Markets Wrap: U.S. Stocks Fall for Fourth Day

The Electoral College voted Monday to cement President-elect Joe Biden’s victory over President Donald Trump in this year’s presidential election.

Biden and Harris are set to be sworn into office as president and vice president of the United States on Jan. 20, Inauguration Day.

U.S. stocks fell for a fourth day as investors assessed the prospects for a federal spending package and the likelihood for further virus-related economic restrictions.

The Dow Jones Industrial Average fell 184.82 points, or 0.62%, to close at 29,861.55. The S&P 500 fell 17.96 points, or 0.49%, to end at 3,645.50 while the Nasdaq Composite rose 62.17 points or 0.50% at 12,440.04.

Photo: Finviz

Apple (AAPL-US) fell 0.51%; Facebook (FB-US) rose 0.23%; Alphabet (GOOGL-US) fell 1.27%; Amazon (AMZN-US) rose 1.30%; Microsoft (MSFT-US) rose 0.44%.

Tech giants deemed to be gatekeepers could face fines as high as 10% of annual revenue if they don’t comply with new European Union rules on data usage to be unveiled Tuesday.

Companies that could include Google, Amazon.com Inc., and Apple Inc. will be banned from using any data from business users to compete with them or from treating their own services more favorably in rankings, among other obligations. Nasdaq futures pared gains.

A company that “systemically infringes” the obligations could face orders by the European Commission to make behavioral and structural changes, such as divesting businesses. Companies will be considered to be in systematic non-compliance if the EU has issued at least three fines within a period of five years.

Photo: Zoox

Zoox Inc., the self-driving startup owned by Amazon.com Inc., unveiled a fully autonomous electric vehicle with no steering wheel that can drive day and night on a single charge.

The vehicle, which Zoox describes as a driverless carriage or robotaxi, can carry as many as four passengers. With a motor at each end, it travels in either direction and maxes out at 75 miles per hour. Two battery packs, one under each row of seats, generate enough juice for 16 hours of run time before recharging, the company said. To commercialize the technology, Zoox plans to launch an app-based ride-hailing service in cities like San Francisco and Las Vegas.

Tesla (TSLA-US) rose 4.89%. Tesla’s market capitalization has increased by more than $500 billion in 2020, and the company is now worth about as much as that of the nine largest car companies globally, despite selling a small fraction of the volume of cars that they do.

Those automakers include Volkswagen, Toyota, Nissan, Hyundai, GM, Ford, Honda, Fiat Chrysler, and Peugeot. Overall, Tesla expects to sell at least 500,000 electric vehicles this year worldwide, making up less than 1% of total vehicle sales. 

15 years after buying Reebok, German sportswear maker Adidas on Monday said it was considering a sale of the company as part of its strategic options heading into 2021.

Adidas first purchased Reebok back in 2005 for $3.8 billion to compete with Nike in the United States, but a lack of progress in turning it around led to repeated calls from investors to dispose of the brand.

Semiconductor companies are facing improved prospects headed into 2021, but these tailwinds could be tempered by stock prices that are near all-time highs, analysts said on Monday.

The Philadelphia Semiconductor index rose 1.2% on Monday, bringing its year-to-date advance to nearly 50%. 

This rally “sets high expectations for sales and EPS momentum through 2021,” wrote Bloomberg Intelligence. However, “barring severe Covid-19 impediments, chipmakers can perform to this expectation or even above it.”

Analysts were broadly positive on the group’s fundamentals, even as they differed on the upside potential of the stocks.

“Bears will say good news is priced in and a retreat’s overdue,” wrote Craig Ellis, an analyst at B. Riley Securities. “Yet an upcycle comparison to the post-Great Recession recovery argues for +19% SOX upside.” The firm sees additional upside and “relative valuation gains as broadening and accelerating fundamental strength lifts EPS materially through the year.”

Morgan Stanley took a more cautious stance. The firm sees strong semiconductor fundamentals in 2021, including a “broad based demand recovery,” but noted that this was “matched by peak multiples.” Analyst Joseph Moore cautioned that price-to-earnings multiples had expanded to “extreme levels,” which “puts the focus on earnings recovery, not further expansion, as the key stock driver.”

The firm has an in-line rating on the sector, and wrote that investors should be discerning with stock selection.

This view was echoed by Stacy Rasgon, an analyst at Bernstein. “We are emerging out of COVID more constructive on the long-term prospects for semis given the increasing importance of the sector, both functionally and strategically,” he wrote. At the same time, he added, “we are cognizant of nearer-term risks, and prefer to be selective.”

Rasgon wrote that when it comes to recent strength, “questions of sustainability remain” as some of the tailwinds have been driven by remote work, a factor that will face “tough compares and an uncertain trajectory in a recovery scenario.” There are also signs that investors are highly crowded within the space, he wrote.

The firm listed Broadcom, Qualcomm and Nvidia among its top picks for 2021.