AUTO

Tesla Is No Longer Indie

Today, electric automaker Tesla will join the U.S. stock market’s equivalent of Top 40 radio: the S&P 500 index. The induction caps a sensational year for the company, whose shares have gained more than 700% as it smashed vehicle delivery records.

Now, we wouldn’t normally write about the reshuffling of the S&P 500 (typically a mundane affair), but...

Tesla is not an ordinary stock

For one, it’s absolutely humongous. With a market capitalization of $659 billion, Tesla will be the largest company to ever enter the S&P 500. And once it’s in, it’ll be the sixth-biggest company in the index—sitting behind only Apple, Microsoft, Amazon, Google parent Alphabet, and Facebook.

• It also dwarfs other car stocks. Tesla’s market value is 18x Ford’s and 10x GM’s. 

Second, the stock is extremely volatile, meaning it’s prone to dramatic daily swings based on company news that might not be a huge deal. Because of Tesla’s size, the value of those daily undulations can sometimes surpass the entire market capitalization of automakers such as BMW or Fiat Chrysler. 

Third, for many years Tesla wasn’t profitable. Only in the past several quarters did it actually make money, which is one of the qualifications for inclusion in the S&P.

What does it mean for the stock market? 

More than $4.5 trillion is managed by index funds that track the S&P 500. So those fund managers have gone on a Tesla stock buying binge for over a month in order to mirror the index’s new composition.

• Because of everything we mentioned above, Tesla’s inclusion should have a noticeable impact on the S&P. Goldman Sachs wrote that the index would be two percentage points higher this year had Tesla been a member.

Looking ahead: Could Tesla stock become...boring? Potentially. Finance professor Anna Pavlova told the NYT that over time, stocks included in the S&P tend to move more as a group and their volatility goes down. 

Then again, it's Elon Musk we're talking about. 

ECONOMY

Better Late Than Facing Your Constituents

At looong last, congressional leaders last night announced they'd agreed on a second round of stimulus to help the ailing U.S. economy. What’s in the ~$900 billion goodie bag: 

• Direct payments. Those who made under $75,000 in the 2019 tax year will receive checks for $600, plus $600 per child.  
• Added unemployment benefits of $300 per person 
• $300 billion for the Paycheck Protection Program, which supports small businesses 
• A $15 billion injection to help airlines rehire over 32,000 workers who were furloughed in October, plus more for airports and air travel-related industries. Amtrak will receive $1 billion, and public transit systems will nab $14 billion. 
• $25 billion for rental assistance, plus an extension to the federal eviction moratorium

Bottom line: The final product was both much less than Democrats wanted and much more than what Republicans wanted. Pressure to 1) keep the government from shutting down and 2) pass a bill before going home for the holiday break helped get the job done. 

GAMING

High-Pressure Timeline Cybersunk Cyberpunk 2077

When the video game Cyberpunk 2077 dropped on Dec. 10, the hype was like a Beyoncé x BTS sneaker drop. But since then, that anticipation has fizzled into angry customers, thousands of refund requests, and even a potential lawsuit. 

The backstory: First announced in 2012, Cyberpunk 2077 was the crown jewel of Polish game studio CD Projekt Red. It promised exceptional customization features and an expansive dystopian universe with none other than Keanu Reeves at the center. Eight million people preordered copies. 

But now the game reviews are in, and they are perhaps best expressed by the NYT: “virtually unplayable.” Players say the game is full of glitches, including tanks falling from the sky and characters losing their pants. 

• Both Sony and Microsoft are offering full refunds for copies purchased through their online stores. Sony has pulled it completely. 

What happened? According to employees, CD Projekt Red leadership demanded unrealistic development timelines along the path to release.  

Looking ahead...some investors may pursue a class-action lawsuit against the studio over “misrepresentation in order to receive financial benefits.”

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CYBERSECURITY

Maybe We Should Go Back to Typewriters and Telegrams

In the past few days, more details about the massive Russia-linked hack of IT management software company SolarWinds have tumbled out. 

Quick review: SolarWinds is a company that provides cybersecurity services. Sometime in the past few months-ish, hackers used its tentpole network management tool, Orion, to breach 18,000 customers including high-profile targets like Microsoft and the U.S. Departments of State, Treasury, Commerce, and Homeland Security. 

• Secretary of State Mike Pompeo explained, “we can say pretty clearly that it was the Russians.”

What we’ve learned: 

1. SolarWinds’s security had been shaky for a while. A researcher alerted the company last year that anyone could get into its update server with the password “solarwinds123” (though that’s not where researchers think the hackers sneaked in this time). 
2. The hack exposed the weaknesses of Einstein, a government program meant to prevent this kind of cyberattack. 

Bottom line: This isn’t a rupture that can be patched with some Neosporin and good vibes. The affected networks will remain compromised as investigators assess the fallout, which could take months or even longer. 

CALENDAR

The Holly, Jolly Week Ahead

Good luck trying to squeeze five days of work into three. 

Markets: The New York Stock Exchange and the Nasdaq will close at 1pm on Christmas Eve and shut down completely on Christmas Day.

Movies: Wonder Woman 1984 will debut on Christmas in both theaters and on HBO Max simultaneously. Warner Bros. is employing this bold strategy for its entire 2021 slate of movies.

Economy: Data on home sales for November (new and existing) will show us whether the housing market stayed red hot through the fall. 

The Brew’s schedule: We’ll be in your inbox every day this week except Christmas. And starting on Saturday we’ll begin a weeklong series recapping this crazy year—well, at least we’ll try to. 

Everything else:

• The NBA regular season begins tomorrow. Teams will play 72 games instead of the traditional 82. 
• Festivus is on Wednesday—hope you don’t have too many grievances with us.

WHAT ELSE IS BREWING

• The UK announced new restrictions for London and large parts of southeast England to curb a new strain of the virus. Several European countries banned flights from the UK.
• Apple temporarily closed all its retail stores in California and some in the UK due to the public health crisis.
• SoftBank is expected to file for a SPAC today, per Axios.
• Lockheed Martin is buying U.S. rocket engine manufacturer Aerojet Rocketdyne for $4.4 billion.
• YouTube star MrBeast launched 300 burger joints across the country, and the MrBeast Burger app jumped to No. 1 on the App Store. 
• Long read: the journalist and the pharma bro.

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Useful lists: 2020’s top gadgets and former President Obama’s top songs of the year.

Dive back into the week.

• Shallow dive: Blob opera
• Medium dive: Our gift guide (in case you’re scrambling)
• Deep dive: 21+ mental health resources and tools
• Cannonball: A side-by-side comparison of Moderna’s and Pfizer’s vaccines.

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GAMES

Multiple Choice

Which of the following did Tesla CEO Elon Musk not tweet in December?

1. “Bitcoin is my safe word” 
2. “Should I run for president in 2024?” 
3. “100”
4. “Science is discovering the essential truths about what exists in the Universe, engineering is about creating things that never existed”

ANSWER

Musk did not mention a White House run.

** A Note From Fidelity

Before investing in any mutual fund, consider the investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. 

Investing involves risk, including risk of loss. 

Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2020 FMR LLC. All rights reserved.