Daily Market Report | 12/18/2023
US FINANCIAL MARKET
US Stocks Rally Plows Ahead While Bonds Falter: Markets Wrap – Bloomberg, 12/18/2023
- US stocks kicked off the week on positive note buoyed by a burst of deals, even as central bankers sought to sow doubts that aggressive interest-rate cuts will materialize early next year.
- Coming off a seven-week bull run, the S&P 500 rose 0.4% while the Nasdaq 100 climbed 0.4% after the tech-heavy benchmark closed at a record on Friday.
- More than $40 billion of mergers and acquisitions hit the wire on Monday after months of disappointing volumes.
- The dollar steadied while the rally in Treasuries took a breather as yields climbed across tenors.
- The yield on 10-year Treasuries advanced five basis points to 3.96%.
- Federal Reserve Bank of Chicago President Austan Goolsbee was the latest to join a chorus of officials tempering market optimism after he said markets were front-running rate cuts.
- European Central Bank Governing Council member Bostjan Vasle also took a cautious tone after New York Fed President John Williams last week said bets on a March reduction were premature, and ECB President Christine Lagarde said the bank had not discussed cuts at all.
- Whether or not the S&P 500 can extend its seven-week bull run may be determined by data this week on durable goods orders, personal consumption expenditures — the Fed’s preferred measure of inflation — and the final third quarter gross domestic product estimate.
- Traders will also be watching Japan with the nation’s central bank beginning a two-day policy meeting Monday.
- While speculation has grown the Bank of Japan will soon end the world’s last negative-rate regime, economists see April as the most likely timing for a change, with around 15% expecting Ueda to pull the plug on negative rates in January, according to a Bloomberg survey of more than 50 economists.
- A consortium backed by Clearlake Capital and Insight Partners has agreed to buy Alteryx in a deal valuing the software developer at $4.4 billion including debt.
- Nippon Steel agreed to buy United States Steel for $14.1 billion in cash, in a deal to end months of uncertainty about the future of the historic American metal producer.
- West Texas Intermediate crude rose 2.8% to $73.44 a barrel.
Apple to halt US sales of Series 9, Ultra 2 smartwatches on patent dispute – Reuters, 12/18/2023
- Apple said on Monday it would pause sales of its Series 9 and Ultra 2 smartwatches in the United States from this week, as it deals with a patent dispute over the technology that enables the blood oxygen feature on the devices.
- The move comes after an order in October from the U.S. International Trade Commission that could bar Apple from importing its Apple Watches after finding the devices violate medical technology company Masimo’s patent rights.
- The company said it would pause sales of the Watches from its website starting Dec. 21, and from Apple retail locations after Dec. 24.
- Both the Series 9 and the Ultra 2 would remain available for purchase outside of the United States and there would be no impact on units previously bought that include the blood oxygen feature.
- Apple believes the ITC’s finding was erroneous and should be reversed and intends to appeal the decision to the Federal Circuit.
- Masimo has accused Apple of hiring away its employees, stealing its pulse oximetry technology and incorporating it into the popular Apple Watch.
Adobe, Figma Scrap $20 Billion Merger Deal – Wall Street Journal, 12/18/2023
- Adobe has called off its planned $20 billion acquisition of the collaboration-software company Figma, weeks after a U.K. regulator warned that the deal would likely harm innovation.
- Adobe and Figma said Monday morning that they have mutually agreed to terminate the cash-and-stock transaction because they couldn’t see a clear path to receiving regulatory approval from the European Commission and the U.K. Competition and Markets Authority.
- The U.K. agency late last month said that, following a detailed investigation, it provisionally found the acquisition would eliminate competition between two main companies in product-design software, reduce innovation and remove Figma as a threat to Adobe’s flagship Photoshop and Illustrator products.
- The European Commission aired similar concerns in November and gave Adobe a chance to respond to its objections.
- The companies have signed a termination agreement that requires Adobe to pay Figma a $1 billion termination fee.
Nippon Steel to Acquire U.S. Steel for $14.1 Billion – Wall Street Journal, 12/18/2023
- U.S. Steel agreed to be acquired by Nippon Steel in a $14.1 billion deal that would combine two steel giants in America and Japan.
- The deal values the Pittsburgh-based U.S. Steel at $55 a share, a 40% premium to the company’s share price when the market closed on Friday.
- Shares of U.S. Steel surged 29% to $50.57 in premarket trading.
- The agreement ends a monthslong sales process for the 122-year-old company that was created by J.P. Morgan, Andrew Carnegie and others, and played an integral role in the country’s industrialization in the 20th century.
- Following the close of the transaction, U.S. Steel will retain its name, brand and headquarters in Pittsburgh.
- The move would make Nippon Steel one of the world’s largest steel producers.
- Cloud analytics company Alteryx on Monday said it agreed to be taken private by Clearlake Capital Group LP and Insight Partners for $48.25 a share.
- The deal values Alteryx at about $4.4 billion, or a 59% premium to the company’s unaffected closing stock price on Sept 5, the day prior to media reports about a potential deal.
- “We have long appreciated the company’s best-in-class technology that enables users to transform data into insights,” said Clearlake’s Behdad Eghbali, co-founder and managing partner; and partner Prashant Mehrotra.
- Southwest Airlines faces a civil penalty totaling $140 million after the U.S. Department of Transportation said the airline violated consumer protection laws during its holiday meltdown last year.
- The penalty, which the agency said is 30 times larger than any it has levied for consumer protection violations, includes a $35 million payment directly to the government.
- Southwest will receive credit for $33 million for the frequent flier points it gave to customers who were affected.
- And vouchers Southwest will have to issue to compensate travelers caught up in future travel disruptions account for the remainder of the penalty.
US ECONOMY & POLITICS
US Homebuilder Sentiment Rises for First Time in Five Months – Bloomberg, 12/18/2023
- US homebuilder sentiment improved in December for the first time in five months as falling mortgage rates led to a pickup in prospective-buyer traffic and sales expectations.
- The National Association of Home Builders/Wells Fargo gauge rose 3 points to 37, according to data out Monday.
- The figure matched the median forecast in a Bloomberg survey of economists.
- Despite the recent decline in financing costs, 60% of developers are still extending incentives to spur demand.
- Some 36% of builders reported cutting prices in December, matching the previous month as the highest share of the year.
- The report showed the gauge of prospective buyer traffic also climbed for the first time in five months, while a measure of expected sales reached a three-month high.
‘Powerful’ storm dumps heavy rain over East Coast with 59M under flood alerts – CNBC, 12/18/2023
- A “powerful” storm lashed the mid-Atlantic coast Monday morning with heavy rain and thunderstorms, leaving 59 million people from Virginia to Maine under flood alerts, 200,000 homes and businesses without power, and holiday travelers scrambling as airports report flight delays and cancellations.
- There’s a slight risk of excessive rainfall over parts of New England through Tuesday, the National Weather Service’s Weather Prediction Center warned.
- “The associated heavy rain will create mainly localized areas of flash flooding, with urban areas, roads, and small streams the most vulnerable,” the weather service said.
- The East Coast is already reeling from the impacts with more than 250,000 people across New England and New York without power as of 8 a.m., according to PowerOutage.us.
- In New York City, a travel advisory is in effect due to flooding conditions on roads, power outages and high winds on bridges.
- There are more than 500 delays nationwide and more than 370 cancellations, a number likely to keep growing Monday ahead of holiday travel chaos that sees millions take to the skies a week ahead of Christmas, according to FlightAware data.
Fed Officials Add to Chorus Pushing Back Against Rate-Cut Bets – Bloomberg, 12/18/2023
- Two more Federal Reserve officials pushed back against the depth of interest-rate cuts expected by markets next year, reinforcing similar comments from other US central bank officials last week.
- Chicago Fed President Austan Goolsbee said he was surprised by the outsize market reaction to the Fed’s updated quarterly economic projections last week.
- Those new forecasts signaled that the Fed’s next move is likely a cut, leading to a rally in asset prices and bets of as many as six cuts starting as early as March.
- “I was confused a bit with the — was the market just imputing, ‘here’s what we want them to be saying?’” Goolsbee said Monday in an interview on CNBC.
- “I thought there seemed to be some confusion about how the FOMC even works. We don’t debate specific policies speculatively about the future.”
- The Chicago Fed chief called the cooling in prices this year “significant” but said they’re not yet back to the central bank’s target.
- “If we get inflation back into the range of our dual mandate goals then we’ve got more symmetric concerns, let’s call it, about both sides of the dual mandate,” Goolsbee said.
- Cleveland Fed President Loretta Mester said in an interview with the Financial Times published Monday that markets had gotten “a little bit ahead” of the central bank by betting on early interest-rate cuts in 2024.
- “The next phase is not when to reduce rates, even though that’s where the markets are at,” Mester said.
- “It’s about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%.”
EUROPE & WORLD
- America’s most senior intelligence and defense officials are beginning a new round of on-the-ground diplomacy aimed at resurrecting talks to release hostages still held by Hamas in Gaza and bringing Israel’s war there to a conclusion.
- CIA Director William Burns traveled to Warsaw on Monday to meet with his Israeli counterpart David Barnea, the head of Mossad, and the Qatari prime minister, according to Egyptian officials and another person familiar with the talks.
- The talks have gained more urgency following the killing by Israeli forces in Gaza of three hostages held by Hamas as they held up a white flag on Friday, an incident that has strengthened public calls in Israel to give priority to the release of hostages over other military objectives.
- Secretary of Defense Lloyd Austin is due in Israel with Joint Chiefs of Staff. Gen. CQ Brown Jr. on Monday to meet with the five members of Israel’s war cabinet including Prime Minister Benjamin Netanyahu, Defense Minister Yoav Gallant and minister Benny Gantz.
- A quarter of a mile from a civilian border crossing between Israel and northern Gaza lies what Israel’s military says is the largest tunnel discovered in the enclave.
- It is large enough that large vehicles can drive through it, and yet, until recently, Israel didn’t know the tunnel reached right up to its border.
- Israeli troops uncovered the tunnel exit buried under a sand dune a few weeks ago.
- Israeli officials believe that the tunnel, up to 50 meters deep at points, and 2½ miles long, took years and millions of dollars to build and was meant to facilitate a large-scale attack on Israel.
- “This is for moving massive assets,” Israeli military spokesman Lt. Col. Richard Hecht told reporters on Sunday. “It’s strategic.”
- The discovery of the large tunnel near the Israeli border provides further insight into how much Hamas has invested into its tunnel program and how little Israel knew about it before the group’s Oct. 7 attacks.
- Israeli military spokesman Daniel Hagari called the large tunnel “Sinwar’s secret,” a reference to Hamas leader Yahya Sinwar, and his brother Mohammad Sinwar, who Israeli officials say headed the tunnel building project.
BP Joins Maersk, Hapag-Lloyd in Pausing Shipments Through Red Sea – Wall Street Journal, 12/18/2023
- BP will pause all oil-tanker shipments through the Red Sea after attacks in the area from Yemen’s Houthi rebels, adding to similar moves from major shipping companies in recent days.
- “In light of the deteriorating security situation for shipping in the Red Sea, BP has decided to temporarily pause all transits through the Red Sea,” the London-based energy major told Dow Jones Newswires.
- The decision will be under continuous review, as circumstances in the region evolve, it said.
- Germany’s Hapag-Lloyd will reroute several ships via the Cape of Good Hope until the passage through the Suez Canal and the Red Sea are safe again, it said in a statement to Dow Jones Newswires on Monday.
NIO Stock Rises After EV Maker Lands $2.2 Billion Cash Infusion – Wall Street Journal, 12/18/2023
- The Chinese company once touted as a Tesla killer is getting a much-needed boost.
- NIO’s American depositary receipts jumped after the electric-vehicle company unveiled a $2.2 billion cash injection from an investment group backed by Abu Dhabi’s government.
- CYVN Holdings is buying new shares to take its stake above 20%.
- It had already spent nearly $1.1 billion earlier this year buying new and existing shares to build up a 7% stake.
- Once one of China’s most vaunted EV startups, NIO has become a symbol of the challenges many automakers face amid EV price wars.
Factmonster – TODAY in HISTORY
- New Jersey became the third state to ratify the U.S. Constitution. – 1787
- Slavery was abolished with the ratification of the 13th Amendment to the Constitution. – 1865
- The Supreme Court upheld the wartime internment of Japanese-Americans. – 1944
- Japan was admitted to the United Nations. – 1956
- The Shippingport Atomic Power Station in Pennsylvania became the first civilian nuclear facility to generate electricity in the United States. – 1957
- The British Parliament abolished the death penalty for murder. – 1969
- George W. Bush received 271 votes in the delayed Electoral College balloting. – 2000
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Wealth Management or LPL Financial. Prior to making any investment decision please consult your financial advisor regarding your specific situation.
