S&P futures up 0.3% Wednesday morning following Tuesday’s declines, where the DJIA posted its ninth consecutive loss, the longest streak since 1978. Weak breadth remains a key story, with S&P decliners outpacing advancers for the 12th straight session. Treasuries slightly weaker, dollar index flat, gold up 0.1%, Bitcoin futures down 2.4%, and WTI crude up 0.2%.
Focus remains on today’s FOMC decision, expected to deliver a 25 bp rate cut, completing 100 bp of easing since September. Updated SEP likely to signal a slower pace of easing, with Powell emphasizing patience amid a stronger economic backdrop. Housing starts data also on the calendar.
Corporate Highlights:
- HMC-US and NSANY-US: Confirmed collaboration talks, with media speculating on a potential merger.
- POST-US: Acquired Potato Products of Idaho; recent reports suggested potential LW-US deal.
- HEI-US: Missed fiscal Q4 results; FSG organic revenue growth decelerated.
- WOR-US: Reported fiscal Q2 revenue and EBITDA slightly ahead of expectations.
- MA-US: Announced $12B share repurchase program and a 15.2% dividend increase.
- BA-US: Resumed full jet production in Seattle after strike resolution.
- MU-US and LEN-US: Set to report earnings after the close.
US equities closed lower on Tuesday: The Dow declined 0.61%, the S&P 500 fell 0.39%, the Nasdaq dropped 0.32%, and the Russell 2000 was the worst performer, down 1.18%. Stocks closed off their session lows but reversed Monday’s gains. Breadth remained weak, with the S&P 500 recording its 12th consecutive session of more decliners than advancers, marking the longest streak since 1978. Similarly, the Dow experienced its ninth consecutive decline, another record dating back to 1978. Lagging sectors included managed care, energy, semiconductors, asset managers, insurers, and industrial metals. Conversely, pharma, biotech, MedTech, commodity chemicals, retailers, and China tech stocks posted relative outperformance.
Tech leadership, which had been a key driver of December’s rally, showed signs of a pause, with Nvidia (NVDA) falling further into correction territory. This development added to scrutiny over the narrow market breadth, as value and cyclicals have significantly underperformed in recent weeks. While Fed easing expectations have provided some support, concerns around market concentration, positioning, and weak cyclical participation are notable headwinds.
The market also reacted to mixed economic data. Headline November retail sales increased 0.7% m/m, beating expectations and showing strength in categories like online, sporting goods, and building materials. However, industrial production declined, and capacity utilization missed forecasts. Meanwhile, the NAHB homebuilder confidence index remained flat, with challenges tied to higher rates and construction costs. Investors are now focused on Wednesday’s FOMC decision and Powell’s press conference, as well as the updated Summary of Economic Projections (SEP).
Treasuries were flat, with a $13B 20-year Treasury auction tailing after last week’s strong performance. The dollar index rose 0.1%, while the greenback lagged against the yen. Gold fell 0.3%, and Bitcoin futures gained 0.2% after jumping more than 4% in the previous session. WTI crude dropped 0.9%, dipping below $70/barrel.
Corporate News by Sector
Information Technology
- QUBT-US (+51.5%): Awarded a NASA contract to tackle a radar imaging problem, driving significant investor interest.
- ON-US (+2.0%): Strengthened its partnership with Japan’s DENSO to advance autonomous driving technologies; DENSO plans to acquire ON shares on the open market.
- SEDG-US (+16.6%): Upgraded to “buy” from “sell” at Goldman Sachs; analysts cited attractive valuation and restructuring opportunities after an 86% decline over the past year.
- NET-US (+2.5%): Upgraded to “buy” at Stifel; analysts highlighted the company’s massive TAM and potential for 25-30% sustained revenue growth.
- VIAV-US (-5.7%): Downgraded to “underweight” at Morgan Stanley; concerns centered on earnings potential in the Optical Security segment.
Consumer Discretionary
- NSANY-US (+11.5%): Nikkei reported that Nissan is in merger talks with Honda (HMC-US).
- AFRM-US (-2.7%): Announced a $750M convertible note offering, with plans to repurchase $300M in shares.
Healthcare
- TEVA-US (+26.5%): Phase 2B trial for ulcerative colitis and Crohn’s disease met primary endpoints, boosting investor sentiment.
- PFE-US (+4.7%): Reaffirmed FY24 guidance; FY25 midpoint slightly above expectations. The company also announced an additional $500M in expected cost savings by 2025.
- JAZZ-US (-2.2%): Announced CEO Bruce Cozadd will retire by the end of 2025 as the company transitions to new leadership.
Industrials
- COMM-US (-3.3%): Downgraded to “underweight” at Morgan Stanley; analysts flagged risks tied to telecom spending and debt management.
Materials
- NUE-US (-2.6%): Issued a negative Q4 preannouncement, citing weaker steel mill earnings due to lower volumes and average selling prices.
Energy
- KOS-US (+19.2%): Announced it does not intend to make a firm bid for Tullow Oil (TLW-GB).
Eco Data Releases | Wednesday December 18th, 2024
S&P 500 Constituent Earnings Announcements | Wednesday December 18th, 2024
Data sourced from FactSet Research Systems Inc.
