Thursday Morning Reads
- It’s the Economy, Stupide
- Is Gruyère Still Gruyère if It Doesn’t Come From Gruyères?
- Shipping Congestion Is Growing at World’s Biggest Port
- Libor, Long the Most Important Number in Finance, Dies at 52
- Consumer Prices Popped Again
- Demand for Chocolate Fuels Surge in Price of Cocoa
- Fed’s ‘Most Important Task’ Is To Control Inflation, Brainard Says
- What Inflation and Rate Hikes Mean for Your Portfolio
- Tesla Is Inching Dangerously Close
- Automakers Say They Won’t Let Tesla Steal the Truck Race
- Smart Headlights Are Finally on Their Way
- The Florida Financiers Buying Up Europe’s Football Teams
- C.E.O.s Were Our Heroes, at Least According to Them
How and when will the pandemic be over? Many are asking that question as the Omicron variant sweeps across the U.S., with infection numbers continuing to surge and hospitals strained due to a shortage of healthcare workers. New Jersey just reinstated a public health emergency due to the situation, while California has even ordered COVID-positive medical staff (that are asymptomatic) to stay on the job. Hospitalizations are also climbing higher than last winter's peak - before the widespread distribution of vaccines - due to Omicron's extraordinary spread in absolute numbers (meaning more people will experience severe disease).
Snapshot: Despite the toll on the healthcare system and other essential services, Omicron patients are 74% less likely to end up in ICUs and 91% less likely to die than Delta patients, according to the Kaiser Permanente in Southern California. Other studies also indicate that Omicron is less severe than other variants, and many are hoping that this will herald a new era of the virus becoming an endemic illness, or comparable to the flu. Spanish Prime Minister Pedro Sanchez became the latest European leader this week to suggest that possibility, while the U.K. government already told the public it must "to learn to live with the virus."
Similar sentiment is starting to appear among top ranks in the U.S. "I think it's hard to process what's actually happening right now, which is: Most people are going to get COVID," Janet Woodcock, acting head of the FDA, told a Senate hearing on Tuesday. "What we need to do is make sure the hospitals can still function - transportation, other essential services are not disrupted while this happens. I think after that will be a good time to reassess how we're approaching this pandemic."
Other comments: "There's no way we're going to eradicate this [virus]," added White House chief medical advisor Dr. Anthony Fauci. "As Omicron goes up and down," the U.S. will enter a new phase "where there will be enough protection in [the] community, enough drugs available so that when someone does get infected and is in a high-risk group, it will be very easy to treat that person. When we get there, there's that transition, and we may be on the threshold of that right now."
Coronavirus vaccine and treatment stocks: AbbVie (NYSE:ABBV), Amgen (NASDAQ:AMGN), BioNTech (NASDAQ:BNTX), Johnson & Johnson (NYSE:JNJ), Eli Lilly (NYSE:LLY), Gilead Sciences (NASDAQ:GILD), GlaxoSmithKline (NYSE:GSK), Merck (NYSE:MRK), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX), Pfizer (NYSE:PFE), Regeneron (NASDAQ:REGN) and Sorrento Therapeutics (NASDAQ:SRNE).
Following the confirmation hearing of Fed Chair Jay Powell on Tuesday, Lael Brainard is heading over to Capitol Hill this morning for her hearing in front of the Senate Banking Committee. As nominee for Vice Chair of the Federal Reserve, Brainard will tell Congress that the fight against inflation is the central bank's "most important task" as it shifts gears towards tighter monetary policy. Brainard has been in the economic policymaking field for years, serving as a senior Treasury official for international affairs under President Obama and working her way up to the Fed's Board of Governors.
Prepared remarks: "Inflation is too high, and working people around the country are concerned about how far their paychecks will go. In some foreign countries, I saw up close how high inflation hurts workers and families, especially the most vulnerable. Our monetary policy is focused on getting inflation back down to 2% while sustaining a recovery that includes everyone."
Inflation data on Wednesday showed the Consumer Price Index jumping by 7% Y/Y in December, marking the largest increase since June 1982. The core CPI, which excludes food and energy and is the Fed's preferred gauge of inflation, also topped expectations, coming in at 5.5% for the highest reading since 1991. As a result, many expect the central bank to begin a cycle of interest rate hikes in March and to start the process of winding down its nearly $9T balance sheet later in the year.
Go deeper: While Brainard is aligned with Powell and other FOMC officials on issues linked to monetary policy, she has opposed them on other occasions, like supervisory matters and big bank oversight. She has even dissented more than 20 times on board votes connected to easing regulations on the largest U.S. financial institutions. Brainard has also advocated for making the financial system more inclusive and found a path to address climate change through the Fed's financial stability mission.
As many companies rethink their return to the office, some firms are looking to make changes permanent. Stock trading app Robinhood (HOOD), which has about 3,400 employees, just approved plans to let most of its employees work remotely on a permanent basis, meaning no location or regular in-office requirements. While some top tech players have opted for WFH for the time being, or unveiled hybrid arrangements, Robinhood says the new policy will make it a "remote first company."
Quote: "In the last two years, we've seen how flexibility and trust allow teams to do their best work, attract top talent, and create a workplace that’s more inclusive and equitable," the company wrote in a blog post. "Our teams have done amazing work and built a strong workplace community during these uncertain and challenging times, and we're excited to continue to offer them the flexibility they've asked for by staying primarily remote."
Twitter (TWTR) unveiled similar working arrangements in 2020, but others trying to get employees back in the office have suffered repeated setbacks. Facebook parent Meta Platforms (FB) just delayed plans to return workers until March (and will require booster shots for those that do), while Apple (AAPL) canceled its Feb. 1 return deadline without setting a new date. It really depends on the business, but the pandemic has forced many companies to rethink the necessity of expensive fixed costs like offices.
Fine print: "Some [Robinhood] teams will need to live within a commutable distance to an office location due to regulatory and business reasons, and a small segment will still need to come into the office. All employees will have access to our offices located across the country with Safety First protocols in place. As we move forward, we're committed to continue learning, listening and creating a flexible, accessible and great workplace for everyone."
A broad rally continues to take shape across commodity markets, with WTI crude oil topping $82 a barrel on Wednesday, as well as copper trading above $10,000 a ton for the first time since October. Joining the rally are nickel and lithium stocks as demand for electric vehicles hits fresh records. The price of nickel even notched a 10-year high, climbing to $23,000 a ton as stockpiles continue to dwindle across the globe.
Snapshot: Nickel is one of the most widely used minerals for EV batteries, though supply does not seem to be keeping up with demand. "With China's policy response gathering steam at a moment of severely depleted inventories, micro and macro conditions are beginning to align, driving a repricing of metals toward scarcity," explained Nicholas Snowdon, analyst at Goldman Sachs. "We are starting to see consumers wake up and recognize the problems that exist," added Jeremy Weir, CEO of Trafigura, one of the world's largest commodity traders.
EV makers are scrambling for the metal, prompting Tesla (TSLA) this week to ink its first U.S. supply deal. Under the arrangement, the company agreed to purchase 75,000 tons of nickel from Talon Metals' (OTCPK:TLOFF) Tamarack mine project in Minnesota. BHP (BHP) also announced it would invest as much as $90M in Kabanga Nickel, which owns a nickel project in Tanzania, as the miner aims to boost its exposure to metals needed for a low-carbon economy.
Outlook: Growth of electric vehicle sales topped that of the global car market in 2021, up 26% over the previous year, led by the U.K and Europe. In the U.S., over 310K EVs were sold in the first six months of the year, compared to the 322K sold over the entire 2020, though the segment still only reflects 4% of the market. Besides offering some hot cars, tougher standards over emissions and fuel economy are in the mix as America drives toward a goal of 50% all-electric and plug-in hybrid sales by 2030.
In Asia, Japan -1%. Hong Kong +0.1%. China -1.2%. India +0.1%.
In Europe, at midday, London flat. Paris -0.4%. Frankfurt +0.1%.
Futures at 6:20, Dow +0.1%. S&P +0.1%. Nasdaq +0.1%. Crude flat at $82.65. Gold -0.3% at $1822.20. Bitcoin +2.3% to $43756.
Ten-year Treasury Yield +3 bps to 1.75%
Today's Economic Calendar
8:00 Fed's Harker Speech
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Fed’s Brainard testifies before Senate Banking Committee
10:30 EIA Natural Gas Inventory
12:00 PM Fed's Barkin: “The Economy: What We’ve Learned”
1:00 PM Fed's Evans: U.S. Economic and Monetary Policy
1:00 PM Results of $22B, 30-Year Note Auction
4:30 PM Fed Balance Sheet
What else is happening...
EU medicines regulator warns on COVID booster shot frequency.
Solar standard bearer bleeds cash as investors turn cold.
Heightened tensions: IEA blames Russia for Europe's energy crunch.