Closing Recap

Friday, December 29, 2023

U.S. stocks spent most of the final trading day of 2023 in negative territory, erasing overnight gains as many of the eleven S&P sectors finished down on the day, but still recorded big gains on the year. The Nasdaq Composite ended the year higher by +44%, the S&P 500 +24.5%, the Dow Jones Industrials +13.75%, and the Russell 2000 +16.8%, while semis (SOX) up 66% YTD. It was the year of “buying the dip” as every major support level for major averages was supported and stocks rallied in the final two months of the year on rate cut expectations. So, with the S&P 500 index (SPX) finishing the week higher for a 9^th consecutive week, what are some of the stats going forward? @SethCL noted that the “last time it was up 9 consecutive weeks was 2004 and before that two 9-week win streaks ’89 and ’94, before that a 12-week win streak ’85. Now next year returns: ’86 = 14%, ’90 = -4.5%, ’95 = 34%, ’05 = 3%. The Nasdaq Composite also posted a 9-week win streak today and Bespoke invest notes the last time both the S&P and Nasdaq finished with 9-week winning weeks together was late 1985. The S&P 500 failed to close at all-time highs to end the year despite coming within 3-points yesterday, a feat that has been done just 8 times ever with years 2020, 2013, 1999, 1991, 1963, 1958, 1954, and 1928 the other times (as per CNBC).

While the media notes the big jump in small caps helping lead the December rally, it has still been the mage cap names (Mag7) names that have done the bulk of the heavy lifting for major averages this year. Names like AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA boosted XLK (+55% YTD), XLC (+52%), and XLY (+39% YTD) to biggest sector gains of 2023. The combined weighting of the top two holdings in the S&P 500 is 14.7% between AAPL/MSFT. Charlie Bilello notes that since 1980, the largest combined weightings of the top two holders prior were: 10.9% in the mid ’80s between IBM/T, then 9.1% in late ’90s between MSFT/GE and 7.7% between XOM/WMT in mid-2000’s. Smallcaps have been leaders in Q4, as the IWM was down roughly (-75) for the year at the end of October but ends higher YTD by about +16.5%. Asian markets close out the year much weaker than the US, as the Shanghai Composite was down 3.7% for 2023 amid economic growth concerns and worries about the heavily indebted property sector. Hong Kong’s stock market has fared even worse, with the Hang Seng down 13.8%.

• Gold prices slumped -$11.70 to settle at $2,071.80 an ounce on Friday, ending the year higher by around 13%. Prices rose to record highs this month of $2,135.40 an ounce amid hopes the Fed could cut interest rates as soon as March. Fundamentals of a dovish pivot in U.S. interest rates, continued geopolitical risk, and central bank buying are expected to support the precious metals market into 2024. Spot palladium braces for 38% drop in 2023, its worst year since 2008, spot platinum on track to fall over 7% in 2023 and spot silver poised for 0.6% fall in 2023.

• In Airline: the sector enjoyed their first yearly gain since 2019, dealing with a domestic slowdown and geopolitical issues – DAL +23% YTD, AAL +8.3% UAL +10% YTD, while discount names fell LUV -13.8% SAVE -9.5% JBLU -13%.
• In ride hailing, UBER downgraded from Buy to Neutral at Nomura while up tgt to $62 saying investors have rewarded the company for profitably scaling its business model, and, earlier this year, consolidating its market position in the ridesharing market in US/Canada – but thinks most of the catalysts for the stock are already priced in, and Uber is fairly valued at the current price. Nomura downgraded LYFT from Buy to Reduce with $13 tgt as sees limited room for Lyft to increase take-rates further as driver opex growth outpaces driver earnings growth and it does not see any near-term pathways for Lyft to address the drag on earnings from its bike sharing business.

• BSX rises after saying late Thursday they anticipate FDA approval of FARAPULSE PFE System in Q1 (earlier than Wall Street views of 2H’24).
• FBIO direct offering of 3.3M shares/warrants to buy up at offering price of $3.33 per share.
• MYMD rises on positive mid-stage trial data for experimental drug to treat a muscle loss disorder.
• UNH said it will record a charge of about $7 billion, as it has agreed to sell its Brazil operations to a private investor.
• Drugmakers including PFE, SNY, and TAK 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 – Reuters.
• Rough year for managed care: as shares of CVS, HUM, CI, ELV all lost between 9% and 15% on the year amid an increase in medical costs due to a higher demand for elective surgeries and have also indicated higher medical costs to likely remain elevated next year. UNH posted its 1^st down year in fourteen and HUM (-9% YTD) and ELV (-11% YTD) both snapped a decade-long winning streak as per Reuters.

• BGC rises after saying expects to report double-digit revenue and pre-tax adjusted earnings growth for both Q4 and full year 2023.
• JBL lowered Q2 revenue guidance to $6.6B-$7.2B from prior $7.0B-$7.6B view because the deal to sell its mobility business closed a month earlier than expected; guided Q2 adj EPS to $1.43-$1.83 from $1.73- $2.13.
• JD said it won $141 million in damages in a years-long anti-monopoly case filed against its larger e-commerce rival BABA as well as Zhejiang Tmall Network, and Zhejiang Tmall Technology which were found to have abused market dominance and engaged in monopolistic practices.
• NVDA to launch slower version of its gaming chip in China to comply with U.S. export controls. A product page on Nvidia’s website for Chinese consumers shows that the new Nvidia RTX 4090D has 11% fewer processing cores than versions sold outside of China.