Monday Morning Reads

Monday Morning Reads




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Lawmakers from both parties announced Sunday night that they finally reached an agreement on a $900B coronavirus spending package to bolster the U.S. economy. It would be one of the largest economic relief bills in the nation's history, second only to the $2.2T CARES Act passed back in March. The legislation includes $600 in direct payments to individuals and $300 per week of enhanced unemployment benefits, as well as funding for small businesses, vaccine distribution, food assistance, education and child care. It also covers rental relief and extends the nationwide eviction moratorium through January 31, 2021. The House is expected to vote on the bill today, followed by the Senate, and while that was supposed to be a catalyst for the market's next move higher, U.S. stock futures are going in the other direction. Dow -2%; S&P 500 -2.2%; Nasdaq -1.5%.

What happened?

Traders are nervously watching a new COVID-19 mutation in the U.K., which has resulted in a tough lockdown in London and southeast England, and led a number of countries to block travel from Britain. The mutant variant, dubbed B117, could be up to 70% more transmissible than COVID-19, and has already been detected in the Netherlands, Denmark and Australia. Cause of concern: The number of mutations carried by B117, as well as the speed at which it is supplanting other strains of the virus. Some reassurance: So far there is no evidence that the mutations are affecting the course of the illness in infected patients or the effectiveness of COVID-19 vaccines in development. The latest news also hammered the pound, which fell 1.7% to $1.3297, while Brexit trade talks missed another deadline amid few signs that either side is ready to compromise.

Oil sentiment goes into reverse

Just when things were starting to look better for black gold, with WTI transitioning to $50/bbl resistance, a series of announcements over the weekend showed crude investors that they're not out of the woods just yet. "The oil market has been on a bull trend in the past month or so, ignoring negative factors, amid an optimism that a widening vaccine rollout would revive global growth, but investors' rosy expectations for 2021 have suddenly vanished due to a new variant of the virus," said Kazuhiko Saito, chief analyst at commodities broker Fujitomi. Also weighing on the sector... Royal Dutch Shell (RDS.A, RDS.B) said it would write down the value of oil and gas assets by $3.5B-$4.5B, bringing total impairments for the oil major this year to nearly $20B. Crude futures -5.3% to $46.61/bbl.
Go Deeper: OPEC+ adopts a hands-on approach to the oil market.

More on the stimulus bill

The relief package leaves out two of the most contentious elements in the negotiations: legal protections for businesses from coronavirus lawsuits, which had been sought by the GOP, and direct aid for state and local governments advocated by Democrats. A dispute was additionally resolvedover the Fed's emergency lending powers. The central bank wouldn't be able to replicate programs identical to the ones it started at the beginning of the pandemic without Congressional approval, but that wouldn't prevent it from starting other similar programs. The airline industry also received a big lift, winning $15B to reinstate payroll reimbursements that expired two months ago.

Who's next in line for a coronavirus vaccine?

As trucks began delivering Moderna's (NASDAQ:MRNA) shot to health departments, hospitals and other vaccination sites on Sunday, a Centers for Disease Control and Prevention panel voted on the next groups to receive inoculations. Vaccination is already underway in the U.S. - via the Pfizer (NYSE:PFE) jab - for the so-called phase 1a group, which includes at least 24M healthcare workers and long-term care facility residents. The 1b group, estimated to cover about 49M people, or nearly 15% of Americans, would encompass "frontline essential workers" (i.e. teachers, police and firefighters, grocery workers) and people over 75 years of age. Phase 1c will broaden eligibility to another 129M people, including persons between the ages of 65 and 74, people between the ages of 16 and 64 who have high-risk underlying conditions and remaining "essential workers." If accepted by the CDC director, the committee's recommendations will set federal guidance, though state officials are charged with the final say on distribution.
Go Deeper: Vaccine cuts for several U.S. states due to FDA confusion.

Musk has some fun with Bitcoiners

Tesla (NASDAQ:TSLA) shares went on a wild ride Friday as indexes and ETFs scrambled to get shares before today's inclusion in the S&P 500. The stock was down 4% with almost 15 minutes left in the session, only to end up 6%(it's down another 5% premarket). Never one to keep quiet, Tesla CEO and master troller Elon Musk took aim at Bitcoin (BTC-USD) over the weekend, saying the crypto was his "safe word" and it's "almost as bs as fiat money." The activity drew a response from MicroStrategy (NASDAQ:MSTR) CEO Michael Saylor (who has invested $1.3B of his company's money in the crypto), saying, "if you want to do your shareholders a $100B favor, convert the TSLA balance sheet from USD to BTC. Other firms on the S&P 500 would follow your lead & in time it would grow to become a $1T favor." Musk questioned if such transactions are even possible, though Saylor replied that they are and that he would be happy to share his playbook offline "from one rocket scientist to another." As for the price of Bitcoin, it took out a $24K milestone this weekend, before falling back (it's currently at $22.7K).

Merger Monday

Lockheed Martin (NYSE:LMT) is buying rocket engine manufacturer Aerojet Rocketdyne (NYSE:AJRD) for $4.4B as the company beefs up its propulsion capabilities amid competition from new entrants like SpaceX (SPACE) and Blue Origin (BORGN). Speaking of space, Viasat (NASDAQ:VSAT) inked an agreement to acquire RigNet (NASDAQ:RNET) in an all-stock transaction that will see the company diversify across a number of important verticals. Meanwhile, private-equity firm Thoma Bravo struck a deal to buy property-management-software provider RealPage (NASDAQ:RP) for $9.6B, in one of the largest recent leveraged buyouts, while Fidelity National Information Services (NYSE:FIS) and Global Payments (NYSE:GPN) reportedly held unsuccessful talks for a merger deal that could have been valued at $70B.

National security risk

Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC) could get a boost as the U.S. takes another step against Chinese telecom equipment giants. Congress wants to fund an almost $2B project to rid U.S. broadband networks of Huawei equipment, which it considers a risk to national security, as well as gear from ZTE Corp. (OTCPK:ZTCOF). In the beginning of the summer, the FCC formally designated the two companies as threats, a declaration that bars U.S. firms from tapping an $8.3B government fund to purchase equipment from the companies. Then earlier this month, the FCC finalized rules that require carriers with ZTE or Huawei equipment to "rip and replace" that gear, but is awaiting funding from Congress.

What else is happening...

Moody's gives only one finance sector a positive outlook for 2021.

iPhone assembler Wistron placed on probation after riots in India.

EU regulator meets to discuss Pfizer (PFE) vaccine approval.

Smaller contractors play pivotal role in vaccine supply chain.

Today's Markets

In Asia, Japan -0.2%. Hong Kong -0.7%. China +0.8%. India -0.3%.
In Europe, at midday, London -2.3%. Paris -2.8%. Frankfurt -3%.
Futures at 6:20, Dow -2%. S&P -2.2%. Nasdaq -1.5%. Crude -5.3% to $46.61. Gold -0.2% at $1885.90. Bitcoin -3.1% to $22682.
Ten-year Treasury Yield -5 bps to 0.90%

Today's Economic Calendar

8:30 Chicago Fed National Activity Index
1:00 PM Results of $17B, 20-Year Bond Auction

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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