Closing Recap

Monday, December 23, 2024

As expected, volumes were thin ahead of the Christmas holiday, with stocks slipping initially to kick off the trading day before rallying late morning, as the S&P 500 and Nasdaq added to Friday’s stock market gains. Smallcaps failed to participate in today’s rally as the yield on the benchmark 10-year Treasury yield rose as high as 4.6%, the highest level since late May. News flow was very thin as well with no earnings, Fed speakers, or even macro headlines to move stocks outside of a few economic data points. Speculative crypto assets extended last week’s declines with Bitcoin falling -4% below $93,000 after posting its first losing week since the Presidential election. Market breadth was negative while sectors were mixed as Healthcare, Technology and Communications led while Consumer Staples, Materials and Industrials fell the most. Note we had 13 straight day of negative S&P 500 breadth snapped on Friday where advancers outpaced decliners sharply following the tamer PCE inflation data. Note U.S. stocks are entering a historically strong period for U.S. stocks next week. Since 1969, the last five trading days of the year, combined with the first two of the following year, have yielded an average S&P 500 gain of 1.3% – a period known as the “Santa Claus Rally”, according to the Stock Trader’s Almanac (that would mean from 12/24 thru 1/3 this year)

• December Consumer Confidence index 104.7 below consensus 113.3. (lightest since September); conference board’s consumer confidence index for November revised to 112.8 (previous 111.7).

• Treasury yields hit their highest levels since late May 2024, rising just shy of 4.6% for the 10-year yield.
• U.S. sells $69B 2-year notes at high yield 4.335%, awards 21.89% of bids at high with bid-to-cover ratio 2.73, as Primary dealers take 11.26% of U.S. 2-year notes sale, direct 6.65% and indirect 82.09%
• February gold prices slip -$16.90 to settle at $2,628.20 an ounce.
• The dollar index (DXY) gained 0.45% above 108, hovering around a two-year high as investors continue to digest results of last week’s FOMC meeting which laid out a shallower interest rate cut path for 2025
• Natural gas for January delivery settles down 2.4% at $3.656/mmBtu, off the overnight 2-year high of $3.944/mmBtu.

• In Autos: Honda (HMC) and Nissan Motor Co. (NSANY) signed a basic agreement for merger talks and held a joint media briefing in Tokyo. Honda also said it will buy back as much as ¥1.1 trillion yen ($7 billion) of its own shares. https://tinyurl.com/yktnz98v ; NIO started sales of its most expensive car, priced from 788,000 yuan (of $108,000), as it seeks to double deliveries in 2025 and eventually become profitable. The 10-year-old automaker officially launched the flagship ET9 battery-electric sedan at its annual customer event Saturday in Guangzhou
• In Lodging & Leisure: PLYA shares rose after news that Hyatt Hotels (H) is in exclusive talks with the company on strategic options, including a takeover. Exclusivity talks until Feb 3rd, or a deal is struck, but there is no guarantee of any transaction happening (Hyatt has a 9.99% stake in Playa).
• In Online Travel: DESP shares jumped after Prosus entered into a definitive agreement to acquire the leading Latin American Online Travel Agency, for $19.50 per share, equating to a 33% premium to the closing share price as of December 20.

• In Aerospace & Defense: NASA selected four companies, including LUNR and VSAT to expand its Near Space Network’s commercial direct-to-Earth capabilities services. The cumulative maximum value of the contracts is $4.82 billion.

• In REITs: Raymond James upgraded shares of Timber REITs PCH and WY to Outperform from Market Perform deeply discounted valuations (nearly 30% versus current NAVs) and a steadily improving backdrop it sees forming for lumber price fundamentals. Raymond James points to an under-supplied U.S. housing market, expected to grow with lower mortgage rates and strong demand for rural and HBU (higher and better use) land sales as key drivers.
• In Insurance: MET said it agreed to buy PineBridge Investments, a global asset manager, from Pacific Century Group in a deal valued at up to $1.2 billion.

• BMY said that Sotyktu, which is already approved to treat plaque psoriasis, met the primary endpoint in two Phase 3 trials of patients with psoriatic arthritis; said phase 3 trials met primary endpoint with significant acr20 response.
• LLY said late Friday that the FDA approved Eli Lilly’s Zepbound for moderate-to-severe obstructive sleep apnea in adults with obesity; shares of RMD, INSP in sleep apnea sector fell in sympathy.
• NUVB said the FDA granted priority review to the new drug application for its investigative cancer therapy, taletrectinib.
• NVO shares of the obesity drugmaker rebound partially after falling -17.8% on Friday after headline results from REDEFINE 1, a phase 3 trial in the global REDEFINE program disappointed investors.
• TRAW said current topline data from a Phase 1 trial of tivoxavir marboxil as a treatment for HSN1 bird flu showed that a single dose of the treatment maintained plasma drug levels consistently above EC(90) for more than 23 days with higher dose dating coming.

• In Hardware: XRX to buy printer-maker Lexmark International from Ninestar Corporation, PAG Asia Capital, and Shanghai Shouda Investment Centre in a deal valued at $1.5B as deal is expected to close in the second half of 2025.
• In Semiconductors: QCOM shares rose after a U.S. federal jury in Delaware on Friday decided that QCOM properly licensed its CPUs, and did not breach Nuvia’s license agreement with ARM. ARM’s lawsuit against QCOM sought to prevent QCOM from paying the lower royalty rates that Nuvia contracted with ARM (QCOM acquired Nuvia in 2021). Overall strength in semis with big gains in NVDA, AMD, AVGO and INTC as well as equipment names.
• Last week, the SOX was down 4% while the NASDAQ fell -2%. Headlines last week were driven largely by CHIPS funding announcements as the Biden Administration announced funding for notables such as Samsung, TXN, and SK Hynix. In total, over $7B in funding was shelled out as the Biden team looks to finalize deals ahead of the presidency transition. In terms of earnings, MU reported November quarter results in which guidance fell well short of expectations.