US FINANCIAL MARKET

S&P 500 Trims ADP-Fueled Gains as Oil Tumbles: Markets Wrap – Bloomberg, 12/6/2023

• Stocks pared gains that were driven by bets the Federal Reserve will cut rates next year as oil sank below $70 amid oversupply concerns.
• After climbing in the immediate aftermath of data showing gradual cooling in the labor market, the S&P 500 fluctuated — dragged down by energy producers.
• Treasury 10-year yields dropped to around 4.1%.
• Just a few days ahead of the US jobs report, another economic reading showed private payrolls increased 103,000 last month, trailing estimates.
• Meantime, the Bank of England stepped up warnings about hedge funds shorting US Treasury futures, saying its measure of the net position is now larger than before the “dash for cash” crisis in March 2020.
• Citigroup’s CFO Mark Mason said the bank’s trading revenue is likely to slump in the fourth quarter as the firm has seen less activity across commodities and rates.
• Exxon Mobil plans to raise share buybacks 14% as the oil giant accelerates crude production in the US Permian Basin, boosted by its $60 billion acquisition of Pioneer Natural Resources Co.
• Toll Brothers’ executives pointed to “solid” demand in recent weeks as mortgage rates pulled back from two-decade highs.
• Apple’s iMessage service looks set to win a carve out from new European Union antitrust rules to rein in Big Tech platforms after watchdogs tentatively concluded that it isn’t popular enough with business users to warrant being hit by the regulation.
• Tesla suffered a blow in its labor dispute in Sweden after an appeals court withdrew an injunction allowing the company to pick up license plates for new cars directly from the manufacturer.
• McDonald’s is looking to hit 50,000 locations around the world by 2027 in what the company calls the fastest expansion spurt in its history.

Toll Brothers Shares Climb as Mortgage Rate Pullback Stokes Demand – Bloomberg, 12/6/2023

• Toll Brothers stock rose as the homebuilder’s executives pointed to “solid” demand in recent weeks as mortgage rates pulled back from two-decade highs.
• The company said Tuesday that it expects to deliver 9,850 to 10,350 homes in fiscal year 2024, up from the 9,597 units the company delivered in fiscal year 2023.
• “With resale inventories at historic lows, buyers continue to be drawn to new homes, and we expect lower rates with lower inflation to add to this already solid demand,” Yearley said Tuesday in a statement on earnings for the three months through October.
• The company said it expects an adjusted home sales gross margin of 27.9%, below the 28.7% in 2023.

MongoDB earnings clear Wall Street’s bar, but stock falls – MarketWatch, 12/6/2023

• MongoDB easily cleared expectations with its latest results and outlook but shares of the database company fell 5.5% in Tuesday’s extended session.
• MongoDB’s revenue came in at $433 million, up 30% from a year before, while the FactSet consensus was for $406 million.
• The database-management company posted a fiscal third-quarter net loss of $29.3 million, or 41 cents a share, compared with a net loss of $84.9 million, or $1.23 a share, in the year-prior quarter.
• On an adjusted basis, MongoDB posted earnings per share of 96 cents, while analysts were expecting 51 cents a share.
• For the fiscal fourth quarter, MongoDB anticipates $429 million to $433 million in revenue, along with 44 cents to 46 cents in adjusted EPS. The FactSet consensus was for $418 million in revenue and 37 cents in adjusted EPS.

Box’s stock drops 13% on tepid revenue forecast – MarketWatch, 12/6/2023

• Box reported quarterly results Tuesday roughly in line with analysts’ revenue and earnings estimates but offered tepid sales guidance.
• Revenue increased 5% to $261.5 million from $249.5 million a year ago.
• Box posted fiscal third-quarter net income of $10.7 million, or 4 cents a share, compared with net income of $9.9 million, or 3 cents a share, in the year-ago quarter. Adjusted earnings were 36 cents a share.
• Analysts surveyed by FactSet had expected on average net income of 38 cents a share on revenue of $262 million.
• Box executives said they anticipate sales of $1.037 billion to $1.039 billion in the fiscal year. Analysts polled by FactSet are expecting $1.043 billion.

Exxon Boosts Buybacks 14% as Hunt for More Oil Accelerates – Bloomberg, 12/6/2023

• Exxon Mobil plans to raise share buybacks 14% as the oil giant accelerates crude production in the US Permian Basin, boosted by its $60 billion acquisition of Pioneer Natural Resources.
• Exxon will repurchase $20 billion of stock next year, the Spring, Texas-based company said in a statement Wednesday. That matches arch rival Chevron, which pledged to lift buybacks after agreeing to buy Hess Corp. for $53 billion in late October.
• Exxon also plans to spend $23 billion to $25 billion on capital projects next year as it expands its footprint in North America’s most-prolific oilfield and pursues untapped reserves in overseas regions such as Guyana. That compares with a 2023 target of about $25 billion. The Texas oil giant also expanded spending on low- carbon ventures.
• The company plans to cut $6 billion in “structural costs” by 2027, in addition to the $9 billion in reductions achieved since 2019, according to the statement. Outlays for low-carbon projects will reach $20 billion through 2027 as the company builds its lithium, carbon-capture and hydrogen portfolios.

Oil Drops to a Five-Month Low as US Crude Exports Fuel Pessimism – Bloomberg, 12/6/2023

• Oil fell to the lowest since early July as a flood of US exports and doubts over whether OPEC+ will be able to deliver on its planned production cuts raised concerns about an oversupply of crude.
• Markets turned their attention on Wednesday to US government data on the nation’s crude stockpiles and exports to gauge how much the country’s supplies may be weighing on markets across the globe.
• American crude shipments are nearing a record 6 million barrels a day, according to estimates from ship-tracking firms.
• In another sign of abundant supply, an industry report said inventories rose last week both across the US and at the storage hub in Cushing, Oklahoma.
• West Texas Intermediate fell below $71 after slumping more than 7% over the previous four sessions.

Mastercard Raises Dividend; Board Authorizes $11 Billion Share-Repurchase Plan – Wall Street Journal, 12/6/2023

• Mastercard said Tuesday its board has authorized an increase to the company’s quarterly cash dividend and approved a new stock-buyback plan of up to $11 billion.
• The new dividend of 66 cents a share will be payable on Feb. 9, 2024, to shareholders of record on Jan. 9, 2024, the company said. Mastercard last raised its dividend, to 57 cents, in December 2022.
• The company said the new share-repurchase plan will become effective at the completion of its previously announced $9 billion program. As of Dec. 1, that program had about $3.5 billion remaining.

Google Announces AI System Gemini After Turmoil at Rival OpenAI – Wall Street Journal, 12/6/2023

• Google said it developed a new artificial-intelligence system more powerful than any currently on the market, including technology developed by ChatGPT creator.
• The Alphabet unit said the algorithm wouldn’t be widely available until early next year, citing a need for more extensive safety testing despite spending most of this year on the project.
• The announcement of the powerful software, known as Gemini, is the latest attempt by Google to display its AI bona fides after the launch of ChatGPT about a year ago shook up the tech industry and caught the company flat-footed.
• Gemini’s release—and public reception—will present a litmus test for Google’s technology following a push to move faster in developing and releasing AI products. It coincides with a period of turmoil at OpenAI that has sent tremors through the tightknit AI community, suggesting the industry’s pecking order is far from settled.

Nvidia’s CEO Still Plans to Sell High-End Chips in China – Wall Street Journal, 12/6/2023

• Nvidia’s CEO said he still hopes to supply high-end processors to China, days after U.S. Commerce Secretary Gina Raimondo warned U.S. companies against sales of AI-enabling chips to the country in the name of national security.
• “Our plan now is to continue to work with the U.S. government to come up with a new set of products to comply with the new regulations,” Jensen Huang told reporters in Singapore Wednesday. “The new regulations have additional limits. We have to come up with new products to comply with those regulations.”
• The Santa Clara, Calif.-based company has come under scrutiny in recent weeks for seeking to redesign its advanced chips to cater to the Chinese market soon after U.S. officials put out rules to stem sales of artificial-intelligence chips. In October, U.S. officials tightened chip restrictions to shut out the sales of Nvidia’s China-specific graphics processing units, used by many Chinese companies for cloud and building AI programs.
• The latest round of U.S. export curbs had left $5 billion worth of Nvidia’s chips in limbo, The Wall Street Journal has reported. China has historically formed about 20% of Nvidia’s revenue, Huang said on Wednesday.
• Nvidia is working on a new lineup of AI chips customized for China, called the H20 and L20, the Journal reported in November. The company developed new chips within weeks in the hope of continuing sales to China, according to people familiar with the matter.
• The restrictions on AI chips are part of a wider effort by the Biden administration to curtail China’s access to advanced chips, AI tools and other technology that the U.S. believes China could use to advance its military and cyberwarfare capabilities.

McDonald’s Ups Its Expansion Pace With Goal of 50,000 Stores – Bloomberg, 12/6/2023

• McDonald’s is looking to hit 50,000 locations around the world by 2027 in what the company calls the fastest expansion spurt in its history.
• The chain currently has more than 41,000 restaurants and already committed to opening an extra 2,000 by the end of this year. The new target highlights the burger giant’s stepped-up ambitions as it looks for its next leg of growth.
• New restaurant openings will boost systemwide sales by 2% next year and by 2.5% after 2024, McDonald’s said Wednesday in a statement ahead of a presentation to investors. Systemwide sales are those generated by all McDonald’s restaurants, from company-operated to franchised locations.
• McDonald’s is also looking to increase users of its loyalty program to 250 million 90-day active customers by 2027, from about 150 million currently. It’s targeting an additional $25 billion in systemwide sales from loyalty-program users over the same period, up from $20 billion today.
• McDonald’s expects operating margins in the mid-to-high 40% range in 2024, which is similar to the last two quarters, and continued expansion in subsequent years. It’s forecasting capital expenditures of $2.5 billion next year, and sequential increases of about $300 million to $500 million each year through 2027.

US ECONOMY & POLITICS

Private payrolls increased by 103,000 in November, below expectations, ADP says – CNBC, 12/6/2023

• Private sector job creation slowed further in November and wages showed their smallest growth in more than two years, payrolls processing firm ADP reported Wednesday.
• Companies added just 103,000 workers for the month, slightly below the downwardly revised 106,000 in October and missing the 128,000 Dow Jones estimate.
• Along with the modest job growth came a 5.6% increase in annual pay, which ADP said was the smallest gain since September 2021. Job-changers saw wage increases of 8.3%, making the premium for switching positions the lowest since ADP began tracking the data three years ago.
• After leading job creation for most of the period since Covid hit in early 2020, leisure and hospitality recorded a loss of 7,000 jobs for the month. Trade, transportation and utilities saw an increase of 55,000 positions, while education and health services added 44,000 and other services contributed 15,000.
• The ADP report comes two days before the more widely watched nonfarm payrolls count from the Labor Department.
• Including government jobs, nonfarm payrolls increased 150,000 in October and are expected to show growth of 190,000 in November, according to Dow Jones.

Ukraine Aid Falters in Senate as Republicans Insist on Border Restrictions – New York Times, 12/6/2023

• President Biden’s urgent push to replenish Ukraine’s war chest and send aid to Israel is on the brink of collapse in the Senate, where Republicans are prepared on Wednesday to block the funding unless Democrats agree to add strict measures to clamp down on migration at the U.S. border with Mexico.
• A classified briefing with administration officials called to shore up support devolved into a partisan screaming match on Tuesday afternoon, with Republicans angrily accusing Democrats of trying to steamroller over their demands for a border crackdown.
• The meltdown, which took place on the eve of a critical test vote in the Senate on a $110.5 billion emergency spending bill, not only made it clear that the measure would fail, but severely dimmed the prospects for any bipartisan agreement soon. A vote to block aid would spotlight flagging U.S. resolve at a critical time in Ukraine’s war against President Vladimir V. Putin’s Russia.
• Republican senators leaving the briefing said they were outraged that administration officials had refused to answer their questions about border security, which they said was a prerequisite for any plan to send emergency help to American allies.
• Even Republicans who have argued vociferously for helping Ukraine amid waning support in their party for doing so said there was no appetite for a bill to do so unless it also clamped down on immigration.

Kamala Harris Works to Bridge Democratic Divide Over Israel-Hamas War – Wall Street Journal, 12/6/2023

• During more than a dozen phone calls to discuss the war in Gaza between President Biden and Israeli Prime Minister Benjamin Netanyahu, a U.S. official, who has become increasingly involved in the administration’s handling of the conflict, was listening in: Vice President Kamala Harris.
• In her private talks with top administration officials, Harris has emerged as one of the top policy makers bridging the divide within the Democratic Party between a hard core of Israel supporters and groups that are sharply critical of the Biden administration’s approach to the war in Gaza, according to people familiar with the discussions.
• Among her efforts, Harris has pushed for the White House to articulate more empathy for Palestinians and to focus on a post-conflict Gaza plan, the people familiar with the discussions said.
• That approach has come through in her public comments, most prominently during her whirlwind visit to the climate summit in Dubai, where she said, “Israel must do more to protect innocent civilians.”

EUROPE & WORLD

Israel Says It Has Killed Half of Hamas’s Battalion Commanders – Wall Street Journal, 12/6/2023

• The Israeli military has killed about half of Hamas’s midlevel commanders in Gaza, Israeli officials said, as its troops pressed forward Wednesday into the suspected hiding place of the group’s leader in a bid to eliminate its top brass.
• Israel is deploying a deliberate strategy to find and kill the militant group’s midlevel operatives to disrupt Hamas’s ability to fight in Gaza, though military analysts caution doing so is unlikely immediately to deliver the victory it craves.
• Israel has so far failed to assassinate the U.S.-designated terrorist group’s senior leadership, which includes Yahya Sinwar, leader of Hamas in Gaza, and Mohammed Deif, the head of the group’s armed wing. But fighting is now coalescing around Khan Younis, one of Hamas’s strongholds in the southern strip, where the Israeli military says Sinwar and others could be hunkering.
• The structure of Hamas’s secretive armed wing, the Izz ad-Din al-Qassam Brigades, isn’t widely known. But Israel estimates it has roughly 24 battalions each with 1,000 or more fighters. The Israeli military has said it has significantly degraded 10 of those by taking out midlevel commanders.

Russia Says OPEC+ Cuts May Go Further in Echo of Saudi Stance – Bloomberg, 12/6/2023

• OPEC+ could take further measures if last week’s production cuts agreement isn’t enough to balance the oil market, said Deputy Prime Minister Alexander Novak.
• The deal to reduce OPEC+ output by 2.2 million barrels a day for three months from Jan. 1 should allow the market to “pass safely” through the period of seasonally lower demand usually seen in the first quarter, Novak said on Tuesday according to the Tass news agency.
• “In case the current actions are not enough, OPEC + countries will take additional steps to avoid speculations and volatility,” he said.
• Production cuts could be deepened or extended at the OPEC+ level if needed, said a person familiar with discussions.

Putin Arrives in Saudi Arabia on Rare Trip to Shore Up Ties – Bloomberg, 12/6/2023

• Russian President Vladimir Putin arrived in Saudi Arabia for a meeting with Crown Prince Mohammed Bin Salman as part of a rare foreign trip to strengthen partnerships in the Gulf, and defying US and European efforts to isolate him on the global stage.
• Putin arrived in Riyadh from Abu Dhabi, where his two-nation tour began earlier on Wednesday, according to Russian state TV. He held talks there with United Arab Emirates President Sheikh Mohammed Bin Zayed Al Nahyan, during which both leaders touted the relationship between the countries and expanding economic ties.
• Putin’s visit to the energy-rich region — his first since invading Ukraine almost two years ago — shows he’s still welcome in parts of the globe, even as the US and Europe seek to punish the Kremlin with sanctions and arms to Kyiv.
• His talks in Saudi Arabia will focus on bolstering the partnership between the oil giants, and comes after OPEC+, the alliance between the Organization of Petroleum Exporting Countries and other major oil producers, agreed last week to extend and deepen production cuts to bolster prices.

Saudi Revenues Surprise, Top Expectations Despite Oil Cuts – Bloomberg, 12/6/2023

• Saudi Arabia recorded higher budget revenues than expected this year despite a sharp drop in oil prices and production.
• Still, a ramp-up in spending on Crown Prince Mohammed bin Salman’s multi-trillion-dollar plan to diversify the economy left the budget with a deficit of 82 billion riyals ($22 billion), according to official figures published on Wednesday.
• The Finance Ministry also stuck with next year’s revenue forecast of 1.17 trillion riyals it first announced in October.
• That’s despite OPEC+ deepening supply cuts earlier this month to help bolster oil prices.
• Revenues for 2023 are set to reach 1.19 trillion riyals, over 5% higher than estimated in the budget a year earlier.
• Spending accelerated at a faster rate, hitting 1.28 trillion riyals.

As U.S. Seeks Calmer China Ties, Europe Gets Tough – Wall Street Journal, 12/6/2023

• European Union leaders plan to warn Chinese leader Xi Jinping that the bloc is prepared to impose new sanctions and trade penalties on his nation unless it acts to address economic frictions and rein in exports to Russia of goods used for its war in Ukraine, EU officials said before a summit in Beijing Thursday.
• While Washington has moved recently to ease tensions with China, European strains with Beijing have sharpened.
• In a sign of that growing gulf, as the EU’s top leaders flew to Beijing on Wednesday, an Italian official said Rome had formally told China that Italy was withdrawing from its Belt and Road Initiative, the latest European country to do so. The U.K. also announced Wednesday its first sanctions against Chinese companies for supporting Russian war-related manufacturing.
• The EU’s trade deficit with China has roughly doubled during the past two years, to more than $400 billion, a situation European officials view as unsustainable and which they say reflects both barriers impeding European businesses in China and Chinese subsidies.

Factmonster – TODAY in HISTORY

• Construction of the Washington Monument was completed. (1884)
• A presidential address was broadcast on the radio for the first time when Calvin Coolidge spoke before Congress. (1923)
• Gerald Ford was sworn in as vice president, replacing Spiro T. Agnew. (1973)
• Hugo Chavez elected president of Venezuela. (1998)

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