Daily Comment (May 14, 2021)

by Bill O’Grady, Thomas Wash, and Patrick Fearon-Hernandez, CFA

[Posted: 9:30 AM EDT] | PDF

Good morning, all! U.S. equities are expected to open higher this morning following reports that the Fed will likely not be withdrawing monetary support anytime soon despite the Consumer Price Index rising faster than expected in April. Today’s report starts off with a brief update on the Colonial Pipeline cyberattack. International news follows, with details about elections in Northern Ireland and Venezuela, a new conflict between Armenia and Azerbaijan, and escalation in the Israel-Palestine conflict. Economics and policy news are up next, including the debt ceiling talks, a possible end to the gasoline shortage, and the impact the semiconductor shortage will have on the auto industry. China news follows, and we close with our pandemic coverage.

Colonial Pipeline update: It was revealed on Thursday that Colonial Pipeline Company paid nearly $5 million to hackers last week to regain access to its computer network. The ransom was paid in “difficult-to-trace cryptocurrency” in exchange for a decrypting tool to help the company restore access to its computer system. So far, it isn’t clear who is responsible for the attack but President Biden has stated there is a “strong reason” to believe the attack was based in Russia, although he does not suspect that the Russian government was involved. The cyberattack on the pipeline exposes the vulnerabilities in U.S. infrastructure to attacks by opportunistic hackers and U.S. enemies. In addition, the ransom payment highlights the growing importance of semi-anonymous cryptocurrencies in facilitating criminal activity.

International news: Northern Ireland chooses a new leader, Olympic athletes are finding it difficult to find accommodations in Japan, and violence in the Gaza Strip.

 Economics and policy: Colonial Pipeline is fully operational, Senate Democrats are considering alternatives to raising corporate and wealth taxes, and the semiconductor shortage is expected to have a more severe impact on the auto industry in the second quarter.

China:  Defaults for Chinese companies are rising, and China will start taxing dirty fuel.

COVID-19:  The number of reported cases is 161,206,768 with 3,345,317 fatalities.  In the U.S., there are 32,852,998 confirmed cases with 584,487 deaths.  For illustration purposes, the FT has created an interactive chart that allows one to compare cases across nations using similar scaling metrics.  The FT has also issued an economic tracker that looks across countries with high-frequency data on various factors.  The CDC reports that 337,089,765 doses of the vaccine have been distributed with 264,680,844 doses injected.  The number receiving at least one dose is 153,986,312, while the number of second doses, which would grant the highest level of immunity, is 117,647,439.  The FT has a page on global vaccine distribution.  The weekly Axios map shows rising cases in about half the country.

Extending the time between Pfizer vaccines from three to 12 weeks may boost the antibody response, according to a study released by Birmingham University. The study suggests that a longer interval between shots could reduce the need for a subsequent booster for the elderly.

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