US FINANCIAL MARKET

Stocks Fall as Bonds Gyrate After Hot CPI Data: Markets Wrap – Bloomberg, 1/11/2024

• Wall Street saw a volatile session, with stocks down and bonds whipsawing after hotter-than-anticipated inflation data tempered bets on a Federal Reserve rate cut in March.
• All around trading desks, the prevailing view is that the consumer price index wasn’t excellent but didn’t move the needle on the Fed’s course expectations.
• In other words, investors are mostly convinced officials are done hiking and will start easing policy in 2024 — even if that happens a bit later than markets are currently pricing.
• The S&P 500 trimmed its weekly advance, led by losses in megacaps like Tesla and Apple.
• Treasury 10-year yields changed little while remaining above 4%. Fed swaps priced in less monetary easing in 2024.
• The dollar rose. Bitcoin gained, with trading commencing on the first US exchange-traded funds that invest directly in the cryptocurrency.
• The S&P 500 fell 0.8% as of 11:48 a.m. New York time.
• The Nasdaq 100 fell 0.9%
• The Bloomberg Dollar Spot Index rose 0.1%
• The yield on 10-year Treasuries was little changed at 4.03%

Bitcoin Climbs to $49,000 as Trading of US Spot ETFs Commences – Bloomberg, 1/11/2024

• Bitcoin surged past $49,000 for the first time since December 2021, with trading commencing on the first US exchange-traded funds that invest directly in the biggest cryptocurrency.
• Before paring the gains, the token advanced as much as 6.7% to $49,021, the highest since December 2021, buoyed by the approval of spot Bitcoin ETFs by the US Securities and Exchange Commission after markets closed on Wednesday.
• All 11 ETFs have begun trading, and over $1.4 billion has already changed hands in just the first 45 minutes of trading.
• The Grayscale Bitcoin Trust has seen $634 million change hands, according to data compiled by Bloomberg.
• When the first Bitcoin futures fund began trading, it saw a turnover of almost $1 billion during the day. At the time, the futures fund debut was the second-most heavily traded fund on record.
• Shares of so-called crypto companies were mostly lower. Bitcoin proxy MicroStrategy was changed a little, while miners Marathon Digital and Riot Platforms were both negative. Coinbase Global fell 1.65%.

Bond Market Sticks With Rate-Cut Bets as Hot CPI Whipsaws Yields – Bloomberg, 1/11/2024

• Bond traders, confident that the Federal Reserve will start cutting interest rates in the coming months, largely shrugged off higher-than-anticipated inflation readings for December.
• While yields surged immediately after the consumer price index showed prices rose more than economists expected, the moves were short-lived. Traders expect the Fed to embark on a series of rate cuts totaling more than a full percentage point this year no later than May. Wagers on an earlier start were only briefly pared.
• The benchmark 10-year note’s yield changed slightly at around 4.03% after briefly topping 4.06%.
• Shorter-maturity yields, more sensitive to Fed moves, erased their increases.
• The two-year notes fell 4 basis points from Wednesday’s closing level.

After Big Tesla Bet, Hertz Selling One-Third of EV Fleet – Wall Street Journal, 1/11/2024

• Hertz is selling about a third of its global electric vehicle fleet, citing weaker demand for its electrified rentals.
• The car rental company said in a regulatory filing on Thursday that it would use part of the proceeds from selling about 20,000 EVs in the US to purchase internal-combustion-engine vehicles.
• The move represents another setback for the auto industry, which has been moving aggressively to boost sales of electric vehicles to meet stiffening environmental regulations worldwide. It also marks a reversal for Hertz, which in 2021 bet on EVs with a 100,000-vehicle order from Tesla and plans to stock its fleet with battery-powered vehicles better.
• Hertz said the sell-down would help it better balance supply against anticipated EV demand from customers. The company will cut out an outsize portion of lower-margin rentals and cut down on high expenses associated with EVs, Hertz said in the filing.

Tesla Boosts Pay for US Factory Workers That the UAW Wants to Unionize – Bloomberg, 1/11/2024

• Tesla notified workers at its California car plant of pay increases across its US factories, the latest bump by a nonunion automaker the United Auto Workers is trying to organize.
• All US production associates, material handlers, and quality inspectors are getting a “market adjustment pay increase” to kick off the new year, according to a flyer posted at Tesla’s facility in Fremont, California. The document viewed by Bloomberg News doesn’t say how much of a raise workers will get. Tesla’s senior director of human resources didn’t respond to questions.
• Tesla is joining the likes of Toyota Motor, Volkswagen, and Hyundai Motor in hiking pay at US plants after the UAW secured historic labor contracts last year for workers at Ford Motor, General Motors, and Stellantis. The union is now parlaying success at the bargaining table into a simultaneous organizing drive targeting Tesla and a dozen other manufacturers, looking to double the number of auto workers in its ranks.
• Higher pay for production workers will make the “game of pennies” Musk described on Tesla’s last earnings call more difficult.
• The company has about 140,000 employees globally, roughly half of which are in the US.

GM Misses EV Production Goal by Half While Production Woes Persist – Bloomberg, 1/11/2024

• General Motors aimed to produce 150,000 electric vehicles last year, with about half of them being new models built using its Ultium battery pack. The company missed its target by a mile.
• The automaker sold 75,000 EVs in 2023, with most of them being the Chevrolet Bolt compact and the slightly larger Bolt EUV, lower-priced models not using Ultium batteries that will soon be discontinued in their present form.
• The automakers’ Ultium-powered vehicles, like the Cadillac Lyriq, Chevy Blazer SUV, Silverado pickup, and Hummer EV, along with its BrightDrop fleet vans, accounted for a little less than 14,000 of the firm’s EV sales in 2023.
• GM has had persistent problems with the automation that assembled the Ultium battery cells from its joint venture LG Energy Solution into battery packs, and production has been slow to ramp up.
• As it works to clear the bottleneck, the automaker is also working to change sourcing for two EV parts so the Blazer and Lyriq will meet the qualifications for the full $7,500 EV tax credit from Joe Biden’s Inflation Reduction Act in the coming months.

Chesapeake, Southwestern to Merge as New Gas Behemoth – Wall Street Journal, 1/11/2024

• Chesapeake Energy and Southwestern Energy agreed to merge in an all-stock transaction valued at $7.4 billion, creating the largest natural gas producer in the US.
• The deal is essentially a bet that booming liquefied-natural-gas exports from the shores of Texas and Louisiana will allow drillers to sell more of their product to Europe, Asia, and other global markets craving American fuel.
• It also continues a wave of consolidation recently sweeping the US energy industry.
• With a market capitalization of more than $17 billion, the combined company would have a massive position in one of the US’s largest gas basins in the Northeast and a significant gas-producing region near the Gulf Coast.
• Huge terminals there have helped make the US the world’s top LNG exporter.
• The deal, at $6.69 a share, values Southwestern at a 2.9% discount to its closing market value of about $7.6 billion on Wednesday.
• The deal is by far the most significant US gas tie-up since at least 2017, according to energy analytics firm Enverus analysts.
• It comes less than three years after Chesapeake emerged from bankruptcy and set up the company to leapfrog rival EQT and become the country’s top natural gas fracker by production and market capitalization, according to analysts.

Google Trims Hundreds of Jobs as It Marshals Resources for AI – Wall Street Journal, 1/11/2024

• Google laid off hundreds of employees in several areas of the business on Wednesday, a sign of further cost reductions at the search giant as it continues to reverse a pandemic hiring spree.
• The cuts affected employees in divisions, including those working on Google’s Assistant program, hardware, and internal software tools, the company said. The exact size and scope of the layoffs couldn’t immediately be determined.
• A Google spokesman said the company was “responsibly investing in our company’s biggest priorities and the significant opportunities ahead.” The company said it is helping those affected to look for other roles internally.
• The co-founders of Fitbit, James Park and Eric Friedman, will also leave the company as part of the reorganization, Google said.

Biden Administration to Probe US Steel Deal Caught in 2024 Crosswinds – Wall Street Journal, 1/11/2024

• The Biden administration is preparing to dig into the deal to sell United States Steel to a Japanese company, with the fate of the faded industrial icon pushed into an election-year debate over how to rebuild American manufacturing might.
• Lawyers for US Steel and Nippon Steel have consulted several times with Treasury Department officials, beginning the morning the transaction was announced last month, people familiar with the matter said. The phone and email exchanges have focused on the process for filing with the Committee on Foreign Investment in the US. The people said that this Treasury-led interagency panel has the power to recommend the president block deals if they pose a national security threat.
• Once the companies file formal paperwork with Cfius, the Biden administration will have 90 days to review the transaction. Cfius reviews dozens of transactions yearly and rarely recommends the president reject a deal.
• The White House said the deal deserves “serious scrutiny” but has said little publicly about a transaction that could test President Biden’s plans to revitalize US manufacturing. Treasury Secretary Janet Yellen said this week that she didn’t want to “weigh in on the merits” of the agreement.

Amazon Misses EU Deadline for Concessions Over iRobot Deal – Wall Street Journal, 1/11/2024

• Amazon.com missed a Wednesday deadline to offer remedies to the European Union over its $1.7 billion acquisition of Roomba maker iRobot after the bloc had raised concerns that the deal could stifle competition in the robot vacuum cleaner market.
• The European Commission, the EU’s executive arm, made its concerns known in November after conducting an in-depth investigation into the deal outlined in August 2022. The bloc sent Amazon a statement of objections—a formal step to inform companies of objections raised against them.
• Under EU merger procedures, the deadline for companies to submit remedies typically falls on working day 65 of a Phase 2 investigation—an in-depth analysis of the merger’s effects on competition—meaning that Amazon had until Wednesday to do so.
• When companies submit remedies, these are reflected on the EU’s webpage for the deal. However, the webpage for the iRobot deal shows no remedies.

US ECONOMY & POLITICS

US Inflation Accelerates, Tempering Case for Fed to Cut Rates – Bloomberg, 1/11/2024

• US inflation accelerated in December as Americans paid more for housing and driving, challenging investor bets that the Federal Reserve will cut interest rates soon.
• According to government figures, • The consumer price index increased by 3.4% in the year through December, the most in three months. Every month, it also rose by more than forecast.
• The CPI excluding food and energy rose 0.3% from a month earlier in December.
• On an annual basis, the so-called core measure increased 3.9%.
• The Bureau of Labor Statistics figures showed shelter, electricity, and motor vehicle insurance increases.
• Used-car prices increased for a second month, defying expectations for a decline.
• Shelter prices, which comprise about a third of the overall CPI index and contributed to more than half of its advance, rose 0.5% in December.

All US Regions End 2023 With Inflation Below 4%  – Bloomberg, 1/11/2024

• The US inflation rate at the end of 2023 was highest in Pacific coastal states at 3.8%, according to Bureau of Labor Statistics data published Thursday.
• States in the South followed closely, with a 3.7% annual gain in consumer prices, while the rate ticked up to 2.3% in New England from 2% the previous month.
• Regional divergence narrowed, with a gap of 1.5 percentage points — the smallest in three years — separating the areas with the highest and lowest rates.
• The nationwide inflation rate rose to 3.4% from 3.1% in November.

Fed’s Williams Says Rates Are High Enough to Cool Inflation to Goal  – Bloomberg, 1/11/2024

• Federal Reserve Bank of New York President John Williams said monetary policy is now tight enough to guide inflation back to the Fed’s target, but suggested policymakers need more evidence of cooling inflation before cutting interest rates.
• “My base case is that the current restrictive stance of monetary policy will continue to restore balance and bring inflation back to our 2% longer-run goal,” Williams said Wednesday in White Plains, New York.
• The New York Fed chief said it would be natural for interest rates to decline as inflation falls — a sentiment expressed by several other policymakers in recent weeks — but the timing and speed of any cuts would depend on the path of inflation and the economy.
• The tone of Williams’ comments differed from those he made on December 15, when he said the near-term question for Fed officials was whether the policy was “sufficiently restrictive” to ensure inflation comes back to 2%. At the time, he also added that officials “aren’t really talking about rate cuts.”
• In his latest speech, Williams also pushed back on Dallas Fed President Lorie Logan’s assertion that policymakers should begin discussing slowing its balance-sheet runoff, a process known as quantitative tightening.
• He said bank reserves are little changed from levels seen before the central bank embarked on QT.

Chris Christie Drops Out of GOP Presidential Race – Wall Street Journal, 1/11/2024

• Chris Christie dropped out of the GOP presidential nomination race, giving a potential boost to Nikki Haley even as he declined to endorse another contender in the contest to dislodge front-runner Donald Trump.
• The former New Jersey governor’s abrupt exit comes as Republican voters will make their first selections in the Iowa caucuses on Monday, followed by the New Hampshire primary eight days later.
• Christie’s announcement injected drama and uncertainty into a race where the overarching question has been whether the GOP field would narrow quickly enough for anyone to mount a serious challenge to Trump.
• Christie struggled to gain momentum and has faced pressure from Republicans to clear the way for a stronger alternative to Trump, which in recent weeks has been Haley, the former South Carolina governor and ambassador to the United Nations.

He Was Hired by Fani Willis to Prosecute Trump. Now He’s Accused of an Affair With Her. – Wall Street Journal, 1/11/2024

• Allegations that Fulton County District Attorney Fani Willis engaged in an improper relationship with Nathan Wade, a special prosecutor on her team that brought racketeering charges against Donald Trump and others, are focusing attention on the Atlanta attorney with little previous criminal trial experience.
• There exists no record that Wade, a lawyer in private practice hired to lead the Trump case, has ever handled a felony trial in Georgia, according to a filing Monday by a co-defendant in the Trump case.
• The filing alleges that Wade and Willis have been in a continuing romantic relationship that predates her hiring him.
• While the filing didn’t provide evidence of a romantic relationship, it makes a bombshell claim: Willis hired her alleged boyfriend, and they both benefited financially from the arrangement.
• The motion on Monday stunned Atlanta’s tight-knit legal community and injected uncertainty into one of the highest-profile prosecutions in the country. Lawyers in Georgia say, at a minimum, that the allegations in the Monday filing raise questions about why Willis sought Wade’s services.
• Ashleigh Merchant, the lawyer who researched and wrote the filing, said sealed records from Wade’s divorce proceeding from his estranged wife would substantiate her allegations. According to Merchant’s motion, Wade billed the county for 24 hours of work on a single day in November 2021, shortly after getting the special prosecutor job.

EUROPE & WORLD

Iran Seizes Oil Tanker Linked to US Sanctions Dispute – Wall Street Journal, 1/11/2024

• The Iranian Navy said it had seized an oil tanker off the coast of Oman that has been at the center of a dispute between Iran and the US, raising the stakes amid a spate of attacks by Iran-backed Houthi rebels along Middle Eastern shipping routes and warnings of retaliation from Washington.
• The tanker was impounded “in retaliation for the theft of oil by the American regime,” the Iranian army said. Iranian state media showed Iranian commandos landing on the ship’s deck from a military helicopter.
• The seizure came as Secretary of State Antony Blinken wrapped up a weeklong tour of the region aimed at cooling tensions there, especially in the waters of the Middle East, where attacks have risen since the Israel-Hamas war began.
• The latest security incidents along shipping routes indicate that Blinken’s visit to the region, which concluded Thursday, fell short of one of its key goals: to dial down tensions inflamed by Israel’s war against Hamas in Gaza.
• The US is now considering targeting land-based Houthi positions in Yemen in response to the Red Sea attacks. The US and British military have already responded to the Houthi threat by shooting down missiles and drones fired by the group. The US Navy recently sank Houthi boats that had fired on commercial ships.

South Africa Accuses Israel of Genocide in UN Court – Wall Street Journal, 1/11/2024

• South Africa accused Israel of genocide before the International Court of Justice Thursday, contending that the Jewish state’s military response to Hamas attacks launched from Gaza violates the international treaty drafted in the aftermath of Nazi Germany’s systematic extermination of six million Jews.
• More than 150 countries have ratified the Genocide Convention, which allows a nation to file a complaint against another it believes is committing genocide even if, as in South Africa’s case, it has no direct connection to the conflict. South Africa argues that Israeli military operations, which the Gaza health ministry says have cost more than 23,000 Palestinian lives, are intended to wipe out Palestinians in Gaza as a distinct group.
• “Our opposition to the continuing slaughter of the people of Gaza has driven us as a country to approach the ICJ,” South African President Cyril Ramaphosa said on Wednesday. “As a people who once tasted the bitter fruits of dispossession, discrimination, racism, and state-sponsored violence, we are clear that we will stand on the right side of history.”
• Israeli officials say Hamas, which is classified as a terrorist organization by the US and the European Union, has exacerbated casualties by embedding its personnel in civilian areas and turning protected places such as hospitals and religious institutions into legitimate targets by using them for military purposes.
• In its legal filing, South Africa argues that “across Gaza, Israel has targeted the infrastructure and foundations of Palestinian life, deliberately creating conditions of life calculated to bring about the physical destruction of Palestinian people.”

Factmonster – TODAY in HISTORY

• Amelia Earhart became the first to fly solo from Hawaii to California. (1935)
• The first government report regarding the dangers of cigarette smoking was issued by the US Surgeon General, Luther Terry. (1964)
• The first al-Qaeda prisoners arrive at Guantanamo Bay, Cuba. (2002)
• Outgoing Illinois governor George Ryan cleared the state’s death row by commuting the sentences of 167 inmates. (2003)
• The Arab Spring movement began in Tunisia when demonstrators took to the streets to protest chronic unemployment and police brutality. (2011)

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. 

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Financial Group or LPL Financial.

Prior to making any investment decision, please consult your financial advisor regarding your specific situation.