US FINANCIAL MARKET

Stocks Hold Onto Gains Amid Signs Economy Cooling: Markets Wrap – Bloomberg, 12/21/2023

• US stocks held onto gains after Thursday data signaled the economy was headed in the right direction, cementing bets on prospective interest rate cuts from the Federal Reserve.
• The S&P 500 rose 0.7%. The Nasdaq 100 rose 0.6%. The Dow Jones Industrial Average rose 0.5%.
• Bonds slid with the rate on the US two-year rate around 4.35% while the 10-year rose to 3.88%.
• Gross domestic product was revised lower to a 4.9% annualized rise in the third quarter, trailing economists’ projections, the government’s third estimate of the figures Thursday showed.
• Initial applications for US unemployment insurance rose last week by less than forecast, remaining near historic lows.
• Some market watchers blamed Wednesday’s swoon in US stocks on so-called zero-day, or ODTE, options, noting that hefty “put” volumes likely led option holders to dump the underlying equities.
• But the broader picture of slowing inflation and rate-cut bets means such speed bumps will be short-lived, many argue.
• Philadelphia Fed President Patrick Harker added to the rate-cut conviction Wednesday, saying it’s important that interest rates head lower, though he cautioned the central bank should not move too fast and not “right away.”
• Nike’s earnings, due after market close should provide insights on the state of US consumers.
• Friday brings UK GDP data, US consumer sentiment, and so-called core personal consumption expenditures (PCE) price index — the Fed’s preferred inflation gauge.
• In commodities, oil prices retreated after three days of gains, as surging US production tempered the threat of Houthi attacks on ships in one of the world’s most important waterways.
• The US dollar resumed a slide, falling against all of its Group-of-10 peers Thursday.
• The Stoxx Europe 600 fell 0.4%.
• The Bloomberg Dollar Spot Index fell 0.4%.
• West Texas Intermediate crude fell 1.1% to $73.44 a barrel.
• Spot gold rose 0.3% to $2,038.33 an ounce.

Vilified Zero-Day Options Blamed by Traders for S&P Decline – Bloomberg, 12/21/2023

• This year’s hottest derivatives trade, and perhaps also its most divisive, stole the limelight one final time for 2023 as market watchers cast zero-day options as the villains behind Wednesday’s rally-ending slump in US equities.
• The S&P gauge slid from as high as 4,778.01 intraday to close at 4,698.35.
• Its 1.5% drop from the previous close was the biggest since Sept. 26.
• It was traded in put options, which give buyers the right but not the obligation to sell an underlying asset, around the 4,755-4,765 area that drew attention, they said.
• Data tracked by Bloomberg shows that puts on the S&P 500 with strike prices of 4,755 and 4,765 and expiring on Dec. 21 had a notional value of $15.4 billion and $11.7 billion, by far the biggest value among put options as of the last close.
• Wednesday’s total put volume on the S&P 500 was the third-highest of 2023.

Micron shares advance on ‘better-than-anticipated’ results, strong guidance – Market Watch, 12/21/2023

• Micron Technology’s stock climbed nearly 5% in after-hours trading Wednesday after the company posted quarterly results that topped analysts’ revenue and earnings estimates.
• Revenue improved to $4.73 billion from $4.0 billion in the year-ago quarter.
• Adjusted earnings were a loss of 95 cents a share.
• Analysts surveyed by FactSet had expected on average a net loss of $1.01 a share on revenue of $4.58 billion.
• Micron provided second-quarter sales guidance of roughly $5.3 billion, while FactSet analysts are forecasting $4.97 billion.

CarMax Tops Expectations on Cost Cuts, Solid Profit Per Car – Bloomberg, 12/21/2023

• CarMax’s third-quarter results exceeded Wall Street expectations on strong profit per vehicle and cost cuts, as it resumed a stock buyback program. Its stock rose by double digits in early trading.
• Revenue in the quarter ended Nov. 30 came to $6.15 billion, down 5.5% from a year earlier and less than the $6.29 billion analysts expected.
• Same-store sales fell 4.1% from a year ago, while wholesale vehicle deliveries rose 7.7%.
• While pandemic-related price inflation eased in the used car market this year, average transaction prices of around $27,500 remain well above historical norms.
• CarMax said gross profit per retail unit came to $2,277 in the latest three-month period, compared with $2,251 in the previous quarter and $2,237 a year ago.
• Squeezing more profit out of fewer vehicles, the Richmond, Virginia-based company on Thursday posted adjusted earnings per share of 52 cents, above the 42 cents analysts estimated on average and the 24 cents of a year ago.

Carnival posts smaller loss, beats revenue estimates on steady cruising demand – Reuters, 12/21/2023

• Carnival on Thursday posted a narrower-than-expected quarterly loss while beating estimates for revenue, as demand remained steady, giving cruise operators enough room to bump up ticket prices.
• The company reported fourth-quarter revenue of $5.4 billion, topping market expectations of $5.31 billion.
• The company reported a fourth-quarter net loss of $48 million, or 4 cents per share, compared with a loss of $1.6 billion, or $1.27 per share, a year earlier.
• Analysts were estimating a loss of 13 cents, according to LSEG data.
• The company said it expected net yields in the first quarter, or the revenue per passenger per cruise day, excluding costs, to be up 16.5% year-on-year.
• Carnival said that booking volumes for the two weeks around Black Friday and Cyber Monday hit an all-time high.

Apple Ramps Up Vision Pro Production, Aiming for Launch by February – Bloomberg, 12/21/2023

• Apple is ramping up production of the Vision Pro mixed-reality headset, setting the stage for a launch by February, according to people with knowledge of the matter.
• Production of the new headset is running at full speed at facilities in China and has been for several weeks, according to the people, who asked not to be identified because the information is private.
• The goal is for customer-bound units to be ready by the end of January, with the retail debut planned for the following month, the people said.
• The company sent an email to software developers on Wednesday encouraging them to “get ready” for the Vision Pro by testing their apps with the latest tools and sending their software to Apple for feedback.
• The rollout will be Apple’s most complex product launch yet, requiring entirely new sales strategies and equipment.
• The headset has customized components that need to be assembled and boxed up at the point of sale.
• It’s also a delicate process.
• If the Vision Pro doesn’t fit a user’s head correctly, the device won’t show content properly and may feel extra heavy.

Warner and Paramount CEOs Discussed Possible Merger of Companies – Wall Street Journal, 12/21/2023

• Warner Bros. Discovery Chief Executive David Zaslav met Paramount CEO Bob Bakish this week and discussed a possible merger between the media giants, people familiar with the matter said, a deal that would unite some of Hollywood and cable’s biggest brands.
• The executives broached the idea of a deal, but no formal talks between the companies are underway.
• Warner owns its namesake studio, cable networks like CNN, TNT, HBO, and HGTV, and a streaming service, Max, that features much of that content.
• Paramount has its major studio and bouquet of cable channels like MTV, Nickelodeon, and Comedy Central, as well as the CBS broadcast network and the Paramount+ streaming service.
• Inside Warner, Zaslav has made no secret of his interest in exploring a deal with Paramount, which could add more programming to the Max service and bring in major NFL sports rights.
• A deal between Paramount and Warner could face significant regulatory challenges.

Wells Fargo Workers in Albuquerque Vote to Form Union, a First for a Megabank – Wall Street Journal, 12/21/2023

• Wells Fargo employees are forming the first union inside a major U.S. lender since the dawn of the modern megabank.
• Eight employees at a branch in Albuquerque, N.M., voted Wednesday on whether to organize.
• Five voted in favor and three voted against, according to a tally by the National Labor Relations Board.
• The NLRB will finalize the results if no one objects to the election within five days.
• The union will cover just a handful of the bank’s 200,000-plus employees.
• But it amounts to a new frontier for the resurgent labor movement, following successful unionization efforts at Starbucks shops, a handful of Apple stores, and an Amazon.com warehouse.
• It could also give momentum to the effort inside Wells Fargo.
• The Communications Workers of America has been trying to organize there for the last few years and hopes to expand its effort to other locations.

Jeff Bezos’ Rocket Startup and Cerberus Compete to Buy SpaceX Rival – Wall Street Journal, 12/21/2023

• The company that dominated Pentagon rocket launches before Elon Musk’s SpaceX existed may get new ownership—and a different billionaire owner.
• United Launch Alliance has received buyout bids from Blue Origin, the space company owned by Jeff Bezos, and Cerberus, the private equity giant led by billionaire Stephen Feinberg, people familiar with the matter said.
• Textron, an aviation and defense manufacturer, has also expressed interest in ULA, some of the people said.
• It couldn’t be determined how much ULA’s suitors have bid for the company, and a deal may not materialize.
• Some people familiar with the potential sale have said valuing ULA could be challenging in part because its historical performance is based on rockets it is discontinuing.
• Jefferies has estimated that ULA would fetch $2 billion to $3 billion in a sale.
• ULA has been owned equally by Boeing and Lockheed Martin since regulators approved the formation of the company almost two decades ago, a deal that ended years of rocket-launch rivalry between the aerospace giants.

US ECONOMY & POLITICS

US Initial Jobless Claims Tick Up, Remain Near Historic Lows – Bloomberg, 12/21/2023

• Initial applications for US unemployment insurance rose last week by less than forecast, remaining near historic lows and indicating the labor market remains resilient as companies seek to retain employees.
• First-time claims for benefits climbed by 2,000 to 205,000 in the week ended Dec. 16, according to Labor Department figures Thursday.
• Recurring claims were little changed in the week ended Dec. 9.
• The median forecast in a Bloomberg survey of economists called for 215,000 initial claims.
• The four-week moving average of initial claims, which helps smooth weekly fluctuations of the weekly data, decreased to 212,000, the lowest level since October.
• Unadjusted data that didn’t take seasonality into account showed initial claims dropped by 9,225 to 239,865.
• California and Georgia logged the largest declines during the week, while Ohio posted the biggest increase.

• A separate report showed gross domestic product grew at a 4.9% annualized rate in the third quarter, less than the previously estimated 5.2%.
• Personal consumption, which accounts for about two-thirds of the economy, advanced at a downwardly revised 3.1% pace.

Regional US Fed banks adopt records transparency policy – Reuters, 12/21/2023

• The 12 regional banks of the U.S. Federal Reserve system on Thursday said they had adopted a new “transparency and accountability” common policy regarding requests for bank records from the media and public.
• The policy goes into effect on Jan. 1, 2024. The Washington-based Board of Governors, which comes under the umbrella of the U.S. government, is already subject to Freedom of Information Act requests.
• The move comes after more than a year of pressure from members of Congress, who oversee the central bank, with both Republicans and Democrats periodically accusing the regional Fed banks of stonewalling requests for information that they argued should be part of the public record.
• The regional Fed banks, while overseen by the Board of Governors, are quasi-private institutions, technically owned by local private banks.
• While some banks did previously have their Freedom of Information policies in place, there was no uniformity until now in handling such information requests from either the media or the public.
• The adoption of the new policy means that records created on or after January 1, 2024, that fall into a prescribed category and are not otherwise exempt, “will be published or provided upon request,” according to the policy document.

FTC Proposes Curbing Targeted Advertising to Children Online – Wall Street Journal, 12/21/2023

• The Federal Trade Commission on Wednesday proposed new limits to protect children from what it says are tech companies’ increasingly invasive surveillance tactics.
• The move is the latest effort by FTC Chair Lina Khan to use the breadth of her legal authorities to rein in often lightly regulated tech companies, including YouTube owner Google, and Meta Platforms, owner of Instagram.
• Relying on a 1998 law, the agency would require that targeted ads for children be turned off by default, limit push notifications by online services, and restrict what it called “surveillance” in schools, among other steps.
• The announcement marks an early step in the development of a proposed new rule, which would amend an existing children’s privacy rule.
• The FTC will take public comment for 60 days on its proposed rule before making it final, which would have a good chance of passing in the Democratic-led agency.
• If adopted by the commission, the rule “will enter its second quarter-century stronger and better prepared to protect children online,” Commissioner Alvaro Bedoya wrote in a statement.

EUROPE & WORLD

U.S., China Militaries Start Talking Again After a Dangerous Rupture – Wall Street Journal, 12/21/2023

• The Pentagon’s top officer spoke with his Chinese counterpart, restoring dialogue between the militaries after a 16-month rupture during which the U.S. said China’s forces conducted dangerous intercepts of American and allied planes and ships.
• In a videoconference Thursday, Air Force Gen. CQ Brown Jr., chairman of the Joint Chiefs of Staff, and Gen. Liu Zhenli of the People’s Liberation Army’s Joint Staff Department, discussed a range of issues including global and regional security issues, but Pentagon officials were mum on details in a brief statement issued after the call.
• “General Brown discussed the importance of working together to responsibly manage competition, avoid miscalculations, and maintain open and direct lines of communication,” according to the statement.
• “Gen. Brown reiterated the importance of the People’s Liberation Army engaging in substantive dialogue to reduce the likelihood of misunderstandings.”
• Their call came together a little more than a month after President Biden and Chinese leader Xi Jinping agreed to resume military contacts at a summit meeting outside San Francisco that succeeded in moderating the contentious tone in U.S.-China relations.
• Beijing, following up on another Biden-Xi agreement, has also moved against some illicit traders in the chemicals used to make fentanyl, U.S. officials said.

US to Gather Intelligence on Chinese Chipmakers as Biden Mulls Tariffs – Bloomberg, 12/21/2023

• The US Commerce Department will begin gathering information on Chinese production of legacy semiconductors — chips that aren’t cutting-edge but are still vital to the global economy — as it looks to track how deeply reliant US companies have become on the technology from China.
• In January, the agency’s Bureau of Industry and Security will survey more than 100 companies in autos, aerospace, defense, and other sectors to understand how they procure and use legacy chips, according to a Commerce official.
• Some Chinese chipmakers have used low prices to undercut competitors, according to the official, and Washington wants to prevent China from dominating that industry as it did in steel and solar.
• “Over the last few years, we’ve seen potential signs of concerning practices from the PRC to expand their firms’ legacy chip production and make it harder for US companies to compete,” Commerce Secretary Gina Raimondo said in a statement, referring to the People’s Republic of China.
• The survey will “inform our next steps,” she said.

Biden Administration Explores Raising Tariffs on Chinese EVs – Wall Street Journal, 12/21/2023

• The Biden administration is discussing raising tariffs on some Chinese goods, including electric vehicles, in an attempt to bolster the U.S. clean-energy industry against cheaper Chinese exports, people familiar with the matter said.
• Biden administration officials, long divided over trade policy, have left in place Trump-era tariffs on roughly $300 billion of Chinese goods.
• But officials at the White House and other agencies are debating the levies again, the people said, with an eye on wrapping up a long-running review of the tariffs early next year.
• Chinese EVs are already subject to a 25% tariff, which has helped prevent subsidized Chinese automakers from making inroads into the U.S. market.
• Raising that tariff, which comes on top of a 2.5% tariff on auto imports, likely would have little immediate impact on U.S. consumers.
• Other targets for potential tariff-rate increases are Chinese solar products and EV battery packs, the people said.

Israel Signals It Could Agree to Palestinian Authority Governing Gaza After the War – Wall Street Journal, 12/21/2023

• A top national security aide to the Israeli Prime Minister indicated that the country could accept a U.S. plan for a revamped Palestinian Authority—which currently governs the West Bank—to also take over the day-to-day administration of Gaza after the war, in a sign that Netanyahu is easing his opposition to the idea under pressure from the Biden administration.
• “Israel is aware of the desire of the international community and the countries of the region to integrate the Palestinian Authority the day after Hamas, and we make it clear that the matter will require a fundamental reform of the Palestinian Authority,” Israel’s national security adviser, Tzachi Hanegbi, wrote in an opinion piece published Thursday on the Arabic-language news site Elaph.
• Israel, he added, “is ready for this effort.”
• The possible shift in Israel’s postwar plans comes amid communications and power blackouts in the Gaza Strip that have upended the work of aid agencies serving the war-shattered population, slowed emergency workers responding to Israeli bombings, and added a new layer of misery for Palestinians already facing shortages of food, water, and medicine.

Factmonster – TODAY in HISTORY

• The Pilgrims landed at Plymouth, Massachusetts. – 1620
• The first basketball game, invented at Springfield College in Massachusetts by James E. Naismith, was played. – 1891
• Pierre and Marie Curie discovered radium. – 1898
• The first crossword puzzle was printed in New York World. – 1913
• A terrorist bomb exploded aboard a Pan Am Boeing 747 over Lockerbie, Scotland, killing 270 people. – 1988
• Eleven of the former Soviet republics form the Commonwealth of Independent States. – 1991
• Palestinians took over the control of the city of Bethlehem. – 1995

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Historical performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. Any economic forecasts set forth may not develop as predicted. 

All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Material presented is excerpts derived from third party content and you may need a subscription to access the full the content. The views and opinions expressed are those of the authors and do not necessarily reflect the views of Pence Financial Group or LPL Financial.

Prior to making any investment decision, please consult your financial advisor regarding your specific situation.