The stock market rally started the new year with solid gains, as the Dow Jones Industrial Average, S&P 500 index, Nasdaq composite and Russell 2000 all hit record highs. Expectations of a larger stimulus package rose with Democrats seizing control of the Senate — taking in stride a pro-Trump mob briefly storming the Capitol building. A weak jobs report offers further reason for more fiscal fuel. Economically sensitive sectors took the lead, while Tesla (TSLA) soared on strong Q4 deliveries and analyst upgrades, while also announcing a cheaper, lower-end Model Y. Nio (NIO), Xpeng (XPEV) and Li Auto (LI) jumped on booming sales. General Motors (GM) also reported rising U.S. sales. Micron Technology (MU) beat views and guided higher.
Stock Market Rally Hits Highs
The stock market rally continued to rise, fueled by stimulus hopes and election certainty as Democrats won Georgia runoffs to control the Senate. The Dow Jones, S&P 500 index, Nasdaq composite and Russell 2000 all hit record highs. Economically sensitive sectors, such as mining, metals, crude oil and financials, soared on stimulus hopes, while solar and marijuana stocks rallied on possible policy changes. Tesla (TSLA) and China EV stocks jumped on strong sales. Tech giants and software stocks retreated, but then rebounded. The 10-year Treasury yield rose back above 1% on stimulus hopes, while Bitcoin continue to explode, rising above $40,000 briefly.
U.S. Loses Restaurant Jobs
Employers cut 140,000 workers from their payrolls in December, defying views for a small gain. Yet the jobless rate held steady at 6.7%, and the data underscored the resilience of the U.S. economy amid an ongoing surge in Covid hospitalizations, deaths and restrictions. The Labor Department said that 61% of industries added jobs last month. That hiring wasn’t enough to offset the loss of a half-million jobs in the leisure and hospitality sector, including 372,000 at restaurants and bars. Still, construction added 51,000 jobs, while factory employment rose 38,000. Retail added 120,500 jobs. Temp employment grew by 67,000, while the ranks of couriers and messengers rose 37,000. Health care employment rose 39,000.
Despite the downside miss, the 10-year Treasury yield extended this week’s surge above 1%, rising to 1.11%.
January’s jobs report may not be much better, but vaccines, stimulus checks and the prospect for much more fiscal stimulus on the way suggest a much healthier job market by spring.
EV Stocks Jump On Booming Sales
EV stocks soared on strong delivery numbers and election results that gave Democrats a majority in the Senate, making green energy policies more likely. Global deliveries hit a record 189,750 in Q4, bringing the 2020 total to 499,550, just shy of its stated goal of 500,000. Tesla also said it’ll begin delivering their made-in-China Model Y this month. In the U.S., Tesla announced a much-cheaper Model Y with a shorter range. Tesla stock spike for the week, showing climax-type action. Meanwhile, China-based Nio (NIO) delivered 17,353 vehicles last quarter, more than double from 2019, for a total of 43,728 for 2020. Nio stock jumped to a record high, ahead of its Nio Day on Jan. 9. Li Auto (LI) delivered 6,126 in December vs. 4,747 in November. Li stock surged. Xpeng (XPEV) had 5,700 deliveries last month, an increase of 326% vs. 2019. Xpeng stock rose solidly.
IBD Stock Of The Day Flashes Climax Top Signals
GM, Toyota Saw U.S. Sales Rise
General Motors (GM) grew U.S. auto sales nearly 5% in the final quarter of 2020, while Toyota (TM) increased sales 8%. Other major automakers saw declines, including 8% at Fiat Chrysler (FCAU) and 10% at Ford (F). Overall, an estimated 14.5 million new vehicles were sold during 2020, down 15%. That would mark the lowest sales year since 2011 but far stronger than expected during the coronavirus lows, when many factories were shut down. In Q4, GM’s sales returned to pre-pandemic levels, though they fell 12% for the full year.
GM and Ford shares flashed bullish rebounds, offering early entries within their flat bases.
AstraZeneca (AZN) rose higher Monday on reports it would supply the United Kingdom with 2 million doses of its coronavirus vaccine every week beginning in mid-January. The company’s vaccine also gained authorization in India. Moderna (MRNA) won emergency approval from the European Medicines Agency and U.K. regulators for its vaccine. Moderna says it plans to make 1 billion doses in 2021.
CureVac (CVAC) reached an alliance with Bayer (BAYRY) to help on its coronavirus vaccine, which is in late-stage trials. CureVac stock jumped.
Crude Oil Jumps On Saudi Surprise
Oil prices soared to their best levels since February as Saudi Arabia shocked oil markets Tuesday with a voluntary 1-million-barrel-per-day output cut. The announcement came after the Organization of the Petroleum Exporting Countries along with Russia, together known as OPEC+, agreed to allow a 75,000 bpd combined increase from Russia and Kazakhstan in February and March. Oil demand still faces uncertainty even with the distribution of Covid-19 vaccines as new lockdowns sweep Europe. Iran seizing a South Korea tanker and expectations for a big U.S. stimulus also boosted crude prices.
Micron Earnings Jump 63%
Micron Technology (MU) reported a 63% EPS gain with sales up 12% to $5.77 billion in the fiscal first quarter. It was Micron’s second consecutive quarter of earnings growth and third straight quarter of sales growth The memory-chip maker also guided higher for the current quarter, citing an improving DRAM market. Micron reversed lower Friday but was up solidly for the week.
Taiwan Semiconductor (TSM) early Friday reported December sales rose 13.6% vs. a year earlier in Taiwanese dollars, after November sales rallied 15.7%. For the full year, revenue grew 25.2%. Next week, earnings are on tap. TSM stock reversed lower Friday but was up for the week.
UnitedHealth, AmerisourceBergen Make Health Buys
UnitedHealth (UNH) said it will buy Change Healthcare (CHNG) for $7.84 billion, or 25.75 per share. The Dow Jones giant sees the acquisition of the health IT firm as accretive to its adjusted earnings per share by 50 cents in 2022. Drug wholesaler AmerisourceBergen (ABC) said it would buy Walgreens’ drug distribution business for $6.5 billion as it looks to expand its coverage in Europe. Walgreens (WBA), another Dow stock, reported fiscal Q1 earnings that topped estimates.
News In Brief
Teledyne Technologies (TDY) agreed to buy Flir (FLIR) in an $8 billion deal to expand its sensor offerings for the defense industry. Flir shareholders will receive $28 per share in cash and 0.0718 shares of Teledyne stock for each Flir share. Teledyne said the deal will be immediately accretive to earnings, excluding transaction costs.
Costco (COST) grew same-store sales 10.9% in December, but fell just short of some estimates. E-commerce sales jumped 61.6%. Net sales growth weakened vs. the prior two months as the coronavirus resurgence weighed on foot traffic during the key holiday season.
Constellation Brands (STZ), the parent of Corona and other beer and wine brands, reported fiscal third-quarter results that beat estimates.
Bed Bath & Beyond (BBBY), the home goods retail chain, reported fiscal Q3 results that missed expectations.
Plug Power (PLUG) surged after SK Group agreed to invest $1.5 billion in the fuel-cell company, with plans for a South Korea joint venture to promote hydrogen as alternative energy for Asian markets.
Boeing (BA) will pay more than $2.5 billion to settle a Justice Department criminal charge that the Dow Jones aerospace giant concealed key information from the FAA regulators investigating the two 737 Max crashes.
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