Wall Street Breakfast: What Moved Markets

Mutant strain

Some sentiment was dented early in the week after a new COVID-19 mutation emerged in the U.K., which resulted in a tough lockdown in London and southeast England, and led a number of countries to block travel from Britain. The mutant variant, dubbed B117, could be up to 70% more transmissible than COVID-19, and has already been detected in the Netherlands, Denmark and Australia. Cause of concern: The number of mutations carried by B117, as well as the speed at which it is supplanting other strains of the virus. Some reassurance: So far there is no evidence that the mutations are affecting the course of the illness in infected patients or the effectiveness of COVID-19 vaccines in development.

Opioids lawsuit

On Tuesday, the U.S. Department of Justice filed a civil lawsuit against Walmart (NYSE:WMT) for its alleged role in the opioid epidemic. The retailer was accused of unlawfully filled prescriptions for painkillers that it should have known did not serve a legitimate medical purpose, as well as pressuring its staff to dispense as many drugs as possible. The DOJ wants Walmart to pay billions of dollars in damages, though the company said the case is “riddled with factual inaccuracies and cherry-picked documents taken out of context.” It added that “blaming pharmacists for not second-guessing the very doctors DEA approved to prescribe opioids is a transparent attempt to shift blame.” (48 comments)

iCar

Apple’s (NASDAQ:AAPL) Project Titan is not only alive, but plans to produce an electric passenger vehicle with “breakthrough battery technology” and self-driving capabilities by 2024, according to an article published by Reuters. The news saw AAPL shares close in on all-time highs on Tuesday, before falling back, while shares of EV maker Tesla (NASDAQ:TSLA) initially spun lower on the report.Backdrop: Project Titan has been moving in fits and starts since 2014, when it began to design its own vehicle from scratch, but reverted back to a software push at one point and reassessed its goals. It remains unclear who would assemble a possible iCar, but sources have said they expect Apple to rely on a manufacturing partner. (530 comments)

China goes after its biggest tech company

The country’s top market regulator launched an investigation into Alibaba (NYSE:BABA), just a month after stopping its sister company Ant Group from going public, in what would have been the world’s largest IPO. The State Administration for Market Regulation is looking into suspected anti-monopolistic behavior by Alibaba, like forcing merchants to sell exclusively on its platform, triggering shares of the e-commerce giant to slump as much as 10% on Thursday. Following a broad crackdown on Big Tech across the globe, Beijing has in recent months increased its scrutiny of its local tech groups, but this was the most aggressive action of regulators thus far. Recent rumors also suggest Jack Ma offered to give parts of Ant Group to the Chinese government.

Crypto crackdown

Regulators appear to be getting serious about crypto as the space turns into one of the investing themes of 2020. A day after the Treasury proposed new rules on crypto movement, the SEC brought a lawsuit against Ripple Inc. by alleging it violated investor protection laws by selling unregistered securities when it sold (XRP-USD) to investors. The move saw Ripple lose nearly half of its value over the course of the week, while Ripple CEO Brad Garlinghouse criticized the decision. “XRP is a currency, and does not have to be registered as an investment contract. In fact, the Justice Department and the Treasury’s FinCEN already determined that XRP is a virtual currency in 2015 and other G20 regulators have done the same. No other country has classified XRP as a security.” (19 comments)

Low-cost IPO alternative

The SEC approved a proposal allowing companies to raise new capital via direct listings, whereby a company floats its shares on a stock exchange, but doesn’t hire banks to underwrite the transaction like in an IPO. “This is a victory for the New York Stock Exchange (NYSE:ICE), which had been seeking to change its rulebook to make the new process available to companies going public,” NYSE President Stacey Cunningham said in a statement. Until now, companies have only been allowed to use direct listings to sell existing shares, limiting the process to a small number of cash-rich companies like Palantir (NYSE:PLTR), which went public in September. “The massive pops during recent market debuts have proven the traditional IPO process has only gone downhill,” added Bill Gurley, general partner at venture capital firm Benchmark

Breaking ties with Republican-led Senate

Congressional Republicans are facing high-stakes decisions in the coming days over two major pieces of bipartisan legislation that were snubbed by the White House. President Trump vetoed the $740B annual defense policy bill, which did not include a provision to repeal Section 230 of the Communications Decency Act and would create a commission to study renaming military bases named for Confederate officials. A day earlier, he expressed discontent with a $892B coronavirus relief package due to the funding headed overseas and undersized direct payments. Trump has not vetoed the stimulus bill and could still sign it in the coming days. While both bills have veto-proof majorities, the response from GOP leaders could affect the outcome of the Jan. 5 Georgia runoff elections that will determine control of the Senate for the next two years. (308 comments)

Brexit relief

The U.K. and the European Union agreed to a post-Brexit trade deal to send the deal to U.K. Prime Minister Boris Johnson and EC President Ursula von der Leyen for final approval. The pound moved higher against the U.S. dollar in reaction and some U.K. stocks in the banking and retail sectors rallied. Britain says it wants to maintain close ties with the EU and its single market of 450M consumers. “We can now embark on a new, more hopeful, chapter in our history,” said U.K. Cabinet Secretary Michael Gove on the path ahead.

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