US FINANCIAL MARKET

Stocks Rally, Yields Fall on Fed’s Mixed Messages: Markets Wrap – Bloomberg, 12/19/2023

• US equities legged higher, and yields fell after the latest signals from a Federal Reserve policymaker as traders wagered the central bank is on track to engineer a soft landing and start cutting rates.
• The Nasdaq 100 climbed 0.3% after touching an all-time high.
• The tech-heavy index set a closing record Monday for the second consecutive session.
• The S&P 500 added 0.4%, with the underlying index approaching an all-time peak after Federal Reserve Bank of Richmond President Thomas Barkin suggested the US central bank would cut interest rates if recent progress on inflation continues.
• Meanwhile, new US home construction surged in November signaling builders continue to benefit from a limited supply of existing home sales.
• Residential starts jumped 14.8% last month to a 1.56 million annualized rate, government data showed Tuesday.
• Yields on the US 10-year bond, a proxy for mortgage rates, slipped to around 3.91% while the rate on the policy-sensitive two-year hovered around 4.44%.
• Still, other policymakers in the US and Europe have tried to push back against such bets.
• Chicago Fed President Austan Goolsbee and the Cleveland Fed’s Loretta Mester suggested Monday that the expectations were premature.
• Atlanta Fed President Raphael Bostic will speak later on Tuesday.
• Japan’s central bank has been an outlier, having failed to even start tightening policy, while many peers appear set to wind down rate-hike cycles.
• Investors are awaiting this week’s data readouts including durable goods orders, the final third-quarter gross domestic product estimate, and personal consumption expenditures — the Fed’s preferred measure of inflation.
• Oil prices are trading near their highest close in two weeks as more companies shun the Red Sea after a spike in vessel attacks along the key shipping conduit.
• West Texas Intermediate crude rose 1% to $73.20 a barrel.
• The Stoxx Europe 600 rose 0.3%.
• The Bloomberg Dollar Spot Index fell 0.3%.

FuelCell’s stock drops after revenue falls below expectations – Market Watch, 12/19/2023

• Shares of FuelCell Energy were knocked lower Tuesday after the fuel cell technology company reported fiscal fourth-quarter revenue that fell more than expected, as product revenue tanked more than 50%.
• Revenue dropped 42.7% to $22.5 million to miss the FactSet consensus of $25.0 million, as product revenue tanked 56.3% to $10.5 million.
• Among FuelCell’s other business segments, service agreements revenue was negative $829,000, compared with negative $1.1 million a year ago, amid higher future-cost estimates.
• Generation revenue declined 2.7% to $8.5 million and advanced technologies revenue dropped 43.1% to $4.3 million.
• Net losses for the quarter to Oct. 31 narrowed to $31.2 million, or 7 cents a share, from $43.3 million, or 11 cents a share, in the same period a year ago.
• That beat the FactSet consensus for a per-share loss of 8 cents.
• Backlog decreased 5.7% to $1.03 billion.
• The company ended the quarter with total cash and short-term investments of $403.3 million, down from $414 million at the end of the third quarter.

Amazon in Talks to Invest in Diamond Sports – Wall Street Journal, 12/19/2023

• Amazon is in talks to invest in the biggest regional sports programmer, a move that would advance the e-commerce giant’s aggressive push into sports content as it takes on streaming rivals like Disney and Netflix.
• Diamond Sports Group, which carries the games of more than 40 major sports teams across the country and filed for bankruptcy earlier this year, is actively negotiating with Amazon about a strategic investment and a multiyear streaming partnership, according to people familiar with the matter.
• If an agreement is reached, Amazon’s Prime Video platform will eventually become the streaming home for Diamond’s games.
• Diamond, which has the local rights to about half the teams in Major League Baseball and the National Basketball Association and about a third of the National Hockey League teams, would continue operating its cable networks through its existing partnerships.
• It isn’t clear how much money Amazon is planning to invest or at what valuation.

Google to Pay $700 Million in Play Store Settlement – Wall Street Journal, 12/19/2023

• Google parent Alphabet agreed to pay $700 million and make certain changes to its app store, settling one of several antitrust challenges to the search-engine company.
• The settlement resolves the claim by a group of states that Google operated its app store, Google Play, as an illegal monopoly, allegedly stifling competition from other app distributors on devices using the Google-owned Android operating system.
• Alphabet will contribute $630 million to a settlement fund distributed to benefit consumers, per a court-approved plan, and will pay $70 million into a fund used by the states, the company said.
• Developers will also now be able to use an alternative billing system to Google Play’s billing option, which the company said it has been piloting for over a year.
• The settlement also requires that Alphabet simplify the process of downloading apps directly from developers’ websites without using an online store such as Google Play.

Walmart Expands Buy Now, Pay Later Options in Store During Peak Holiday Shopping – Bloomberg, 12/19/2023

• Shoppers at more than 4,500 Walmart stores now have the option to pay overtime for their holiday purchases during in-store self-checkout, part of an expanded partnership with Affirm Holdings.
• “Recent Affirm research revealed that more than half of Americans (54%) are looking for retailers to offer a buy now, pay later option at checkout,” Pat Suh, Affirm’s senior vice president of revenue, said in a statement.
• “Moreover, we’ve found that 76% of consumers would either delay or not make a purchase without Affirm.”

Kenvue Stock Jumps After Court Ruling in Tylenol Case – Wall Street Journal, 12/19/2023

• Kenvue shares rose around after the Tylenol maker got a favorable court ruling in a product-liability case.
• A New York federal judge on Monday granted a motion from the defense to exclude opinions from the plaintiff’s expert witnesses on whether in-utero exposure to Tylenol could cause children to develop autism spectrum disorder or attention deficit hyperactivity disorder.

Tesla to raise pay for hourly Nevada Gigafactory workers in January — move could stave off union interest – CNBC, 12/19/2023

• Tesla has informed workers at its battery factory in Sparks, Nevada, that some set-rate hourly workers there will see pay increases of around 10% starting in early January 2024.
• According to internal materials seen by CNBC, and workers at the plant who were informed of “cost of living adjustments,” Tesla will bump hourly workers from $20 to $22 an hour on the low end, and from $30.65 up to $34.50 an hour on the high end.
• It’s also streamlining some levels, so that several levels of workers making between $26.20 and $30.65 an hour today will be adjusted to $34.50 an hour, for instance.
• The adjustments also represent a 10% or greater raise for most hourly workers, adding anywhere from $2 to $8.30 an hour to their pay.

Trevor Milton Gets Four Years in Prison for Deceptions on Zero-Emission Trucks – Wall Street Journal, 12/19/2023

• A judge sentenced Trevor Milton on Monday to four years in prison for defrauding investors in Nikola, the electric-truck company he founded.
• The exuberant Milton, 41 years old, was convicted on several fraud charges last year.
• Witnesses testified that he lied to ordinary investors about nearly every aspect of Nikola.
• Milton said the company’s zero-emission truck prototype was drivable when it wasn’t.
• He said Nikola was equipped to produce the necessary hydrogen to power the trucks when it wasn’t.
• And he boasted that the company had a long list of sales orders, many to companies that didn’t exist.
• U.S. District Judge Edgardo Ramos, who also ordered Milton to pay a $1 million fine and forfeit a property in Utah, said real people were hurt by his actions.
• The judge said that Milton would remain out on bail while he appealed his conviction.

US ECONOMY & POLITICS

US Housing Starts Unexpectedly Rise to a Six-Month High – Bloomberg, 12/19/2023

• US new-home construction unexpectedly surged in November to a six-month high, benefiting from a dearth of existing houses on the market and suggesting the crunch in residential real estate is easing.
• Residential starts increased 14.8% last month to a 1.56 million annualized rate, government data showed Tuesday.
• The median forecast in a Bloomberg survey of economists called for a 1.36 million pace.
• Construction of single-family houses jumped 18% to the highest level since April 2022, while start of multifamily projects increased 6.9%.
• Permit applications, an indicator of future construction, decreased to a 1.46 million pace due to a drop in multifamily projects.
• The average rate on a 30-year fixed mortgage has dropped back below 7% for the first time since August, according to the latest data from Freddie Mac.
• All regions reported increased housing starts in November, including a 16.3% jump in the South.
• New construction doubled in the Northeast and rose 2.1% in the West and 1.4% in the Midwest.
• The number of homes completed rose 5% to a 1.45 million pace.
• The level of one-family properties under construction also increased.

Fed’s Barkin Suggests Rate Cuts Possible If Inflation Keeps Falling – Bloomberg, 12/19/2023

• Federal Reserve Bank of Richmond President Thomas Barkin suggested the US central bank would cut interest rates if recent progress on inflation continues but said he’s still looking for conviction that inflation is heading back to the Fed’s 2% target.
• “If you’re going to assume that inflation comes down nicely, of course, we would respond appropriately,” Barkin said in a broadcast interview with Yahoo Finance.
• Barkin, who will vote on policy decisions next year, said he’s looking for “consistency and breadth” in inflation data over the next several months, and added that he sees demand for labor and inflation normalizing.
• “I don’t assume what the data is going to do,” he said.
• “I’ve got a perspective that inflation is a little stubborner than the average person is in there. And I hope I am wrong on that.”

Pentagon Eyes Microwave Weapons to Tackle Drone Threat – Wall Street Journal, 12/19/2023

• Pentagon planners worried about the increasing threat from drones have looked at everything from mesh nets and missiles to cannons and lasers, but now a once highly classified technology is attracting more attention and funding.
• High-power microwave devices that can disrupt or even fry the electronics of aerial threats—such as drones and missiles—are moving to the forefront of defense strategies after years of development.
• In theory, microwave systems offer the ability to keep firing for as long as they have power, which could help take down a swarm of drones.
• The stakes for developing such technologies are high: The relatively low cost of small drones has increasingly made them the weapon of choice for less sophisticated armies, terrorists and militant groups trying to overwhelm or slip through defense systems.

New Law Gives Texas Power to Arrest, Deport Migrants – Wall Street Journal, 12/19/2023

• Texas is set to begin arresting and potentially deporting migrants under a bill Republican Gov. Greg Abbott signed into law Monday, escalating the state’s conflict with the federal government over the authority of the U.S. border.
• The measure makes it a state crime for anyone without authorization to be in the U.S. to cross into Texas outside of a designated port of entry.
• It is already illegal under federal law for anyone to cross into the U.S. between ports of entry.
• The law, which takes effect in March, will allow state and local police to arrest people suspected of such crossings into the state, if they are also suspected of being in the country illegally.
• The law, which takes effect in March and which Abbott pushed during a special legislative session last month, will allow state and local police to arrest people suspected of such crossings, if they are also suspected of being in the country illegally.
• Local judges could then order the removal of migrants who prefer that to prosecution.

Fed Official Says Rate Cuts Could Be Needed Next Year to Prevent Overtightening – Wall Street Journal, 12/19/2023

• A Federal Reserve official said it is appropriate for the central bank to begin looking ahead to lowering interest rates in 2024 because of how inflation has improved this year.
• San Francisco Fed President Mary Daly said her outlook for interest rates and inflation was “very close” to the median of projections from 19 Fed officials last week.
• Most of them penciled in at least three rate cuts next year amid a faster decline in inflation than they anticipated.
• “We’re acknowledging progress when progress is there,” Daly said in an interview Monday.
• Daly said that if inflation continues its steady decline of recent months, the Fed’s benchmark interest rate “will still be quite restrictive even if we [cut rates] three times next year.”
• Daly said she is watching the effect that restrictive policy has on the labor market.
• When the unemployment rate starts to rise, it tends to go up by a lot and not by only a little bit, Daly said.
• As a result, “we have to be forward-looking and make sure that we don’t give people price stability but take away jobs.”
• “There is more work to do, and at this point, that work includes not only focusing on bringing inflation down to 2%…but also recognizing that we want to continue to do this gently, with as few disruptions to the labor market as possible,” she said.

EUROPE & WORLD

BOJ Keeps Traders Guessing on Negative Rate as Yen Rally Stalls – Bloomberg, 12/19/2023

• Bank of Japan Governor Kazuo Ueda kept investors in the dark on when he’ll call time on the world’s last negative interest rate, following a stand-pat policy decision that pared some of the yen’s recent gains.
• Ueda appeared determined to keep his options open at a press briefing after the central bank’s two-day meeting.
• He didn’t rule out policy normalization at any of the gatherings in the coming months while insisting he first needs to see more evidence that the BOJ will achieve its price stability target.
• He added that policymakers were unlikely to give an explicit warning of an impending rate hike, largely discounting the kind of telegraphing sometimes employed by the Federal Reserve and the European Central Bank.
• “There isn’t much likelihood of us suddenly announcing that we’ll raise rates a month in advance,” Ueda said, having earlier remarked that surprises couldn’t always be avoided.
• For speculators looking for more concrete hints of a January move, the decision and comments offered little to support that view.

TSMC Chair Steps Down in Power Shift at Global Chip Linchpin – Bloomberg, 12/19/2023

• Taiwan Semiconductor Manufacturing Chairman Mark Liu plans to retire in 2024 and cede his role to Chief Executive Officer C.C. Wei, handing the reins of the world’s most important chipmaker to a fellow engineering maven.
• The reshuffle means Wei is set to become one of the most influential executives in technology, steering Apple’s and Nvidia’s main chipmaking partner while fielding requests for manufacturing investment from governments around the world.

Israel keeps pounding Gaza, Houthis vow more Red Sea attacks – Reuters, 12/19/2023

• Israel kept pounding the shattered Gaza Strip on Tuesday while Yemen’s pro-Palestinian Houthi movement vowed to defy a U.S.-led naval mission and keep hitting Israeli targets in the Red Sea.
• The conflict has spread beyond Hamas-ruled Gaza, including into the Red Sea where Iran-aligned Houthi forces have been attacking vessels with missiles and drones.
• That has prompted the creation of a multinational naval operation to protect commerce in the area, but the Houthis said they would carry on anyway, possibly with a sea operation every 12 hours.
• Announcing the naval operation, U.S. Defense Secretary Lloyd Austin said in Bahrain that joint patrols would be held in the southern Red Sea and Gulf of Aden, which encompass a major East-West global shipping route.
• “This is an international challenge that demands collective action,” he said.

U.S. Officials Press Israel to Reduce Intensity of Fighting in Gaza Within Weeks – Wall Street Journal, 12/19/2023

• Top U.S. officials are pressing Israel to shift to more targeted raids in Gaza to limit civilian casualties, allow more humanitarian aid to reach the enclave’s population, and regain more international support for the effort.
• Defense Secretary Lloyd Austin and Air Force Gen. CQ Brown, the chairman of the Joint Chiefs of Staff, appealed in meetings with Israeli Prime Minister Benjamin Netanyahu and other leading Israeli officials in a visit to Israel Monday night.
• Israeli forces are still facing an unexpectedly stiff fight in northern Gaza, delaying their effort to shift their focus to southern Gaza and especially the city of Khan Younis, where many of Hamas’s leaders are believed to be hiding and many of the more than 100 hostages are believed to be held, Israeli officials and analysts said.
• U.S. officials have said privately that they want to see the scale of the fighting reduced in a matter of weeks, not months.
• Publicly, the Biden administration continues to support Israel’s campaign to destroy Hamas’s ability to wage military operations or govern Gaza.

Kim Jong Un’s Most Powerful Weapon Is Ready if U.S. Makes a ‘Wrong Decision’ – Wall Street Journal, 12/19/2023

• In November 2017, North Korea hit a milestone: launching a homegrown intercontinental ballistic missile that could reach the U.S. mainland.
• More than six years later, honing the technology has become a perennial quest, with launch after launch.
• The latest came on Monday, as Pyongyang fired a missile thousands of miles into space before it fell safely into the waters between the Korean Peninsula and Japan.
• North Korean leader Kim Jong Un oversaw the test-fire of the Hwasong-18 solid-fuel ICBM, Pyongyang’s state media reported on Tuesday.
• The North’s newest ICBM can be launched faster and farther than any of the regime’s previous models.
• Kim said the launch demonstrated North Korea was prepared should Washington make a “wrong decision” against his country.

Factmonster – TODAY in HISTORY

• Benjamin Franklin began publishing Poor Richard’s Almanac. – 1732
• War broke out in Indochina when Ho Chi Minh attacked the French. – 1946
• Apollo 17 splashed down in the Pacific, ending the Apollo program of manned lunar landings. – 172
• Britain and China signed an accord returning Hong Kong to Chinese sovereignty on July 1, 1997. – 1984
• President Bill Clinton was impeached on two counts by the House of Representatives. – 1998
• Muammar al-Qaddafi of Libya announced that his country would discontinue the development of weapons of mass destruction. – 2003

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