MARKET WRAPS
Watch For:
Fed's Bostic speech at the Rotary Club of Atlanta
Today's Top Headlines/Must Reads:
- Wall Street Doubles Down on Bonds
- Investors Hope the Dogs of the Dow Can Find Their Bite
- Congressional Negotiators Reach Agreement on $1.6 Trillion
Government Spending Level for 2024
Opening Call:
Stock futures indicated a cautious session on Monday after a
plunge in Boeing shares and amid uncertainty over Federal Reserve
policy.
Boeing fell more than 8% premarket after the Federal Aviation
Administration ordered the temporary grounding of 171 Boeing 737
MAX 9 planes after a MAX 9 operated by Alaska Airlines lost a
section of its fuselage midair Friday evening.
Sentiment was further dampened by a sharp fall in China stocks -
the Hang Seng lost 1.9% to flirt with its lowest levels since
November 2022 - as concerns about draconian regulation and the
health of the world's second biggest economy lingered.
Meanwhile, the 10-year Treasury yield was trading at 4.049% as
investors priced the chances of at least a 25 basis point rate cut
at the Fed's March meeting at 62.8%, down from 88.5% a week
ago.
More Premarket Movers
Alaska Airlines and United Airlines said they were grounding
their MAX 9 jets. Alaska Air fell 6%, and United was down 2.7%.
Spirit fell more than 15%.
Merck is in advanced talks to acquire Harpoon Therapeutics for
about $700 million, Bloomberg reported, citing people familiar with
the matter. Merck is discussing paying roughly $23 a share for the
cancer drugmaker. Harpoon Therapeutics shares rose 107% to $21.98
in premarket trading, while Merck fell 0.2%.
Southwestern Energy and Chesapeake Energy are close to
announcing a merger , WSJ reported, citing people familiar with the
situation. Southwestern Energy rose 1.8% premarket. Chesapeake
Energy was down 3.5%.
Synopsys is in advanced talks to acquire Ansys for around $35
billion in a stock-and-cash deal, WSJ reported. Ansys was rising
0.5%. Synopsys shares traded flat.
Tesla fell 1% after WSJ published an article Saturday on alleged
illegal drug use by Elon Musk .
Friday's Post-Close Movers
Boot Barn Holdings expects earnings per share for the third
quarter to be at or above the high end of their guidance. Shares
rose 4.8%.
Inogen named Grégoire Ramade as chief commercial officer. Shares
rose 1.3%.
Smart for Life completed its audit for its planned acquisition
of a ecommerce nutraceuticals company with operations in North
America. Shares fell 2.2%.
Economic Insight
The dominant theme for currency markets this year will be
positioning for a shift to a global cycle of interest-rate cuts,
NatWest Markets said.
It thinks markets have priced in too few near-term rate cuts by
the European Central Bank, and too many for the Fed and the Bank of
England.
"Markets grabbed this [theme of expected rate cuts] with too
much enthusiasm in December and there's potential for this to
continue to be unwound as the market's rallying cry becomes 'too
much too soon'."
Forex:
The dollar traded steady, failing to benefit much from Friday's
jobs data, and looks at risk of falling as investors "remain
confident" that the Fed might cut interest rates in March,
UniCredit Research said.
Markets price too many interest-rate cuts for this year, but any
adjustment is likely to be stronger for ECB and BOE expectations
than it is for the Fed, UniCredit added.
"Such a scenario is likely to help EUR/USD and GBP/USD, although
we do not see big upside potential for these two pairs much above
1.10 and 1.28, respectively," UniCredit said.
Ravenscroft said the dollar should trend lower over 2024, while
the Japanese yen strengthens.
Dollar weakness is expected as the economy heads for a soft
patch and as the Fed pivots towards cutting interest rates, it
added.
The yen could potentially strengthen "materially" if the Bank of
Japan ends its yield-curve control policy as expected, Ravenscroft
added.
Energy:
Oil futures fell around 1% after Saudi Arabia slashed the price
for its flagship Arab Light crude to Asian customers, a barometer
for how the kingdom sees the demand outlook.
"The decrease was larger than the market was expecting," ING
said. "OSPs [official selling prices] for all grades into Europe,
the Med and the U.S. were also cut for February."
However, geopolitical tensions in the Middle East and Libya's
National Oil Corp. declaring force majeure at the Sharara oilfield
still provide support to the market due to heightened fears of
supply disruptions.
Coal
In what has been a tough start to the year for most miners, coal
has shone, Jefferies said.
"The coal equities came flying out of the gates in what was just
a continuation of the very strong performance of 2H23," Jefferies
said, adding that coal's clear outperformance might not last.
"We believe the macro backdrop should be supportive of prices of
other commodities as well in the near-term, especially if the U.S.
economy avoids rolling over into a recession."
Metals:
Base metals mostly dipped along with gold as worries around risk
assets like commodities continued to build.
BMI said it expects copper to average $8,800 a ton this year,
"on the back of a decline in U.S. dollar strength and supply
constraints."
However, it added that much of this depends on Chinese demand,
with a limited growth outlook globally expected to cap demand. BMI
also expected the Fed to start cutting interest rates from July,
but said there could be a cut as soon as March-April.
Capital Economics said greater-than-expected industrial metals
supply growth continues to push up stockpiles, especially for
aluminum.
Still, it reckons metals supply growth will be more modest this
year, while growth in demand will rebound as the energy transition
gathers pace.
"Accordingly, we expect base metals prices to fare better this
year," with copper prices likely to rise the most.
TODAY'S TOP HEADLINES
Shell Flags Earnings Hit of Up to $4.5 Billion From
Impairments
Shell said its fourth-quarter earnings took a hit of between
$2.5 billion and $4.5 billion in impairments that were offset by
significantly higher gas trading, while its overall production
volumes are on track to meet targets.
The London-based energy giant said Monday the impairments were
primarily driven by macro developments as well as portfolio
choices, including its Singapore chemicals and products assets,
which it has been trying to sell.
Nvidia's New China Pickle: Customers Don't Want Its Downgraded
Chips
SINGAPORE-After U.S. regulations barred Nvidia from selling its
high-performance artificial-intelligence chips to China in October,
the company's engineers quickly designed a new lineup to comply
with the tightened rules.
The U.S. tech company may have found some wiggle room, but it
faces a bigger problem: Chinese cloud companies-some of Nvidia's
biggest customers globally-aren't so keen on buying its
lower-powered AI chips.
Lawmakers Push to Defuse China's Dominance of Older-Generation
Chips
The Biden administration needs to take stronger action to stem
China's growing dominance in making older-generation microchips
that are essential across several U.S. industries, according to the
bipartisan leaders of a House of Representatives panel.
The lawmakers' call for new efforts, including potential
tariffs, is intended to counteract an overreliance on China for
less-advanced chips, according to a letter seen by The Wall Street
Journal. Republican Mike Gallagher of Wisconsin, chairman of the
House Select Committee on the Chinese Communist Party, and Raja
Krishnamoorthi of Illinois, the committee's ranking Democratic
member, wrote to President Biden's top business and trade officials
on Friday.
Saudis cut crude prices to all regions amid oil-price
weakness
Saudi Aramco on Sunday said it would cut crude prices to all
regions, including its largest market in Asia - a move that comes
amid weaker global oil prices and increased production by producers
outside the Organization of the Petroleum Exporting Countries.
In a notice, state producer Aramco SA:2222 said February prices
for various grades of Saudi crude, including its flagship Arab
light, in Asia would fall $2 a barrel versus the Oman/Dubai
regional benchmark from their January levels.
Biden Has a Second-Term Wish List. Congress Could Spoil His
Plans.
WASHINGTON-President Biden is planning to pursue an expansive
agenda if voters give him a second term, including resurrecting
proposals for cheaper child care and prescription drugs,
tuition-free community college, an assault-weapons ban and higher
taxes on rich Americans.
But if Democrats don't expand their numbers on Capitol Hill,
many of those plans could be dead on arrival in Congress, suffering
the same fate they faced in Biden's first term. That will raise the
stakes as Democrats fight to retake the House and hold their
majority in the Senate in order to enact many of Biden's biggest
plans.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing scheduled
Economic Calendar (ET):
Nothing scheduled
Stocks to Watch:
Humble & Fume Files for CCAA Protection; Seeks Sale and
Investment Solicitation Process for a Transaction That Will Enable
It to Emerge From Proceedings as a Going Concern; Anticipates
Having Sufficient Liquidity for Proceedings and Does Not Forecast a
Need for Additional Financing at This Time
Expected Major Events for Monday
00:01/UK: Dec KPMG and REC UK Report on Jobs
07:00/GER: Nov Foreign Trade
07:00/GER: Nov Manufacturing orders
07:00/GER: Nov Manufacturing turnover
15:00/US: Dec Employment Trends Index
20:00/US: Nov Consumer Credit
23:30/JPN: Dec CPI (Tokyo), CPI ex-Food (Tokyo)
23:30/JPN: Nov Household Spending
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
Accolade Inc (ACCD) is expected to report for 3Q.
Commercial Metals Co (CMC) is expected to report $1.43 for
1Q.
Commercial National Financial Corp (CNAF) is expected to report
for 4Q.
Ford Motor Company (F) is expected to report.
Jefferies Financial Group Inc (JEF) is expected to report $0.26
for 4Q.
Pure Cycle Corp (PCYO) is expected to report for 1Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Acadia Healthcare Raised to Overweight From Equal-Weight by
Stephens & Co.
agilon health Cut to Hold From Buy by Truist Securities
agilon health Cut to Neutral From Overweight by JP Morgan
Allogene Therapeutics Cut to Market Perform From Market
Outperform by JMP Securities
Allogene Therapeutics Cut to Neutral From Buy by Guggenheim
Ally Financial Inc Cut to Underperform From Market Perform by
Raymond James
APA Cut to Hold From Buy by Johnson Rice
AvalonBay Cut to Sector Weight From Overweight by Keybanc
Bally's Cut to Underweight From Equal-Weight by Wells Fargo
Bank OZK Cut to Underweight From Equal-Weight by Wells Fargo
Bank OZK Raised to Outperform From Market Perform by Raymond
James
Beyond Raised to Buy From Hold by Needham
Boot Barn Holdings Raised to Buy From Neutral by UBS
Booz Allen Hamilton Cut to Underweight From Equal-Weight by
Barclays
Boyd Gaming Cut to Hold From Buy by Stifel
Buckle Inc Cut to Sell From Neutral by UBS
Business First Bancshares Cut to Market Perform From Outperform
by Raymond James
CACI International Raised to Buy From Hold by Stifel
California Resources Cut to Neutral From Buy by B of A
Securities
Carnival Raised to Overweight From Equal-Weight by Wells
Fargo
Churchill Downs Cut to Equal-Weight From Overweight by Wells
Fargo
CNX Resources Raised to Neutral From Underperform by B of A
Securities
Cognizant Tech Solutions Cut to Sell From Hold by Societe
Generale
Columbia Sportswear Cut to Sell From Neutral by UBS
Coterra Energy Raised to Buy From Neutral by B of A
Securities
CrossFirst Bankshares Raised to Outperform From Market Perform
by Raymond James
Cyteir Therapeutics Cut to Underperform From Neutral by B of A
Securities
Cytokinetics Cut to Equal-Weight From Overweight by Morgan
Stanley
D&B Raised to Strong Buy From Outperform by Raymond
James
Definitive Healthcare Cut to Hold From Buy by Canaccord
Genuity
Diodes Cut to Hold From Buy by Truist Securities
DT Midstream Cut to Neutral From Buy by Mizuho
Dynatrace Raised to Buy From Hold by Jefferies
Eagle Bulk Shipping Cut to Neutral From Buy by BTIG
Elanco Animal Health Raised to Buy From Hold by Stifel
EOG Resources Cut to Neutral From Buy by B of A Securities
Erasca Cut to Neutral From Buy by B of A Securities
ESCO Technologies Cut to Neutral From Buy by Sidoti &
Co.
Farmers National Banc Raised to Outperform From Market Perform
by Raymond James
First Foundation Raised to Strong Buy From Outperform by Raymond
James
First Hawaiian Cut to Underweight From Equal-Weight by Wells
Fargo
First Horizon Raised to Strong Buy From Outperform by Raymond
James
Freshworks Raised to Buy From Hold by Jefferies
Genco Shipping & Trading Cut to Neutral From Buy by BTIG
German American Bancorp Raised to Outperform From Market Perform
by Raymond James
Gulfport Energy Cut to Neutral From Buy by B of A Securities
Hancock Whitney Cut to Hold From Buy by Truist Securities
Hilltop Holdings Raised to Market Perform From Underperform by
Raymond James
Huntington Ingalls Cut to Equal-Weight From Overweight by
Barclays
IBM Cut to Sell From Hold by Societe Generale
Independent Bank Group Raised to Outperform From Market Perform
by Raymond James
Instructure Raised to Buy From Hold by Jefferies
Leidos Holdings Raised to Overweight From Equal-Weight by
Barclays
Manpower Cut to Underperform From Outperform by Exane BNP
Paribas
McDonald's Cut to Perform From Outperform by Oppenheimer
Medical Properties Trust Cut to Sector Weight From Overweight by
Keybanc
Monarch Casino Cut to Hold From Buy by Stifel
MSCI Inc Cut to Market Perform From Outperform by Raymond
James
Natl Storage Affiliates Raised to Overweight From Sector Weight
by Keybanc
Northern Oil Cut to Underperform From Buy by B of A
Securities
Norwegian Cruise Line Cut to Equal-Weight From Overweight by
Wells Fargo
OceanFirst Raised to Outperform From Market Perform by Raymond
James
Okta Cut to Hold From Buy by Jefferies
Old Second Bancorp Cut to Outperform From Strong Buy by Raymond
James
Omnicom Raised to Outperform From Neutral by Macquarie
Palantir Technologies Cut to Underperform From Hold by
Jefferies
Papa John's Cut to Perform From Outperform by Oppenheimer
Paycom Software Cut to Hold From Buy by Jefferies
Paycor HCM Cut to Hold From Buy by Jefferies
Paylocity Holding Cut to Hold From Buy by Jefferies
PayPal Holdings Cut to Neutral From Buy by BTIG
Pennant Group Raised to Overweight From Equal-Weight by Stephens
& Co.
Physicians Realty Trust Cut to Sector Weight From Overweight by
Keybanc
Retail Opp Investment Raised to Overweight From Sector Weight by
Keybanc
Revolution Medicines Raised to Buy From Neutral by B of A
Securities
Rexford Industrial Realty Cut to Neutral From Outperform by
Baird
Seacoast Banking of FL Cut to Hold From Buy by Truist
Securities
SITE Centers Cut to Peer Perform From Outperform by Wolfe
Research
SouthState Cut to Market Perform From Outperform by Raymond
James
STAG Industrial Cut to Neutral From Outperform by Baird
Synovus Raised to Strong Buy From Outperform by Raymond
James
Texas Capital Bancshares Cut to Outperform From Strong Buy by
Raymond James
Triumph Group Raised to Overweight From Equal-Weight by
Barclays
United Rentals Cut to Underperform From Outperform by Exane BNP
Paribas
V2X Cut to Hold From Buy by Stifel
Vimeo Cut to Hold From Buy by Jefferies
WesBanco Raised to Outperform From Market Perform by Raymond
James
Yum Brands Raised to Outperform From Perform by Oppenheimer
Zions Bancorp Cut to Hold From Buy by Truist Securities
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
January 08, 2024 06:12 ET (11:12 GMT)
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