Wednesday Morning Reads
- Where Do I Fall ?
- Billions in Profits to Island Tax Havens
- How High Can You Go?
- Flood of Day Traders Strains Online Brokers
- Hacked by a Nation-State
- DoorDash Set for Trading Debut
- Good Time for Index-Fund Trackers
- My Favorite Investment Writing of 2020
- Growth At an Unreasonable Price
December is usually a quiet time for the IPO market, but this year there will instead be a flurry of offerings as the pandemic upends the traditional calendar. Shares of DoorDash will begin trading on the NYSE this morning under ticker symbol "DASH" after pricing its IPO at $102 apiece, way above its upwardly revised target range. That would raise $3.37B at a valuation of around $38B (more than double its $16B valuation in June) after benefiting from a surge in demand for food delivery services due to COVID-19 restrictions. A day after DoorDash's debut, Airbnb (ABNB) is set to begin trading, followed by videogame company Roblox (RBLX) and the parent of online retailer Wish, ContextLogic (WISH). (96 comments)
U.S. stock futures are inching up again after closing at record highs on Tuesday, given the hopes over a vaccine rollout and stimulus efforts in Washington. "There's one thing that makes investor optimism typically go higher and that’s higher stock prices," said Keith Lerner, chief market strategist at Truist/SunTrust Advisory Services. Late Tuesday, Treasury Secretary Stephen Mnuchin offered a $916B package to House Speaker Nancy Pelosi that adds a $600 direct payment for most Americans, opening yet another front in the multi-track effort to reach a coronavirus aid agreement. On today's economic and earnings calendar, the U.S. Labor Department will release its monthly Job Openings and Labor Turnover Survey, or JOLTS, while Adobe (NASDAQ:ADBE) will report results after the bell.
Vaccine headlines continue to pour in following V-Day in the U.K., brighter news on the University of Oxford and AstraZeneca (NASDAQ:AZN) jab and the possibility of mandatory vaccinations for New Yorkers. The latest? China's state-backed coronavirus vaccine, developed by Sinopharm (OTCPK:SHTDF), was found to have protected 86% of people against COVID-19 in trials conducted on 31,000 volunteers in the UAE. The vaccine has already been administered to hundreds of thousands of people under emergency authorization in China, but it's yet to receive public use approval from any drug regulators. Unlike shots developed from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) - which have over 94% efficacy - but rely on mRNA and deep freeze facilities, China's vaccine is based on an inactivated virus and can be transported at normal refrigerated temperatures. That makes it an attractive option for nations without sophisticated cold-chain infrastructure and developing countries like Indonesia and Pakistan have already signed deals for the vaccine.
Reports had surfaced earlier this week, but Elon Musk has confirmed his relocation to Texas, joining one-fifth of Americans who have done a "pandemic move." "First of all, Tesla (NASDAQ:TSLA) and SpaceX (SPACE) obviously have massive operations in California. In fact, it's worth noting that Tesla is the last car company still manufacturing cars in California. SpaceX is the last aerospace company still doing significant manufacturing in California. For myself, yes I have moved to Texas," he told the WSJ's CEO Council summit. "If a team has been winning for too long, they do tend to get a little complacent, a little entitled and then they don't win the championship anymore. California has been winning for a long time," he added, doubling down on his displeasure with the state's regulatory environment. Many companies and tech leaders have shared similar sentiment. Hewlett Packard Enterprise (NYSE:HPE) recently relocated its headquarters from San Jose, California, to Houston, Texas, while Palantir (NYSE:PLTR) moved its HQ to Denver from Palo Alto. (29 comments)
Starbucks (NASDAQ:SBUX) is holding its first Investor Day since December 2018, with shares going on a 72% run since the last event. While the pandemic hit the coffee chain hard at first, resulting in a 40% Y/Y loss in sales in the second quarter, CEO Kevin Johnson doesn't expect the company to slow down. He sees business in China fully recovering in the current quarter and forecasts earnings in the fiscal year ending September 2021 will beat those of 2019. The pandemic has been hard on Starbucks' smaller rivals, with market research provider Euromonitor predicting the U.S. will lose at least 2,000 coffee shops this year. Some of things keeping Starbucks competitive are overhauling cafes, raising employee wages and turning to AI, while Johnson will explain further growth efforts later today. Fun fact: The event will feature a virtual coffee tasting, with samples of Starbucks' holiday blend sent in advance to analysts.
U.K. Prime Minister Boris Johnson heads to Brussels this evening for a dinner with European Commission President Ursula von der Leyen that's being cast as a last chance to unlock stalled Brexit negotiations. If all goes well, the two sides could be back in a room hammering out trade details within days, but if it goes badly, a tumultuous no-deal Brexit may be on the menu in three weeks' time. The talks have been tied up over fishing rights, a competitive playing field for standards and subsidies, and how any agreement might be enforced. Some trust? On Tuesday, the U.K. dropped contentious clauses of its Internal Market Bill that would have given it the power to unilaterally override the Brexit divorce treaty (particularly related to the Irish border).
Royal Dutch Shell (RDS.A, RDS.B) has been hit by the departure of several clean energy executives amid a split over how aggressively the oil giant should shift towards greener fuels, FT reports. Those include Marc van Gerven, who headed the solar, storage and onshore wind businesses, Eric Bradley, who worked in Shell's distributed energy division, and Katherine Dixon, a leader in its energy transition strategy team. Other top executives are due to leave the company, though not every move is known to be linked to the pace of change. The wave of resignations comes shortly before Shell is set to announce a strategy update in February, spelling out how it plans to become a net zero emissions business. In August, rival BP (NYSE:BP) said it would shrink oil and gas output by 40% over the next decade, a move analysts predict will force Shell down a similar path.
"Treasurys at these rates... I wouldn't touch them with a 10-foot pole," JPMorgan (NYSE:JPM) Chase CEO Jamie Dimon said at Goldman Sachs' annual financial services conference. The yield on the 10-year Treasury was last at just 0.9% and has stayed below 1% since breaking below that threshold during the pandemic. As a lender with $3.2T in assets, JPMorgan still has to continually purchase Treasurys and other low-yielding investments to earn a spread, but that's one reason that bank profitability and stock values have been under pressure since the coronavirus crisis. What about equities? "There may be a bubble in small parts of the stock market, not all of it," Dimon added, signaling a strong end to year on Wall Street. "You didn't ask me, so I'll tell you anyway, trading and investment bank numbers are up about 20%, maybe a little more (in the fourth quarter). I do think we hit the bottom, and we're growing," he said of longer-term trends for trading revenues.
Congress is looking to approve the first overhaul of U.S. anti-money laundering laws in decades. The U.S. House of Representatives signed off on legislation yesterday that would force corporations to register the IDs of their beneficial owners with the Treasury Department's Financial Crimes Enforcement Network (FinCEN) to stop criminals from using shell companies. Big benefit for banks... Financial institutions would no longer have to act as the information collecting middlemen between companies and law enforcement, resulting in a lower overall cost of compliance. The bill also directs law enforcement, bank supervisors and lenders to set up channels of communication to streamline the process of reporting suspicious activity.
What else is happening...
U.S. to impose preliminary duties on silicon metal imports.
'There seems to be no end in sight' for strong home sales - Gundlach.
Tuesday's Key Earnings
In Asia, Japan +1.3%. Hong Kong +0.8%. China -1.1%. India +1.1%.
In Europe, at midday, London +0.4%. Paris +0.2%. Frankfurt +1%.
Futures at 6:20, Dow +0.3%. S&P +0.2%. Nasdaq +0.1%. Crude +0.3% to $45.73. Gold -0.6% at $1863.80. Bitcoin -2.9% to $18293.
Ten-year Treasury Yield +3 bps to 0.94%
Today's Economic Calendar