Finance

Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York, December 17, 2021.
Andrew Kelly | Reuters

Stock futures climbed in overnight trading Monday following a broad sell-off amid fears about the fast-spreading Covid omicron variant.
Futures on the Dow Jones Industrial Average gained 140 points, S&P 500 futures rose 0.4% and Nasdaq 100 futures added 0.6%.

Nike shares jumped about 3% in extended trading after the sneaker maker reported quarterly earnings and sales that exceeded analysts’ expectations, despite ongoing supply chain pressures.
The overnight action came after a losing day on Wall Street with low trading volume ahead of the holidays. The blue-chip Dow dropped more than 400 points for its third straight declining session. The S&P 500 and the Nasdaq Composite both declined more than 1% Monday, and the S&P’s three-day drop of 3% was its worst such showing since September.
The omicron surge has kept investors on edge with the variant now found in at least 43 U.S. states and 90 countries. Officials with the World Health Organization said omicron is more contagious than any previous variant of Covid-19. It accounted for 73% of new infections in the U.S. last week, federal health officials said Monday.
Monday’s stock sell-off erased the S&P 500’s earlier gains in December, to flatline for the month; Dow is up about 1.3%, while the Nasdaq is down nearly 3.6% and is on pace to snap a two-month winning streak.
“As we head into the shortened holiday week amid surging omicron cases, continued supply chain pressures and the failure of the Build Back Better plan, increased volatility and thinner trading volumes could cause the market to overreact, which could be a buying opportunity in the run-up to Christmas,” said Mark Hackett, Nationwide’s chief of investment research.
Investors also assessed the prospect for President Joe Biden’s economic agenda. The Senate will vote on Biden’s sweeping social safety net and climate policy bill in January, despite Democratic Sen. Joe Manchin’s opposition to it. It is unclear if Democrats will try to pass a smaller bill that includes only parts of the full package.

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The Carnival Cruise Ship ‘Carnival Vista’ heads out to sea in the Miami harbor entrance known as Government Cut in Miami, Florida June 2, 2018.
RHONA WISE | AFP | Getty Images

Check out the companies making headlines in midday trading.
Carnival — Shares rose 3.4% despite Covid concerns as the company announced it expects to post a profit in the second quarter of 2022. Carnival said advanced bookings for the second half of 2022 and 2023 are at high levels and at high prices relative to 2019.

Devon, Diamondback, Exxon Mobil — Energy stocks fell broadly on Monday as concerns about the omicron variant dragged down oil prices. Devon Energy fell 2.4%. Diamondback and Exxon dropped 3.2% and 1.5%, respectively.
Oracle — Shares slid 5.2% following the announcement the enterprise software maker will acquire medical records technology provider Cerner in an all-cash deal of $95 per share, or about $28.3 billion in equity value. Cerner shares, which jumped nearly 13% on Friday following initial reports of the deal, inched less than 1% higher on Monday. The acquisition is the largest ever for Oracle.
Canopy Growth — Shares of the cannabis producer dropped 8.8% after Piper Sandler downgraded the stock to underweight from neutral, citing sales trends under pressure. Last week, Wells Fargo initiated coverage of the stock with an underweight rating, calling the company overvalued.
Sunrun — Shares of the residential solar company dipped 8.2% amid uncertainty about the Build Back Better bill, and after KeyBanc cut the stock to a sector weight rating. The firm’s call centers on the proposed decision from California regulators to slash solar incentives that have been instrumental to the industry’s growth. Given Sunrun’s exposure to the California market, KeyBanc said the valuation implications are “too wide for comfort.”
AT&T — Shares of the telecom giant rose 1.7% amid a broad market sell-off after an upgrade from Barclays. The Wall Street firm hiked its rating on AT&T to overweight from neutral, saying the telecom stock deserved to close the valuation gap on some of its rivals.

Verso — Shares of Verso surged nearly 35% after the Ohio-based maker of specialty, graphic and packaging paper announced it will be acquired by Swedish paper producer BillerudKorsnas in a deal worth $27 per share in cash.
— CNBC’s Yun Li, Tanaya Macheel, Jesse Pound and Pippa Stevens contributed reporting

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The Build Back Better Act, Democrats’ package of climate and social investments, would have ended the “backdoor” and “mega backdoor” Roth strategies starting in 2022.
These tax rules allow wealthy investors to skirt income and savings limits in Roth 401(k) plans and IRAs. Roth accounts are attractive because future investment growth and withdrawals are tax-free after age 59½.
Sen. Joe Manchin, D-W.Va., said he won’t vote for the legislation in its current form. The delay means the strategy will persist at least into next year.

Sen. Joe Manchin, D-W.Va., walks outside of the Senate Chamber on Capitol Hill on Dec. 9, 2021.
Kent Nishimura | Los Angeles Times | Getty Images

The “backdoor Roth” tax strategy used largely by wealthy retirement savers and slated to be killed next year has survived — for now.
The loophole lets rich 401(k) and individual retirement account owners save in a Roth-style account, shielding future investment growth from tax. Roth accounts are generally off-limits to such investors due to an income cap.

Democrats aimed to end the rules starting in 2022 as part of the Build Back Better Act, a roughly $1.75 trillion package of climate and social investments coupled with changes to the tax code aimed at rich Americans.
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House Democrats passed the legislation in November; Senate Democrats hoped to pass it by year’s end. But Sen. Joe Manchin, D-W. Va., scuttled those plans on Sunday, announcing that he won’t back the measure in its current form. Manchin’s vote is crucial to pass the bill due to unified Republican opposition.
The delay means the prohibition on the backdoor Roth strategy won’t kick in at the beginning of 2022 as planned — meaning taxpayers may not have to scramble to take advantage of the rules before they’re outlawed.
If Democrats pass the legislation early next year, it’s likely (though not certain) that Congress would postpone the effective date to 2023, experts said.

“I don’t think you’re going to have an effective date in the middle of the year,” said Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. “That’s too cumbersome.”
“You might have thought you should be racing to get a backdoor Roth in place,” Rosenthal said. “But you don’t need to race.”
The backdoor Roth rules were among the few targeting wealthy retirement savers that would have begun next year. Others, like one creating new distribution rules for retirement savings exceeding $10 million, would have started later in the decade.
The prohibition on backdoor Roth contributions would affect all taxpayers, unlike most other aspects of Democrats’ tax proposals, which impact households with $400,000 or more of income.

Backdoor Roth

imagedepotpro | E+ | Getty Images

Roth accounts are especially attractive to wealthy investors. Investment growth and future withdrawals are tax-free after age 59½, and there aren’t required withdrawals at age 72 as with traditional pre-tax accounts.
However, there are income limits to contribute to Roth IRAs. In 2021, single taxpayers can’t save in one if their income exceeds $140,000. (The cap is $208,000 for married couples filing a joint tax return.)
High-income individuals can skirt the income limits via a “backdoor” contribution. Investors who save in a traditional, pre-tax IRA can convert that money to Roth; they pay tax on the conversion, but shield earnings from future tax.
(There isn’t an income limit for contributions to pre-tax IRAs. However, wealthy taxpayers likely can’t deduct that contribution from their taxes, as lower earners can.)

Mega backdoor Roth

Workplace retirement plans (like a 401(k) plan) don’t prohibit wealthy investors from Roth savings. But another loophole — the “mega backdoor Roth” strategy — lets them invest large sums of money well above the typical annual contribution limits in 401(k)s and IRAs.
This process involves making an after-tax contribution to a 401(k) and converting that savings to a Roth-style 401(k) or IRA account.
IRA and 401(k) rules disallow more than $6,000 and $19,500 of annual contributions in 2021, respectively. (Those limits are higher — $7,000 and $26,000, respectively — for those age 50 and older.)

However, some employers permit savers to invest tens of thousands of additional funds via after-tax contributions courtesy of other tax rules.
In 2021, employees could save an additional $38,500 in a 401(k) plan via after-tax contributions, which may then be converted to Roth funds. (It’s $45,000 for those age 50 and older.)
Most employers don’t allow for such contributions, though. Roughly 20% of 401(k) plans did so in 2020, according to the Plan Sponsor Council of America. The share is nearly double that when examining just the largest companies, with over 5,000 employees participating in the plan.

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Check out the companies making headlines before the bell:
Moderna (MRNA) – Moderna shares jumped 7.2% in the premarket after the drugmaker said a booster dose of its Covid-19 vaccine increased protection against the omicron variant 37-fold. Amid the spread of omicron, other vaccine makers are also seeing gains with Pfizer (PFE) up 1.4%, BioNTech (BNTX) adding 3.1% and Novavax (NVAX) surging 10.3%.

Cruise line operators – The surge in omicron cases is weighing on cruise stocks, with more pressure after a Royal Caribbean (RCL) ship docked in Miami with 48 cases of Covid. Royal Caribbean dropped 2.9% in premarket trading, with Carnival (CCL) down 2.9% and Norwegian Cruise Line (NCLH) falling 3.6%.
Airline stocks – Omicron concerns are also weighing on the airline stocks, with United Airlines (UAL) falling 2.9%, American Airlines (AAL) sliding 2.8%, Delta Air Lines (DAL) falling 2.8%, Southwest (LUV) down 2.3% and JetBlue (JBLU) losing 2.2%.
Biogen (BIIB) – Biogen rallied 3.6% in the premarket after announcing it would cut the price of its Alzheimer’s drug Adulhelm by 50% in order to improve access to the treatment.
Cerner (CERN) – The medical records technology provider will announce a deal today to be acquired by Oracle (ORCL) in an all-cash transaction “in the mid-$90s” per share, according to CNBC’s David Faber. Cerner shares jumped 13% Friday after the Wall Street Journal reported the two sides were close to an agreement. Cerner was up another 1.7% in premarket trading.
Canopy Growth (CGC) – The cannabis producer slid 3.4% in premarket action after Piper Sandler downgraded the stock to “underweight” from “neutral”, citing sales trends that are under pressure across Canopy’s businesses.

Sunrun (RUN) – The solar company’s stock tumbled 9.4% in the premarket following a KeyBanc downgrade to “sector weight” from “overweight.” That follows proposals in California that would reduce “net metering” benefits for solar power customers and reduce incentives to buy such systems.
AT&T (T) – Barclays upgraded AT&T to “overweight” from “neutral,” based on a better broadband outlook for telecom companies than for cable providers. AT&T was up 1.6% in the premarket.
Verso (VRS) – The Ohio-based maker of specialty, graphic and packaging paper will be acquired by Swedish paper producer BillerudKorsnäs in a deal worth $27 per share in cash. Verso surged 32.2% in premarket trading.
Axon Enterprise (AXON) – The maker of stun guns and body cameras saw its stock jump 7.3% in the premarket, following a number of stock purchases by company insiders.
Novo Nordisk (NVO) – The Denmark-based drugmaker saw its shares slide 4.2% in premarket trading after saying supply issues in the U.S. market would leave it unable to meet demand for its weight-loss drug Wegovy.

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Ubisoft debuted a platform called Quartz which lets players own in-game cosmetic items in the form of NFTs.
The move was met with widespread anger from gamers, who slammed Quartz as a cash grab.
The debacle highlights division in the gaming world over non-fungible tokens.

A gamer uses a PS4 controller as he plays the new Ubisoft video game Watch Dogs Legion on October 28, 2020.
Kenzo Tribouillard | AFP via Getty Images

Gamers are a notoriously skeptical crowd.
In 2017, for example, Electronic Arts faced huge backlash over a decision to let players pay to unlock certain characters in its “Star Wars Battlefront II” game. Traditionally, players are required to toil for several hours to access such content.

The outcry was so intense that EA eventually walked back its plans, which critics described as a “pay-to-win” model.
So when Ubisoft, the French video game publisher, dropped a video this month showing off its foray into non-fungible tokens, it’s fair to say the reaction was a little predictable.
The company debuted a platform called Quartz which lets players own in-game items such as helmets in the form of NFTs, digital assets designed to track ownership of unique items on the blockchain. The feature was added to Ubisoft’s “Ghost Recon Breakpoint” game.
The move was met with widespread anger from gamers, who slammed Quartz as a cash grab. Some commenters also raised concerns with the environmental impact of cryptocurrencies.
OperatorDrewski, a YouTube channel with over 1 million subscribers, commented: “To me, this is a blatant signal that you’re just milking the Ghost Recon franchise for literally every cent while putting in minimal effort into the actual game itself.”

Although YouTube has recently hidden dislikes on its videos, users downloading software to get around the change were able to find Ubisoft’s trailer for Quartz has been overwhelmingly disliked, with only 1,600 likes and more than 40,000 dislikes.
An Ubisoft spokesperson told CNBC the NFTs available on Quartz are currently free, and that the company is not taking a cut of any secondary market sales.
“Ubisoft Quartz is an experiment,” the spokesperson said.

“Digits,” Ubisoft’s NFTs, are “cosmetic, playable in-game items that have no impact on gameplay,” the spokesperson added. “In that sense, they are completely optional.”
Addressing environmental concerns, Ubisoft said it is relying on a less energy-intensive cryptocurrency network called Tezos.
Ubisoft isn’t the only gaming company jumping on the NFT bandwagon.
EA CEO Andrew Wilson says the phenomenon is “an important part of the future of our industry.” Ukrainian developer GSC Game World wanted to integrate NFTs into its upcoming title “STALKER 2,” but has now scrapped those plans following pushback from fans.

The industry is divided

The Ubisoft debacle highlights division in the gaming world over non-fungible tokens. Last month, for instance, Microsoft Xbox chief Phil Spencer warned some efforts to bring NFTs to video games feel “exploitive.”
“There are definitely some aspects of [NFTs] that feel a little exploitive right now with some of these games,” Geoff Keighley, host of The Game Awards, told CNBC on a call ahead of the video game industry’s annual awards ceremony, which recently took place.
While Keighley says he likes the idea of game creators making revenue through royalties on NFT sales, “the thing I hope doesn’t happen is that games become a platform just for commerce.”
“To me, what I love about games is the worlds, stories and experiences inside them,” he added. “What I don’t want is for things to feel transactional. It’s a bit like microtransactions, when that was the big drama for gamers.”
Several cryptocurrency start-ups are betting NFTs will play a role in the world of video games. Axie Infinity, for example, is a blockchain-based game that lets users collect and breed creatures called “Axies” — kind of like “Pokémon” but with NFTs.

Why blockchain?

Robby Yung, CEO of Animoca Brands, an investor in Axie Infinity creator Sky Mavis, said the business model in gaming has changed over the years.
“Gaming’s historically more premium, meaning you bought cartridges or DVDs or, later, downloadables. You paid upfront prices for games,” he said.
“That has transitioned largely to an economic model around free-to-play. The idea is that it’s free upfront but you have virtual assets inside the game that you acquire to enhance and improve your gameplay.”
Yung says the NFT approach is innovative as it means gamers can now take ownership of digital properties they buy within a game. Players can then take those assets outside of the game and exchange it elsewhere. He said the phenomenon reminds him of his childhood.
“If you bought cartridges for your games console and you wanted the new one but couldn’t afford it, you would sell some of your old games at a second-hand shop,” Yung said.
“These days with digital content we’ve not had that second-hand market. And so now blockchain is enabling that to happen again, where you can dispose of content that you are no longer interested in or are not playing with anymore.”
Still, despite excitement from some over NFTs and their potential use in gaming, it’s clear that not everyone is on board.
While NFTs may one day have a place in video games, right now they’re still in an “embryonic stage,” according to George Jijiashvili, principal analyst at Omdia.
“Rushing into offering NFTs without fully evaluating it could lead to serious reputational damage,” Jijiashvili said.

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The stock market’s volatility jump may be in its early stages.
Despite a bullish 2022 outlook, Wilmington Trust’s Meghan Shue expects the wild swings to ramp up as investors digest a less accommodative Federal Reserve and assess new risks tied to the Covid omicron variant.

“While we’re overweight to equities, we’re holding elevated cash because we think there are probably going to be more opportunities presenting themselves,” the firm’s head of investment strategy told CNBC’s “Trading Nation” on Friday. “Cash could be your friend over the coming months.”
The major indexes are on a losing streak. The Dow dropped 532 points on Friday and posted its worst day of the month. It fell 1.9% last week while the S&P 500 lost 1%.
Meanwhile, the tech-heavy Nasdaq fell 3% and is now off more than 6% from its 52-week high. The Nasdaq traditionally has a tougher time weathering a rising rate and slowing growth environment.
“When you combine that with elevated valuations and then continued uncertainty around omicron, you just get a recipe for continued volatility and a possible correction,” said Shue, a CNBC contributor.
Her base case calls for stocks to correct as much as 10% over the next two to three months. But she refers to it as a buying opportunity.

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“Cyclicals and value still look very attractive,” she said. “Small caps are also very beaten down. And, if we do move beyond omicron, we could see a rally there.”
Overall, Shue, who oversees $152 billion in assets, is positive on the U.S. and international markets. According to her firm’s bullish 2022 forecast, inflation will normalize, supply chain pressures will ease and labor market participation will pick up.
“We’re going to be moving back into a reacceleration phase of the economic cycle,” she said.
Last month, Shue told “Trading Nation” her firm had its biggest overweight in stocks ever.
“Stocks [are] still expected to be one of the strongest performing asset classes,” Shue said. More

Traders work on the floor of the New York Stock Exchange (NYSE) on December 08, 2021 in New York City.
Spencer Platt | Getty Images

Stock futures fluctuated in overnight trading Sunday following a losing week as investors continued to grapple with the resurgence of Covid cases and an upcoming shift in the Federal Reserve’s easy monetary policy.
Futures on the Dow Jones Industrial Average dipped 130 points. S&P 500 futures dipped 0.3% and Nasdaq 100 futures were flat.

The major averages are coming off a negative week, with the S&P 500 declining 1.9%. The tech-heavy Nasdaq Composite dropped nearly 3% last week as investors dumped high-flying growth stocks on the prospect of higher interest rates, while the Dow slipped 1.7%.
Some investors are hoping for a Santa Claus rally into the year-end, which calls for positive market performance in the last five trading days of the year and first two trading days of January, according to Stock Trader’s Almanac.
“On the one hand, corners of the market are oversold,” Adma Crisafulli, founder of Vital Knowledge, said in a note. However, “the aggressive ‘buy the dip’ mentality, which proved so profitable for the last 1.5+ years, especially in the high-multiple corners of the market, was underwritten by a tidal wave of stimulus that is now receding.”
Last week, the Fed announced a more aggressive plan to wind down its asset purchases, and said that it will potentially raise interest rates three times next year.

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Despite the losses last week, the S&P 500 is still up 1.2% this month, bringing its 2021 gains to 23%. The tech-heavy Nasdaq is down 2.4% in December so far, however, as technology names sold off. The blue-chip Dow has gained 2.6% this month.

The omicron virus is raging across the world as the winter holiday season approaches. The strain has been found through testing in 43 out of 50 U.S. states and around 90 countries, and the number of cases is doubling in 1.5 to 3 days in areas with community transmission, the World Health Organization (WHO) said on Saturday.
On the political front, Sen. Joe Manchin, a conservative Democrat from West Virginia, said Sunday he won’t support the Biden administration’s “Build Back Better” plan. Manchin’s decision will likely kill the $1.75 trillion social spending and climate policy bill as it stands now.

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Chinese electric car start-up Nio’s second electric sedan, the ET5, is set to begin deliveries in September 2022, CEO William Li said Saturday at the company’s annual “Nio Day” event.
Li also announced custom augmented reality glasses for the car that are made by Nreal, a Chinese start-up backed by Nio’s investing arm.
On the global front, Nio plans to enter Germany and three other countries in Europe next year, Li said.

Nio’s et5 electric sedan is set to begin deliveries in Sept. 2022.

BEIJING — Chinese electric car company Nio revealed Saturday a new sedan and custom augmented reality (AR) glasses that reduce the need for in-car screens.
Augmented reality is a technology for imposing digital images over the real, physical world. For cars, the tech can let drivers keep their eyes on the road without having to glance down at a dashboard.

Nio said it partnered with Chinese augmented reality start-up Nreal for the AR glasses that go with its new sedan, the ET5.
The electric car is set to begin deliveries in September 2022, with pre-subsidy prices starting at 328,000 yuan ($51,250) for models that come with a battery. The AR glasses are not included and must be bought separately, according to the company.

Nio CEO William Li announces on Dec. 18, 2021, custom AR glasses made with Chinese start-up Nreal.
Evelyn Cheng | CNBC

The ET5 is Nio’s second sedan to come to market. The company’s first sedan, the ET7, was revealed in January at a higher pre-subsidy starting price of 448,000 yuan, but hasn’t begun deliveries yet.
Deliveries of the ET7 are set to begin on March 28, 2022, William Li, Nio’s founder, chairman and CEO, said Saturday at the company’s annual “Nio Day” event.
Tesla, BYD, Xpeng and other electric car companies in China already sell sedans which have proved popular with locals.

Nio said its deliveries bounced back in November from a low of 3,667 cars in October, bringing the total for the first 11 months of the year to 80,940 vehicles. Its ES6 and EC6 SUVs were among the top 10 new energy SUVs sold in China this year through November, according to the China Passenger Car Association.

Nio plans to enter Germany

Next year, the electric car company plans to bring its products and services to Germany, the Netherlands, Sweden and Denmark, Li said. By 2025, the company aims to reach users in more than 25 countries and regions, he said.
Nio opened a flagship store in Oslo, Norway, this year and began delivering vehicles to the electric car-friendly country, where Chinese rivals Xpeng and BYD have also shipped cars.
In early November, Li had said on an earnings call the company planned to enter five other countries in Europe next year in addition to Norway.

Nio’s ET5 electric sedan offers six options for interior colors, including the seatbelt.
Evelyn Cheng | CNBC

AR/VR investments

Nio’s investment arm Nio Capital is an investor in Nreal. The custom glasses for the ET5 sedan can project an effective screen size of 201 inches at 6 meters, according to a release.
Nio also announced Saturday that it has jointly developed virtual reality glasses with Nolo, another Chinese start-up backed by Nio Capital. Pricing and other details about availability weren’t disclosed.

Read more about electric vehicles from CNBC Pro

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