HOT AIR BALLOON FLIGHT

By Julia Horowitz • Monday, December 13

Good morning. In today's newsletter: Is it time to stop talking about FAANG stocks? Plus, China's SenseTime postpones its market debut, and the number of Americans getting fired has plunged.

 

US stock futures are higher ahead of a week of major central bank decisions. Markets in Europe gained in early trading, while stocks in Asia were mixed.

 

▸ Forwarded this newsletter? Want global markets news and analysis from CNN Business reporters every morning? You can sign up here.

MARKET FLASH

These 5 stocks are driving the market

Despite anxiety about inflation and the Omicron variant, the stock market is on track for another banner year. That's in large part thanks to stellar gains from just a handful of stocks.

 

What's happening: According to new research from Goldman Sachs, just five companies — Microsoft, Apple, Nvidia, Tesla and Google parent Alphabet —  have contributed 51% of S&P 500 returns since April. Going back to the beginning of the year, they account for more than a third of the index's rise.

 

We've spilled plenty of ink talking about the clout of FAANG stocks — Facebook, Apple, Amazon, Netflix and Google. But is it time to retire FAANG and ring in the era of ... MANTA?

After shooting up 76% in 2020, Amazon's stock is up just 6% this year, compared to a nearly 26% rise in the S&P 500. Supply chain problems and pay hikes to recruit and retain workers have eaten into Amazon's profits despite the ongoing boom in online shopping.

 

Netflix's stock has also lost steam, rising 13% this year after skyrocketing 67% in 2020. The company has scored big with shows like "Squid Game," but investors are worried about whether the company can keep rapidly recruiting subscribers as competition among streaming services grows.

 

Facebook, now called Meta, has done slightly better, jumping 21% year-to-date. But that leaves it on track for its worst year since 2018, as investors weigh regulatory threats and the social network's pivot to virtual reality.

 

Shares in Apple and Google have popped 35% and 69%, respectively. That's good enough to join the MANTA club. 

 

Tesla also makes the cut. After rising an eye-popping 743% in 2020, shares of Elon Musk's electric carmaker have kept pushing higher. They're up 44% since the beginning of 2021 as Wall Street tries to position itself for the green energy transition.

 

Chipmaker Nvidia, for its part, has shaken off global supply issues and matched 122% gains last year with a 131% increase in 2021. Microsoft's surging cloud business has driven a 54% stock jump this year, also beating its performance in 2020.

 

Step back: There have been moments over the past 12 months when investors have tried to reduce their exposure to high-growth companies, which don't look as attractive in a world where interest rates could begin to rise. But on the whole, tech and Tesla have remained the undisputed market champions — even if the basket of winners looks slightly different.

 

A question that often arises when looking at the small number of companies that power the S&P 500 is whether the concentration makes the market vulnerable to a larger pullback. If something happens to Nvidia, for example, will everyone get hurt — whether they own stock in the company or not?

 

Goldman Sachs thinks that as it stands, the risk is low. The investment bank said investors have already priced in the beginning of interest rate hikes by the Federal Reserve and notes that borrowing costs will remain extremely low. Corporate earnings also "continue to surpass expectations."

 

"While 'unknown unknowns' cause the largest drawdowns and by their nature are impossible to assess in advance, the macro environment does not suggest drawdown risk is elevated in the coming months," its strategists said. 

VOICES

On the future of the Nord Stream 2 gas pipeline

"President Putin wants to see gas flowing through that pipeline if and when it becomes operational. It's very unlikely or hard to see that happening if Russia has renewed its aggression on Ukraine."

 

US SECRETARY OF STATE ANTONY BLINKEN (ON NBC'S "MEET THE PRESS")

 

Read more here.

NEWS ALERT

China's SenseTime is postponing its market debut

SenseTime is postponing its big initial public offering after getting caught up in tensions between the United States and China.

 

The Chinese artificial intelligence startup announced Monday that it would delay its widely anticipated market debut in Hong Kong, where it had planned to raise up to $767 million. It was set to start trading as soon as this week, my CNN Business colleague Michelle Toh reports.

 

Quick rewind: On Friday, the US Treasury Department placed SenseTime on a list of "Chinese military-industrial complex companies." Americans are barred from investing in these firms.

 

The US Treasury said that SenseTime was sanctioned because of the role its technology plays in enabling human rights abuses against the Uyghurs and other Muslim minorities in Xinjiang.

 

SenseTime has "strongly" denied the accusations and said it's been "caught in the middle of geopolitical disputes." China's foreign ministry said the sanctions on SenseTime were "based on lies and disinformation."

 

The company said in a stock exchange filing Monday that it would postpone the listing "to safeguard the interests of the potential investors of the company" and allow them to "consider the potential impact of" the US move on any investments. Investors in Hong Kong who already applied to take part in the IPO will receive refunds, it added.

 

What is SenseTime? The company was founded in 2014 in Hong Kong. It generates hundreds of millions of dollars in annual revenue by deploying a portfolio of tech that helps power smart city systems and driverless vehicles. It's best known for its facial recognition software.

 

As of last week, SenseTime was planning to price shares at roughly 50 cents apiece. That would have put its valuation at roughly $17 billion. SenseTime said that it still "remains committed to completing the global offering and the listing soon."

UP NEXT

The US Producer Price Index, one measure of inflation, arrives on Tuesday — but investors are looking ahead to the Federal Reserve meeting Wednesday.

WHAT WE'RE READING AND WATCHING

▸ 6 people killed in Amazon warehouse after tornado (CNN Business)
▸ Modi's Twitter hacked with bitcoin announcement (CNN Business)

▸ Share buybacks hit a record after 2020 pullback (WSJ)
▸ Crypto and other exotic ETFs are coming in 2022 (CNN Business)
▸ Who's to blame for inflation? It's complicated (CNN Business)
▸ Experts count coffee trees as prices hit 10-year highs (Reuters)

FINAL WORD

The number of Americans getting fired has plunged

If you have a job today, chances have never been better that you can keep it as long as you want.

 

Firings and layoffs have plummeted as bosses try to avoid staff shortages that could hurt their businesses, my CNN Business colleague Chris Isidore reports.

 

"Employers are hanging onto workers for dear life," said Julia Pollack, chief economist for ZipRecruiter.

 

About 1.36 million people lost their jobs in October, barely more than the 1.35 million who were let go in May — a record low.

 

New weekly jobless claims recently dropped to their lowest level in five decades. That means it's very likely that November and December readings for terminations and layoffs will fall even further, Pollack said.

 

Breaking it down: Employers realize how hard it is to fill jobs and are willing to hang on to workers they might have let go in the past. There are three job openings right now for every two people looking for work, according to Labor Department data. That's by far the worst ratio for employers since the agency started tracking job openings in 2000.

 

"Companies are loath to make any cuts," said Andy Challenger, senior vice president at job placement firm Challenger, Gray and Christmas. "They're hanging on to everyone they can."