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MARKET WRAPS

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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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