Closing Recap

Tuesday, December 26, 2023

US equity futures offered a small post-holiday gift of overnight gains and, with no significant economic news and little upgrade/downgrade activity from brokers, the market held gains through the morning. Mid-morning breadth was about 2.3:1 in favor of advancers, while all but one S&P sector ETFs showed gains. Energy, Utilities, and Industrials were leading gainers with Health Care the only sector ETF in the red. Small caps also participated in the morning rally, with the IWM making multiple attempts to break through the daily resistance pivot at $202.80.

In interesting data, @bespokeinvest passed along a Heatmap survey indicating more people are more likely to drive a Tesla now because of Elon Musk, a reversal from the February 2023 survey indicating more people were less likely to drive a Tesla because of Elon Musk. Separately, @KobeissiLetter continues to highlight US home prices, noting prices jumped again last month for the 9th consecutive increase, while the yr/yr growth rate is the highest since December 2022. The takeaway is affordability continues to get worse despite recent declines in 30-year mortgage rates. On a more positive note, @RyanDetrick highlights both employee comp and disposable income are running above PCE (inflation). So, while goods do cost more, the benefits in consumers’ pockets have helped the economy avoid recession thus far. Lastly, another from Bespoke, noting US equity valuations reflect higher multiples on the ten largest stocks but a fade in multiples the further down you move in market cap. Many eyes will be on which, if either, end of the spectrum moves back toward the center in 2024.

Into the final hour of trading, indices held gains and breadth expanded to better than 3:1 in favor of advancers. All S&P sector ETFs were in the green, as Health Care (XLV, +0.25%) joined the rest on the plus side. Leaders were Energy (XLE, +1.15%), Real Estate (XLRE, +0.83%) and Utilities (XLU (+0.81%). Small caps outperformed, with IWM +1.4% versus SPY +0.45% and QQQ +0.60%. Value and growth also enjoyed gains, with value the outperformer. The Russell 1000 Value climbed +0.7%, while its Growth counterpart rose 0.34%.

• WTI February crude futures gained $2.01/bbl, or +2.73%, to settle at $75.57. The move higher came despite a recent death cross, the first “real” one since early 2020. There was a brief cross in 2022, but most technical analysts dismissed it because the 200dma was rising at the time. Brent also gained +2.00/bbl, or +2.53%, to $81.07 as Red Sea attacks and tensions created a ripple effect and supply concerns. Note, of course, this is a quiet week, and many traders continue to take a cautious stance on economic risks in 2024.

• MANU shares rose as they agreed to sell a 25% stake to billionaire Jim Ratcliffe for $1.3B; Ratcliffe will pay $33 a share for the 25% stake in the soccer club, according to a statement on Sunday. The sale prices values Manchester United (MANU) at about $5.4 billion http://tinyurl.com/x3ukc24 .
• BMY proposes to acquire RYZB in deal valued at about $4.1B, with holders to receive $62.50 per share in cash, (proposed deal for $3.6B net of estimated cash acquired) http://tinyurl.com/3pkc7whh .
• MIST shares tumbled after saying the U.S. FDA refused to review its marketing application for a nasal spray in the treatment of paroxysmal supraventricular tachycardia, a type of abnormal heart rhythm.
• SSYS shares rose after NNDM announced that it has submitted a preliminary all cash proposal to the Board of Directors of Stratasys to purchase all the outstanding shares of Stratasys that it does not currently own for $16.50 per share in cash, with an ability to increase its price subject to due diligence. http://tinyurl.com/y8trx9jm .
• UPS was downgraded to Neutral with PT $155 at Daiwa.
• US listed China stocks saw early strength (TCEHY, NTES, WB, etc.) after China softens its stance on Gaming; China’s press and publications authority has approved 105 new online games, saying it fully supports the industry after proposed curbs caused massive losses last week for investors in major games makers.