Premarket stocks: Investors want Omicron answers. They won’t get them yet

“We have to go through a couple of weeks yet of uncertainty,” Dr. Paul Burton, the chief medical officer for Moderna, told CNN’s Paula Reid on Sunday.

The raft of unknowns spooked financial markets on Friday, when the Dow plummeted 905 points, or 2.5%, logging its worst day in over a year. Oil prices plunged more than 10%.

The CNN Business Fear & Greed Index, which tracks market sentiment, is back firmly in “fear” territory.

There are five questions, as we see it, that edgy investors now want answers to. The first three are exactly what public health officials are scrambling to determine.

  • Is the Omicron variant more transmissible?
  • Does it increase the risk of severe disease?
  • Does it reduce the efficacy of vaccines?

“The question is, is there a tiny hit to vaccine efficacy, or is there a large hit? I think we’ll get some preliminary data probably in the next few days,” Dr. Ashish Jha, dean of Brown University’s School of Public Health, told CNN.

Two additional questions relate to the potential economic impact of the variant.

  • How will governments respond?
  • Will consumers adjust their behavior?

“I began this year warning that the evolution of the pandemic was the key risk facing the global economy,” Neil Shearing, group chief economist at Capital Economics, said in a research note on Monday. “News of Omicron, followed by swift moves by governments to close borders to limit its spread, and the sharply negative market response to these events, are a reminder of this acute economic vulnerability.”

A number of countries have slammed their borders shut to visitors from southern Africa. The European Union, Australia, the United States, Canada, Rwanda and many others have banned travelers from countries including South Africa, Botswana, Zimbabwe and Namibia. Japan has closed its borders entirely to non-resident nationals.

It’s not clear, however, whether more stringent rules could be put in place for a broader range of countries, impeding international travel on a wider scale.

Should infections start to jump, countries could also begin to reimpose restrictions on public life. Curfews for restaurants, work-from-home orders and other mandates — which have already been cropping up again in Europe — would hurt the economic recovery.

On the radar: Consumers could also make their own decisions to stay at home should fear about the variant grow.

Investment advisors are telling their clients to avoid spreading alarm and wait for more intel, though they concede this is an important moment.

“We do not recommend panic selling or repositioning,” said Christopher Harvey, senior equity analyst at Wells Fargo. “Conversely, it is hard to say, ‘Nothing to see here … as you were.’ While not real exciting advice we think less is more until we can better ascertain the risks.”

In short: The next few days and weeks could be bumpy as investors react to developments on any of the fronts outlined above. The VIX, which measures market volatility, is down 14% this morning. It’s still at its highest level since September, though, as Wall Street enters a tense wait-and-see period.

Shoppers return to stores for holiday shopping spree

Black Friday doesn’t carry the significance it once did for US shoppers increasingly comfortable with snagging deals online.

But customers still dished out more money for clothing, electronics and other items this Black Friday as they opted to visit stores in person again, my CNN Business colleague Nathaniel Meyersohn reports.

Sales on Black Friday increased almost 30% from a year ago, according to estimates through 3 p.m. ET Friday from Mastercard, which tracks payment data in stores and online. In-store sales jumped 43%.

“[This] speaks to the strength of the consumer,” said Steve Sadove, senior advisor for Mastercard. “We anticipate a positive holiday season well beyond Black Friday.”

Clothing sales led the growth, climbing 86% compared to Black Friday one year ago, when shoppers were mostly staying at home and didn’t have much reason to spruce up their wardrobes.

Gearing up: It’s a strong way to kick off the all-important holiday shopping season. Retail sales in November and December are expected to grow between 8.5% and 10.5% this year compared with 2020, reaching a record of up to $859 billion, according to the National Retail Federation.

But there’s a wrinkle. According to data from Adobe Analytics, online spending on Black Friday was $8.9 billion — a decrease compared to 2020.

“For the first time ever, Black Friday saw a reversal of the growth trend of past years,” analyst Vivek Pandya said. “Shoppers are being strategic in their gift shopping, buying much earlier in the season and being flexible about when they shop to make sure they get the best deals.”

Watch this space: Eyes are now on Cyber Monday. Adobe forecasts it will be the biggest online shopping day of the year, with consumers shelling out between $10.2 billion and $11.3 billion. Will it meet expectations?

Economists are now carefully monitoring the effects of the Omicron variant on consumer sentiment. It had already deteriorated due to inflation, though customers have continued to pull out their wallets.

Canada taps its strategic reserves … of maple syrup

Last week, countries around the world announced they would tap their strategic oil reserves in a bid to lower gasoline prices.

Not to be left out, Canada is also tapping its strategic reserves. But not for crude.

The Quebec Maple Syrup Producers is releasing roughly 50 million pounds from its strategic stockpile of maple syrup, almost half of the trade group’s holdings, my CNN Business colleague Ramishah Maruf reports.

Back up: The government-supported organization, which is often referred to as the OPEC of maple syrup, uses its reserves to control syrup prices and supply. As of 2020, Quebec produced 73% of the world’s maple syrup.

The strategic reserve was created to keep syrup in stock during bad harvest seasons or when demand spikes. While 2021 was an average year for Quebec’s production, sales rose 21% compared to last year, straining supply.

“The pandemic helped in our case because we’re seeing people cook more at home and use more local products,” spokesperson Helene Normandin said in an interview with Bloomberg.
Big picture: This pattern has been replicated for a number of agricultural products in recent months. When weather conditions dent yield, the situation is even worse. Extreme weather has threatened coffee supply, for example, driving futures to their highest level in a decade last week.

Up next

Pending US home sales for October arrive at 10 a.m. ET.

Coming tomorrow: Did US consumer spending stay strong in November despite inflation concerns?

Premarket stocks: Investors want clarity. They might not like what they see

“The market is tip toeing forward lost as it is in the fog and trying to find its way,” Sebastien Galy, senior macro strategist at Nordea Asset Management, said in a research note.

Investors may be about to get some direction, however. Earnings season kicks off in earnest on Wednesday, with quarterly reports from JPMorgan Chase and Delta Air Lines providing insight into recent consumer behavior.

The US consumer price index for September will also be released before the opening bell. Economists predict that inflation remained at high levels during the month due to stretched supply chains and rising energy costs.

Later on Wednesday, investors will get a look at minutes from the Federal Reserve’s most recent meeting in September. The report will be scoured for clues on when the central bank will roll back its stimulus measures.

Stepping back: The fresh data, combined with more earnings reports later this week, should give investors a much clearer picture of the economy.

“The period of volatility is continuing in the stock market, but time should gently soothe the frayed nerves,” said Galy.

Getting more data is one thing. But there’s no guarantee that investors will like what they find.

Supply chain snafus: Moody’s Analytics warned on Monday that supply chain disruptions “will get worse before they get better.”

“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Moody’s wrote.

See here: Apple (AAPL) is likely to slash its projected iPhone 13 production targets for 2021 by as many as 10 million units, according to Bloomberg. Why? Because suppliers are struggling to secure enough components.

Investors will be paying close attention to earnings reports and executive comments in the coming weeks, looking for more evidence of supply chain disruption eating into corporate profits.

The White House is trying to get a handle on the problem. The Biden administration will work with companies and ports on a “90-day sprint” to alleviate bottlenecks, according to a senior administration official.

The Port of Los Angeles will move to 24/7 service, bringing it into line with operations at the Port of Long Beach, which is already working on a 24/7 schedule, the official said. Those ports handle 40% of US container traffic.

The other big focus will be inflation. Investors will want to know whether supply chain issues, rising energy prices, and higher wages are pushing up costs for companies, and to what degree businesses are passing those costs onto consumers.

The big risk: Central banks are betting that inflation will ease over the coming months, and they could be forced to pull back stimulus earlier than expected if prices remain elevated.

“There is … a risk that transitory pressures could become persistent and central banks may have to take preemptive action,” the International Monetary Fund warned in its World Economic Outlook on Tuesday.

“What [central banks] have to watch out for is the second-round effects [with] these increases in energy prices feeding into wages and then feeding into core prices. That’s where you have to be very, very vigilant,” IMF chief economist Gita Gopinath told the Financial Times.

Wanted: climate investors

The world needs a much more ambitious plan to save the climate and achieve net-zero emissions by 2050, and investors have a major role to play.

The International Energy Agency said in its global energy outlook published Wednesday that investment in clean energy projects and infrastructure is falling short, reports my CNN Business colleague Julia Horowitz.

“We are not investing enough to meet future energy needs, and the uncertainties are setting the stage for a volatile period ahead,” IEA Executive Director Fatih Birol said in a statement.

The task at hand: Birol said that in order to reach net-zero emissions, clean energy investment needs to more than triple over the next decade.

About 70% of that spending should happen in developing economies “where financing is scarce and capital remains up to seven times more expensive than in advanced economies.”

Up next: The IEA is pushing for more aggressive climate action as world leaders prepare for the crucial COP26 summit in Glasgow in November.

“The way ahead is difficult and narrow, especially if investment continues to fall short of what is required,” the IEA said in its report.

The investment surge required will largely be “carried out by private developers, consumers and financiers responding to market signals and policies set by governments,” the agency said.

There needs to be “an unmistakeable signal from Glasgow,” the IEA added.

Netflix scores a massive hit

“Squid Game” — a fictional drama from South Korea — is Netflix’s “biggest-ever series at launch,” the streaming company tells CNN Business.
The dystopian series, in which contestants who are deeply in need of money play deadly children’s games to win cash prizes, has been viewed by 111 million accounts since debuting on Netflix (NFLX) September 17.

Numbers context: Netflix announced earlier this year that 82 million households watched “Bridgerton” in its first 28 days. “Squid Game” surpassed that number in a shorter amount of time.

The series is No. 1 on Netflix’s Top 10 lists in 94 countries around the world.

The numbers speak to the sheer size of “Squid Games'” popularity and the speed at which it took off. But ratings data from all streaming services comes with some important caveats.

For starters, these numbers are from Netflix itself and have not been vetted by any outside sources. Also, that 111 million figure doesn’t mean everyone watched the series from start to finish. It is based on Netflix’s metric of accounts watching at least two minutes of the series.

Still, the series is a massive hit, and further proof that shows from outside the United States can score big with global audiences.

Up next

JPMorgan Chase (JPM), BlackRock and Delta Air Lines (DAL) report earnings before the opening bell.

Also today:

  • US CPI for September publishes at 8:30 a.m. ET.
  • US crude oil inventories data at 10:30 a.m. ET.
  • Minutes from the Fed’s September meeting will be released at 2:00 p.m. ET.
Coming tomorrow: More bank earnings including Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC).

Robinhood investors may have the last laugh after lackluster IPO

It’s way too soon to make that call. But notably, shares of Robinhood debuted at $38 — the same price as Facebook (FB) in its May 2012 IPO. Today Facebook is trading at nearly $361.

Robinhood has certainly had a rollercoaster ride so far: The stock tumbled 8% on its first day and fell as low as $33.25 the second day. But it’s since roared back up to more than 40% above the IPO price and is now trading around $54, even briefly hitting a high of $85 last week.

“The platform that powered the meme stock movement has itself become a meme stock — sometimes to Robinood’s benefit and sometimes to its detriment,” said Jonathan Anastas, chairman of Alpha Esports Tech, a mobile gaming firm.

So much for the Reddit army of “apes” bringing Robinhood to its knees? Perhaps. The company has been credited with — and also criticized for — helping turn investing into something like a game. But Anastas argues Robinhood is simply following the money.

“They appeal to a trader demographic that is focused more on emotion and momentum,” Anastas said. “Robinhood is not valued on fundamentals.”

Already on the hunt for acquisitions

Still, Robinhood is now a publicly traded company with a market valuation north of $45 billion and it’s looking to grow its business quickly — just like Facebook did before it.

The platform announced Tuesday that it is buying Say Technologies, an online shareholder communications platform geared towards individual investors, for $140 million in cash.
“Like Robinhood, Say was built on the belief that everyone should have the same access to the financial markets as Wall Street insiders,” Aparna Chennapragrada, Robinhood’s chief product officer, wrote in a blog post.

“We share a common goal of eliminating the barriers that keep people from participating in our financial system,” she added.

The fact that Robinhood is looking to make an acquisition so soon after its IPO is also similar to a big deal Facebook pulled off back in 2012, just before it went public: Facebook bought Instagram for $1 billion, a deal that some felt was too pricey at the time.

Facebook, like Robinhood, also struggled out of the gate. In fact, it was an even bigger IPO flop as shares plunged about 50% below their IPO price in the first few months of trading before bottoming out.

But CEO Mark Zuckerberg wound up having the last laugh. The Instagram acquisition helped Facebook become a bigger player in mobile and allowed it to attract even more of the young users advertisers covet. Nine years after its “failed” IPO, Facebook is now worth more than $1 trillion.

Plenty of competition in fintech and from Wall Street

It’s hardly a given, however, that Robinhood is on track for a similar surge by 2030. Robinhood CEO Vlad Tenev, like Zuckerberg, will need to stay on top of market trends to get even bigger.

“Robinhood has had a lot of naysayers but they’ve amassed millions of account holders and the marching orders are clear,” said Michael Kamerman, CEO of Skilling, an online brokerage firm. “I think Vlad wants to attract even higher net worth clients.”

Robinhood will also need to fend off a large swath of competition over the next decade.

Rival online trading firms ae gunning for Robinhood, including Webull and eToro, which is in the process of merging with a special purpose acquisition company (SPAC) so it too can go public.
Meanwhile financial giants Charles Schwab (SCHW) and Morgan Stanley (MS) are courting retail traders more aggressively too, thanks to their respective acquisitions of online brokers TD Ameritrade and E-Trade.

With that in mind, Robinhood could also one day wind up as a juicy takeover target for a larger financial firm that would probably love to get access to Robinhood’s younger customer base.

“Wealth has moved from boomers and Gen X to millennials and Gen Z,” Anasta said. “Younger investors have different preferences.”

Alibaba Q2 earnings: Company to face investors as Beijing’s business crackdown grows

The company will report results for its most recent quarter on Tuesday.

Alibaba’s main business — e-commerce — has held up well during the coronavirus pandemic, soaring as people turn to online shopping to buy things without leaving their homes. The company has also benefited from continued economic strength in China, which averted the recession that pummeled most of the globe last year.

The company is expected to report revenue of 209 billion yuan ($32 billion) for the quarter, a 36% increase from a year earlier, according to data provider Refinitiv.

But the prospect of further scrutiny from Chinese regulators looms large.

In May, Alibaba (BABA) said it posted a loss of about $1.2 billion for its first quarter — a hit that was mainly due to a record $2.8 billion fine that Beijing imposed on the company after accusing it of behaving like a monopoly.
Joe Tsai, Alibaba Group’s co-founder and executive vice chairman, played down concerns when the fine was announced, saying that the company was “pleased” that it could “put this matter behind us.”

“With this penalty decision, we’ve received a good guidance on some of the specific issues under the anti-competitive law,” he told investors on a call at the time.

Beijing’s broader clampdown hasn’t let up. Alibaba’s New York-listed shares plunged nearly 14% during July as investors grew nervous about Chinese tech, including the ability of such companies to trade outside of China. (Alibaba also trades in Hong Kong; its dual-listing in 2019 was touted as a symbolic homecoming for the company.)
Shortly after ride-hailing giant Didi went public on the New York Stock Exchange at the end of June, Beijing banned it from app stores over cybersecurity concerns. The stock plunged, and is still trading well below its IPO price of $14 a share.
US securities regulators have also expressed concern about future Chinese public offerings, with the Securities and Exchange Commission telling staff last week to ask such firms to disclose more information before trading plans can be approved.
Beijing calls for calm after historic tech stock rout
Regulatory scrutiny on a broadening number of industries has also spooked investors. A stock market sell-off last week wiped out hundreds of billions of dollars in market value for several prominent Chinese tech companies, including Alibaba. That came as Beijing issued directives for education tech, food delivery and other sectors.
Chinese state media has since urged investors to stay calm, with one newspaper telling investors to “have confidence in the market.”

“A short-term shock does not change the nature of the long-term positive trend,” read a commentary published in the Securities Times last week. “China’s economy and markets are at an advantage in terms of its width and depth.”

— Paul R. La Monica, Laura He and Michelle Toh contributed to this report.