MARKET WRAPS
Watch For:
NAHB Housing Market Index for December
Today's Top Headlines/Must Reads:
- China's Millionaires Are Worried. That's a Problem for Wall Street.
- It's the Magnificent Seven's Market. The Other Stocks Are Just Living in It.
- Stocks Beat the Odds This Year. Why They Can Do It Again in 2024.
Opening Call:
Stock futures rose on Monday but gains were limited by comments from Federal Reserve officials that tempered enthusiasm over just how soon interest rates might be lowered.
"The surge in risk appetite, fueled by the Fed's recent stance, has paused as [S&P 500] bulls are likely catching their breath at the open," SPI Asset Management said.
"Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week," it added.
Fundstrat said stocks will also be supported by the buying of fund managers who had been worried about the macroeconomic environment and therefore until recently had been overly defensive.
"As we think about the final two weeks of 2023, this tells me that there will be a certain amount of performance chasing into year end," Fundstrat said.
"And couple that with the fact that retail investors withdrew $240 billion from ETF and mutual funds, in a year when S&P 500 [was up greater than] 25%, and one can see why equities have an underlying bid into year end."
Overseas
Global indexes largely retreated, as Hong Kong's Hang Seng Index fell 1% and Japan's Nikkei 225 shed 0.6%. Europe's Stoxx 600 hovered, and Britain's FTSE 100 lost 1%.
Premarket Movers
Apple fell less than 1% premarket, after Bloomberg News reported Friday that an iPhone ban in China was accelerating. Apple hasn't commented on the report.
Broadcom on Friday became the 10th most valuable U.S. company, closing with a valuation of $527.7 billion and surpassing Visa, according to Dow Jones Market Data. Broadcom rose slightly in premarket trading.
DocuSign is working with advisers to explore a sale, WSJ reported, with either strategic buyers or private-equity firms. Shares fell 0.3% in premarket trading after jumping 12% on Friday.
Illumina said it plans to sell Grail , its unit that makes cancer blood tests, after a federal appeals found the $7.1 billion acquisition in 2021 to be anticompetitive. Shares rose 1.5%.
Uber Technologies fell 0.1% as shares were set to make their S&P 500 debut on Monday. Jabil and Builders FirstSource also will join the index on Monday.
Vodafone shares climbed almost 7% in London , and its ADRs similarly jumped premarket, after French peer Iliad said it had made a proposal to Vodafone to merge their Italian businesses.
Friday's Post-Close Movers
Arcutis Biotherapeutics received FDA approval for its Zoryve topical foam in the treatment of seborrheic dermatitis late Friday. Shares gained 31%.
Enzo Biochem's revenue in the quarter ended Oct. 31 rose 10% as it saw higher demand in multiple product areas. The company's loss narrowed to $6.6 million, or 13 cents a share, from a loss of $10.6 million, or 22 cents a share, a year earlier. Shares rose 4.5%.
Minerva Surgical will delist its shares from the Nasdaq, with the last day of trading on or about Dec. 28. The company expects the move to lower its general and administrative expenses. Shares fell 51%.
Roku fell 2% after analysts at Seaport Research downgraded shares of the company to Sell from Neutral with a price target of $75. Roku fell 6.8%.
Forex:
The dollar could continue to weaken into year-end after the Fed signaled last week that it was starting to consider cutting interest rates next year, although this period of weakness won't last long, MUFG said.
With the ECB and the Bank of England remaining reluctant to talk about cutting rates, there is a "window for dollar selling into year-end." However, the "weak external global growth outlook" remains supportive for the dollar, which should bounce back in the first quarter, MUFG added.
Bonds:
Commerzbank Research said the bond rally appears mature but the German Ifo business sentiment index and U.S. PCE data still look supportive.
"The market is taking more comfort from the disappointing euro area PMIs in its view of ongoing disinflation and full-blown Fed and ECB rate cut cycles next year."
Energy:
Oil prices rose, supported by escalating tensions in the Middle East due to recent attacks on ships crossing the Red Sea.
Shipping and logistics majors A.P. Moller-Maersk and Hapag-Lloyd stopped their ships from entering the southern entrance of the Red Sea after recent attacks on commercial ships by Houthi forces.
Meanwhile, Russia said it would deepen oil export cuts in December by potentially 50,000 barrels a day or more, Reuters reported, citing Russian news agencies.
Brent crude price is forecast between $70 and $90 a barrel next year on the back of stronger U.S. supply, Goldman Sachs said, cutting its price expectation by $10.
According to the bank, Brent is set to rise to $85 a barrel by June, and average $80-$81 in 2024 and 2025.
The forecast trim came as GS lifted its outlook for U.S. liquids supply growth to 0.9 million barrels a day from 0.5 million barrels a day for 2024.
"While we have adjusted the range, we still look for range-bound prices and only moderate price volatility in 2024," the bank said.
"Elevated spare capacity to handle tightening shocks should limit upside price moves."
Metals:
Copper prices were lower as uncertainties about the Fed's interest rate path persisted, with some top officials trying to temper speculation and adopt a more cautious tone.
Meanwhile, aluminum and gold made modest gains, with bullion having staged a strong rally this month.
TODAY'S TOP HEADLINES
IBM to Buy Business Units From Software AG for $2.32 Billion
IBM said it will buy German software company Software AG's webMethods and StreamSets divisions for 2.13 billion euros ($2.32 billion).
The acquisition comes as the U.S. technology giant continues to focus on and invest in hybrid cloud and artificial intelligence technology, the companies said on Monday.
Southwest Hit With $140 Million Penalty for 2022 Holiday Meltdown as It Prepares for Next Christmas Weekend
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.
The Era of Big Taxes Is Upon Us
Rich countries are raising more money from taxpayers than they have in decades to finance a burst of state spending as surging interest rates make borrowing less attractive.
Tax revenues have risen to record levels as a share of economic output in a number of major economies, including France, Japan and South Korea, according to data published by the Organization for Economic Cooperation and Development, the club of mainly rich countries.
The Great American Warehouse Building Boom Is Over
Higher interest rates are choking off construction of warehouses that feed America's growing e-commerce appetite, putting an end to a building boom that remade vast swaths of the country.
Over the past decade, warehouses became an investor darling as investors such as Blackstone and Singapore sovereign-wealth fund GIC bought up vast portfolios. During the pandemic, developers plastered cities and suburbs with logistics facilities to profit from surging rents and seemingly insatiable demand from Amazon.com and other e-commerce companies.
Despite Record Home Prices, Housing Is About to Drag Inflation Down
Home buyers keeling over from sticker shock might think it crazy that housing could deliver significant relief on inflation. Yet that is economists' base case for 2024.
The fight against inflation has reached its proverbial "last mile," and the biggest remaining obstacle is shelter.
Senate Negotiators Fail to Reach Agreement on Border Framework
WASHINGTON-Senate negotiators failed Sunday to reach a deal on a framework for border-security measures that Republicans have demanded as a condition of passing new funding for Ukraine, further slimming the chances of any vote before Christmas.
The lack of a breakthrough by the self-imposed weekend deadline underscored the difficulties facing the Senate talks, even after the Biden administration signaled it was prepared to make significant concessions on immigration policy. Many Republicans not involved in the discussions have expressed skepticism in recent days about any deal, while progressive Democrats have raised concerns that the White House was bowing to conservative demands.
Voters Want Something Different. Is It RFK Jr.?
SALT LAKE CITY-With President Biden and former President Donald Trump both deeply unpopular, Robert F. Kennedy Jr. is trying to be what many voters say they want-something different.
Overwhelming majorities of Americans view Biden and Trump negatively, and almost one-in-five Americans say they'd vote for a third-party candidate in 2024, according to a recent Wall Street Journal poll. Kennedy-an independent candidate, member of the most famous Democratic family in the U.S. and purveyor of conspiracy theories-is the biggest beneficiary of that dissatisfaction.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Quipt Home Medical 4Q
Economic Calendar (ET):
0830 Nov New Housing Price Index
Stocks to Watch:
Buhler Industries: Lenders Extend Maturity Date of Credit Facilities to Dec. 22 From Dec. 15; Has Made Progress in Search for a Long Term Investment Partner
Expected Major Events for Monday
09:00/GER: Dec Ifo Business Climate Index
09:30/UK: Sep Card Spending statistics
(MORE TO FOLLOW) Dow Jones Newswires
12-18-23 0615ET
