Weekly Market Update: Omicron infections surge, but worries abate, allowing Santa Claus rally to take hold
2021-12-23T16:01:40.823
Investor risk appetite waned early this week as investors worried that the exponential rise in Omicron variant cases would stall economic growth and add pressure to inflation. Governments continued to intensify social restrictions, particularly in Europe. Adding to the jitteriness was China's central bank decision to cut the one-year loan prime rate amid a slowing economy that has been dragged by a slump in the property sector. In Washington, Senator Manchin continued to hold up the chances of President Biden's Build Back Better plan getting through Congress despite the President's insistence that they will get something done early next year. Major US averages were once again under their 50-day moving averages and the VIX had popped back above 25.
As the news flow around Omicron improved so too did investor sentiment. By mid-week a powerful Santa Claus rally took US indices back towards all-time highs. Though Omicron infections continued to explode, the narrative that they largely remained less severe seemed to offer some solace to investors that this wave may ultimately be shorter and do less economic damage than prior Covid waves. Also, both Pfizer and Merck received FDA approval for their antiviral pills while data continued to show mRNA vaccines offer protection against Omicron. A Walter Reed study garnered attention as well after it was reported that the US Army has developed a vaccine effective against COVID-19 and all its variants including Omicron. The report noted that and imminent data set may also show the vaccine could offer protection from future variants and previous SARS-origin viruses. For the week, the S&P gained 2.3%, the DJIA was up 1.7%, and the Nasdaq rose 3.2%.
In corporate news this week, Nike reported an earnings and revenue beat for Q2 but saw its Asia sales falter amid factory closures and transportation issues. Micron’s outlook exceeded consensus and the chip manufacturer said PC production had been hurt by other component shortages, though demand remains strong and supply is improving. Sanderson Farms reported a jump in earnings as robust retail chicken prices offset a rise in feed grain costs. Novavax said a two-dose primary regimen of its COVID vaccine demonstrated cross-reactive immune responses against Omicron and other variants. The FDA authorized both Pfizer and Merck antiviral COVID treatments, though it did not authorize Merck’s product for those under 18 years old. Oracle confirmed the $28B acquisition of electronic health records vendor Cerner as it pushes into the digital patient space. AT&T announced it would sell the online advertising platform Xandr Inc. to Microsoft Corp. as it scales back its digital marketing ambitions. Investors reacted poorly to Crocs' announcement that it would acquire casual footwear brand HeyDude for $2.5B, selling shares off by more than 10%.
SUN 12/19
(US) Sen Manchin (D-VW) says he will Not support Biden's "Build Back Better" legislation
1638.HK Missed total of $118.8M interest payments for bonds due 2021, 2023, 2025 notes and $400M in prinicpal payments for 2021 notes; Bonds due 2021 and 2026 remain in grade period through Jan; Have been in talks with holders on debt restructuring plan
*(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: CUTS 1-YEAR RATE BY 5BPS TO 3.80% [1st cut in the 1-year LPR since Apr 2020], maintains rate on 5-year LPR
MON 12/20
MRNA Prelim booster data shows increased antibody levels 37x with 50 µg dose against Omicron, and by 83x with 100µg dose
(US) NY Fed takes $1.76T in RRP program at 0.05%; 81 participating and accepted counterparties (Record high)
MU Reports Q1 $2.16 v $2.10e, Rev $7.69B v $7.66Be
NKE Reports Q2 $0.83 v $0.63e, Rev $11.4B v $11.2Be
(CN) China loan prime rate (LPR) is expected to be cut further in 2022, RRR cut is also expected in H1 – Chinese press
(US) SEMI Nov North America-based Manufacturers of Semi Equipment Billings: $3.93B (record high), +5.0% m/m and +50.6% y/y
TUES 12/21
(NZ) Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.5% v +1.4% prior
MRK FDA reportedly to authorize PFE's Paxlovid and MRK's molnupiravir Covid pills this week - press
(US) TREASURY $20B 20-YEAR BOND REOPENING DRAWS 1.942%, BID-TO-COVER 2.59 v 2.25 PRIOR AND 2.37 OVER LAST 8 REOPENINGS
(US) NY Fed takes $1.75T in RRP program at 0.05%; 77 participating and accepted counterparties
(IL) Israel government advisory panel of health experts recommends giving the 4th booster shot
(CN) Satellite pictures show China military build up in the South China Sea using new warfare style weapons and tactics - press
WEDS 12/22
(US) Walter Reed US Army researchers expect to announce soon [within weeks] that they have developed a vaccine effective against COVID-19 and all its variants including Omicron, as well as from its future variants and previous SARS-origin viruses - financial press
MAERSKB.DK Acquires omnichannel fulfilment contract logistics firm LF Logistics Holdings for EV of $3.6B cash; Gives firm a network of warehouses
(RU) Yamal-Europe pipeline said to be running in reverse for a 2nd straight day; Russia's Gazprom cites cold temperatures
3333.HK Evergrande's Risk Management Committee statement; Utilizing its extensive resources and will actively engage with the Group's creditors in order to mitigate the Group's risk
*(US) Q3 FINAL GDP ANNUALIZED Q/Q: 2.3% V 2.1%E; PERSONAL CONSUMPTION: 2.0% V 1.7%E
*(US) Q3 FINAL GDP PRICE INDEX: 6.0% V 5.9% PRELIM; CORE PCE Q/Q: 4.6% V 4.5% PRELIM
(TR) Reportedly Turkish Treasury had set USD/TRY reaching 18 as a redline to trigger its Lira rescue plan - press
*(US) DEC CONSUMER CONFIDENCE: 115.8 V 111.0E (best reading since July)
(US) Association of American Railroads weekly rail traffic report for week ending Dec 18th: 504.1K total units, -3.1% y/y
NVAX Announces initial Omicron cross-reactivity data from COVID-19 vaccine booster and adolescent studies; Two-dose primary regimen demonstrated cross-reactive immune responses against Omicron and other variants
700.HK Declares interim special dividend payable in ~HK$128B JD.com shares; To pay 1 Class A share of JD.com for every 21 shares held by shareholders
THURS 12/23
AZN University of Oxford study supports use of AstraZeneca’s Vaxzevria COVID-19 vaccine as third dose booster against Omicron; Neutralizing antibody levels against Omicron following a third dose of Vaxzevria were broadly similar to levels achieved after two doses against the Delta variant
(RU) Russia President Putin: Have the impression that Ukrainian govt is preparing for military operation in Donbass region; Russia does not seek conflict - annual press conference
*(US) INITIAL JOBLESS CLAIMS: 205K V 205KE; CONTINUING CLAIMS: 1.86M V 1.84ME
Friday 12/24
Markets closed for Christmas Holiday
