Daily Market Report | 12/29/2023
US FINANCIAL MARKET
S&P 500 Vies for Breakout at End of Stellar Year: Markets Wrap – Bloomberg, 12/29/2023
- Wall Street’s final session of the year has stocks set for their ninth straight week of gains — the longest winning run since 2004.
- The S&P 500, Nasdaq 100 and The Dow Jones Industrial Average were little changed.
- While signs of exhaustion have emerged over the last few days, the lack of any significant catalyst and anemic trading volume have left equities drifting near all-time highs.
- The great cross-asset surge has defied every major concern ranging from Federal Reserve uncertainty, recession forecasts and geopolitical risks.
- Many who came into 2023 dreading all that have ended up scrambling to chase the rally.
- The S&P 500 traded just steps away from its all-time high of 4,796.56. Fueled by the artificial-intelligence boom, stretched positioning and the “fear of missing out,” the US equity benchmark has risen about 25% in 2023, while the Nasdaq 100 headed for its best year since the dot-com era.
- Treasuries fell once again after posting solid gains in recent weeks.
- The yield on 10-year Treasuries advanced three basis points to 3.87%.
- The recommended close for dollar-denominated cash bonds is 2 p.m. New York time.
- The greenback was poised for its worst year since the onset of the pandemic.
- Key inflation data endorsing a growing narrative that central bankers will aggressively ease monetary policy in 2024 have fueled solid gains for both equities and bonds over the last two months.
- The rally has also been fueled by Fed Chair Jerome Powell’s dovish pivot at the December policy meeting.
- The Stoxx Europe 600 rose 0.2%.
- The Bloomberg Dollar Spot Index was little changed.
- West Texas Intermediate crude rose 0.9% to $72.42 a barrel.
- Spot gold fell 0.2% to $2,061.56 an ounce.
Oil Limps Into 2024 as OPEC+ and War Fail to Prevent Annual Drop – Bloomberg, 12/28/2023
- Oil headed for the biggest annual drop since 2020 as war and OPEC+ production cuts failed to propel prices higher in a year dominated by supply growth outside of the grouping.
- West Texas Intermediate edged higher near $72 a barrel Friday but is set to close 2023 about $8 below where it started the year.
- A broader Bloomberg gauge of commodities has dropped by about 10% over the past 12 months.
- Crude is capping a tumultuous year, with prices aided by the outbreak of the Israel-Hamas war, as well as speculation that the Federal Reserve is done with hiking interest rates as inflation wanes.
Repo Benchmark Hits All-Time High in Volatile Funding Market – Bloomberg, 12/29/2023
- The rate on overnight general collateral repurchase agreements (REPO) — a key metric for US funding markets — first traded at 5.625% at the open on the final trading day of December before dropping to 5.45%, according to ICAP.
- It has since climbed back to 5.50%.
- But that’s still lower than where repo rates for Dec. 29 were trading during the prior session.
- Overnight rates typically move higher at the end of the quarter as some dealers’ curb activity in money markets to shore up their balance sheets.
- Traders have been on alert for additional pressure after repo rates surged last month following a sharp rally in US Treasuries.
Nickel Is Year’s Biggest Metals Loser, Copper Manages Small Gain – Bloomberg, 12/28/2023
- In a mostly lackluster year for metals trading, nickel emerged as the worst performer and might not see a reprieve anytime soon.
- The metal used in stainless steel and electric vehicle batteries is poised to post an annual drop of more than 40% on the London Metal Exchange, the biggest decline since 2008. That’s by far the worst outcome among industrial metals, and contrasts with a 3% gain for copper or with iron ore’s advance of about 20% in Singapore.
- Metals have been pressured this year by global economic headwinds and uncertainty over China’s growth outlook.
- In most cases, concerns over tightening supply or even shortages have proved unfounded or perhaps premature. But those worries were particularly true for nickel, a market that’s been flooded with a wave of new material from top producer Indonesia. Demand growth has also faded.
- Copper’s annual gain comes after a fourth quarter rebound, helped by optimism that the Federal Reserve will start cutting interest rates next year.
- Shares of Fisker charged higher Friday, after the electric vehicle maker said it will announce in January a plan to accelerate sales and deliveries.
- As part of its look into 2024, the company said it will increase the number of test-drive events in the U.S. and Europe, as it has witnessed higher sales rates after customers experienced the Fisker Ocean vehicles firsthand.
- The company said it has produced 10,142 EVs in 2023 as it has “largely overcome” the supply chain issues results from the COVID pandemic.
- And deliveries have totaled about 4,700, including a jump of more than 300% from the third quarter to the fourth quarter.
- The majority of the EVs delivered have been the Fisker Ocean One priced at $68,999.
Google settles $5 billion consumer privacy lawsuit – CNBC, 12/29/2023
- Alphabet’s Google has agreed to settle a lawsuit claiming it secretly tracked the internet use of millions of people who thought they were doing their browsing privately.
- U.S. District Judge Yvonne Gonzalez Rogers in Oakland, California, put a scheduled Feb. 5,2024 trial in the proposed class action on hold on Thursday, after lawyers for Google and for consumers said they had reached a preliminary settlement.
- The lawsuit had sought at least $5 billion.
- Settlement terms were not disclosed, but the lawyers said they have agreed to a binding term sheet through mediation and expected to present a formal settlement for court approval by Feb. 24, 2024.
- The plaintiffs alleged that Google’s analytics, cookies, and apps let the Alphabet unit track their activity even when they set Google’s Chrome browser to “Incognito” mode and other browsers to “private” browsing mode.
- They said his turned Google into an “unaccountable trove of information” by letting the company learn about their friends, hobbies, favorite foods, shopping habits, and “potentially embarrassing things” they seek out online.
Boeing urges inspections of 737 Max planes for ‘possible loose bolt’ – CNBC, 12/29/2023
- Boeing is urging airlines to inspect 737 Max planes to look for a “possible loose bolt” in the rudder control system, the latest quality issue to affect the manufacturer’s bestselling jetliner.
- The company recommended the inspections after “an international operator discovered a bolt with a missing nut while performing routine maintenance on a mechanism in the rudder-control linkage,” the Federal Aviation Administration said in a statement Thursday.
- “The company discovered an additional undelivered aircraft with a nut that was not properly tightened.”
- The inspections will take about two hours per plane, and all new 737 Maxes will undergo the check before they’re handed over to customers, Boeing said.
- “The issue identified on the particular airplane has been remedied,” Boeing said in a statement.
- “Out of an abundance of caution, we are recommending operators inspect their 737 MAX airplanes and inform us of any findings.
- A spokeswoman for United Airlines, one of the biggest 737 Max customers, said the carrier doesn’t expect any impact to its operations because of the issue.
Drugmakers set to raise U.S. prices on at least 500 drugs in January – CNBC, 12/29/2023
- Drugmakers including Pfizer, Sanofi and Takeda Pharmaceutical plan to raise prices in the United States on more than 500 unique drugs in early January, according to data analyzed by healthcare research firm 3 Axis Advisors.
- The expected price hikes come as the pharmaceutical industry gears up for the Biden Administration to publish significantly discounted prices for 10 high-cost drugs in September and continues to contend with higher inflation and manufacturing costs.
- Under President Joe Biden’s Inflation Reduction Act (IRA), the government’s Medicare health program can negotiate prices directly for some drugs starting in 2026.
- Worries are also growing about fresh disruption to supply chains from a prolonged Middle East conflict, with shippers forced to halt or reroute traffic from the Red Sea, the world’s main East-West trade route.
- Three companies including GlaxoSmithKline, which last week said it would cut prices on some asthma, herpes and anti-epileptic drugs for 2024, are also expected to lower prices on at least 15 unique drugs in January, according to the data.
US ECONOMY & POLITICS
Maine Bars Trump From State’s 2024 Presidential Primary Ballot – Bloomberg, 12/29/2023
- Maine’s secretary of state ruled that Donald Trump cannot run in the state’s Republican primary, citing his efforts to overturn the 2020 election results.
- The ruling, which is certain to face court challenges, marks the latest attempt by opponents to keep Trump — the frontrunner for the Republican nomination in polls — off the ballot for his actions after losing in 2020.
- Shenna Bellows, Maine’s top election official and a Democrat, made her decision after receiving three challenges from voters, and cited Trump’s conduct culminating in the insurrection at the US Capitol on Jan. 6, 2021.
- “I do not reach this conclusion lightly. Democracy is sacred,” Bellows wrote.
- “I am mindful that no secretary of state has ever deprived a presidential candidate of ballot access based on Section Three of the Fourteenth Amendment. I am also mindful, however, that no presidential candidate has ever before engaged in insurrection.”
Summers Says Investors Probably Underestimating Inflation Risk – Bloomberg, 12/29/2023
- Former Treasury Secretary Lawrence Summers said investors are probably underestimating inflation risk as markets move swiftly toward expectations for Federal Reserve easing.
- “I think there’s still a risk that the market is probably underestimating that we’re not going to quite make as much progress on inflation as people hope, and that there’s not going to be quite as much room for Fed easing as people hope,” Summers said.
- “I’m not really sure we’re a 2%-target-inflation country in any durable sense,” said Summers.
- “To declare that proverbial ‘soft landing’ to have taken place seems to me to be premature,” Summers said. “I’d certainly say it looks better and more likely than it did six or eight months ago. I always said that soft landings were the triumph of hope over experience, but occasionally hope may triumph over experience.”.
EUROPE & WORLD
- U.S. chipmaking giant Nvidia is set to launch an adjusted version of a gaming processor with slower performance in China to comply with U.S. export restrictions.
- A product page on Nvidia’s website for Chinese consumers shows that the new Nvidia RTX 4090D — which a spokesperson says will be launched in January, according to Reuters — has 11% fewer “CUDA” (Compute Unified Device Architecture) cores than versions of the chip that are sold outside of China.
- RTX is Nvidia’s line of advanced gaming GPUs, or graphics processing units.
- Nvidia was not immediately available for comment when contacted by CNBC, but a company spokesperson told Reuters that the chip has been “designed to fully comply with U.S. government export controls.”
- Nvidia “extensively engaged with the U.S. government” while developing the product, the spokesperson said, according to Reuters.
JD.com Wins Antimonopoly Suit Against Alibaba – Wall Street Journal, 12/29/2023
- Chinese e-commerce giant JD.com said it won a lawsuit against rival Alibaba Group Holding, which was fined 1 billion yuan ($140.7 million) over monopolistic practices.
- Zhejiang Tmall Network, Zhejiang Tmall Technology and Alibaba Group were found to have abused market dominance and engaged in monopolistic practices, causing severe damages to JD.com, it said in a statement Friday, citing a Beijing court ruling.
- The practice known as “choosing one between the two” forces merchants into signing exclusive agreements with a single online retailer, preventing them from offering products on other platforms.
UnitedHealth Group to Sell Operations in Brazil – Wall Street Journal, 12/29/2023
- UnitedHealth Group has agreed to sell its operations in Brazil to a private investor.
- The healthcare and insurance company disclosed Friday that it expects to close the sale in the first half of next year and record a mostly non-cash $7 billion charge as a result, largely from the impact of foreign currency translation losses.
- UnitedHealth expects that charge to dent its current annual profit outlook, but not the adjusted earnings guidance it gave at the end of last month, according to a securities filing.
- Israeli forces expanded their military operations in the southern Gaza city of Khan Younis, intensifying efforts to kill Hamas’s top leadership, as aid agencies said the areas to which Israel has directed Palestinians to evacuate were increasingly overcrowded and short on resources.
- A Hamas political delegation was headed to Cairo on Friday to discuss a deal proposed by Egypt to end the war, a plan that neither side has agreed to so far, Egyptian officials said.
- Israel said negotiations on the deal, which would free hostages held by Hamas, were under way.
- As the humanitarian situation worsens in Gaza, Israeli Finance Minister Bezalel Smotrich on Friday said Israel would continue to withhold Palestinian tax revenue funds as long as he remains in the post.
- Israel collects monthly tax revenues on imports and exports on behalf of the Palestinian Authority in the West Bank, but has refused to release funds earmarked for services and salaries in Gaza since the Hamas attack on Oct. 7, alleging the money could reach the militant group, which is a U.S.-designated terrorist organization.
- Russia launched a massive missile and drone attack on cities across Ukraine, killing at least 12 and injuring scores more in one of the biggest barrages of the war.
- Ukrainian President Volodymyr Zelensky said the Russians launched around 110 missiles on Friday morning.
- The majority were shot down, he said, but damage was nonetheless widespread.
- Casualties were reported in Kyiv, Kharkiv, Odesa, Dnipro, Zaporizhzhia and Lviv—the six largest Ukrainian cities not under Russian occupation.
- “Today, Russia used nearly every type of weapon in its arsenal,” Zelensky wrote Friday on Telegram, noting that Moscow had fired Kinzhal ballistic missiles as well as cruise missiles.
- “We will surely respond to terrorist strikes. And we will continue to fight for the security of our entire country, every city, and every citizen. Russian terror must and will lose.”
- Friday morning’s attack was the largest in months, after a period of relative quiet in Ukraine.
- Ukraine’s ability to repel the huge barrage is a testament to the improvement in Kyiv’s air defenses since last winter.
Russia Plans to Boost Key Diesel Exports by a Fifth in January – Bloomberg, 12/29/2023
- Russia plans to boost diesel exports from its major western ports by almost a fifth next month amid growing refinery runs.
- Diesel loadings from facilities on the Black and Baltic seas, including some cargoes originating in Belarus, are set to rise to 3.39 million tons in January, industry data seen by Bloomberg show.
- That equals about 817,000 barrels a day, or 18% more than the nation exported in the first 28 days of December, according to calculations based on historical data from intelligence firm Kpler.
China Names New Defense Minister, Removing Block to US Talks – Bloomberg, 12/29/2023
- China named navy veteran Dong Jun as its new defense minister; a move that will help resume top-level military talks with the US that are seen as crucial to steadying ties between the nuclear-armed powers.
- Dong’s appointment was announced by the country’s top legislator on Friday, ending weeks of speculation over who would occupy the role Li Shangfu was ousted from in October, without explanation.
- China’s new defense minister is the first to come from a naval background.
- Dong’s promotion suggested purges were ongoing in the rocket force, as well as the military procurement department that Li used to run, and which is under investigation, according to Wen-Ti Sung, a non-resident fellow at the Atlantic Council’s Global China Hub.
Red Sea Attacks Mean Double Wages for Danish Crew – Bloomberg, 12/29/2023
- The shipping industry in Denmark, home to some of the world’s largest firms, agreed to double wages for crew sailing through the Red Sea to compensate for the danger posed by the recent attacks.
- The hazard pay kicks in for the time spent in two defined high-risk areas in the region, according to a deal presented on Friday by employer group Danish Shipping and the nation’s three largest labor unions for seafarers.
- Diverting around Africa can take as much as 25% longer than using the Suez Canal shortcut between Asia and Europe, adding to costs that may ultimately be passed on to consumers.
Factmonster – TODAY in HISTORY
- Texas became the 28th state in the United States. – 1845
- The first Young Men’s Christian Association (YMCA) opened in Boston. – 1851
- The last major battle of the Indian Wars, at Wounded Knee Creek, took place with hundreds of Indian men, women, and children massacred. – 1890
- The Constitution of Ireland, changing the Irish Free State into Eire, went into effect. – 1937
- During World War II, Germany began dropping incendiary bombs on London. – 1940
- A peace agreement was signed, ending 36 years of conflict in Guatemala. – 1996
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