CNN Business/Julia Horowitz and Charles Riley
It will take months for vaccines to help the economy
Here’s some sobering news: The International Energy Agency has once again downgraded its forecast for 2021, saying that it will take months for coronavirus vaccines to start reversing the damage caused by the pandemic.
The agency on Tuesday knocked 170,000 barrels per day off its demand forecast for next year because of weaker than expected purchases of jet fuel and kerosene.
“The understandable euphoria around the start of vaccination programmes partly explains higher prices but it will be several months before we reach a critical mass of vaccinated, economically active people and thus see an impact on oil demand,” the IEA said in its monthly report.
“In the meantime, the end of year holiday season will soon be upon us with the risk of another surge in Covid-19 cases and the possibility of yet more confinement measures,” it added.
Expectations for oil demand are important because they tell a story about the broader economy. If planes are grounded and people are staying home, they consume less energy. The IEA, which monitors energy market trends for the world’s richest countries, is trying to answer the same basic question as investors: How quickly will vaccines help?
The latest: The sight of health care workers in the United States receiving the vaccination on Monday was a genuine moment for celebration. At the same time, the virus is surging across key economies and forcing politicians to impose new lockdowns that could send their countries back into recession.
Goldman Sachs CEO expresses concern about market euphoria driven by small investors buying IPOs
Goldman Sachs Chairman and CEO David Solomon told CNBC on Tuesday that he’s concerned about the intense demand from retail investors in recent initial public offerings.
“I do think we’re in a moment in time where there’s a lot of euphoria. I personally am concerned about that,” Solomon said on “Squawk Box.” “I don’t think in the long run that’s healthy. I think it will rebalance over time, as it always does.”
Solomon’s comment comes after the market debuts last week of DoorDash and Airbnb, both of which saw major spikes in their share prices after they began trading.
DoorDash closed its first trading day Wednesday higher by more than 85%. Goldman Sachs and JPMorgan were the lead underwriters for the food delivery app’s IPO. Airbnb soared more than 112% the following day. Morgan Stanley and Goldman Sachs were lead underwriters for the home-rental platform’s offering.
“I think a bunch of these are great business, but obviously the market at the moment is pricing in perfection execution and enormous growth for a very long period of time,” Solomon said.
Solomon isn’t the only one to express concern about the first-day price action for newly public companies. On Friday, CNBC’s Jim Cramer criticized investment banks for not appropriately factoring in the “new cohort” of younger investors as they priced IPOs. “I don’t want to say that the market is broken, but the process of how we’re doing these deals is definitely broken,” the “Mad Money” host said.
Marketwatch/Myra P. Saefong and Mark DeCambre
Gold climbs to highest finish in a week on hope for further U.S. coronavirus relief
Gold futures climbed on Tuesday to finish at their highest in a week, rebounding from a two week low a day earlier, as prospects for another coronavirus fiscal package gained more traction in Washington before the end of the year.
The move for the metal also comes ahead of Wednesday’ monetary policy announcement from the Federal Reserve.
“Whether it’s all upside from here or not may well depend on whether the Fed can deliver tomorrow, with the central bank doing so at a time when Congress has not passed any relief of its own,” said Craig Erlam senior market analyst at Oanda, in a market update. “Bold measures may be necessary in case lawmakers on Capitol Hill fail to deliver, which could be very good for gold prices.”
February gold GCG21, 0.29% rose $23.20, or 1.3%, to settle at $1,855.30 an ounce, the highest finish for a most-active contract since Dec. 8, FactSet data show. Prices closed 0.6% lower on Monday to hit the lowest settlement since Dec. 2.
Meanwhile, silver for March delivery SIH21 added 60 cents, or 2.5%, to $24.644 an ounce, after a 0.2% loss in the previous session.
Investors were focused on a bipartisan group effort by members of House and Senate lawmakers, who on Monday proposed a two-part package that would separate the most contentious issues holding up approval from a $748 billion package that includes widely supported measures, including extended unemployment benefits and aid to business. Thornier issues, including liability protections for businesses and aid to state, local and tribal governments were put into a proposed $160 billion package.
‘It’s an economic war’— Warren Buffett urges Congress to extend relief for small businesses
Berkshire Hathaway Chairman Warren Buffett urged Congress on Tuesday to extend aid to small businesses as they continue to struggle through economic shutdowns used to fight the coronavirus pandemic.
“It’s an economic war,” Buffett told CNBC’s Becky Quick on “Squawk Box” in a telephone interview, speaking alongside Goldman Sachs CEO David Solomon about helping small businesses.
Specifically, Buffett asked lawmakers to extend the Paycheck Protection Program.
“I think the country owes it to the millions of small-business people … just renew the PPP and get us to the end of the tunnel,” Buffett said. “When we went into World War II, a lot of industries were shut down; everything went to the defense production. Well, we’ve shut down a lot of people in this particular induced recession and others are prospering, and I think the country owes it to the really millions of small business people.”
The window to apply for PPP loans expired earlier this year even with funds remaining in the program. However, Congress has been in a stalemate for months in its negotiations for new government aid, putting pressure on businesses, particularly the smaller ones.
Late on Monday, a bipartisan group of lawmakers presented a $908 billion fiscal stimulus package. The proposal includes about $300 billion to support small businesses, including restaurants and entertainment venues.
Small businesses, especially restaurants, have struggled to stay afloat during the pandemic as social distancing restrictions force them to limit capacity. Some businesses have been forced to shut down temporarily — and permanently, in some cases — because of these limitations and a lack of stimulus.
Without additional aid for small businesses, Congress is “in the process of dashing the dreams of tens of thousands,” Buffett said. “Congress should act.”