US FINANCIAL MARKET
S&P 500 Rises as US Stocks Build on Record High: Markets Wrap – Bloomberg, 1/22/2024
- Stocks kept climbing after hitting a record last week as robust economic data and corporate results fueled Wall Street’s appetite for risk.
- Equities are shaking off a rocky start to the year amid conviction that the Federal Reserve will soon cut interest rates and bets that the artificial intelligence boom is set to continue.
- Meanwhile, earnings season kicks into high gear this week, with companies including Netflix, Tesla, and Intel due to report their numbers.
- The S&P 500 extended its advance above 4,800, led by gains in big tech.
- The Nasdaq 100 rose 0.5%. The Dow Jones Industrial Average rose 0.5%.
- Treasury 10-year yields declined three basis points to 4.09%.
- Last week’s record close for US stocks has pulled valuations back to the highs seen last July.
- Gains in Apple, Microsoft, Nvidia, Alphabet, Amazon.com, Meta Platforms, and Tesla have powered the resurgence on Wall Street, primarily based on optimism around artificial intelligence and cost-cutting efforts at these companies.
- The equally weighted version of the S&P 500 strips out some of their outsized influence, resulting in a ratio of around 16 times forward earnings, a discount of 17% to the benchmark’s standard valuation.
- Options traders are betting on more gains in the S&P 500 after it hit a record high on Friday.
- A slew of bullish wagers shifted the yardstick of what’s seen as the upper bound of the US benchmark’s trading range.
- The so-called call wall has moved to 5,000 points from 4,800 — signaling that traders see the market clearing the next hurdle toward further gains, according to SpotGamma data.
- That points to a further 3.3% upside, based on Friday’s close.
- Even as the S&P 500 closed Friday at an all-time high, money managers and analysts are contending with data that signals US economic resilience and Fed officials who’ve pushed back against reducing interest rates too soon.
- The latest warning for investors unleashing dovish monetary wagers across the board: Two-thirds of Bloomberg Markets Live Pulse respondents said that betting on early monetary easing is the “most foolish” among popular trades heading into 2024.
- Archer-Daniels-Midland plunged after the US agricultural trading giant suspended its chief financial officer and cut its earnings outlook pending an investigation into its accounting practices.
- Sunoco, a US gas station owner, agreed to acquire pipeline and fuel storage company NuStar Energy LP for about $7.3 billion to buy up more of a critical part of its supply chain.
- Macy’s said Sunday that it wasn’t interested in a bid from Arkhouse Management and Brigade Capital Management to take over the retailer, claiming the offer lacked “compelling value.”
- The Stoxx Europe 600 rose 0.7%.
- West Texas Intermediate crude rose 1.5% to $74.50 a barrel.
- Spot gold fell 0.3% to $2,022.46 an ounce.
FAA Calls for Door-Plug Checks on Second Boeing Jet – Wall Street Journal, 1/22/2024
- The US Federal Aviation Administration recommends that airlines check a second type of Boeing jet that uses the same door plug as the one that blew out of an Alaska Airlines flight earlier this month.
- The FAA said late Sunday that it advised Boeing’s 737-900ER aircraft operators to inspect the planes’ mid-exit door plugs.
- The checks are recommended, not required, so airlines don’t have to take aircraft out of service to conduct them immediately.
- The checks involved about 380 planes between five and 17 years old.
- The FAA cited “an added layer of safety” in recommending the inspections and called for visual checks of four places where door plugs are secured to airplanes.
- It said some operators had already checked 900ER door plugs and “noted findings with bolts.”
Sunoco to Buy NuStar Energy in $7.3 Billion Deal – Wall Street Journal, 1/22/2024
- Fuel distributor Sunoco has agreed to buy liquids terminal and pipeline operator NuStar Energy in a stock-swap transaction valued at about $7.3 billion, including assumed debt.
- On Monday, Sunoco said it would issue 0.4 units, worth about $23.78 based on Friday’s closing price, for each NuStar unit, a nearly 32% premium to NuStar’s Friday closing price of $18.03.
- Dallas-based Sunoco said it expects to complete the deal, which diversifies and adds scale to its business, in the second quarter.
- Sunoco said it had secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s preferred units, subordinated notes, revolving credit facility, and receivables financing agreement.
- The company expects to achieve at least $150 million of run-rate synergies by the third year of the deal and about $50 million a year of additional cash flow from refinancing high-cost floating-rate capital.
SolarEdge Leads Solar Stocks Higher as Company Announces Sweeping Layoffs – Barron’s, 1/22/2024
- SolarEdge announced plans to lay off 16% of its workforce as the company faces pressure on costs—a move has sent solar stocks across the board higher, providing a respite amid a brutal year for shareholders.
- SolarEdge announced a workforce reduction that will affect around 900 employees in a bid to reduce expenses.
- Most of the layoffs center on manufacturing sites.
- They follow existing measures SolarEdge has taken to cut costs, including discontinuing manufacturing in Mexico and reducing capacity in China.
Archer Daniels Stock Sinks as It Places CFO on Leave During Accounting Probe – Barron’s, 1/22/2024
- Archer Daniels Midland fell sharply Monday after the agriculture company placed its chief financial officer, Vikram Luther, under administrative leave as it investigated its accounting practices.
- In a statement, ADM said it placed Luther on leave pending an investigation by outside counsel for the company and the board’s audit committee “regarding certain accounting practices and procedures concerning ADM’s Nutrition reporting segment.”
- The company said it was responding to a voluntary document request from the Securities and Exchange Commission.
- The company said it was cooperating with the SEC.
- ADM said it named Ismael Roig, who joined the company in 2004, as interim chief financial officer.
- In connection with the announcement, ADM said it would delay the release of its fourth quarter and 2023 earnings.
- The company expects to report adjusted earnings greater than $6.90 a share for the year.
- ADM said it was withdrawing its forward-looking guidance for the nutrition reporting segment.
US ECONOMY & POLITICS
Never Trumpers Brace for New Hampshire Shutout – Bloomberg, 1/22/2024
- For Republicans who are loath to nominate Donald Trump for president, New Hampshire is quickly becoming the best and perhaps final chance to stop him.
- The stakes increased Sunday when Florida Governor Ron DeSantis — once seen as likeliest to unseat Trump as the party’s standard bearer — suspended his White House bid and supported the former president.
- Just two days before, another 2024 aspirant, South Carolina US Senator Tim Scott, endorsed Trump, adding to the air of inevitability around the frontrunner.
- For Nikki Haley, the last major GOP rival to Trump left in the race, New Hampshire is shaping up as a make-or-break moment.
- Her supporters say she still has a chance to upset Trump or at least come in a close second, but the window is narrowing.
- Trump leads in the state with 50% support from likely GOP primary voters, compared to Haley’s 39%, a poll from CNN published Sunday found.
- The CNN poll showed DeSantis with 6% support in New Hampshire, and those voters are likely to go to Trump, New Hampshire Republican Party Chairman Chris Ager said.
Florida Governor DeSantis Drops Out of 2024 Race, Endorses Trump – Bloomberg, 1/22/2024
- Ron DeSantis dropped out of the 2024 US presidential race on Sunday. They endorsed frontrunner Donald Trump, narrowing the Republican field to two significant candidates ahead of Tuesday’s closely watched New Hampshire primary.
- “He has my endorsement because we can’t go back to the old Republican guard of yesteryear,” DeSantis said in a video released Sunday on X, formerly Twitter.
- The Florida governor described Trump as the preferable alternative to President Joe Biden or Nikki Haley, the last remaining rival to Trump in the GOP primaries.
- His exit from the race is a stunning blow to the political fortunes of a candidate who just two years ago won a second term as governor in a landslide election and stepped onto the national stage heralded by big-dollar Republican donors as the future of the party.
- New polling from CNN and the University of New Hampshire showed DeSantis earning just 6% of the state’s Republican vote, with Trump at 50% and Haley, the former South Carolina governor, at 39%.
EUROPE & WORLD
Israeli forces storm hospital as Khan Younis hit by bloodiest fighting of 2024 – Reuters, 1/22/2024
- Israeli forces, advancing deep into western Khan Younis in Gaza’s bloodiest fighting of the new year so far, stormed one hospital and placed another under siege on Monday, cutting the wounded off from trauma care, Palestinian officials said.
- Troops advanced for the first time into the al-Mawasi district near the Mediterranean Coast, west of Khan Younis, the central city in southern Gaza.
- There, they stormed the Al-Khair hospital and were arresting medical staff, Gaza health ministry spokesman Ashraf al Qidra told Reuters.
- The Palestinian Red Crescent said tanks had also surrounded another Khan Younis hospital, al-Amal, headquarters of the rescue agency, which had lost contact with its staff there.
- Qidra said at least 50 people were killed overnight in Khan Younis, while the sieges of medical facilities meant dozens of dead and wounded were beyond the reach of rescuers.
- Residents said bombardment from air, land, and sea was the most intense in the southern sector of Gaza since the war began in October, as Israeli tanks surged across Khan Younis towards the Mediterranean coast.
A Lamborghini-Style EV: BYD Goes Upmarket to Outmaneuver Tesla – Wall Street Journal, 1/22/2024
- BYD overtook Tesla as the world’s top electric vehicle seller by pumping out a range of affordable cars that gave Chinese drivers what they wanted: choice.
- BYD is releasing the cars under a different brand, Yangwang, marking a strategy shift from relying on lower-priced runarounds to producing less conventional vehicles with a hefty price tag.
- They include a $150,000 supercar that resembles a Lamborghini and an SUV that it says can rotate 360 degrees on the spot and float in water—features that turn heads in China’s cutthroat car market where buyers chase the latest innovative technology.
- In China, the world’s biggest EV market, Tesla’s market share has been shrinking: BYD now sells five cars to everyone that the US automaker does.
- BYD’s popularity has surged as it cranks out new and varied models at a rapid pace, growing its portfolio of electric vehicles to more than two dozen models, catering to almost every taste and budget.
US Presses Diplomatic Effort for Gaza Peace Plan – Wall Street Journal, 1/22/2024
- President Biden’s top Middle East adviser, Brett McGurk, is in the region to discuss the war in Gaza and the fate of Israeli hostages as an Arab plan for the future of the enclave begins to take shape.
- McGurk, National Security Council coordinator for the Middle East and North Africa, met Egyptian officials in Cairo on Monday and is expected to meet with Qatari officials next, said Egyptian officials.
- It is the latest in a series of high-level visits by US officials aimed at charting a path to end Israel’s war in Gaza.
- Arab countries, including Saudi Arabia, Egypt, Jordan, and Qatar, are working on a new proposal aimed at reaching a comprehensive deal to end hostilities and at creating a pathway to a two-state solution, according to Arab officials.
- The plan—that Saudi and Egyptian officials say is backed by the US—envisions talks for a permanent cease-fire and a clear road map for the creation of a Palestinian state in Gaza and the West Bank.
- In exchange, Saudi Arabia would be willing to establish diplomatic relations with Israel as part of a process of Israeli regional normalization that was proposed before the Hamas-led attack on October 7.
Ocean Shipping Rates Surge as Red Sea Attacks Continue – Wall Street Journal, 1/22/2024
- Global shipping prices are continuing to rise as Houthi rebels keep up attacks on cargo vessels in and around the Red Sea.
- The disruptions are critical for ships passing through the Suez Canal, creating ripples across European and US supply chains, delaying shipments, and raising transportation costs.
- Average worldwide costs of shipping a 40-foot container rose 23% in the week through January 18 to $3,777, according to London-based Drewry Shipping Consultants, more than doubling in the past month.
- The increases are felt far beyond the disrupted trade routes linking China with Europe and the US East Coast.
- Spot-market rates to ship containers from China to Los Angeles rose 38% from January 18 to $3,860 weekly.
- Big companies with longer-term contracts with ocean carriers are mainly immune to spot-market swings.
- But Damas said many such companies are paying 20% or more surcharges on top of contract rates to compensate for higher shipping costs such as fuel and insurance.
Factmonster – TODAY in HISTORY
- The Czar’s troops killed 500 workers in “Bloody Sunday” in St. Petersburg. – 1905
- The Supreme Court legalized some abortions in Roe v. Wade. – 1973
- The US Senate confirmed Madeleine Albright as the first female secretary of state. – 1997
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