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Covid restrictions tighten across the U.S., Tesla soars on S&P inclusion, and a big day for retail. 

Shutting down

The news yesterday that the Moderna Inc. Covid-19 vaccine is 94.5% effective is a very welcome development. But with deployment still some time away, efforts by authorities remain focused on slowing the pandemic down which is running out of control across the U.S. California reinstituted bans on many indoor businesses, Michigan has ordered a three-week partial shutdown and states including Oregon, Washington and New Jersey tightened curbs. President-elect Joe Biden said containing the virus is key to the economic recovery.

Tesla, AirBnB

Tesla Inc. will become the largest-ever company added to the S&P 500 when it joins the index on Dec. 21. The company's shares jumped more than 12% in premarket trading in the wake of the news, adding more than $15 billion to Elon Musk's net worth. Airbnb Inc. filed its long-awaited initial public offering prospectus that outlined a plunge in revenue due to the pandemic, while painting an optimistic view of the future. The company plans to raise as much as $3 billion when it lists next month. 

Retailers 

Economists get a health check on the critical U.S. consumer today. At 8:30 a.m. retail sales data for October is released, with a 0.5% increase expected in the month after September's surprisingly strong number. Walmart Inc., Home Depot Inc. and Kohl's Corp. report results today, with strong results expected as customers did their holiday shopping early this year. However, with the pandemic resurgent, traditional retailers face a difficult few months ahead. 

Markets rise

There is little sign yet that today is the day investors will be able to break out their 'Dow 30,000' hats as the rally that has driven that gauge to record highs pauses. Overnight, the MSCI Asia Pacific Index added 0.2% while Japan's Topix index closed 0.2% higher. In Europe, the Stoxx 600 Index had slipped 0.2% by 5:50 a.m. with travel shares giving back some of yesterday's gains. S&P 500 futures pointed to a small drop at the open, the 10-year Treasury yield was at 0.895%, oil held over $41 a barrel and gold was broadly unchanged. 

Coming up... 

U.S. industrial and manufacturing production data is at 9:15 a.m. Fed Chair Jerome Powell speaks later, while four regional Fed presidents take part in a virtual conference on racism and the economy. The Senate will hold a procedural vote on Fed nominee Judy Shelton. September TIC flow data is released at 4:00 p.m. The OPEC+ joint ministerial monitoring committee meets, and Facebook Inc. and Twitter Inc. CEOs testify before the Senate. European Central Bank President Christine Lagarde and Indian Prime Minister Narendra Modi are among today's speakers at the Bloomberg New Economy Forum. 

What we've been reading

This is what's caught our eye over the last 24 hours.

And finally, here's what Joe's interested in this morning

Stocks have been propulsed higher over the last couple of weeks thanks to two big developments that have diminished investor anxiety. The election (more or less) went off without a hitch and two vaccine candidates have shown to be extremely promising. And yet despite all this, yields on U.S. Treasuries have only moved modestly higher. The 10-year is currently below 0.9%, which is not only lower than pre-crisis levels -- it was even briefly higher than that in June. So what gives?

What we're seeing is the Fed's new policy framework at work. What the Fed did this summer can be understood basically as setting the bar for future rate hikes higher than it did in the past. The central bank wants to see full employment, and to see inflation move higher on a sustained basis before it will consider raising rates. What this means in practice is that while good news on the vaccine and in financial markets may bring forward the date of the first rate hike, the effect is modest. Under previous regimes, one could have imagined the Fed quickly getting an itchy finger, and wanting to move sooner rather than later on the hikes. Under Jerome Powell, that possibility has been ruled out. The economy could be hot for several more quarters, but unless we got back to something resembling full employment with inflation firming up, the Fed won't go there. And as it is, inflation is still quite subdued, and we're along way from pre-crisis levels of employment.

Another way to think about it is like this: good news on the macro front should push rates higher. But under the current approach to monetary policy, a piece of good news that would have caused rates to surge in the past now only produces a modest bump.

Joe Weisenthal is an editor at Bloomberg.

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