Daily Market Report | 01/04/2024
US FINANCIAL MARKET
Bonds Slide After Jobs Data Curb Rate Cut Bets: Markets Wrap – Bloomberg, 1/4/2024
- Treasury yields rose while technology stocks wobbled after robust jobs data sparked doubts about how soon and deeply the Federal Reserve could start cutting interest rates.
- The Nasdaq 100 was little changed as the tech-heavy benchmark pulls back from what could be its longest losing streak in over a year.
- Apple dipped after its second downgrade this week as Piper Sandler flagged concern about iPhone inventory levels.
- S&P 500 edged higher after the index capped a three-day selloff yesterday.
- The Nasdaq 100 was little changed. The Dow Jones Industrial Average rose 0.5%.
- Ten-year Treasuries extended declines with the yield rising toward 4% after data showed US companies ramped up hiring in December and jobless claims came in below estimates.
- Swaps traders trimmed their bets on Fed easing after the data.
- Traders will next turn to the monthly US jobs report on Friday as well as European inflation data to gauge whether central banks have room to start lowering interest rates.
- Wagers on a March rate cut is dimming with the labor market still on sure footing and the minutes on Wednesday from the Fed’s December meeting suggesting rates could remain at restrictive levels “for some time.”
- West Texas Intermediate crude traded around $73 a barrel after supply disruptions in Libya, and as Iran said attacks that killed almost 100 people in the country were carried out to punish its stance against Israel.
- The Stoxx Europe 600 rose 0.5%.
- Shares of Walgreens fell on Thursday after the company reported fiscal first-quarter adjusted earnings and revenue that topped expectations but cut its quarterly dividend nearly in half.
- The retail pharmacy giant slashed its dividend to 25 cents per share from 48 cents per share to “strengthen [its] long-term balance sheet and cash position,” CEO Tim Wentworth, who officially took the helm during the quarter, said in a statement.
- Revenue: $36.71 billion vs. $34.86 billion expected.
- Comparable sales at pharmacy locations rose 8.1%.
- Pharmacy sales for the quarter rose 10.7% compared with the fiscal first quarter of 2023, as comparable sales climbed more than 13% due to price inflation in brand medications and “strong execution” in pharmacy services, Walgreens said.
- Total prescriptions filled in the quarter including immunizations totaled 311.6 million, which is flat compared with the same period a year ago.
- Retail sales for the quarter fell 6.1% from the same period a year ago, and comparable retail sales declined 5%.
- Earnings per share: 66 cents per share adjusted vs. 61 cents expected.
- The company did not indicate in the earnings release whether it would also maintain its previous revenue guidance of $141 billion to $145 billion.
- Despite the quarterly beats, Walgreens reiterated its fiscal 2024 adjusted earnings guidance of $3.20 to $3.50 per share.
- It forecast a full year adjusted effective tax rate of 15% to 17%, compared to the prior outlook of 19% to 20%.
Mobileye Global Stock Plummets After Revenue Warning – Wall Street Journal, 1/4/2024
- Shares of Mobileye Global dropped after the developer of autonomous driving technologies warned of a sharp fall in first-quarter revenue.
- Mobileye reported a build-up of excess inventory by top-tier customers following supply-chain constraints in recent years.
- Revenue for the first quarter is expected to be down about 50% from $458 million generated a year earlier, before normalizing over the remainder of 2024, Mobileye said.
- This decline will weigh on earnings, and the company said it anticipates its first-quarter profit levels to be significantly below the subsequent quarters, with an operating loss for the quarter of $257 million to $242 million.
- Mobileye forecast revenue for full-year 2024 at between $1.83 billion and $1.96 billion, down from the about $2.08 billion to $2.08 billion it now expects for 2023.
- The company had previously projected revenue of about $2.07 billion to $2.09 billion for 2023.
Ford Posts Single-Digit Sales Increase in 2023 – Wall Street Journal, 1/4/2024
- Ford’s U.S. sales rose 7.1% in 2023, boosted by strong demand for its pickup trucks and commercial vans.
- The Dearborn, Mich., automaker, which released full-year figures Thursday, sold around 2 million vehicles last year, a result that wasn’t significantly impacted by the six-week long United Auto Workers strike that temporarily halted production at some of Ford’s largest plants.
- Still, Ford underperformed the broader industry with U.S. auto sales overall up 12.4% from the prior year, according to an estimate from research firm Wards Intelligence.
- Ford recorded a 25.3% increase in hybrid sales over the prior year, as customers across brands snatched up these vehicles at a faster rate than fully electric models, whose sales rose 18%.
- Sales of the Transit van surged 30%, and results for its electric counterpart—the E-transit—increased 18% over the prior year.
- Ford recorded a 13% increase in truck sales last year, driven by a strong performance from its F-Series line.
Google Is Finally Killing Cookies. Advertisers Still Aren’t Ready. – Wall Street Journal, 1/4/2024
- Google is going forward with sweeping changes to how companies track users online—moves that have been years in the making.
- Advertisers still aren’t ready.
- The changes, among the biggest in the history of the $600 billion-a-year online ad industry, center on the use of cookies, technology that logs the activity of internet users across websites so that advertisers can target them with relevant ads.
- Starting Thursday, Google will start a limited test that will restrict cookies for 1% of the people who use its Chrome browser, which is by far the world’s most popular.
- By year’s end, Google plans to eliminate cookies for all Chrome users.
- Marketers, advertising technology companies and web publishers are working to ensure their businesses can weather the transition.
- They said Google, which has introduced software tools designed to help replace cookies, hasn’t done enough to prepare the market.
- Perplexity, a startup going after Google’s dominant position in web search, has won backing from Jeff Bezos and venture capitalists betting that artificial intelligence will upend the way people find information online.
- Started less than two years ago, Perplexity has fewer than 40 employees and is based out of a San Francisco co-working space.
- The company’s product, which it calls an answer engine, is used by about 10 million people monthly.
- Those ingredients were enough to persuade Institutional Venture Partners, Bezos and other tech executives to invest $74 million in the company, the largest sum raised by an internet search startup in recent years.
- The investment valued Perplexity at $520 million, including the new money, said Chief Executive Officer Aravind Srinivas.
- Amazon.com, the e-commerce company chaired by Bezos, has committed to investing billions in Anthropic, the AI startup behind the chatbot Claude.
Eli Lilly Warns Against ‘Cosmetic’ Use of Popular Weight-Loss Drugs – Bloomberg, 1/4/2024
- Eli Lilly cautioned against using its popular diabetes and obesity drugs for “cosmetic weight loss” as off-label use of the medications has skyrocketed, and shortages ensued.
- “Mounjaro and Zepbound are indicated for the treatment of serious diseases; they are not approved for – and should not be used for – cosmetic weight loss,” the company said in a statement Thursday morning.
- Neither drug is approved for weight loss in people who don’t have a diagnosis of type 2 diabetes or obesity.
- Lilly did not outline any additional steps it is taking to prevent off-label use.
- The company also said it was concerned about knock-off versions of its medicines that have not been approved by the US Food and Drug Administration, some of which have been found to contain impurities.
APA to Buy Callon Petroleum in $4.5 Billion Deal – Wall Street Journal, 1/4/2024
- Energy company APA has agreed to buy smaller peer Callon Petroleum in a stock-swap deal valued at about $4.5 billion including debt, continuing a wave of consolidation in the energy sector.
- APA on Thursday said it would issue 1.0425 shares, worth $38.31 based on the Wednesday closing price of $36.75, for each share of Callon, offering a nearly 14% premium to Callon’s closing price.
- APA said it expects to issue about 70 million shares in the transaction, for an implied equity value of about $2.57 billion.
- APA said the Callon deal adds scale to its operations across the sprawling oil-rich Permian Basin, most notably in the Delaware Basin, and that it expects the combined company’s daily production will exceed 500,000 barrels of oil equivalent.
- APA shareholders will own about 81% of the combined company, while Callon investors will own roughly 19%.
- The transaction is slated to close in the second quarter.
Spot Container Shipping Rates Soar 173% on Red Sea Threats – Bloomberg, 1/4/2024
- Short-term rates for container shipping between Asia, Europe and the US are climbing on reduced capacity caused by the threats to cargo vessels in the Red Sea.
- The spot rate for shipping goods in a 40-foot container from Asia to northern Europe now tops $4,000, a 173% jump from just before the diversions started in mid-December, Freightos.com, a cargo booking and payment platform, said late Wednesday.
- The cost for goods from Asia to the Mediterranean increased to $5,175, Freightos said, adding that some carriers have announced prices above $6,000 for this route starting in mid-January.
- Rates from Asia to North America’s East Coast have risen 55% to $3,900 for a 40-foot container.
Peloton Partners with TikTok for Workout Content Hub – Wall Street Journal, 1/4/2024
- Peloton Interactive has entered an exclusive partnership with TikTok to create a workout content hub on the popular short-form video platform.
- The companies said Thursday that their new arrangement will result in the dedicated, co-branded #TikTokFitness hub to house custom Peloton content for the platform.
- Peloton noted that this is the first time it will produce custom social content for a partner that is outside of its owned channels.
- Content will include live Peloton classes, class clips, original instructor series, celebrity collaborations and ongoing creator partnerships.
- The hub will be available on TikTok in the U.S., U.K. and Canada.
EV Startup Fisker Ditches Tesla-Style Direct Sales Model – Wall Street Journal, 1/4/2024
- The electric-vehicle startup Fisker is abandoning a direct-to-consumer sales model in the U.S. in favor of using traditional dealerships, after it found the approach too expensive and struggled in 2023 to get its cars to buyers quickly.
- The company is in talks with U.S. dealers and hopes to sign up at least 50 this year, said Chief Executive Officer Henrik Fisker.
- The automaker’s decision is a major strategic about-face for a startup that once believed dealerships would be a hurdle to its success.
- The company began selling its first vehicle, the Ocean sport-utility vehicle, in 2023, but has been challenged by the complex logistics of shipping vehicles to U.S. customers from a factory in Austria.
- Fisker produced 10,142 Ocean SUVs in 2023.
- It delivered less than half to customers.
- The company has reservations from customers across the U.S. but only two showrooms in Los Angeles and New York.
- Known as Fisker Lounges, the locations in upscale shopping areas don’t sell vehicles or offer test drives.
US ECONOMY & POLITICS
US Companies Ramped Up Hiring in December, ADP Data Show – Bloomberg, 1/4/2024
- US companies ramped up hiring in December and wage gains continued to cool, consistent with an outlook for sustained economic growth and diminishing inflation.
- Private payrolls increased 164,000 last month, the most since August, according to figures published Thursday by the ADP Research Institute in collaboration with Stanford Digital Economy Lab.
- The reading came in above all but one estimate in a Bloomberg survey of economists.
- The advance was led by services sectors including leisure and hospitality and education and health care, while manufacturing cut jobs for a fourth straight month.
- The West and the Northeast added jobs, while the South and Midwest cut positions.
- Workers who stayed in their job saw a 5.4% median pay bump in December from a year ago, according to the report.
- For those who changed jobs, wages rose 8%.
- Another report released earlier Thursday suggested that labor-market cooling is largely coming in the form of weaker hiring instead of job losses.
- US-based employers announced some 35,000 layoffs in December, a 20% decline from a year ago and the second-lowest reading of 2023, according to Challenger, Gray & Christmas.
Weekly US jobless claims at two-month low; labor market gradually easing – Reuters, 1/4/2024
- The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting labor market conditions remain fairly tight even as demand for workers is easing.
- Initial claims for state unemployment benefits dropped 18,000 to a seasonally adjusted 202,000 for the week ended Dec. 30, the lowest level since mid-October.
- Economists polled by Reuters had forecast 216,000 claims for the latest week.
- Claims data tend to be volatile around this time of year because of holidays.
- Unadjusted claims fell 6,820 to 268,020 last week.
- Claims plunged by 7,572 in California and tumbled 6,080 in Texas.
- That helped to more than offset notable increases in Pennsylvania, New Jersey, Michigan, Massachusetts and Connecticut.
- Planned layoffs, however, jumped 98% to 721,677 in 2023, the highest annual count since 2020.
- The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 31,000 to 1.855 million during the week ending Dec. 23, the claims report showed.
Buy Now, Pay Later Plans Fuel Record Online Holiday Shopping – Bloomberg, 1/4/2024
- Plans that let US consumers pay overtime helped generate a record $222.1 billion in online holiday sales Nov. 1 through Dec. 31, according to the latest Adobe Analytics report, up 4.9% from the same period in 2022.
- Use of buy now, pay later financing plans hit an all-time high of $16.6 billion for e-commerce purchases in the last two months of 2024, Adobe said, 14% more than for last year’s holiday spending.
- Discounts also drove end-of-year shopping, with Adobe reporting price cuts on electronics that were deeper than a year earlier.
- Toys and apparel also had significant discounts.
- A notable shift occurred in 2023, as holiday-season purchases from smartphones reached 51%, surpassing desktop and laptop sales for the first time, the report found.
EUROPE & WORLD
Deadly Iran Blasts and Red Sea Warnings Fan Mideast Tensions – Bloomberg, 1/4/2024
- Iran said blasts that killed almost 100 people in a central province were aimed at punishing its stance against Israel’s invasion of Gaza but stopped short of directly assigning blame for an attack that stoked concerns of a broader conflict.
- No group immediately claimed responsibility for the twin explosions in the Iranian province of Kerman on Wednesday, which targeted a crowd marking the anniversary of the death of Qassem Soleimani.
- Tehran said at least 84 people were dead and 220 others wounded.
- Only hours after the blasts — the Islamic Republic’s deadliest since its founding in 1979 — more than a dozen countries led by the US increased their pressure on Tehran.
- They issued a warning against Houthi militants, an Iranian proxy force in Yemen, against continuing their attacks on shipping in the Red Sea, which have disrupted global commerce and triggered a build up of Western naval power in the area.
U.S. and BAE to Bring Back Popular Howitzer After Success in Ukraine – Wall Street Journal, 1/4/2024
- The U.S. Army is resurrecting production for the M777 howitzer after its heavy use by Ukraine brought new demand for a big gun whose most recent order was five years ago.
- The M777’s production comeback highlights how the war in Ukraine is helping to reshape the global armaments industry, with battlefield use of artillery and missile-defense systems, in particular, leading to a surge in demand.
- For now, the effort is focused on producing new parts to refurbish old guns in Ukraine.
- But it shows how the nearly two-year Ukraine war is taking a toll on Kyiv’s Western-donated equipment, some of which is no longer produced.
- That leads to future problems in acquiring spare parts needed to keep guns operational.
- British defense company BAE Systems said Thursday that it will restart production of M777 parts for the U.S. Army.
- The newly manufactured parts will be used to refurbish M777s deployed in Ukraine, according to a person familiar with the matter.
- The U.S. is seeking to base military drones along the West African coast in an urgent effort to stop the spread of al Qaeda and Islamic State in the region, according to American and African officials.
- The U.S. is holding preliminary talks to allow American unarmed reconnaissance drones to use airfields in Ghana, Ivory Coast and Benin, countries on the Atlantic Ocean.
- Relatively stable and prosperous, the three coastal countries, along with Togo, now find themselves threatened by Islamist militants surging south from Mali, Burkina Faso and Niger—three beleaguered nations in the Sahel, the semidesert band south of the Sahara.
- The negotiations reflect a military retrenchment on the part of the U.S.
- Drones would allow American forces to conduct aerial surveillance of militant movements along the coast and provide over-the-shoulder tactical advice to local troops during combat operations.
U.S. Strike Kills Iran-Backed Militia Leader in Iraq – Wall Street Journal, 1/4/2024
- An American airstrike killed an Iran-backed militia leader in Baghdad on Thursday, U.S. officials said, drawing denunciations from Iraqi leaders and a vow from the militant group to retaliate, amid already metastasizing tensions in the region.
- A U.S. official said Washington conducted a “precision strike” on a vehicle traveling in eastern Baghdad, targeting a member of the Harakat al Nujaba group that the U.S. has been tracking.
- The person targeted “had American blood on his hands,” another U.S. official said.
- Iraq’s government said that the attack was a blatant violation of Iraq’s security and sovereignty and “undermines all agreements between Iraqi forces and coalition forces in Iraq.”
- U.S. forces in Iraq have come under a wave of attacks by Iran-backed militias in recent months.
Factmonster – TODAY in HISTORY
- William W. Grant of Davenport, Iowa, performed what is thought to be the first appendectomy. – 1885
- Utah was admitted as 45th state in the United States. – 1896
- In Gonzales v. Williams, the U.S. Supreme Court decided that citizens of Puerto Rico are not aliens and can enter the U.S. freely. – 1904
- Burma (Myanmar) gained independence from Great Britain. – 1948
- During the Korean War, North Korean and Communist Chinese forces captured the city of Seoul. – 1951
- President Johnson outlined his “Great Society” in his State of the Union address. – 1965
- Former wrestler Jesse Ventura was sworn in as Minnesota’s governor. – 1999
- California Democrat Nancy Pelosi becomes the first woman U.S. Speaker of the House of Representatives. – 2007
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