Now, It Gets Rough
For the short term, it only gets rougher. I speak not of our beloved equity markets. The marketplace can afford the luxury of favoring certain industries over others. Our marketplace can be forward-looking. Sometimes not so far, other times further out. Our marketplace can almost immediately respond to policy that expands the monetary base or artificially cheapens credit. Our marketplace can get by on poorly timed fiscal support, and even flourish should "the swamp" actually cooperate and work for the people that put them there.
Where I go this morning is backwards. Twenty-four hours or so. I think we, as caring people, need to be more concerned with the weekly 853,000 (seasonally adjusted) Initial Jobless Claims reported by the Department of Labor on Thursday. Though gifted a reprieve, if that's the right word -- it certainly is not if it is thou who has been tapped on thy shoulder -- the week prior, new claims at the state level for jobless benefits bottomed at a still alarmingly elevated level in early November and have been rising ever since. Continuing Claims, which statistically trail initial claims by a week, printed upward this week from the week prior for the first time since early September.
In addition, the Pandemic Unemployment Assistance program, which caters to gig workers, freelancers and the self-employed, saw an influx of 427,000 (unadjusted) new claims last week versus 288,000 the week prior. The federal unemployment stipend to weekly jobless benefits was what really kept the consumer in the game for much of the year. That help is long gone, and with so many behind of rent/mortgage payments and with an end to eviction protection looming, disaster lurks. What of the landlord? Not their fault. They may be in an even deeper jam than are their tenants, still paying taxes on and maintaining properties without incoming revenue.
What I Am Saying...
... is that the entire U.S. and global economies skate on thinner ice than many of those less impacted think. Sure, the Atlanta Fed's GDPNow model that tracks an estimate for current quarter (over quarter and annualized) GDP in real-time still shows fourth-quarter growth running at an 11.4% clip, and that would be impressive. One must understand, however, that models like this are a snapshot, a still photo if you will. These are not projections.
As the pandemic spreads quite quickly across nearly every state, the sheer number of municipalities forced to take measures that reduce human interaction will grow, not recede, as Hanukkah leads to Christmas, which leads to Kwanzaa, which in turn wraps up with the New Year. Some families will gather. Another 220,000-plus individuals test positive for this virus every day in the U.S. Think all of them are quarantining correctly? The virus is now exacting a death toll in the U.S. equivalent to what we experienced on 9/11/01, except every single day. If that was a tragedy, and it was, I was present..... What the heck is this?
The Wall Street Journal on Thursday published the results of its latest monthly survey of economists, including perspective from both the private sector and academia. Not that economists know everything, they most certainly do not. I have held titles with the word "economist" in the heading at three Wall Street firms. The title does not make us correct on all economic matters, but it does mean that we give a lot of thought to such concepts as surplus and scarcity, created both naturally and artificially, as well as the human response to these conditions and how to alter that response (hopefully for the better) through policy.
To make a long story short, the consensus of those interviewed is for a weak-looking start to 2021 as the virus continues to hurt labor markets. Economists, like most Americans, see light at the end of the tunnel, or should I say at the end of the winter, as vaccines and fiscal support increase the pace of economic activity, or what we used to call the "velocity of money." Haven't heard or read that term in a while, unless I wrote it myself. It's only the most important metric for measuring the economic health of a society ever created. That's all.
Winter is only going to get rougher than we already thought was pretty rough, gang. That means we are going to have to get tougher in matters of personal discipline while cutting others a break when and where possible as they pass through the stages of ongoing disbelief, anger and depression due to their prolonged lack of not just economic, but social support.
Equity markets did not move so much on Thursday, really just stabilizing after what was a shaky Wednesday session. Some money moved back into the Nasdaq Composite. The Nasdaq 100 ended that losing streak at one. The S&P 500 closed down small. Breadth was impressive, however. Winners beat losers decisively up at Times Square, and by a narrower margin (8-7) down on Wall Street. Advancing volume easily defeated declining volume at both of New York's primary equity exchanges.
Out of the woods? Not likely. The positive-looking breadth was led by the small-caps, and aggregate trading volume dropped off from Wednesday somewhat significantly, especially at the Nasdaq, which was where the weakness was that day. That means that while enough managers took profits on Wednesday, more than a few were much less active on Thursday, meaning there has been at least some cash creation.
As mentioned above, the expected light at the end of the tunnel will likely be provided through the availability and then distribution of Covid-19 vaccinations. The United States took one giant step forward on Thursday night as a majority (17-4, 1 abstention) of voters (scientists) sitting on the Vaccines and Related Biological Products Advisory Committee decided that the benefits of the Pfizer (PFE) /BioNTech (BNTX) Covid vaccine outweigh the risks for those age 16 years and older. What this does is pave the road for the Food and Drug Administration (FDA) to issue an EMU (Emergency Use Authorization) in short order.
Remember, the FDA is not bound to agree with the assessment of this committee, though this was a necessary step. The FDA will need to give the impression of making its own decision, so this may take a day or two. By the way, though Pfizer is a U.S. firm, and BioNTech a German operation, the vaccine has already been authorized for use in the U.K., Canada, and Saudi Arabia, with inoculations already under way in the U.K. Pfizer plans to apply for full approval sometime next year. Keep in mind that the Moderna (MRNA) effort will go to this same advisory committee next Thursday, Dec. 17, so we may have two vaccines prior to year's end.
Beyond that, AstraZeneca (AZN) and Johnson & Johnson (JNJ) are considered close to being ready early in 2021 if all goes as well as hoped. As far as vaccines are concerned, there was a hiccup overnight. This is why European equities and U.S. equity index futures have been soft as darkness fades to light.
It appears that the vaccine candidate worked on jointly by Sanofi (SNY) and GlaxoSmithKline (GSK) hit a bump in the road overnight. That candidate has apparently produced an insufficient immune response in the elderly. That vaccine will now need to reformulate the level of antigen in the dosage and restart clinical trials at an earlier stage than where they had thought they were. This vaccine may not be ready now until late next year, which will hurt aggregate global supplies. In addition, a candidate from lesser-known CSL Ltd. (CSL) , an Australian biopharma, has apparently failed for now as that vaccine can produce in patients a false positive result for HIV.
Oh, and "the swamp" still stands in between the American people and the help they need. Listen, red team... we have to help municipalities to some degree. Hey, blue crew.... we need to protect employers and schools trying to reopen or remain open. This is not rocket science. Let's act with some urgency. (That means get off your tail and get this done, maggots.) Let's act like we're aware of the fact that we are in the middle of a global crisis. That is all. You're dismissed. I'm here if you need me.
2) The Walt Disney Company (DIS) hit the ball out of the park at its "investor day" Thursday night. Disney+ alone now has 86.8 million subscribers, up from 73.7 million less than two months ago. Across the Disney+, Hulu, ESPN+ and Hotstar (global) platforms, the firm now has more than 137 million subscribers with plans to expand Disney+ into Eastern Europe, South Korea and Hong Kong in the short term. The ramp-up in new content will be incredible, focusing on the Marvel and Star Wars franchises as well as Pixar, Disney Animation, and yes, even the Kardashians. I could write more, but that would require an entire piece to itself.
3) Futures markets look like they may want to get ugly here on Friday morning. Stay nimble. We all know that a positive headline concerning vaccines or especially positive (or negative) headlines making use of the word "fiscal" can turn algorithmic response far more quickly than you can react. Know your levels.
Economics (All Times Eastern)
08:30 - PPI (Nov): Expecting 0.7% y/y, Last 0.5% y/y.
08:30 - Core PPI (Nov): Expecting 1.4% y/y, Last 1.1% y/y.
10:00 - U of M Consumer Sentiment (Dec-adv): Expecting 76.0, Last 76.9.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 246.
The Fed (All Times Eastern)
Fed Blackout Period
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (ROAD) (.30)