Early Look

Wednesday, December 18, 2024

U.S. futures are rebounding after sliding on Tuesday, as markets await the final FOMC meeting of the year where another 25-bps cut is widely anticipated, bringing the Fed’s total cuts this year to 100-bps. So, what happened Tuesday? Well, the CBOE Volatility Index (VIX), or “fear index” rose 8% to 15.87, its highest close since November 21^st ahead of the FOMC meeting today while the small-cap Russell 2000, seen as more sensitive to higher interest rates, dropped over 1%. The Dow Jones Industrial Average posted its 9th consecutive down day Tuesday, the longest such losing streak since 1978 according to CNBC. @bespokeinvest also notes we have seen 11 consecutive days of negative breadth. The S&P and Nasdaq Comp have held strong this month, led by the same names day after day (AAPL, AMZN, GOOGL, META, NFLX, TSLA) while other sectors such as Materials (XLB) has fallen every day in December (down 12-straight), REITS (XLRE) down 12 of last 13 trading days, Energy (XLE) and Financials (XLF) are each down 10 of the last 12 trading days!

Inflation remains stubbornly above the Fed’s 2% target; the economy is growing at about a 3% pace, and the labor market is holding strong – yet futures market traders are pricing in a near-certainty that the Fed later today will lower its benchmark overnight borrowing rate by a quarter percentage point. In addition to the rate decision, the Fed will update its “dot plot” of future expectations as well as the collective outlook on the state of the economy. Still, despite some jitters over future Fed policy, stocks are on track to end the year strong with the S&P 500 up nearly 27%, the Nasdaq up nearly 34% and the Dow up over 15%.

In Asian markets, The Nikkei Index fell -282 points to 39,081, the Shanghai Index rose 20 points to 3,382, and the Hang Seng Index gained 164 points to 19,864. In Europe, the German DAX is up 76 points to 20,323, while the FTSE 100 advanced 18 points to 8,213. Oil prices advanced, with WTI rising 0.8% to $70.60 a barrel. Spot gold is steady near $2,648/oz. Bitcoin falls 2% after topping $108,000 for the first time on Tuesday and Treasury yields flat with 10-yr at 4.4%.

• The Dow Jones Industrial Average slid -267.58 points, or 0.61%, to 43,449.90.
• The Nasdaq Composite slipped -64.83 points, or 0.32%, to 20,109.06
• The Russell 2000 Index declined -27.91 points, or 1.18% to 2,334.08.

• 8:30 AM ET                  Current Account Balance
• 8:30 AM ET                  Housing Starts M/M for November…est. 1.343M
• 8:30 AM ET                  Building Permits M/M for November…est. 1.43M
• 10:30 AM ET                Weekly DOE Inventory Data
• 2:00 PM ET FOMC Rate Policy Decision and press conference (25 bps rate cut expected)

• Earnings After the Close: EPAC LEN MLKN MU SCS WS

• U.S. Congress is set to vote in the coming days on legislation restricting U.S. investments in China as part of a bill to fund government operations through mid-March, lawmakers said. In October, the Treasury finalized rules effective Jan. 2 that will limit U.S. investments in AI and other technology sectors in China that could threaten U.S. national security.

• China-based CATL announced plans to open 1,000 swap stations next year in China, including in Hong Kong and Macao, with a long-term goal of 10,000 stations built with partners.
• Ollie’s Bargain (OLLI) upgraded to Buy from Sell at Citigroup with a $133 TP saying it is well-positioned to win in the uncertain retail landscape. Long-term, believe the recent success through higher sales volume and store count is proof the model is scalable across the U.S.

• Dow Inc. (DOW) upgraded to Outperform from In Line at Evercore ISI.
• TechnipFMC (FTI) awarded substantial subsea contract for shell’s bonga north development in Nigeria with contract valued between $250M and $500M.
• Heico (HEI) Q4 EPS $0.99 vs est. $0.98, EBITDA $264Mm vs est. $272.6Mm on revs $1.014B vs est. $1.032B.
• Westlake Chemical (WLK) upgraded to Buy at Citigroup and downgraded both Eastman Chemical (EMN) and Axalta Holdings (AXTA) to Neutral from Buy. Citi maintains their broadly neutral view on commodity chemicals with most chains having some form of supply overhang and 1H25 earnings looking very similar to 2H24
• Worthington Industries (WOR) Q2 adj EPS $0.60 vs est. $0.52, adj EBITDA $56.2Mm vs est. $52.6Mm on revs $274Mm vs est. $273.77Mm.

• Fulton Financial (FULT) reports a $125M buyback and boosts the dividend to 18c from 17c.
• LPL Financial (LPLA) said total advisory and brokerage assets at the end of November were $1.76T, an increase of $86B, or 5.1%, compared to the end of October 2024. Total net new assets for November were $35B.

• Eli Lilly and Company (LLY) said that the National Medical Products Administration (NMPA) in China has approved Kisunla (donanemab-azbt, 350 mg/20 mL every four weeks injection for IV infusion), for treatment for adults with early symptomatic Alzheimer’s disease, which includes people with mild cognitive impairment (MCI).
• Merck (MRK) said it has entered into an exclusive global license agreement with Hansoh Pharma, a Chinese biopharmaceutical company, for HS-10535, an investigational preclinical oral small molecule GLP-1 receptor agonist. Hansoh will receive an upfront payment of $112 million and is eligible to receive up to $1.9 billion in milestones.

• Siemens (SIEGY) plans to sell a €2.5 billion stake in Siemens Energy in the coming months to help fund its $10 billion acquisition of software maker Altair Engineering – Bloomberg.