Stocks hover near record highs, data impacted on COVID, EV demand, US Politics, OPEC+ on tap

US stocks are rocking in the new year, with all the major indexes hovering near record-high territory. It is hard not to like equities as the economic outlook seems to be inching towards pre-pandemic life.  The COVID situation is still bleak as the holiday surge will likely deliver one last peak in both new cases and hospitalizations.  Vaccine rollout plans will also likely see tweaking, especially under a Biden administration.  Halving doses, additional vaccines becoming available, and having CVS, Walgreens, and other pharmacies administer the vaccine will spur optimism that large parts of the country could see restrictions ease sooner.

Another healthy stream of M&A news is also helping keep Wall Street in a positive mood.  Healthcare insurer Centene Corp agreed to buy Magellan Health for USD95 per share in cash, a deal worth USD2.2 billion.  Brookfield Asset Management proposed to take Brookfield Property private in a USD5.9 billion deal.  Teledyne will buy Flir Systems in a cash/stock deal valued at around USD8 billion.  Steady deal flow will keep many investors aggressive to start the year.

The positive start for stocks will likely be short-lived as investors brace for the Georgia elections that will determine how much change we can expect from the Biden administration.  The FAANG stocks could be hardest hit with a ‘blue wave’ since that will allow President-elect Biden to deliver on his promises of higher taxes and a tougher regulatory environment.  Amazon, Apple, Facebook, Google, and Netflix are taking the wind out of today’s positive start.

US Manufacturing PMI sparkles

Risk appetite got a tentative boost after the final US Markit Manufacturing PMI was revised higher to 57.1, the highest reading since September 2014.  The Markit survey was somewhat mixed as the employment component impressed while supplier delivery time declined to the lowest reading since the series started.  Supply chain disruptions were expected due to COVID and the largest rise in cost burdens since April 2018 will weigh on manufacturers.

US construction spending in November slowed down but is still heading higher.  Private construction climbed higher by 1.2%, while public construction continues to remain steady.  The winter months will trigger some softness, but will not change the mind of traders that housing remains the bright spot of the economy.

 

Telsa stock climbs

Tesla shares are off to a great start following better-than-expected delivery figures for the fourth quarter that saw them just miss their 2020 goal of 500,000 vehicles.  The road ahead for Tesla will be bumpier as their Chinese competitors also crush their sales numbers for last year.  Tesla momentum appears will tentatively remain in place even after prices rose over 700% in 2020.  It is hard to see how analysts can remain in the Tesla outperform camp, but following a strong finish and relentless Robin Hood type interest, it seems the party can go on a little longer.

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