US FINANCIAL MARKET

Tech Giants Lift Stocks as AI Euphoria Rages On: Markets Wrap – Bloomberg, 12/7/2023

• A rally in megacaps spurred a rebound in stocks on speculation the artificial-intelligence boom will continue fueling market gains.
• Alphabet jumped 5% a day after Google released Gemini, the “largest and most capable AI model” the company has ever built.
• Advanced Micro Devices also rallied after pledging its new accelerator chips will run AI software faster than rival products.
• The Nasdaq 100 rose 1% and the S&P 500 halted a three-day drop, with traders also awaiting Friday’s jobs report that will be key in shaping Federal Reserve rate-cut bets.
• Treasury yields rose on speculation that bets on rate cuts by major central banks have gone too far, with hawkish signals from the Bank of Japan rattling global bonds.
• The BOJ indication drove the yen up 2%, while sending yields higher around the globe.
• The yield on 10-year Treasuries advanced four basis points to 4.15%.
• In a week jam-packed with labor-market readings, data showed continuing applications for US jobless benefits fell by the most since July in a holiday week after climbing for the past two months.
• Despite the decline, continuing claims are still near a two-year high amid growing evidence of a cooling labor market.
• JetBlue Airways boosted its full-year financial outlook, citing better-than-expected bookings and operational performance this fall. Its shares jumped by double digits in early trading.
• Dollar General reported comparable sales that were better than the average analyst estimate, a sign that Chief Executive Officer Todd Vasos is having some early success in improving results after taking the helm for a second time in October.
• GameStop, the video-game retailer, reported sales that fell short of analysts estimates.
• Elon Musk’s SpaceX has initiated discussions about selling insider shares at a price that values the closely held company at $175 billion or more, according to people familiar with the matter.
• The Stoxx Europe 600 fell 0.3%.
• The Bloomberg Dollar Spot Index fell 0.3%.
• West Texas Intermediate crude rose 0.8% to $69.95 a barrel.
• Spot gold rose 0.2% to $2,029.40 an ounce.

JetBlue Airways Lifts 4Q Forecasts on Strong Holiday-Travel Demand – Wall Street Journal, 12/7/2023

• JetBlue Airways lifted its outlook for fourth-quarter sales, saying that demand for travel is holding up and bookings have accelerated into the holidays.
• The airline is forecasting a 4% to 7% drop in fourth-quarter sales from a year ago, compared with a previous forecast for a sales decline of 6.5% to 10.5%.
• The company is targeting an adjusted loss of 25 cents a share to 35 cents a share, compared with a prior forecast of 35 cents a share to 55 cents a share.
• For the full year, JetBlue is targeting sales growth of 4% to 5%, compared with a prior outlook of 3% to 5% growth.
• “Demand for travel remains healthy,” the company said in a securities filing.
• “Since late October, close-in bookings have outperformed expectations for both holiday peak and non-holiday travel periods.”

GameStop stock slips after revenue miss, and Ryan Cohen eyes equity investments – Market Watch, 12/7/2023

• GameStop’s stock fell in extended trading Wednesday after the videogame retailer missed analysts’ revenue expectations with its fiscal third-quarter results, despite coming in better than anticipated on the bottom line.
• Revenue was $1.078 billion, compared with $1.186 billion in the prior year’s quarter.
• Analysts expected GameStop to report revenue of $1.182 billion.
• On an adjusted per-share basis, broke even, whereas analysts surveyed by FactSet were expecting an 8-cent loss.
• In a filing, GameStop said that net sales in Australia, the U.S. and Canada decreased by 16.8%, 13.3% and 9.7%, respectively, while net sales in Europe grew 12.8% over the same period, boosted by decreased supply constraints.
• The company exited the quarter with cash and cash equivalents of $1.210 billion, compared with $1.195 billion at the end of the prior quarter.
• In the filing, GameStop noted that its board of directors approved a new investment policy Tuesday, permitting the company to invest in equity securities, among other investments.
• The board has given Chairman and Chief Executive Ryan Cohen the authority to manage the investment portfolio.

C3.ai’s stock drops as AI software company misses on top line – Market Watch, 12/7/2023

• C3.ai came up shy on the top line for its latest quarter, and its shares were falling in Wednesday’s after-market activity.
• Revenue at C3.ai came in at $73.2 million, up from $62.4 million a year before, whereas the FactSet consensus called for $74.3 million.
• On an adjusted basis, C3.ai lost 13 cents a share, while analysts had been modeling an 18-cent per-share loss.
• The company noted that it closed 62 agreements, including 36 pilots, during the fiscal second quarter.
• That compares with the 24 pilots that C3.ai closed during its fiscal first quarter.
• Looking to the fiscal third quarter, the company anticipates $74 million to $78 million in revenue, whereas the FactSet consensus was for $77.7 million.
• The company models $295 million to $320 million on the top line for its full fiscal year, which compares with the $307.9 million consensus view.

Chewy Stock Slumps After Earnings. It Sees a Soft Macroeconomic Outlook. – Barron’s, 12/7/2023

• Chewy shares were heading lower after the online pet products retailer provided disappointing guidance for the January quarter and reduced its full-year outlook, amid continued macroeconomic pressures on its business.
• For the fiscal third quarter ended Oct. 31, Chewy posted revenue of $2.74 billion, up 8% from a year ago, at the low end of the company’s guidance range and below the Street consensus at $2.75 billion.
• Profits on an adjusted basis were 15 cents a share, nicely ahead of the Street consensus as tracked by FactSet for a loss of 6 cents a share.
• For the January quarter, Chewy projects sales of between $2.78 billion and $2.8 billion, up 3%, but below the Street consensus at $2.93 billion.
• Chewy reduced its full-year revenue guidance to between $11.08 billion and $11.1 billion, from a previous forecast of $11.15 billion to $11.35 billion.
• Chewy reiterated its forecast for an adjusted EBITDA margin of 3%.

ChargePoint’s stock dips on widening loss, revenue miss – Market Watch, 12/7/2023

• ChargePoint Holdings stock declined in after-hours trading Wednesday after the network of electric-vehicle charging stations posted quarterly results.
• Revenue sank 12% to $110.3 million from $124.3 million a year ago.
• ChargePoint reported a fiscal third-quarter net loss of $158.2 million, or 43 cents a share, compared with a net loss of $84.5 million, or 25 cents a share, in the year-ago quarter.
• Analysts surveyed by FactSet had expected on average revenue of $124.9 million.

Dollar General’s stock buoyed by earnings beat, but retailer is not happy with its performance – Market Watch, 12/7/2023

• Dollar General stock rose early Thursday, after the discount retailer beat third-quarter earnings estimates and backed its guidance for the full year, even as its recently reinstalled CEO said he was not happy with its performance.
• Sales rose 2.4% to $9.694 billion from $9.465 billion a year ago.
• The Goodlettsville, Tenn.-based company posted net income of $276.2 million, or $1.26 a share, for the third quarter, down from $526.2 million, or $2.33 a share, in the year-earlier period.
• The FactSet consensus was for EPS of $1.20 and sales of $9.644 billion.
• Same-store sales fell 1.3%, while FactSet was expecting a 2.1% decline.
• For fiscal 2024, it is planning about 2,385 real-estate projects, including 800 new stores, 1,500 remodels and 85 relocations.
• Sales in the quarter included declines in the home, seasonal, apparel and consumer categories.
• Gross profit as a percentage of net sales was 29% compared with 30.5% in the year-earlier period.
• The decline was mostly due to increased shrink, lower inventory markups and higher markdowns.
• As of Nov. 3, total merchandise inventories, at cost, stood at $7.4 billion, up from $7.1 billion a year ago.
• Dollar General backed its full-year guidance, for a sales increase of 1.5% to 2.5%, and for EPS of $7.10 to $7.60.
• The company expects same-store sales to be down 1% to flat.

Google launches its largest and ‘most capable’ AI model, Gemini – CNBC, 12/7/2023

• Google is launching what it considers its largest and most capable artificial intelligence model Wednesday as pressure mounts on the company to answer how it’ll monetize AI.
• The large language model Gemini will include a suite of three different sizes: Gemini Ultra, its largest, most capable category; Gemini Pro, which scales across a wide range of tasks; and Gemini Nano, which it will use for specific tasks and mobile devices.
• For now, the company is planning to license Gemini to customers through Google Cloud for them to use in their own applications.
• Starting Dec. 13, developers and enterprise customers can access Gemini Pro via the Gemini API in Google AI Studio or Google Cloud Vertex AI.
• Android developers will also be able to build with Gemini Nano.
• Gemini will also be used to power Google products like its Bard chatbot and Search Generative Experience, which tries to answer search queries with conversational-style text (SGE is not widely available yet).

AMD Rolls Out New Chips, Aiming for Nvidia’s AI Crown – Wall Street Journal, 12/7/2023

• Advanced Micro Devices is starting to roll out its newest chips for artificial intelligence, the company said on Wednesday, presenting Nvidia with perhaps its toughest challenge yet in the race to supply semiconductors that undergird the AI boom.
• The chips are expected to become widely available as manufacturers of servers incorporate them into their systems and cloud-computing companies including Microsoft and Oracle begin to offer access to them.
• Microsoft said the chips would be available for customers to evaluate on Wednesday.
• “The year has shown us that AI isn’t just kind of a cool new thing; it’s actually the future of computing,” Chief Executive Lisa Su said, describing AI as a shift akin to the dawn of the internet.

Meta Starts Fully Encrypting Messages on Facebook and Messenger App – Wall Street Journal, 12/7/2023

• Meta Platforms said it has started fully encrypting messages on Facebook by default, moving ahead with a privacy measure that government officials and others have warned could hide illegal activity by child predators and other criminals.
• The social-media giant starting this week is automatically shifting Facebook users to so-called end-to-end encryption for their messages on that platform and its connected Messenger app, it said in a blog post Wednesday.
• Direct messages on Instagram also will shift to such encryption by default somewhat later, likely in the new year, according to people familiar with the matter.
• While law enforcement and other groups have voiced concerns, many privacy advocates have long pushed tech companies to incorporate end-to-end encryption, which shields communications from view by outsiders—including criminal hackers and spies as well as company security officials and law enforcement.

McKinsey Shrinks New Partner Class by Roughly 35% – Wall Street Journal, 12/7/2023

• It got a lot harder to make it to the top of McKinsey.
• The closely held firm named its new class of partners, and the group is roughly a third smaller than last year, according to people familiar with the matter, in the latest sign that economic conditions have dented demand for high-price consultants.
• Around 250 people will become partners early next year, a far smaller class than previous years.
• McKinsey named about 380 people to partner in 2022.
• Making McKinsey partner, like similar promotions at Goldman Sachs or big law firms, comes with big pay bumps and can catapult a career.
• The consulting industry boomed during the pandemic as companies sought advice about how to revamp their business, escalating a battle for talent among McKinsey, Bain and other top firms.
• The nearly century-old company has roughly 45,000 employees around the globe and around 3,000 partners.
• On Wednesday afternoon, McKinsey sent an email to alumni announcing its 248 new partners and sharing a message to staff from Bob Sternfels, the global managing partner. Sternfels in that memo praised the incoming partners and said more than half of the latest class had been deferred last year.
• “Instead of folding, they focused on addressing the feedback from our election committee and came back as stronger candidates this year,” Sternfels wrote.

Morgan Stanley Raises Nearly $1.2 Billion for Late-Stage Growth Investing – Wall Street Journal, 12/7/2023

• Morgan Stanley Investment Management has exceeded its fundraising goals for two new vehicles that invest in privately held high-growth businesses, the New York firm said Thursday.
• North Haven Expansion Equity IX closed with $725 million and North Haven Expansion Credit II with $450 million, according to Pete Chung, head of Morgan Stanley Expansion Capital.
• The final tally exceeded the cumulative initial fundraising target of $850 million by around 40%.
• Morgan Stanley also exceeded the totals collected for the previous funds in both strategies—$400 million for a growth-equity fund in 2018 and $275 million for the first growth-credit fund, which closed in 2017.
• The Expansion Capital group is the asset manager’s late-stage growth-investment unit and part of the $230 billion alternative-assets division.

Elon Musk’s SpaceX Valued at $175 Billion or More in Tender Offer – Bloomberg, 12/7/2023

• Elon Musk’s SpaceX has initiated discussions about selling insider shares at a price that values the closely held company at $175 billion or more, according to people familiar with the matter.
• The most valuable US startup is discussing a tender offer that could range from $500 million to $750 million, said some of the people, who asked not to be identified because the information is confidential.
• SpaceX is weighing offering shares at about $95 apiece, the people said.
• Terms and the size of the tender offer could change depending on interest from both insider sellers and buyers.

Jack Dorsey’s Block Furthers Bitcoin Foray With New Hardware Wallet – Bloomberg, 12/7/2023

• Block is offering a new hardware Bitcoin wallet as crypto advocate Jack Dorsey focuses the payments company formerly known as Square more on security and self-governance for the digital-asset sector.
• Called Bitkey, the wallet allows users to self-custody the cryptocurrency on a hardware device that resembles a USB thumb drive.
• Users of the wallet can connect with crypto exchanges and payment services including Block’s Cash App, allowing them to transfer the token between platforms.

US ECONOMY & POLITICS

US Recurring Jobless Claims Fall in Holiday Week After Big Jump – Bloomberg, 12/7/2023

• Continuing applications for US jobless benefits fell by the most since July in a holiday week after climbing for the past two months.
• Recurring jobless claims, a proxy for the number of people continuously receiving unemployment benefits, decreased by 64,000 to 1.86 million in the week ended Nov. 25.
• That marked only the second drop since early September and followed a surge in the prior week.
• Initial claims ticked up to 220,000 in the week ended Dec. 2, according to Labor Department data out Thursday.
• That was in line with estimates in a Bloomberg survey of economists.
• On an unadjusted basis, initial claims jumped by the most since early 2022, led by populous states like California, New York and Texas.
• In another sign of a cooling labor market, the executive coaching firm Challenger, Gray & Christmas said US-based employers announced 45,510 job cuts in November, which was lower than the same month a year ago but a 24% increase from October.
• Seasonal hiring is also at its lowest level for this point in the year in a decade, according to a separate report.

Debate Performances Fuel Haley’s Rise in GOP Nomination Race – Wall Street Journal, 12/7/2023

• Deft yet serious, quick-witted yet substantive, Nikki Haley’s debate performances are feats of political athleticism that few can match.
• Surrounded by men trying to shout and tear her down, she skewers foes, exhibiting a specifically female form of calm yet gleeful aggression.
• She floats like a fighter jet and stings like a missile.
• And based on that she has surged—into a distant second place in a Republican primary that barely deserves to be called a contest.
• Former President Donald Trump continues to lead the GOP field nationally, with a dominating 59% of the vote, according to a new Wall Street Journal poll, while Haley, the former United Nations ambassador and South Carolina governor, has edged into second with 15%, virtually tying Florida Gov. Ron DeSantis’s 14%.
• No other candidate breaks double digits.
• Trump’s support in the poll, conducted Nov. 29-Dec. 4, was unchanged from the Journal’s poll four months ago, while Haley has risen seven points and DeSantis has slipped slightly.
• “I love all the attention, fellas,” Haley said with a tight smile. “Thank you for that.”

Congress Moves Forward on Roughly $900 Billion Defense Bill – Wall Street Journal, 12/7/2023

• House and Senate lawmakers agreed to scrap the most contentious pieces of a nearly $900 billion defense and national security policy bill, such as restrictions on abortion and transgender care for service members, clearing the way for its passage by the end of the year.
• Lawmakers who serve on both chambers’ Armed Services committees on Wednesday night released compromise text for the annual National Defense Authorization Act.
• This year’s NDAA, which lays out top policy priorities for the Pentagon, calls for a 5.2% pay raise for service members and military training assistance to Taiwan to help the island defend itself against a possible invasion by China.
• The text, called a conference report, came after House and Senate negotiators spent the past week hammering out differences between the NDAA bills their chambers passed earlier this year, a process that prompted House lawmakers to drop several controversial social-policy measures that were unlikely to get approval from President Biden and the Democratic-controlled Senate.
• The newly released proposal now has to pass through both chambers and secure Biden’s signature.
• The Senate could take the first step toward approving it in a procedural vote on Thursday.

EUROPE & WORLD

Fight for Gaza’s Khan Younis Puts Israel, U.S. on Collision Course – Wall Street Journal, 12/7/2023

• The southern Gaza Strip city of Khan Younis is a critical target for Israel’s military—strategically and symbolically.
• The centuries-old market town is the suspected hiding place of Hamas leader Yahya Sinwar and the militant group’s most significant remaining military stronghold.
• But the fight to capture it risks putting Israel on a collision course with the Biden administration, which has called on Israel to minimize civilian casualties and ease humanitarian deprivation in Gaza, and to hew to a more limited war aim of expelling Hamas from power.
• Khan Younis, a city of 400,000 people in normal times, almost doubled in size as Gazans fled there from the bombed-out remains of Gaza City.
• That makes it a treacherous battlefield as Israel fights militants in the midst of crowded neighborhoods.
• Winning control of southern Gaza’s biggest city would allow Israeli troops to surround Hamas’s remaining fighters and effectively remove the U.S.-designated terrorist group from power in the Gaza Strip.
• Israel would need to decide whether to keep waging conventional war against remaining Hamas forces with the airstrikes, ground forces and artillery that have impaired the militants’ fighting power but also caused civilian casualties.
• Or it could begin to shift to limited special-forces operations to target remaining Hamas cells, a potentially yearslong fight that would have U.S. support but also require a long-term presence that could be criticized as occupation.

China’s Weak Trade Data Signals More Economic Pain to Come – Bloomberg, 12/7/2023

• China’s imports unexpectedly shrank in November from a Covid-hit period a year ago, while exports edged up from a low base, suggesting the nation’s slowing economy still hasn’t bottomed out.
• Imports in dollar terms declined 0.6% after clocking an improvement the previous month, according to official data released Thursday.
• That was worse than economists’ consensus forecast of a 3.9% gain.
• Overseas shipments rose 0.5% from a year ago, slightly better than the consensus estimate of no change, and marked the first year-on-year expansion since April.
• The resulting trade surplus was $68.39 billion.
• Exports to the US and European Union have fallen by over 10% so far this year from the same period last year, while those to Russia surged 50%, according to the official data.
• Imports of steel plunged 27% so far in 2023 as the property downturn deepened, while chips declined by 16.5%.

Containership Hits Bridge in the Suez Canal – Wall Street Journal, 12/7/2023

• A containership collided with a floating bridge in the eastern lane of the Suez Canal on Wednesday but the flow of ships across the waterway won’t be interrupted, the Suez Canal Authority said.
• Tugboats were working to pull the ship One Orpheus, which had a fault with its rudder while transiting the canal on its way to the Netherlands from Singapore, the SCA said in a statement.
• The incident occurred in the middle section of the canal, built as an expansion that was completed in 2015.
• SCA officials said about a dozen ships coming from the south were being diverted to the main canal passage. The One Orpheus, a Singapore-flagged vessel, can move around 9,000 containers.

Factmonster – TODAY in HISTORY

• Delaware became the first state to ratify the U.S. Constitution. – 1787
• The U.S. declared war on Austria-Hungary in World War I. – 1917
• The Japanese attacked Pearl Harbor. – 1941
• America’s final moon mission, Apollo 17, blasted off from Cape Canaveral. – 1972
• Indonesia invaded East Timor, leading to a 25-year occupation. – 1975
• A 6.9 magnitude earthquake hit Armenia, killing 25,000. – 1988
• Taliban forces fled from Kandahar, their last stronghold in Afghanistan. – 2001
• Iraq formally declared to the UN that it had no weapons of mass destruction. – 2002
• Hamid Karzai was sworn in as Afghanistan’s first popularly elected president. – 2004

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