Closing Recap

Wednesday, December 27, 2023

U.S. equity futures were quiet overnight, shifting between gains and losses with no particular catalysts and many investors likely away on vacation during the Christmas to New Year’s lull. Early action in the indices was choppy within a narrow range with both the S&P 500 and Nasdaq modestly lower at mid-morning. That said, breadth across the market was about 1.8:1 in favor of advancers. Sector-wise, Real Estate, Consumer Discretionary and Consumer Staples were leading gainers. Communications and Technology were the only two decliners. Equities have enjoyed a strong quarter with the S&P and Nasdaq up 3-straight days and Nasdaq up 12 of last 13-days. The S&P 500 is within 0.5% of its January 3,2022 record high while the Nasdaq is up 44% YTD, best year since 2003. It is worth noting the Fear and Greed Index currently measures Extreme Greed, so a little profit taking wouldn’t be a tremendous shock.

Data-wise today, Cramer out making sure we know how light a week this could be. Yesterday’s NYSE volume was about 53% of the 30-day average per FactSet (SPY about 74%, QQQ about 50%). Separately, @bespokeinvest highlights the reversal in the 20+ year treasury ETF (TLT) which is now +3.67% for the year on a total return basis from a low of -16.8% in October. Also interesting is the two-year and ten-year today both hit lowest yields since May and July, respectively. On a similar note, @charliebillelo notes the US yield curve (10-year minus three-month) has been inverted for 427 consecutive days, now the second longest period in history. It will become the longest if it stretches to February 2024.

Heading into the final hour of trading, both the S&P 500 and Nasdaq were flattish though breadth had contracted slightly to about 3:2 still favoring advancers. Sector leaders were Consumer Discretionary (XLP, +0.38%) and Real Estate (XLRE, +0.34%) on the upside and Energy (XLE, -0.5%) and Utilities (XLU, -0.17%) to the downside. Communications and Technology also remained in the red. Consistent with the positive breadth versus flattish indices, small caps were outperforming with the IWM +0.25%. Both growth and value were just slightly in the green with no particular outperformance for either.

Economic Data

·     US Redbook yr/yr actual 4.1% versus forecast n/a and previous 3.6%.

·     Richmond Fed Composite Manufacturing Index actual -11 versus forecast -3 and previous -5.

Commodities, Currencies & Treasuries

·     February gold futures settled +$23.30/oz, or +1.12%, to $2,093.10 after managing a slight gain yesterday. Declining yields and a softer US Dollar both continue to open the door to gold gains as investors hold out hope for a less restrictive Fed stance in 2024. Today’s action saw a three-week high intraday.

·     WTI February crude futures settled at $74.11/bbl, -$1.46 or -1.93%. The move reversed a bit more than half of yesterday’s gains and was at least partially attributed to shippers returning to the Red Sea despite recent attacks and ongoing conflicts in Gaza. Brent also slipped $1.42, or -1.75%, to $79.65.

·     Both the U.S. two-year Treasury yield (hitting 4.258%) and U.S. ten-year Treasury yield (hitting 3.820%) hit intraday levels marking the lowest since May 17 and July 19, respectively. Current implied probabilities continue to reflect hopes/expectations for Fed easing in 2024. While January is still weighted to a pause, March reflects about a 76% probability of a 25bps cut. Implied rates looking further out dip to 4.814% in May to 4.55% in June and down to 3.761% in December.

Top Stock headlines

·     CHRS said its Udenyca Onbody, a new presentation of its cancer drug, has received FDA approval. Its Udenyca Onbody was previously rejected by the FDA due to issues at a third-party filler. The company resubmitted its application weeks after. was delayed in its approval by the FDA due to issues with a third-party filler.

·     CYTK experimental medicine aficamten significantly improved exercise capacity for patients with a rare, progressive heart disease. The study, which enrolled about 300 people with obstructive hypertrophic cardiomyopathy, saw significant improvements in their peak oxygen uptake from baseline, a sign of improved cardiac function that met the study’s primary goal. The trial also met all 10 of its secondary endpoints, Cytokinetics said.

·     FWBI said it has agreed to sell its inflammatory bowel disease drug called niclosamide to an undisclosed company (Niclosamide is approved to treat intestinal tapeworm infections)

·     IOVA shares tumbled after saying the FDA has placed a clinical hold on its trial on a therapy for a type of lung cancer, after a patient’s death’ IOVA will stop enrollment into the trial and will continue to monitor patients treated.

·     TSLA is preparing to launch an updated version of its popular Model Y SUV at its plant in Shanghai, Bloomberg News reported late Tuesday. According to the report, the revamped Model Y will feature significant interior and exterior changes and is expected to reach mass production as soon as mid-2024.