card. These 8 million cards allow cardholders to purchase items either online or in-store anywhere that Visa Debit card are accepted.

Initial jobless claims were 787,000 for the week ending January 1, down slightly from the upwardly revised 790,000 from the prior week, better than the expected increase to 800,000. Continuing claims fell 126,000 for the four consecutive weekly decline, leaving claims just above 5 million, the lowest level since the week of March 20th. Total claims for all programs is at 19.2 million, the third monthly improvement but above the pandemic low of 19.077.

The ISM Non-Manufacturing PMI for December was stronger than expected, rising to 57.2 from 55.9 in November versus expectations for a decline to 54.6. The New Orders index rose to 58.5 from 57.2, and Business Activity rose to 59.4 from 58.0, but Employment dropped to 48.2 (contraction) from 51.5.

Later today we will get the December Nonfarm Payrolls report which is expected to show 114,000 jobs were added to payrolls, following the 245,000 added in November, with the unemployment rate rising from 6.7% to 6.8%. The day will also bring an update on wholesale inventories.

Markets

The U.S. equity markets were boosted yesterday by the hope that a Democrat-controlled Congress and presidency will be likely to provide additional fiscal stimulus. The Dow rose 0.7%, the S&P 500 1.5%, the Russell 2000 1.9%, and the Nasdaq Composite 2.6%. The 10-year Treasury yield rose to 1.07%, its highest level since back in mid-March.

Stocks to Watch

Micron (MU) reported November quarter EPS of $0.78, beating the $0.69 consensus as revenue for the quarter climbed 12.2% YoY to $5.77 billion vs. $5.66 billion consensus. The company issued upside guidance for the current quarter with EPS of $0.68-$0.82 vs. the $0.64 consensus. Per the company, “Micron is simultaneously leading on DRAM and NAND technologies, and we are in an excellent position to benefit from accelerating digital transformation of the global economy fueled by AI, 5G, cloud, and the intelligent edge.”

Taiwan Semiconductor (TSM) shared its December revenue grew 13.6% YoY but fell on MoM basis fell 6.0%. 2020 revenue through December was up 25.2% YoY to NT$1.34T.

Chip packaging and testing company ChipMOS Technologies (IMOS) reported December quarter revenue rose 20.1% YoY to $78 million, leading its December quarter revenue to rise 13.3% YoY to $224.7 million, nicely ahead of the $214.4 million consensus. The company shared it benefitted from strong memory and DDIC demand throughout 2020, with improvements in both volumes and pricing.

Nikkei Asia reports Honda Motor (HMC) will reduce its vehicle production due to a supply shortage of semiconductors.

Sensor and control company Sensata Tech (ST) raised its outlook for the December quarter to revenue of $902-907 million from the prior $810-850 million and the $836.7 million consensus.

Reuters reported Hyundai (005385:KS) said it was in early talks with Apple, after local media reported the firms were discussing an electric car and battery tie-up. Hyundai soon revised its comments, now saying it has been contacted by various companies for collaboration, without any mention of Apple.

Boeing (BA) entered into a deferred prosecution agreement (DPA) with the Department of Justice to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with the FAA AEG’s evaluation of Boeing’s 737 MAX airplane. Under the terms of the DPA, Boeing will pay a total criminal monetary amount of over $2.5 billion, composed of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the Boeing 737 MAX crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

F5 Networks (FFIV) issued upside guidance the December quarter with EPS above $2.38 vs. the $2.34 S&P consensus; revenue for the quarter is expected to be $623-626 million .vs the $605.4 million consensus. F5 also announced it will acquire privately held Volterra for approximately $440 million in cash and approximately $60 million in deferred consideration. With the addition of Volterra’s technology platform, F5 is creating an edge platform built for enterprises and service providers that will be security-first and app-driven with unlimited scale.

Sirius XM (SIRI) issues downside 2021 revenue guidance of $8.35 billion vs. the $8.56 billion consensus. The company announced it added 909,000 net self-pay subscribers to finish 2020 with approximately 30.9 million self-pay subscribers, exceeding the company’s most recent 2020 subscriber guidance, and expects self-pay net subscriber additions of approximately 800,000 in the coming year.

Shares of Cardtronics PLC (CATM) jumped on the news the company received a new and better buyout offer. Last month, the company agreed to a $2.3 billion buyout ($31 per share) by funds associated with Apollo Global Management (APO) but then Hudson Executive Capital LP offered a higher bid of $35. This new third party, which was not disclosed, offered to buy Cardtronics for $39 a share in cash.

Reports suggest Chinese search engine company Baidu (BIDU) plans to form a company to make smart electric vehicles (EV) with manufacturing to be carried out at plants owned by automaker Geely.

Canadian mining company Sierra Metals (SMTS) is considering sale of all or part of the company, a sale of some its assets or a merger or other business combination with another party.

After today’s market close, there are no expected earnings reports to be had. Investors looking to get a jump on those to be had next week should visit Nasdaq’s earnings calendar page.

On the Horizon

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

“Life is either a daring adventure or nothing.” —Helen Keller, Let Us Have Faith, 1940

Disclosures

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