December 11th - 15th, 2023
As inflation continues to tame and Wall Street rallies, optimism returns to capital markets
The S&P 500 is up 2.99%, the Nasdaq is up 3.17%, and the Dow Industrials is up 3.04% WTD; upbeat inflation news and steady debt markets have fueled a late Q4 stock rally
The 10-Yr U.S. Treasury yield has decreased -0.324% to a current yield of 3.938%, whereas the 30-Yr U.S. Treasury yield decreased -0.275% to a current yield of 4.063%; mixed demand at the latest Treasury auction suggests investors are betting on lower yields and rising bonds prices in the future
Crude oil prices increased 1.71% to a current $71.83/bbl while bitcoin decreased 1.84% to a current $42,902/coin; global market activity has steadied WTI oil prices after a long 7-week decline
Investors spent most of 2023 fretting about inflation and interest rates – now they are snapping up everything from stocks and bonds to crypto and even gold; the simultaneous surge across assets has sparked debate about whether the “everything rally” marks the arrival of a lasting bull market—or just a fleeting sugar high at the end of the Federal Reserve’s tightening cycle [WSJ]
The Consumer Price Index rose only 3.1% year over year in November, and just 0.1% from the previous month; the monthly price growth is on par with the no-increase reading in October, and lower than it was in preceding months – excluding volatile food and energy prices, the core CPI increased 0.3% on the month and 4% from a year ago [CNBC]
Rising asset prices for both equities and bonds have led to a new shift in investor behavior, including share buybacks and heightened options trading
Daily options volume has doubled from five years ago as traders search for fatter payouts than they think traditional buy-and-hold investments will offer; an average of 44 million contracts are now changing hands daily [WSJ]
Companies that hyped themselves as the “disruptors” are now self-destructing at the fastest rate in a decade; overall, more than 3,200 private venture-backed US startups that have collectively raised $27.2 billion have gone out of business this year, according to the NYT and PitchBook [NYT]
The Treasury Department is issuing more shorter-term Treasury bills as demand for longer-term debt has waned; the shift has pushed the share of T-bills above the recommended range [WSJ]
US seeks to buy up to 3M barrels of oil for Strategic Petroleum Reserve; lower prices for WTI crude oil have provided opportunity for demand match [RT]
The number of workdays lost to stoppages, such as strikes, strategic walkouts and picket lines, rose in October to 4.5 million – that monthly total, a preliminary figure, was the highest in 40 years [WSJ]
Fed rate cuts may come in threes next year- the Federal Reserve had investors popping bottles yesterday, not just because it made the expected move of holding interest rates steady for now but also for signaling that there may be multiple interest rate cuts in 2024; most Fed officials penciled in three quarter-percentage-point cuts in their projections [CNBC]
In a cooling market for share buybacks, $10 billion commitments from both car maker General Motors and aerospace-and-defense giant RTX stand out for their irreversibility as well as their headline value; RTX and GM have both entered into blockbuster accelerated share repurchase agreements with banks in recent weeks—an aggressive form of buyback that requires sending all the money out of the door at once – buybacks make sense if companies have accumulated more cash than they pay out in regular dividends or can profitably invest, and if their shares are undervalued [WSJ]
M&A activity has shown areas of growth with developments in energy consolidation, luxury goods, and advanced software
US health insurer Cigna abandoned its attempt to negotiate an acquisition of rival Humana to create a $140B+ insurer; Cigna will buy back an additional $10B worth of shares instead [RT]
FTC is seeking more information on Chevron’s $53B acquisition of energy company Hess [RT]
Endeavor Energy Partners is exploring a sale that could value the largest privately held oil and gas producer in the Permian basin at $25B-$30B [RT]
Macy’s received a $5.8B buyout offer from Arkhouse Management and Brigade Capital Management [BBG]
US industrial firm Honeywell will acquire air conditioner maker Carrier's security unit for $5B cash to bulk up its building safety business [RT]
Occidental Petroleum will acquire closely-held US shale oil producer CrownRock in a $10.8B cash-and-stock deal [BBG]
Global shipping company Star Bulk Carriers, which is focused on transporting dry bulk cargoes, will merge with midsize dry bulk vessel company Eagle Bulk Shipping in a $2.1B all-stock deal [GNW]
Budget hotel operator Choice Hotels International launched a hostile takeover bid for peer Wyndham Hotels & Resorts and is preparing a board battle; Choice Hotels is attempting to acquire Wyndham for $7.2B [RT]
Carlyle Group is exploring a sale or potential listing of Acrotec Group, which could value the Swiss luxury watch parts maker at $4.6B [BBG]
KKR is in advanced talks on a potential acquisition of Iris Software in a deal that could value the private UK software company at $3.8B [BBG]
JBT, a leading global technology solutions provider, improved its offer to acquire food processing company Marel at a $3.7B EV [BW]
Recent developments across four key industries highlight inorganic growth, leadership changes, and pharmaceutical complications
Energy & Natural Resources
Occidental Petroleum makes the latest big energy industry deal – the company has agreed to buy oil driller CrownRock, which operates in the Permian Basin, for $12 billion; it’s the biggest deal for Occidental since it snagged a $10 billion investment from Berkshire Hathaway to take over Anadarko Petroleum in 2019 [CNBC]
Crude oil prices settled Tuesday at their lowest since June; before this week started, prices had already tumbled for seven straight weeks [WSJ]
Technology, Media, & Telecommunications
Fortnite maker scores an epic win in Google antitrust suit – in a landmark verdict, the jury in Epic Games’s lawsuit against Google over fees charged by the Google Play Store found that the tech giant was operating an illegal monopoly [CNN]
Adobe shares fell ~5% despite beating Q4 earnings and revenue expectations due to a weaker-than-expected 2024 forecast [CNBC]
Healthcare & Life Sciences
The pharmaceutical giant, Astrazeneca, is buying U.S.-based Icosavax for up to $1.1 billion, expanding its late-stage pipeline for vaccines and immune therapies [WSJ]
Pfizer stock hit its lowest close since October 2014 after the company warned revenue could fall next year, with demand for Covid-19 products waning; the drug maker's shares have come under pressure as it has struggled to get aboard the obesity-treatment bandwagon [WSJ]
Financial Services
Renaissance Technologies tapped longtime employee David Lippeto be co-chief executive officer of the $40 billion hedge fund firm, according to a note sent to investors [BBG]
Citadel is handling back about $7B in profits to clients; Ken Griffin’s hedge-fund firm performed better than peers in 2023 with a nearly 15% return for its flagship fund [WSJ]
Billionaire Steve Cohen pushes Point72 deeper into macro trading; the firm will now have 51 teams set to exceed the 9.8% 2023 performance [BBG]
Citigroup offers partial early bonuses to encourage staff departures [BBG]
Outside of standard macroeconomic updates and M&A developments, Shohei Ohtani’s record contract and Javier Milei’s introduction to office led news cycles
Japanese MLB superstar and two-time MVP Shohei Ohtani will receive $700 million over the next 10 years from the Los Angeles Dodgers, the largest contract in the history of North American sports, and perhaps across global sports; the contract’s value is nearly $275 million higher (64%) than baseball’s previous record contract and more than the 2023 Opening Day payroll of two teams [AP]
Liz Magill, the president of the University of Pennsylvania, resigned following withering criticism of her failure to unequivocally state that calling for the genocide of Jews would violate the school’s code of conduct at a congressional hearing on antisemitism last week [WP]
LSU quarterback Jayden Daniels won the Heisman Trophy, becoming the fifth QB in the last seven seasons to win the trophy after transferring schools [CBS]
The State Department sidestepped Congress to approve the emergency sale of $106 million worth of tank ammunition to Israel, a sign of commitment to the US' ally amid growing international calls for a cease-fire in Gaza as the humanitarian crisis worsens [AP]
Milei takes office in Argentina – Javier Milei was sworn into office as president of Argentina on Sunday; the far-right libertarian in the mold of former US President Trump has made cooling inflation his top priority, since price growth in Argentina ballooned as high as 142% in October, crushing purchasing power [AP]
A looming Christmas break deadline in the Senate at the end of this week is ratcheting up the pressure for lawmakers to reach a deal on an emergency aid package for Ukraine; Republicans insist on sweeping changes to US immigration policy in exchange for approving the $110.5 billion proposal, and President Biden told GOP leaders he is willing to discuss major concessions to curb access to asylum [WSJ]
Ernst & Young is laying off more than 10% of its U.S. consulting partners as it seeks to cut costs following a failed split; the big-four accounting firm previously cut 3,000 U.S. workers in April, similar to moves at other professional services firms [WSJ]
Gavin McManus
Dec 15, 2023
