US FINANCIAL MARKET

Stocks, Bonds, Dollar Drift on ‘Mood Dampener’ CPI: Markets Wrap – Bloomberg, 12/12/2023

• Wall Street had a hard time finding solid ground after underwhelming inflation data only reinforced speculation Federal Reserve will keep rates elevated for a period before it considers easing policy.
• While the report hasn’t altered bets the Fed will be on hold Wednesday, it does bring into question the market’s aggressive pricing of a dovish pivot in 2024.
• In fact, traders have slightly trimmed their wagers on rate cuts next year, with the first one still projected to happen in May.
• And the figures also spurred speculation that Jerome Powell will possibly try to throw a bit of cold water on rate-cutting views.
• The consumer price index ticked up after being little changed in October, and when stripping out food and energy costs, the so-called core CPI accelerated every month as well.
• Tuesday’s data underscore the choppy nature of getting inflation back in line — particularly in the service sector, which the Fed has zoned in on as the last mile in its inflation fight.
• After falling in the immediate aftermath of the report, Treasury two-year yields reversed course and rose one basis point to 4.72%.
• The yield on 10-year Treasuries declined one basis point to 4.22%.
• The S&P 500 wavered around 4,600. The Nasdaq 100 rose 0.2%. The Dow Jones Industrial Average rose 0.2%.
• Google’s legal defeat at the hands of Fortnite maker Epic Games threatens to roil an app store duopoly with Apple that generates close to $200 billion a year and dictates how billions of consumers use mobile devices.
• Oracle reported slowing quarterly sales growth in its cloud computing business, fueling investor fears that the software maker’s expansion efforts have yet to gain ground in the competitive market.
• Walt Disney and Reliance Industries, led by Asia’s richest tycoon Mukesh Ambani, are expected to sign a non-binding pact as early as Monday to merge their media operations in India in a cash-and-stock deal, according to people familiar with the matter.
• The Stoxx Europe 600 fell 0.2%.
• The Bloomberg Dollar Spot Index fell 0.1%.
• West Texas Intermediate crude fell 3% to $69.18 a barrel.

Oracle shares slide as revenue misses estimates – CNBC, 12/12/2023

• Oracle shares dropped more in extended trading Monday after the software company reported fiscal second-quarter revenue and quarterly revenue guidance that fell short of Wall Street expectations.
• Revenue: $12.94 billion, vs. $13.05 billion expected.
• Earnings per share: $1.34 per share, adjusted, vs. $1.32 per share, expected.
• Oracle’s revenue from cloud services and license support totaled $9.64 billion, up 12% and below the StreetAccount consensus of $9.71 billion.
• Revenue from cloud and on-premises licenses fell 18% to $1.18 billion, slightly lower than the $1.21 billion StreetAccount consensus.
• Services revenue, at $1.37 billion, also missed consensus, which was $1.40 billion.
• Oracle said cloud infrastructure revenue reached $1.6 billion during the period, up 52%.
• With respect to guidance, Oracle called for adjusted net income for the fiscal third quarter of $1.35 to $1.39 per share and 6% to 8% revenue growth.
• Analysts polled by LSEG had predicted $1.37 in adjusted earnings per share and $13.34 billion in revenue, which implies 7.6% revenue growth.

Pfizer to Close $43 Billion Seagen Acquisition After FTC Nod – Bloomberg, 12/12/2023

• Pfizer said it will close its $43 billion takeover of Seagen later this week and will donate the rights from sales of a key drug to appease US trade regulators’ concerns.
• Both companies have now gotten all regulatory approvals to complete the deal, Pfizer said Tuesday in a statement, after the waiting period for the Federal Trade Commission to oppose it expired Monday.
• Pfizer announced broader management changes as well on Tuesday.
• Chief commercial officer Angela Hwang is leaving, and the company is creating an oncology division merging both companies’ research and sales divisions, which will be led by Chris Boshoff.

Google Loses Antitrust Case Brought by Epic Games – Wall Street Journal, 12/12/2023

• Google lost an antitrust case over the market power of its app store on Monday, a blow to the search giant as it faces other legal challenges to its search dominance and ad tech business.
• Videogame maker Epic Games sued the search giant in 2020, alleging it used its dominant position to squeeze excess profits from app developers.
• The San Francisco jury reached a unanimous verdict after deliberating for less than four hours.
• The loss comes as Google battles more antitrust challenges, including a landmark trial focusing on its dominant search engine.
• Epic’s lawsuit formed part of a broader campaign against the fees that Google and Apple charge mobile app developers.
• U.S. District Judge James Donato will decide next year what remedies Epic will be awarded.
• The parties will reconvene in January.

Ford cuts planned 2024 production of electric F-150 Lightning in half – CNBC, 12/12/2023

• Ford Motor will cut planned production of its all-electric F-150 Lightning pickup roughly in half next year, marking a major reversal after the automaker significantly increased plant capacity for the electric vehicle in 2023.
• The new production plans call for an average volume of around 1,600 F-150 Lightnings a week at Ford’s Rouge Electric Vehicle Center in Dearborn, Michigan, starting in January, according to a source familiar with the decision.
• The automaker most recently planned to produce roughly 3,200 of the vehicles on average per week.
• The production cuts for the F-150 Lightning were first detailed in a planning memo to suppliers obtained by Automotive News.
• The memo cited “changing market demand” for the cuts, according to the publication.

Lawmakers call on US regulator to thwart Kroger-Albertsons deal – Reuters, 12/12/2023

• Six U.S. lawmakers wrote to the Federal Trade Commission on Monday expressing their opposition to the proposed $24.6-billion acquisition of grocery chain operator Albertsons by peer Kroger, according to a letter reviewed by Reuters.
• Kroger and Albertsons have said they expect to complete their merger by early 2024, once the FTC completes its antitrust review.
• Senators Elizabeth Warren, Mazie Hirono, Bernie Sanders, and Cory Booker and representatives Summer Lee and Alexandria Ocasio-Cortez said in the letter that Kroger’s proposal to divest 413 stores to C&S Wholesale Grocers would not address harm to consumers, workers, and the grocery industry if the merger is allowed.
• Other lawmakers, including congressmen Greg Landsman, Brian Fitzpatrick, and Josh Gottheimer have sent letters to the FTC in support of the deal.

EY Is Laying Off U.S. Partners Amid Tough Economic Conditions – Wall Street Journal, 12/12/2023

• Ernst & Young is laying off dozens of partners across all U.S. businesses, a deeper round of partner cuts than usual as the Big Four accounting firm faces slowing demand for certain services and seeks to cut costs following its failed plan to break up the firm.
• The cuts are largely concentrated on the advisory side of the U.S. operation, affecting more than 10% of partners in consulting and about 4% in strategy and transactions, but they touch the audit and tax arms as well, people familiar with the matter said.
• That would equate to more than 100 partners in consulting and over 30 partners in strategy and transactions at both junior and senior levels.
• EY began to inform affected partners last week, with notifications expected to continue this week, the people said.
• Some U.S. partners tend to be cut annually over unsatisfactory performance, but the cuts underway are larger than usual, the people said.
• The cuts follow EY’s move in April to let go of 3,000 U.S. employees or less than 5% of its U.S. workforce.

Choice Hotels Launches Hostile Bid for Wyndham – Wall Street Journal, 12/12/2023

• Choice Hotels is launching a hostile takeover offer for Wyndham Hotels & Resorts after repeatedly being rebuffed in its effort to strike a friendly deal.
• Choice on Tuesday unveiled what is called an exchange offer for Wyndham stock, appealing directly to its rival’s shareholders.
• The offer is unchanged from its previous proposal to Wyndham itself of $49.50 in cash and 0.324 Choice shares for each Wyndham share.
• That was worth a total of $90 a share, or $7.8 billion, on Oct. 16, the day before Choice first publicized the offer.
• Choice is prepared to potentially raise the offer after doing due diligence, the company said, confirming an earlier report by The Wall Street Journal.
• To further ratchet up the pressure, Choice intends to nominate a slate of directors to be voted on at Wyndham’s 2024 annual shareholder meeting and is in the process of interviewing candidates. The window for nominations runs from Jan. 10 to Feb. 9.

Microsoft Targets Nuclear to Power AI Operations – Wall Street Journal, 12/12/2023

• Microsoft is betting nuclear power can help save its massive electricity needs as it ventures further into artificial intelligence and supercomputing.
• The technology industry’s thirst for power is enormous.
• A single new data center can use as much electricity as hundreds of thousands of homes.
• Artificial intelligence requires even more computing power.
• Nuclear power is carbon-free and, unlike renewables, provides round-the-clock electricity.
• But it faces significant hurdles to getting built, including the daunting and expensive U.S. nuclear regulatory process for project developers.
• In a twist, Microsoft is experimenting with generative artificial intelligence to see if AI could help streamline the approval process, according to Microsoft executives.

US diabetes patients face delays as insurers tighten Ozempic coverage – Reuters, 12/12/2023

• Some patients with type 2 diabetes say they are having more difficulty getting reimbursed for drugs like Ozempic as U.S. insurers implement restrictions designed to deter doctors from prescribing the medication for weight loss.
• Novo Nordisk confirmed in a recent email that it is seeing tighter health plan management of GLP-1 drugs including Ozempic and is working to minimize disruption for type 2 diabetes patients.
• The trend has contributed to a recent dip in U.S. prescriptions, an executive at the Danish drugmaker said at an investor conference last month.
• Out of 24 diabetes patients contacted by Reuters on Reddit, 13 reported recent problems getting their health plans to cover Ozempic or Mounjaro, a similar drug sold by Eli Lilly.
• The average number of weekly Ozempic prescriptions rose 33% between the first and third quarters of this year but has since dropped more than 6% to about 431,000, according to Iqvia Institute for Data Science.

US ECONOMY & POLITICS

US Consumer Prices Pick Up in Bumpy Path Down for Inflation – Bloomberg, 12/12/2023

• US consumer prices picked up in November, reinforcing the Federal Reserve’s resolve to keep interest rates elevated in the near term.
• The so-called core consumer price index, which excludes food and energy costs, increased 0.3% following a 0.2% advance in October, according to government figures.
• From a year ago, it advanced 4.0% for a second month.

• Economists favor the core metric as a better gauge of the trend in inflation than the overall CPI.
• That measure ticked up slightly after being little changed in October.
• Shelter prices, which make up about a third of the overall CPI index, rose 0.4%, offsetting a decline in gasoline prices.
• Excluding housing and energy, services prices climbed 0.4% from October, picking up from the prior month, according to Bloomberg calculations.
• So-called core goods prices, which exclude food and energy commodities, fell for a sixth month, matching the longest streak since 2003.

Biden-Trump rematch would be close, with RFK Jr a threat to Biden: Reuters/Ipsos poll – Reuters, 12/12/2023

• A looming election rematch next year between U.S. President Joe Biden and his predecessor Donald Trump would be closely fought, a new Reuters/Ipsos poll found, with both candidates saddled with profound vulnerabilities that could cost them the White House.
• Republican former President Trump, 77, faces his worries, including four criminal trials on a bevy of charges related to his attempts to overturn the 2020 presidential election and his handling of classified documents.
• A conviction before the Nov. 5, 2024, election could cost him significant support, the poll found.
• The poll showed Trump with a marginal 2-point lead in a head-to-head matchup, 38% to 36%, with 26% of respondents saying they weren’t sure or might vote for someone else.
• The poll, conducted online Dec. 5-11, surveyed 4,411 U.S. adults nationwide and had a credibility interval, a measure of precision, of about 2 percentage points.
• The poll showed that Kennedy, part of the storied political family, could draw more support from Biden than Trump.
• Trump’s lead widened to a 5-point advantage nationally when respondents were given the option to vote for Kennedy.
• Some 16% of respondents picked Kennedy when given the option, while Trump had 36% support, compared to 31% for Biden.
• Some 31% of Republican respondents said they would not vote for Trump if he was convicted of a felony crime by a jury.
• Some 45% of respondents said Trump was the better candidate for handling the economy, compared to 33% who picked Biden.

House Speaker Johnson Insists Ukraine Aid Package Include U.S. Border Measures – Wall Street Journal, 12/12/2023

• House Speaker Mike Johnson (R., La.) said Monday he was sticking to his position that any package delivering aid to Kyiv would have to include strict new border-security measures, underscoring the stalemate gripping Congress on the eve of a visit by Ukrainian President Volodymyr Zelensky.
• The new House speaker is scheduled to meet with Zelensky on Tuesday as part of a push by Ukraine’s president for continued military aid.
• Republicans and Democrats have been at odds over the national security package for months, as a rising isolationist and America First wing of the Republican Party gains traction and as public support for a war now almost two years old starts to wane.

Air Force Disciplines 15 Officers for Massive Leak – Wall Street Journal, 12/12/2023

• Among the biggest mistakes the unit made was to give Teixeira access to information he didn’t need.
• Fellow airmen didn’t understand what to do when someone had access to such information, the report found.
• Computer specialists, like Teixeira, “require system access to perform system maintenance, but do not require access to intelligence content or products to maintain the system,” the report concluded.
• “Evidence indicates a lack of understanding of the need-to-know concept due to inconsistent guidance on the topic.”
• The report didn’t find that those who saw suspicious activity knew what Teixeira was doing, but rather didn’t report improper handling of classified information up the chain of command.
• The report doesn’t name those who were disciplined but lists their ranks between staff sergeant and colonel.

EUROPE & WORLD

Reliance, Disney to Sign Off on India Media Merger Next Week – Bloomberg, 12/12/2023

• Walt Disney and Reliance Industries, led by Asia’s richest tycoon Mukesh Ambani, are expected to sign a non-binding pact as early as Monday to merge their media operations in India in a cash-and-stock deal, according to people familiar with the matter.
• Ambani’s retail-to-refining conglomerate will infuse money to hold at least 51% of the merged entity if the deal goes through, the people said, asking not to be named as the information is not public.
• Disney will hold the rest, they added, in what will be one of the largest media behemoths in India.
• The diligence and valuation exercises would start after the exclusivity agreement is signed next week and that will determine how much money Reliance will invest in the business, the people said.

Israel Takes Fight Against Hamas to Vast Tunnel Network – Wall Street Journal, 12/12/2023

• Israel’s military said it was intensifying activities underground in northern Gaza and beneath the southern city of Khan Younis, one of Hamas’s last strongholds, where the militant group’s tunnel network presents a serious impediment to an Israeli victory in the territory.
• Israeli forces are tightening their grip over Hamas’s remaining northern bastions while trying to break the militant group’s control over Khan Younis, but to do so means conquering the vast tunnel network that underpins Hamas’s rule across Gaza.
• Many of Hamas’s fighters and weapons are still located underground within the hundreds of miles of tunnels dug by Hamas under the enclave.
• Military analysts have assessed that Israel hasn’t destroyed most of this tunnel network.
• The tunnels under the southern city of Rafah near the Egyptian border, analysts say, are used by Hamas to smuggle most of its weapons into Gaza.
• Speaking from Khan Younis on Monday, Israel’s top general, Herzi Halevi, said, “We are deepening our control over northern Gaza and our penetration into the southern strip, and also deepening activity underground.”

Zelensky’s Plea for Ukraine Aid Will Find a Tough Audience in Washington – Wall Street Journal, 12/12/2023

• Ukrainian President Volodymyr Zelensky enjoyed a hero’s welcome when he came to Washington almost a year ago, a dramatic 10-hour visit that included an address to Congress complete with several standing ovations.
• He will find a tougher audience when he returns to Capitol Hill on Tuesday to plead for a continued military aid package that is facing resistance in Congress at a critical juncture in a war against Vladimir Putin’s Russia.
• Zelensky makes his pitch as war efforts have stalled on the battlefield, leaving some lawmakers and more of the American public skeptical about how much U.S. taxpayers should continue to fund Ukraine’s defense.
• The Ukrainian president plans to begin Tuesday on Capitol Hill, where the Senate last week rejected a roughly $110 billion aid package that includes money for his military and government.

Putin Critic Alexei Navalny Missing From Prison – Wall Street Journal, 12/12/2023

• Alexei Navalny, Russia’s leading opposition figure, is missing from the penal colony where he has been imprisoned and his whereabouts are unknown, his spokeswoman and other allies said, prompting concern in Washington about his condition.
• Navalny, a fierce critic of President Vladimir Putin, hasn’t been heard from for nearly a week, his team said on X.
• In recent weeks he had become ill and was put on an IV by prison staff. The team said that when his lawyers asked on Monday about his whereabouts in two penal colonies in the Vladimir region, east of Moscow, where he had been recently held, they were told he wasn’t at either one.
• “We still don’t know where Alexei is,” Kira Yarmysh, his spokeswoman, wrote on X.
• The State Department said the U.S. has reached out to Russia over Navalny but has no information about his whereabouts.

Factmonster – TODAY in HISTORY

• Pennsylvania became the second state to ratify the U.S. Constitution. – 1787
• Joseph Rainey took his seat as the first African American in the U.S. House of Representatives. – 1870
• The Mona Lisa was recovered in Florence after having been stolen two years earlier (August 1911) from the Louvre. – 1913
• Kenya gained its independence from Britain. – 1963
• The House Judiciary Committee approved a fourth and final article of impeachment against President Clinton. – 1998
• The U.S. Supreme Court stopped the presidential election recount in Florida. – 2000
• Yasir Arafat closed the offices of Hamas and Islamic Jihad. – 2001

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