Today’s Big Picture

Asia-Pacific equity markets finished the day down across the board except for South Korea’s KOSPI which gained 0.13% as Transportation names helped edge out lagging sectors today. Taiwan’s TAIEX declined 0.12%, Australia’s ASX All Ordinaries fell 0.16%, India’s SENSEX gave back 0.24%, China’s Shanghai Composite shed 0.40% and Japan’s Nikkei closed 0.64% lower. Hong Kong’s Hang Seng ended the day down 0.97% in a broad decline led by Producer Manufacturing companies. European markets are mostly lower as of midday trading, and U.S. equity futures point to a positive market open later this morning.

U.S. equity markets continue to chug higher despite being deeply overbought, as are the closely watched McClellan Oscillators for both the S&P 500 and the Nasdaq. McClellan Osciallators reflect market breadth, the difference between the number of advancing and declining stocks. A reading over 70 is considered an overbought condition and coming into this week, the McClellan Oscillator for the S&P 500 is at 95.27 and the Nasdaq’s is at 95.26.

While the market is in the midst of a strong seasonal trend, the overbought nature of the McClellan Oscillator and the Cboe Volatility Index at a three-year low coming into this week suggest even a little disruption in the market could foster profit taking following the 14.6% jump in the S&P 500 and the more than 17% gain in the Nasdaq Composite since late October. We suspect readers will enjoy a continued move higher in the stock market, but with the CNN Money Fear and Greed Index creeping into “Extreme Greed” we would remind them of the old Wall Street saying, “Bulls make money, bears make money, pigs get slaughtered.”

Data Download

International Economy

The Ifo Business Climate indicator for Germany unexpectedly declined to a three-month low of 86.4 in December from a downwardly revised 87.2 in November, and the market consensus forecast of 87.8. Companies became more pessimistic about their expectations for the coming months (84.3 in December versus 85.1) and their current business situation (88.5, the lowest since August 2020, vs 89.4 in November).

Canada is expected to announce new rules this week, requiring all new passenger cars sold in the country to be zero emissions by 2035. Canada targets zero emission vehicles (ZEVs) to represent 20% of all new car sales in 2026, 60% in 2030 and 100% in 2035. The new rules will apply to model year 2026.

Domestic Economy

At 10 AM ET, the National Association of Home Builders (NAHB) will release its December Housing Market Index, which is expected to rise to a reading of 36 from November’s 34 figure.

The Congressional Budget Office, which provides nonpartisan budgetary analyses, sees inflation measured by the price index for personal consumption expenditures (the Fed’s preferred inflation gauge), falling from 2.9% this year to 2.1% in 2024. However, it also sees inflation ticking back to 2.2% in 2025 as downward pressures on inflation in food and energy prices ease.

Federal Reserve Bank of Chicago President Austan Goolsbee said it’s too early to declare victory in the central bank’s inflation fight, and decisions on interest-rate cuts will be based on incoming economic data. Goolsbee’s comments follow those from New York Fed President John Williams on Friday that it is premature to think about the timing of rate cuts.

According to the Department of Education, 40% of student loan borrowers missed their first student loan payments since they were paused for three years due to the COVID-19 pandemic.

As mortgage rates retreat and more people list their homes for sale, online real estate brokerage Redfin (RDFN) expects the housing market will move in the direction of buyers in 2024.

Markets

Friday saw the excitement over Fed Chair Powell’s comments earlier in the week fade as Fed Governors looked to adjust expectations regarding both the amount and timing of rate cuts. Sectors reacted as you might expect, with almost all sectors trading lower, including Real Estate falling 1.21% and Utilities selling off 1.74%. Technology (0.50%) and Consumer Discretionary (0.21%) bucked that trend, mostly due to sector heavyweights Microsoft (MSFT), Amazon (AMZN) and Tesla (TSLA) moving higher. Broad indexes were mixed as the Nasdaq Composite gained 0.35%, the Dow rose 0.15%, the S&P 500 ended the day flat down a mere 0.01% and the Russell 2000 dropped 0.77%.

In individual names, Costco Wholesale Corporation (COST) gained 4.45% on the heels of a strong quarter and a reported special dividend of $15 per share prompting a number of research firms to raise price targets for the stock. Also of note was the revelation that the company had sold approximately $100 million of gold bars in the past quarter.

Here’s how the major market indicators stack up year-to-date:

Dow Jones Industrial Average: 12.54%
S&P 500: 22.91%
Nasdaq Composite: 41.54%
Russell 2000: 12.71%
Bitcoin (BTC-USD): 152.97%
Ether (ETH-USD): 85.40%
Stocks to Watch

No market-moving earnings reports are expected before U.S. equity markets begin trading today. Pre-market breadth is healthy as 289 names in the S&P 500 index have traded hands so far this morning with 188 gainers and 101 decliners. Names catching a bid this morning include Illumina Inc (ILMN) (more below), Steel Dynamics (STLD) and Nucor Corporation (NUE) while Solar Edge (SEDG) and Enphase Energy (ENPH) are under pressure.

Reports indicate more Chinese agencies and government-backed firms have ordered staff to start carrying local branded smartphones and stop bringing their Apple (AAPL) iPhones and other foreign devices to work, extending a previous mandate.

Nissan Motor (NSANY) revealed plans to export electric cars developed in China to global markets, in a research and development deal with Tsinghua University.

IBM (IBM) entered into a definitive agreement with Software AG, majority owned by Silver Lake, to purchase StreamSets and webMethods, for €2.13 billion in cash, as it looks to bolster its AI and hybrid cloud offerings.

Nippon Steel Corp. (NPSCY) will acquire US Steel (X) for $55 per share in a transaction that will close in either 2Q or 3Q 2024.

Illumina announced it will divest cancer tester developer Grail after a U.S. Fifth Circuit Court of Appeal ruling on Friday. The move could come through either a sale or a capital markets transaction with the goal of finalizing terms by the end of 2Q 2024.

Teamsters working nationwide at Anheuser-Busch (BUD) voted by an overwhelming 99% to authorize a strike if Anheuser-Busch fails to come to terms on a new contract 5,000 Teamsters across the company’s 12 U.S. breweries. The current agreement expires Feb. 29, 2024.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Heico (HEI) is the lone company expected to report its quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Tuesday, December 19

Japan: Bank of Japan Interest Rate Decision
Eurozone: Inflation Rate – November
US: Housing Starts & Building Permits – November

Wednesday, December 20

Eurozone: New Car Registrations – November
Germany: GfK Consumer Confidence, Producer Price Index – November
UK: Inflation Rate – November
Eurozone: Consumer Confidence (Flash) – December
US: Weekly MBA Mortgage Applications
US: Existing Home Sales – November
US: Weekly EIA Crude Oil Inventories

Thursday, December 21

US: Weekly Initial & Continuing Jobless Claims
US: GDP (Third Estimate) – 3Q 2023
US: Philadelphia Fed Index – December
US: Leading Indicators – November
US: Weekly EIA Natural Gas Inventories

Friday, December 22

Japan: Inflation Rate – November
UK: Retail Sales – November
UK: GDP Growth Rate, Business Investment – 3Q 2023
US: Durable Orders – November
US: Personal Income & Spending, PCE Price Index November
US: New Home Sales – November
US: The University of Michigan Consumer Sentiment Index (Final) – December
Thought for the Day

“Remember who checks on you when you get a little quiet. Those are your people.” ~ Unknown

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: Earnings Feed: Daily Markets: Stocks Look to Chug Higher; Can It Last?