US FINANCIAL MARKET

S&P 500 Wavers After 5,000 Hype in Run-Up to CPI: Markets Wrap – Bloomberg, 2/12/2024

• Wall Street kicked off the week with small moves for stocks, bonds and the dollar ahead of key economic data and a slew of Federal Reserve speakers.
• Stocks edged only slightly higher after the S&P 500 closed above 5,000 for the first time.
• Only two months into 2024, a spree of records now has the US equity benchmark poised to trounce even the most bullish year-end forecasts among analysts.
• A string of five consecutive weeks of gains drove the gauge above technically overbought levels, triggering some calls for at least consolidation.
• The S&P 500 traded near 5,030. The Nasdaq 100 rose 0.1%. The Dow Jones Industrial Average was little changed.
• Megacaps were mixed, with Nvidia up and Microsoft down.
• Treasury 10-year yields were little changed at 4.19%.
• The greenback fluctuated after notching a sixth straight weekly advance.
• Inflation data will take center stage this week alongside readings on retail sales and consumer sentiment.
• The next pressure point for markets is Tuesday’s consumer price index. The annual US inflation rate is forecast to have dropped to 2.9% in January from 3.4% the prior month, according to consensus estimates of economists surveyed by Bloomberg.
• That would be the first reading below 3% since March 2021, supporting a disinflationary trend that will determine the scope and timing of rate cuts.
• Fed Governor Michelle Bowman reiterated Monday that the central bank’s benchmark lending rate is in a good place to keep downward pressure on inflation, and she doesn’t see a need to cut rates soon.
• In the derivatives markets, traders started pricing in that the Fed will carry out just four — or five at the most — quarter-point rate cuts in 2024, only slightly more than the three penciled in by policymakers.
• That’s a sharp shift from the end of last year, when futures traders were wagering on seven such moves, anticipating the Fed would cut rates by a full percentage point more than it was telegraphing at the time.
• Diamondback Energy agreed to buy fellow Texas oil-and-gas producer Endeavor Energy Resources LP in a $26 billion cash-and-stock deal to create the largest operator focused on the prolific Permian Basin.
• Gilead Sciences agreed to purchase CymaBay Therapeutics Inc., a developer of an experimental liver disease drug, for $4.3 billion in equity value.
• Hewlett Packard Enterprise is seeking as much as $4 billion from Autonomy Corp.’s former bosses following a London judge’s finding that they fraudulently boosted the value of the company before its sale.
• The Stoxx Europe 600 rose 0.5%.

Diamondback Energy Surges on $26 Billion Deal to Buy Endeavor – Bloomberg, 2/12/2024

• Shares of Diamondback Energy surged after it announced a deal to acquire fellow Texas oil-and-gas producer Endeavor Energy Resources LP in a $26 billion cash-and-stock deal to create the largest operator focused on the prolific Permian Basin.
• Diamondback will fund the deal with 117.3 million shares and $8 billion in cash, the two Midland, Texas-based companies said in a statement Monday.
• Diamondback shareholders will own 60.5% of the company after the deal closes.
• Shareholders of Endeavor, which isn’t publicly traded, will own the rest.
• Diamondback has secured a $8 billion bridge facility commitment from Citigroup in connection with the deal, which includes a termination fee of $1.4 billion, according to a filing.
• When the sale closes, Diamondback expects to launch a debt offering of $5 billion to $6 billion to fund the deal, including to pay off Endeavor’s debt.

CymaBay’s stock surges as Gilead reaches $4.3 billion deal for liver-drug developer – Market Watch, 2/12/2024

• CymaBay Therapeutics jumped 24% early Monday after Gilead Sciences reached a $4.3 billion deal to acquire the liver-drug developer for $32.50 per share in cash, a 27% premium to CymaBay’s closing price Friday.
• CymaBay’s lead asset is seladelpar, an investigational treatment for primary biliary cholangitis, a type of liver disease that causes bile-duct damage.
• The U.S. Food and Drug Administration has granted priority review to seladelpar, and a regulatory decision is expected by mid-August.
• The deal brings a potential new addition to the existing portfolio of liver-disease treatments at Gilead, which developed the leading drugs for viral hepatitis.
• Primary biliary cholangitis is a rare, chronic disease that is more prevalent among women, affecting about 65 out of every 100,000 women in the U.S., researchers estimate.
• Subject to regulatory approval, the deal is expected to close in the first quarter of this year, the companies said.
• The transaction is expected to be roughly neutral to Gilead’s earnings per share in 2025, the company said in a release, helping to drive earnings growth thereafter.

US ECONOMY & POLITICS

US Senate forges ahead on Ukraine, Israel aid as ‘Putin is watching’ – Reuters, 2/12/2024

• The U.S. Senate on Monday will attempt to steer a $95.34 billion package containing aid for Ukraine and Israel to passage this week following months of delays, even as it lacked any guarantee that the House of Representatives will support the measure.
• On Sunday, the bill got a boost when the Senate voted 67-27 to move it past an important procedural hurdle.
• Also over the weekend, Majority Leader Chuck Schumer set a course for passage by Wednesday.
• On Monday, the Senate is expected to cast a procedural vote that, if successful, would keep the bill moving forward.
• Having kept senators working during rare back-to-back Saturday and Sunday sessions, Schumer wrapped up for the night saying, “Our friends abroad are watching closely how we vote in the upcoming days.
• Ukrainian fighters are watching and you can be sure (Russian President) Vladimir Putin is watching the Senate, too.”
• The bill now being debated in the Senate has drawn opposition from some Republicans, including in the House of Representatives, who want to shut off U.S. aid to Ukraine.
• At the same time they are insisting that the southern U.S. border with Mexico be hardened to stop an unusually high flow of undocumented immigrants.

President Biden Joins TikTok in Bid to Reach Younger Voters – Wall Street Journal, 2/12/2024

• The Biden campaign has joined TikTok as it ramps up its efforts to reach younger voters despite national-security concerns over the app.
• President Biden’s team posted its first video on Sunday night during the Super Bowl.
• The 26-second clip showed Biden answering questions about which team he was rooting for, his favorite Kelce brother and if he preferred the game or the halftime show.
• The video, posted with the caption “lol hey guys,” had more than 4 million views Monday morning.
• His account has over 45,000 followers.
• His administration has repeatedly expressed concern that the Chinese government could gain access to Americans’ user data or influence what Americans see on the app, which is owned by Beijing-based ByteDance.
• Still, the app is one of the best ways for the Biden campaign to reach young American voters.
• More than 150 million Americans use TikTok, according to the company, and many of them are young people.

Kamala Harris Says She Is Ready to Serve as Biden Faces Age Scrutiny – Wall Street Journal, 2/12/2024

• Vice President Kamala Harris was detailing her priorities for the campaign during a flight on Air Force Two early last week when she was asked a delicate question hanging over the Democratic ticket: Do voters’ concerns about President Biden’s age mean she must convince them she is ready to serve?
• “I am ready to serve. There’s no question about that,” Harris responded bluntly.
• Everyone who sees her on the job, Harris said, “walks away fully aware of my capacity to lead.”
• The response during an interview with The Wall Street Journal on Tuesday came two days before a special counsel report on Biden’s handling of classified documents amplified concerns about the 81-year-old incumbent’s mental acuity.
• The report said Biden displayed “diminished faculties” in interviews and called him an “elderly man with a poor memory.”
• In recent months, Harris has taken on greater and more public responsibilities.
• She has become the administration’s lead messenger on abortion rights, was put in charge of the White House’s new Office of Gun Violence Prevention and is playing a higher-profile role in the administration’s handling of the war in Gaza.

Pentagon Chief Austin in Critical Care for Bladder Issue – Bloomberg, 2/12/2024

• US Defense Secretary Lloyd Austin was admitted into critical care late Sunday with an apparent bladder issue, after being hospitalized for the second time in a month.
• His security detail brought him to Walter Reed National Military Medical Center outside Washington with “symptoms suggesting an emergent bladder issue,” Pentagon spokesman Pat Ryder said in a statement.
• Austin, who in January had been in for treatment for complications from prostate cancer, was moved “for supportive care and close monitoring,” according to a statement from Walter Reed physicians.
• “At this time, it is not clear how long Secretary Austin will remain hospitalized,” the physicians said.
• “The current bladder issue is not expected to change his anticipated full recovery.”
• The Pentagon chief has transferred the functions and duties of the office to Deputy Defense Secretary Kathleen Hicks, according to a statement from the Pentagon.

EUROPE & WORLD

Monday.com Stock Drops After Earnings Top Estimates – Barron’s, 2/12/2024

• Project and task management software company Monday.com, on Monday—posted better-than-expected results for its latest quarter.
• Tel Aviv-based Monday reported fourth-quarter revenue of $202.6 million, up 35% from a year ago.
• The number surpassed the Wall Street consensus as tracked by FactSet of $198 million, and was ahead of the company’s guidance range of $196 million to $198 million.
• Operating income was $21.2 million, well above the guidance range of $7 million to $9 million.
• Under generally accepted accounting principles, the company earned 24 cents a share.
• Monday is projecting first-quarter revenue between $207 million and $211 million, which, at the midpoint of the range, is about in line with the Street at $209 million.
• It forecasts free cash flow of between $56 million and $60 million for the period, above consensus at $47.8 million.
• For all of 2024, Monday expects revenue between $926 million and $932 million, at the midpoint of the range a little ahead of consensus at $927.5 million.
• It projects full-year free cash flow ranging from $200 million to $206 million, with the midpoint above consensus at $200.5 million.

Israel Rescues Two Hostages Held by Hamas in Gaza – Wall Street Journal, 2/12/2024

• Israel rescued two hostages held in Gaza in an overnight raid, as the military prepares for a larger operation to enter what it says is the last bastion for Hamas, where more than one million Palestinians are sheltering.
• The Israeli military said Monday that the rescue of Fernando Simon Marman and Louis Har was a complicated operation, performed under fire in the heart of Rafah, a city in southern Gaza near where Palestinians are seeking refuge from the conflict between Israel and Hamas.
• At roughly 2 a.m. local time, military forces and a police swat team broke into a house in Rafah and engaged in a gunfight with Hamas militants while shielding the hostages before evacuating them to a secure location, the military said.
• Israeli airstrikes in Gaza killed 164 people overnight, including dozens in Rafah, health authorities in the territory said.
• The figure didn’t distinguish between civilians and combatants.
• The rescue operation is likely to provide Israeli Prime Minister Benjamin Netanyahu with a domestic win when he is under pressure internationally to end the war and at odds with the U.S. about whether to expand its military operation to Rafah.

HP Seeks $4 Billion in Losses From Lynch Over Autonomy Fraud – Bloomberg, 2/12/2024

• Hewlett Packard Enterprise is seeking as much as $4 billion from Autonomy’s former bosses following a London judge’s finding that they fraudulently boosted the value of the company before its sale.
• Founder Mike Lynch was found to have inflated Autonomy’s revenue alongside his chief financial officer Sushovan Hussain and induced HP to buy the firm for $11 billion, according to a London civil judgment in 2022.
• The British tech tycoon is currently waiting to face a criminal trial in the US over the sale after being extradited last year.
• He was previously investigated by the UK’s Serious Fraud Office but the agency dropped its case.
• Hussain was convicted in the US for his role in the saga.
• Lawyers for HP calculated the total losses that Lynch and Hussain must pay back as over $4 billion, according to court documents prepared for a hearing Monday.
• This was revised from a previous calculation of $5 billion at trial due to further evidence.

Factmonster – TODAY in HISTORY

• Lady Jane Grey, queen of England for nine days (in 1553), was executed for high treason. – 1554
• Led by philanthropist James Edward Oglethorpe, the first English colonists arrived in Georgia, at the site of Savannah. – 1733
• Chile formally proclaimed its independence from Spain. – 1818
• The Utah Territory granted women the right to vote (revoked in 1887). – 1870
• The National Association for the Advancement of Colored People (NAACP) was founded. – 1909
• Pu Yi, the last emperor of the Manchu (Ch’ing) dynasty in China, renounced his throne following the establishment of a republic under Sun Yat-sen. – 1912
• The first release of American prisoners of war from the Vietnam war took place. – 1973
• The Senate voted to acquit President Clinton on charges of perjury and obstruction of justice. – 1999
• Yugoslavian ex-president Slobodan Milosevic went on trial for war crimes. – 2002
• The 2010 Winter Olympics opened in Vancouver, British Columbia, Canada. The games got off to a tragic start when a luger from the Republic of Georgia, Nodar Kumaritashvili, dies tragically in a crash during training run. – 2010

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