December 4th - 8th, 2023
A slowing labor market alongside deflationary economic conditions brightened the economic outlook for late 2023
The S&P 500 is up +0.51%, the Nasdaq is up +0.99%, and the Dow Industrials is up +0.64% WTD; a slowing labor market in combination with a Goldilocks economic outlook, characterized by moderate growth and stable inflation, have led to a more positive outlook for equities in 2024
The 10-Yr U.S. Treasury yield has decreased -0.077% to a current yield of 4.132%, whereas the 30-Yr U.S. Treasury yield decreased -0.174% to a current yield of 4.245%; an anticipated Fed hold alongside deflationary pressure have lifted bond prices
Crude oil prices decreased -8.53% to a current $69.47/bbl while bitcoin increased 9.49% to a current $43,213/coin; gold has shined with stable rates and escalating geopolitical tensions, while oil prices have fared negatively
Gold ended last week at a record end-of-day high; the precious metal has been boosted by sliding interest rates, central-bank purchases, and war [WSJ]
In another sign of a cooling labor market, available positions in the US dropped to 8.7 million in October, the lowest since 2021 and well below estimates for the month; that was music to the ears of the Fed, which wants to see the labor market soften alongside easing inflation before it considers cutting interest rates [BBG]
The gap between the job openings rate and the unemployment rate has narrowed, an indication that the labor market is cooling; the number of available jobs at the end of October was the lowest since March 2021, the Labor Department said Tuesday [WSJ]
Consumer confidence is on the rise as inflation continues stabilizing and retail pricing positively adjusts
A federal freeze on a pandemic-era tax break hasn’t stopped some financing firms from making money off it, turning longer waits for refunds into a marketing opportunity; credit funds, small business lenders and ERC processing firms are all offering bridge loans and cash advances to small businesses waiting for their refunds [WSJ]
Extraordinary corporate profits were a driving force in last year’s surge in inflation, a pressure that is now easing rapidly as customers push back; volume, rather than pricing, will be the catalyst for future growth [WSJ]
Retailers are making modest predictions about the holiday shopping season—yet their stocks are going gangbusters in response; in the coming days, investors will look at U.S. service-sector activity for November and Friday’s monthly jobs report as they try to assess the strength of the economy and the market’s trajectory [WSJ]
China is trying to defuse a financial time bomb that could severely damage its banking system; cities and provinces across the country have accumulated a massive amount of hidden debt following years of unchecked borrowing and spending [WSJ]
Real interest rates have fallen, boosting assets such as gold that don't pay any income; the 10-year TIPS yield—which is adjusted for inflation—has fallen to 2.086% from above 2.5% in late October [WSJ]
Hopes for a Goldilocks economy—one that’s not too hot or too cold—have sent prices of everything including bonds, gold and stocks flying; activity in the options market shows many investors are positioning for those gains to continue [WSJ]
M&A activity shows slight improvement with developments within airlines, entertainment, and renewable energy
Alaska Airlines agrees to buy Hawaiian Airlines; Alaska Airlines announced on Sunday that it will purchase its struggling Pacific-region rival, Hawaiian Airlines, for ~$1.9 billion in a deal expected to close in 9–18 months [CNN]
Origin Energy rejected a $12.8B Brookfield Asset Management-led takeover after only 69% of investors supported the deal, below the 75% threshold [BBG]
The Premier League sold four years of UK broadcast rights for $8.4B, mostly to its biggest existing partners Sky Sports and TNT Sports [BBG]
Call center software provider Five9, which has a market cap of $6.2B, is exploring a potential sale [BBG]
Roche Holding agreed to pay as much as $3.1B for Carmot Therapeutics, a developer of the new type of weight-loss treatments that have taken the market by storm [BBG]
Blackstone is exploring a sale of Anthos Therapeutics, a developer of a new generation of blood thinners, which could be worth several billion dollars in a potential sale [RT]
Saudi Arabia's PIF sovereign wealth fund will buy a 49% stake in luxury hotel group Rocco Forte Hotels at a $1.8B EV [RT]
Singaporean sovereign wealth fund GIC is in talks to invest in Atlas SP Partners, the securitization business that Apollo Global Management bought from Credit Suisse [BBG]
The FTC is investigating ExxonMobil’s $60B takeover of Pioneer Natural Resources, which would be the largest oil-and-gas deal in two decades [WSJ]
Allete, a US power utility and renewable energy developer with a ~$5.2B market value, including debt, is exploring a sale of the company [RT]
A federal judge considering the DOJ’s bid to block JetBlue Airways' proposed $3.8B acquisition of Spirit Airlines raised the possibility letting the deal proceed if JetBlue divests more assets as the antitrust trial wrapped up [RT]
Longreach Group is considering selling Japanese industrial technology company Fujitsu Component, which may be valued at up to $1B [BBG]
Diageo is seeking to divest its beer portfolio, excluding its flagship brand Guinness, due to margin concerns [RT]
AbbVie agreed to buy neurological disease drug developer Cerevel Therapeutics in a deal valued at $8.7B [BBG]
Medical tools supplier Danaher completed its $5.7B acquisition of Abcam, overcoming the initial opposition from the founder of the protein consumables maker [RT]
Recent developments across four key industries highlight AI investment, leadership changes, and foreign policy complication
Energy & Natural Resources
Billions in US funding hasn’t convinced developing world to ditch coal; South Africa and Indonesia, among the world’s most coal-hungry economies, are backtracking on commitments they made to burn less of the fuel under agreements known as Just Energy Transition Partnerships, or JETPs, which offered them $28.5 billion from the U.S. and other wealthy nations [WSJ]
Venture Global LNG is becoming one of the world’s biggest natural-gas exporters, success that came from pitching bargain-basement contracts to energy companies and then moving quickly to supply gas to Europe after Russia invaded Ukraine and halted exports – some of its earliest customers, including BP and Shell, say the company has reneged on their contracts, claims that Venture Global disputes [WSJ]
Technology, Media, & Telecommunications
Spotify plans to lay off 17% of its workforce, approximately 1,500 employees, in its third round of layoffs this year as part of an intensified effort to boost profitability – the decision comes as the audio streaming company faces challenges from slower economic growth and increased borrowing costs [WSJ]
About a year after OpenAI’s launch of ChatGPT brought the simmering artificial intelligence race to a boil, Google’s highly anticipated AI model, Gemini, has finally joined the competition; released yesterday, Gemini is a large language model (LLM) that Google CEO Sundar Pichai and executives at the company’s DeepMind AI division say will revolutionize generative technology for business and daily life [CNBC]
Uber shares gained more than 4% on Monday after S&P Global said the ride-hailing company will join the S&P 500 index [WSJ]
Mark Zuckerberg sold Meta stock last month for the first time since November 2021; Zuck unloaded ~$185 million worth of shares after holding on to all his stock while the company struggled in 2022 [YF]
Meta and IBM launched a coalition of artificial intelligence companies and research institutions that are pushing a so-called open model of AI; the AI Alliance, whose members include Intel, Oracle, Cornell University, and the National Science Foundation, said it is pooling resources to stand behind “open innovation and open science” in AI [WSJ]
OpenAI rival Mistral is in the final stages of raising $487M in an investing round
led by a16z, with participation from Nvidia, Salesforce, and others [BBG]
Healthcare & Life Sciences
The succession race is on at Johnson & Johnson; J&J CEO Joaquin Duato could stay in the role for several more years, yet few people expect him to remain in the post for as long as the roughly 10-year stints of each of his two predecessors [WSJ]
The nation’s largest drugstore chain, CVS, will move away from the complex formulas used to set the prices of the prescription drugs it sells and shift to a simpler model; under the plan, CVS’s roughly 9,500 retail pharmacies will get reimbursed by pharmacy-benefit managers and other payers based on the amount that CVS paid for the drugs, in addition to a limited markup and a flat fee to cover the services involved in handling and dispensing the prescriptions [WSJ]
Zepbound, Eli Lilly’s weight loss drug, is now available in the US as an alternative to Novo Nordisk’s Wegovy [BBG]
Financial Services
US Bank plans to issue $2.5B of auto credit-linked notes; CLNs have grown in popularity ahead of looming regulatory reforms in 2024 [BBG]
Outside of standard macroeconomic updates and M&A developments, collegiate congressional hearings and NCAA activity have led news cycles
Several commercial vessels and the USS Carney were attacked by drones and missiles in the Red Sea, a US official said, jacking up concerns that the Israel–Hamas war could escalate to a wider conflict that disrupts international trade [WSJ]
Michigan, Washington, Texas, and Alabama are headed to the College Football Playoff, which was arguably the most controversial decision the selection committee has made since the format began in 2014; Florida State was fifth in the final rankings, marking the first time an undefeated team from a Power Five conference was snubbed from the tournament field [AP]
Negotiations for another Israel-Hamas hostage deal have stalled and fighting in Gaza ramped up again, forcing Palestinians in the enclave to again decide whether it is safer to stay put or keep moving [WSJ]
Meta’s AI chief doesn’t think AI super intelligence is coming anytime soon, and is skeptical on quantum computing; Yann LeCun believes that AI systems are 2-3 decades away from reaching some semblance of sentience [CNBC]
A new study published by the Harvard Business School found that certain accessories or physical features gave candidates an edge in landing a job—even after controlling for race, age and gender—and different jobs favored certain looks [WSJ]
The White House has warned that Ukraine funding is about to run out – in letters to Congressional leaders, the White House’s budget chief, Shalanda Young, cautioned that if additional funding for Ukraine isn’t approved before the year ends, the US cannot continue equipping it to fend off Russia’s invasion [P]
On Tuesday, NCAA President Charlie Baker proposed a plan to create a new tier within Division I college athletics; the groundbreaking proposal gives participating schools autonomy over name, image, and likeness (NIL) decisions and initiates a “long-overdue conversation” about the existing framework for compensating student-athletes [YS]
College presidents face backlash for dodging campus antisemitism questions – prominent alumni, business leaders, and politicians spoke out against the presidents of Harvard, MIT, and Penn for not giving straight answers in response to questions at a congressional hearing Tuesday about whether they would discipline students if they called for the genocide of Jews [CNN]
McKinsey & Co.’s new class of partners is roughly a third smaller than last year, a fresh sign that economic conditions have dented demand for high-price consultants [WSJ]
Gavin McManus
Dec 8, 2023
