European markets
European markets started the session in positive territory, albeit with modest gains. However, as the session progressed, indices displayed a mixed performance. The SMI outperformed following the SNB's larger-than-expected rate cut, while broader European equities turned more subdued ahead of the ECB's policy announcement. Autos and Energy/Basic Resources led the gains, driven by strong underlying commodity prices. Retail was the clear laggard, extending its prior session's weakness.
US pre-market
The Nasdaq surged past the 20,000 mark for the first time, driven by gains in Google and Nvidia. Meanwhile, the Dow dropped 99 points, continuing its losing streak, and the S&P 500 gained modestly. Tesla shares reached a record $424.77, propelled by market optimism surrounding its electric vehicle and AI prospects, along with favorable ties between Elon Musk and President-elect Trump. Quantum computing stocks also experienced a significant boost after Google introduced its "Willow" quantum chip, which sparked a 45% rise in Rigetti Computing's stock and lifted the Defiance Quantum ETF by 2%.
Fixed income markets
USTs are marginally weaker after an overnight selloff. Yields were steeper as the market awaited US PPI and ECB updates. Bunds softened, influenced by ECB anticipation and the SNB's unexpected policy move. French OATs and Gilts also edged lower, reflecting broader risk-off sentiment. The Italian Treasury successfully auctioned EUR 8.5 billion across maturities, meeting upper expectations.
Commodities
WTI and Brent saw marginal gains but pared earlier advances after the IEA downgraded 2024 demand growth forecasts. Prices remained near USD 70/bbl and USD 73/bbl, respectively. Gold held steady around USD 2,715/oz, under pressure from USD strength and rising yields, though benefitting from mixed risk sentiment. Copper remained range-bound above USD 9,200/MT, reflecting cautious market sentiment.
Currencies
The Dollar Index (DXY) traded steadily, staying within the 106.26-106.80 range. Market focus shifted to upcoming PPI data after the previous CPI report. EUR/USD hovered around the 1.05 level, awaiting the ECB's expected 25bps rate cut. The pair remained within a 1.0480-1.0539 range. JPY experienced mild depreciation after early APAC strength waned. The BoJ is reportedly leaning toward maintaining rates steady, pending consensus on next week’s decision. GBP held steady with limited UK-specific catalysts. GBP/USD tested a session high of 1.2787 before reverting to the prior range of 1.2714-1.2782. AUD outperformed following robust jobs data. Employment growth exceeded expectations, driving AUD/USD back above 0.64. CHF declined after the SNB surprised markets with a 50bps rate cut, coupled with a reiteration of intervention readiness.
Cryptocurrencies
Bitcoin remained above the 100k mark but traded slightly lower, reflecting minor consolidation after recent rallies.
Political and World News
- Israeli forces reportedly entered the Syria buffer zone temporarily. Hamas signaled potential acceptance of Israeli presence in Gaza post-ceasefire.
- Chinese President Xi reiterated a commitment to strengthening ties with Russia, emphasizing economic collaboration.
- President Biden issued clemency for over 1,500 people, marking the largest single-day clemency action in U.S. history.
- FBI Director Christopher Wray announced his resignation ahead of Trump’s inauguration, with Kash Patel set to replace him.
- U.S. regulators finalized a rule limiting overdraft fees to $5 for banks with over $10 billion in assets. While welcomed by consumers, the rule faces potential rollback under the incoming administration.
- Elon Musk became the first person to reach a net worth of $400 billion, driven by record valuations of Tesla and SpaceX.
- Prominent real estate figures Tal, Oren, and Alon Alexander face federal and state charges for alleged sex trafficking over a decade.
- A former TD Bank employee was charged with laundering $670 million for drug cartels, highlighting systemic compliance failures within the banking sector.
Economic Highlights
- Wholesale Price Index: The U.S. producer price index (PPI) increased by 0.4% in November, surpassing expectations, indicating sustained inflationary pressures. Core PPI matched forecasts at 0.2%.
- Deficit Expansion: The U.S. budget deficit climbed to $366.8 billion in November, a 17% increase year-over-year. The Treasury forecasts $1.2 trillion in annual interest costs as the national debt hits $36.1 trillion.
- Jobless Claims Rise: Initial jobless claims totaled 242,000 for the week ending December 7, a 17,000 increase week-over-week, signaling potential headwinds in the labor market.
- European Rate Cuts: The ECB reduced its key interest rate by 0.25% to 3%, marking its fourth rate cut in 2024. The Swiss National Bank made a larger-than-expected 0.50% cut to 0.5%.
- India's Inflation Eases: India's inflation dropped to 5.48% in November, raising expectations of a 0.25% interest rate cut in early 2025 under the new RBI governor.
Corporate Highlights
- Tesla Hits Record High: Tesla shares closed at $424.77, marking a 6% daily increase and a 71% year-to-date gain. The stock's momentum is linked to optimism about the company's EV and AI advancements, as well as Elon Musk's relationship with President-elect Trump.
- Quantum Stocks Surge: The unveiling of Google's Willow quantum chip has revitalized quantum computing stocks. Rigetti Computing saw a 45% jump, while the Defiance Quantum ETF (QTUM) rose by 2%. Companies like D-Wave and MicroStrategy have also enjoyed massive year-to-date gains of 355% and 538%, respectively.
- SCOTUS Clears Nvidia Case: The Supreme Court allowed a securities fraud lawsuit against Nvidia to proceed, concerning allegations the company misrepresented its reliance on cryptocurrency mining for revenue.
- Walmart's Fintech Growth: Walmart's financial services startup, One, reached a valuation of $2.5 billion after raising $300 million in funding. The company plans to leverage Walmart’s expansive customer and employee network to expand its services.
- SpaceX Valuation Hits $350 Billion: SpaceX's valuation soared following a $1.25 billion secondary share sale, driven by its dominance in the satellite launch market and Starlink's growth.
- Google's New AI Tool: Google launched "Deep Research," an advanced AI tool for its Gemini subscribers, allowing users to generate detailed reports through comprehensive data mining.
- Eli Lilly Collaboration: Ro, a health-tech startup, partnered with Eli Lilly to offer the weight-loss drug Zepbound through its platform at significantly lower prices than traditional options.
- Hershey's Buyout Rejected: Hershey's controlling trust dismissed Mondelez's takeover bid as too low. Hershey’s stock dropped 3.3%, while Mondelez rose 3.5%. Mondelez announced plans for smaller acquisitions and a $9 billion stock buyback program.
- Albertsons and Kroger Dispute: Albertsons terminated its $25 billion merger with Kroger after court opposition, suing Kroger for breach of contract. While Kroger shares rose 2%, Albertsons fell by 1.5%.
- ReNew Energy's Go-Private Offer: ReNew Energy received a $2.82 billion buyout proposal, representing an 11.5% premium. The stock surged 17.7% in response.
Recent Earnings Recap
- Adobe (ADBE) reported robust results with quarterly revenue reaching $5.61 billion, reflecting an 11.05% year-over-year growth, surpassing expectations by $66 million. The company also achieved earnings per share (EPS) of $4.81, a 12.65% increase from the previous year, exceeding forecasts by $0.15. This performance highlights Adobe's continued strength in its subscription-based digital media and cloud services.
- Nordson (NDSN) delivered solid quarterly performance with revenue climbing to $744.48 million, a 3.5% year-over-year increase, surpassing expectations by $7.69 million. EPS rose significantly to $2.78, marking a 13.01% year-over-year improvement, beating estimates by $0.19, signaling operational efficiency and steady demand across its markets.
- Ciena (CIEN) posted mixed results for the quarter. While revenue slightly declined by 0.44% year-over-year to $1.12 billion, it still managed to beat expectations by $24 million. However, EPS dropped 28% year-over-year to $0.54, falling short of estimates by $0.11, reflecting pressure on margins despite stable top-line performance.
Upcoming Earnings Outlook
- Broadcom (AVGO) is set to report after the market close today. Analysts project revenue of $14.09 billion, representing a significant 51.59% year-over-year growth, with EPS estimated at $1.38, a 24.32% increase. Investors will focus on updates about its cloud and semiconductor business segments.
- Costco (COST) will also report later today. Analysts forecast revenue of $62.08 billion, reflecting a 7.41% year-over-year rise, alongside EPS expectations of $3.79, an 8.91% increase. Key attention will be on membership growth and holiday sales outlook.
- RH (RH) is expected to announce earnings with analysts predicting revenue of $813.61 million, an 8.3% year-over-year increase, and EPS of $2.67. Insights into the company's luxury furniture sales trends will be closely monitored.
- GE Vernova (GEV) and Solventum (SOLV) are slated to release earnings on Tuesday. GE Vernova is anticipated to report $10.68 billion in revenue, while Solventum is expected to deliver $2.06 billion.
- Micron Technology (MU) will report Wednesday, with analysts estimating $8.55 billion in revenue, an impressive 80.91% year-over-year growth, alongside EPS of $1.76. The focus will be on-demand recovery in memory chips.
- Lennar (LEN): Projected revenue of $10.08 billion (-8.1% YoY) and EPS of $4.26 (-17.6% YoY).
- General Mills (GIS): Expected revenue of $5.13 billion (-0.18% YoY) and EPS of $1.22 (-2.4% YoY).
- Jabil (JBL): Anticipated revenue of $6.61 billion (-21.19% YoY) and EPS of $1.83 (-29.62% YoY).
- Birkenstock Holding (BIRK): Forecasted revenue of $439.27 million (+7.75% YoY) and EPS of $0.26 (+85.71% YoY).
IPO Activity
Confirmed Today:
- ServiceTitan (TTAN): A cloud-based software provider reported $653.84 million in trailing twelve-month (TTM) revenue, growing 31.34% YoY.
Estimated Friday, Dec. 13:
- Metros Development Co., Ltd. (MTRS): A Japanese real estate consulting company with $489.07 million in TTM revenue and 52.84% YoY growth.
- Mountain Lake Acquisition Corp. (MLAC): A Nevada-based blank check company.
- Roman DBDR Acquisition Corp. II (DRDB): Focused on cybersecurity, AI, and fintech sectors.
- Anteris Technologies Global Corp. (AVR): A cardiac devices manufacturer with $2.71 million in TTM revenue.
- New Century Logistics (BVI) Limited (NCEW): A Hong Kong-based freight forwarding provider with $52.15 million in TTM revenue, down 4.69% YoY.
- NetClass Technology Inc (NTCL): A Chinese education software company with $11.09 million in TTM revenue, up 19.79% YoY.
Market Outlook and Future Events
Investors will closely monitor developments in inflation and interest rate policy, with wholesale inflation data and jobless claims suggesting mixed economic signals. Corporate earnings, particularly from Adobe, will provide further insights into business trends as markets anticipate the Fed's next move. https://arfa.capital/markets/market-update/global-market-highlights-december-12-2024/
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