| | | Market Snapshot
briefing.com
| Dow | 37710.10 | +53.58 | (0.14%) | | Nasdaq | 15095.14 | -4.04 | (-0.03%) | | SP 500 | 4783.35 | +1.77 | (0.04%) | | 10-yr Note | -5/32 | 3.85 |
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| | NYSE | Adv 1289 | Dec 1476 | Vol 662 mln | | Nasdaq | Adv 2051 | Dec 2262 | Vol 5.1 bln |
Industry Watch
| Strong: Utilities, Real Estate, Health Care, Information Technology, Financials, Communication Services |
| | Weak: Energy, Materials, Consumer Discretionary |
Moving the Market
-- Lack of strong directional drivers resulting in mixed, modest moves
-- Treasury yields moving slightly higher after sliding yesterday
-- S&P 500 being unable to climb past its all-time closing high (4,796.56) seen on January 3, 2022 likely reason for afternoon pullback
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Closing Summary
28-Dec-23 16:25 ET
Dow +53.58 at 37710.10, Nasdaq -4.04 at 15095.14, S&P +1.77 at 4783.35
[BRIEFING.COM] It was another lackluster day for the major indices. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average traded up for most of the session with modest gains. The Russell 2000 (-0.4%), meanwhile, underperformed other major indices with a modest decline.
The market took a sharp turn lower, though, with about 15 minutes left of trading. The S&P 500 and Nasdaq Composite settled little changed from yesterday while the Dow Jones Industrial Average eked out a 0.1% gain.
There was no catalyst behind the late selloff. Market participants were perhaps frustrated that the S&P 500 kept knocking on the door of its prior record closing high (4,796.56), but wasn't let in. The pullback coincided with a decline in buying activity amid thin trading conditions, which accelerated the afternoon slide, rather than a surge of selling interest. The S&P 500 reached 4,793.30 at its high today.
Market breadth was mixed for most of the session, but turned slightly negative ahead of the close. Decliners had a roughly 11-to-10 lead over advancers at both the NYSE and the Nasdaq.
None of the S&P 500 sectors moved more than 0.7% in either direction, expect the energy sector, which declined 1.5%. Oil prices also declined. WTI crude oil futures fell 3.1% today to $71.80/bbl.
Meanwhile, the utilities (+0.7%) and real estate (+0.5%) sectors saw the largest gains.
The 2-yr note yield climbed six basis points to 4.29% and the 10-yr note yield jumped six basis points to 3.85% afterthe $40 billion 7-yr note auction met much weaker demand than yesterday's upsized 5-yr note sale.
- Nasdaq Composite: +44.2%
- S&P 500: +24.6%
- Russell 2000: +16.9%
- S&P Midcap 400: +15.5%
- Dow Jones industrial Average: +13.8%
Reviewing today's economic data:
- Weekly Initial Claims 218K (Briefing.com consensus 207K); Prior was revised to 206K from 205K; Weekly Continuing Claims 1.875 mln; Prior was revised to 1.861 mln from 1.865 mln
- The key takeaway from the report is that it won't upset the market's perception that the labor market remains in good shape overall, meaning the level of initial claims is not perceived yet as a threat to the soft landing view.
- November Adv. Intl. Trade in Goods -$90.3 bln; Prior was revised to -$89.6 bln from -$89.8 bln
- November Adv. Retail Inventories -0.1%; Prior was revised to -0.1% from 0.0%
- November Adv. Wholesale Inventories -0.2%; Prior was revised to -0.3% from -0.2%
- November Pending Home Sales 0.0% (Briefing.com consensus 0.5%); Prior was revised to -1.2% from -1.5%
Friday's economic data is limited to:
- 9:45 ET: December Chicago PMI (Briefing.com consensus 50.0; prior 55.8)
Treasuries settle with losses
28-Dec-23 15:40 ET
Dow +101.70 at 37758.22, Nasdaq +8.22 at 15107.40, S&P +7.62 at 4789.20
[BRIEFING.COM] Stocks are little changed in recent action.
The 2-yr note yield climbed six basis points to 4.29% and the 10-yr note yield jumped six basis points to 3.85%.
Friday's economic data is limited to:
- 9:45 ET: December Chicago PMI (Briefing.com consensus 50.0; prior 55.8)
Energy complex futures slide
28-Dec-23 15:05 ET
Dow +90.06 at 37746.58, Nasdaq +10.15 at 15109.33, S&P +7.15 at 4788.73
[BRIEFING.COM] The major indices moved mostly sideways over the last half hour.
WTI crude oil futures fell 3.1% today to $71.80/bbl and natural gas futures slumped 9.2% to $2.37/mmbtu. On a related note, the S&P 500 energy sector has extended its earlier loss, trading down 1.1%. The only other sectors trading down are materials (-0.4%) and consumer discretionary (-0.2%).
Separately, the US Dollar Index is up 0.2% to 101.23.
Advanced Micro, Wynn Resorts among top gain getters in S&P 500 on Thursday
28-Dec-23 14:25 ET
Dow +90.08 at 37746.60, Nasdaq +24.17 at 15123.35, S&P +9.85 at 4791.43
[BRIEFING.COM] The S&P 500 (+0.21%) is in second place in late afternoon action.
Elsewhere, S&P 500 constituents Advanced Micro (AMD 149.73, +3.66, +2.51%), Tractor Supply (TSCO 216.99, +4.35, +2.05%), and Wynn Resorts (WYNN 92.03, +1.40,+ 1.54%) pepper the top of today's standings. WYNN moves higher today following Las Vegas strip gambling numbers, which totaled $821.0 mln in November, up about +22% yr/yr.
Meanwhile, Host Hotels (HST 19.64, -0.08, -0.41%) lags the market; HST trades ex-dividend today.
Gold rally pauses amid rising dollar, yields
28-Dec-23 14:00 ET
Dow +73.18 at 37729.70, Nasdaq +19.70 at 15118.88, S&P +7.67 at 4789.25
[BRIEFING.COM] With about two hours left to go on the penultimate trading day of the year the tech-heavy Nasdaq Composite (+0.13%) is at the bottom of the major averages.
Gold futures settled $9.60 lower (-0.5%) to $2,083.50/oz, easing back from their recent rate-cut sentiment fueled rally amid a rising dollar and stronger treasury yields.
Meanwhile, the U.S. Dollar Index is up about +0.3% to $101.29.
Some magnetic appeal
Saved by a burst of buying interest in the last 10 minutes of yesterday's thinly-traded session, the S&P 500 finished higher for the fourth consecutive session and sits just 0.3% away from its prior record closing high of 4,796.56 seen on January 3, 2022.
It feels as if there is a magnetic force pulling the S&P 500 back to record territory, but it's not there yet. It is not impossible for the S&P 500 to get there today, but some work will need to get done to complete a round trip that has been driven by interest rate swings fueled by the Fed's (expected) policy stance.
Currently, the S&P 500 futures are flat and are trading 0.1% above fair value, the Nasdaq 100 futures are up 40 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are down 61 points and are trading fractionally below fair value.
Modest gains in many of the mega-cap stocks has provided a support element.
Apple (AAPL) is up 0.3% as a pause on the import ban has allowed for the resumption of Apple Watch Series 9 and Ultra 2 sales. Tesla (TSLA) is up 1.0%, aided in part by a Teslarati report that Elon Musk is expected to announce a Tesla India launch in January.
Otherwise, the corporate news flow isn't really flowing in a meaningful way that would trigger a heightened level of trading interest. There was some economic data out a short time ago, and it hasn't dialed up any real trading excitement either.
Initial jobless claims for the week ending December 23 increased by 12,000 to 218,000 (Briefing.com consensus 207,000). Continuing jobless claims for the week ending December 16 increased by 14,000 to 1.875 million.
The key takeaway from the report is that it won't upset the market's perception that the labor market remains in good shape overall, meaning the level of initial claims is not perceived yet as a threat to the soft landing view.
Separately, the advance international trade in goods deficit for November was $90.3 billion, up $0.7 billion from $89.6 billion in October. Advance retail inventories were down 0.1% month-over-month following a downwardly revised 0.1% decline (from 0.0%) in October. Advance wholesale inventories were down 0.2% month-over-month following a downwardly revised 0.3% decline (from -0.2%) in October.
The Treasury market, also tacking on thin trading volume, saw some gyrations in the wake of the data. The 2-yr note yield, which came down sharply on Wednesday, is up three basis points today to 4.26%, and the 10-yr note yield is also up three basis points to 3.82%.
-- Patrick J. O'Hare, Briefing.com
Brinker has been showing good momentum lately as marketing as reinvigorated sales (EAT)
Brinker Intl (EAT) has been showing good momentum since about mid-October, with the stock up around 50% since then and making another new 52-week high this week. This restaurant operator (Chili's, Maggiano's) finally seems like it is starting to turn the corner and we think investors are finding some value here. In Q1 (Sep), EAT reported its largest EPS beat in the last three quarters. It also increased FY24 EPS guidance pretty substantially to $3.35-3.65 from $3.15-3.55.
- Same restaurant comps were good at +5.8% (Chili's +6.1%; Maggiano's +2.6%), but comps have been trending lower (+6.6% in JunQ; +10.8% in MarQ). Comps improved primarily due to increased menu pricing and favorable item mix. Despite comps trending lower, Chili's has posted four consecutive quarters of outperformance versus the casual dining industry. And importantly, its traffic gap versus the industry narrowed throughout SepQ despite the discontinuation of Maggiano's Italian Classics virtual brand and despite cycling through the deep discounting on It's Just Wings.
- EAT says this traffic progress demonstrates the improving strength of its core Chili's business. Part of that is because EAT has stepped up its marketing efforts. The company is on air with its third wave of advertising since restarting campaigns in March. Consumers are responding well to its $10.99 platform. EAT believes advertising superior value is a good way to deal with any economic headwinds.
- Furthermore, EAT says it has steadily gained share of wallet over the past four quarters across all day parts, particularly dinner, and across all income groups with higher income households growing the fastest. As it moves further into FY24, EAT anticipates delivering sustained traffic growth ahead of the industry.
- Also, EAT is pretty excited about its Chicken Crisper relaunch at Chili's. Through recipe simplification, selling larger piece counts, and pricing behind improved sauce and side innovation, EAT says the average crisper food cost as a percentage of sales has moved from 23% to 20% and Chili's is now selling 40% more crispers. A much bigger business with lower food costs and better margins is a great result.
In terms of why the stock has been moving, we think it is a combination of things. EAT's comps have been healthy. Investors appear to like the advertising restart as Chili's value offering resonates with consumers right now. We also think people are just looking at the stock and thinking it's cheap. Even after its run, EAT trades at a P/E of just 12.5x. And even though the stock has moved into the mid-$40's, it is still well below where it was in early 2021, in the $75 area.
Tesla stuck in neutral today after reports that the company could launch in India next month (TSLA)
Tesla (TSLA) not making a strong move today after a report from Teslarati that CEO Elon Musk could announce a Tesla India launch as soon as January. Although individuals in India could import Tesla vehicles after paying exorbitant import fees, in some cases double the price of the car, Tesla vehicles were not available to purchase through the company's website or directly from retail facilities. High import duties were why Tesla has avoided pouring more capital into its ambition to enter India fully.
However, this could finally begin changing starting early next year. Reports suggest that Indian regulators could reduce tariffs on imported automobiles, including electric vehicles, to as low as 15%, benefiting Tesla and its competitors. Mr. Musk may also announce plans to set up a manufacturing facility in the country, close to auto OEM giant Tata Motors, which owns popular brands like Jaguar Land Rover.
- India is one of the largest automobile markets globally by sales. However, relatively few people in the country own a vehicle, just around 20 per 1,000 people. Still, that equates to tens of millions of potential customers. Meanwhile, India's middle class continues to expand, with considerable capacity for growth, representing just a third of the total population.
- Nevertheless, domestic sales may not be what Tesla is coveting in the immediate term. Instead, the EV maker may be eyeing India's location as a prime spot to export vehicles to surrounding nations.
Reports of Tesla setting up shop in India have surfaced several times this year. In November, a Reuters article reported that Tesla was ready to plop as much as $2.0 bln into a factory in the region if the government lowered its import duties to 15% during the first two years of operation. However, these talks ultimately failed, with reports earlier this month noting that India will not be lowering its EV import taxes. In July, Tesla had discussions with an Indian investment agency regarding plans to produce a low-cost EV priced around $24,000. However, it seemed as though nothing materialized from these talks.
With discussions breaking down in the past, it is understandable that investors may remain skeptical. However, after such lengthy discussions, 2024 could be the year Tesla finally clears regulatory hurdles in India, which could provide a significant sales boost over the longer term.
Cytokinetics soars on positive clinical trial data for cardiovascular disease drug (CYTK)
Cytokinetics (CYTK), a late-stage biopharmaceutical company developing treatments for cardiovascular diseases, is soaring to multi-decade highs after reporting positive data from its SEQUOIA-HCM Phase 3 clinical trial for aficaten.
- Aficamten, a once-daily pill, is being developed for a serious heart condition called hypertrophic cardiomyopathy (HCM) in which cardiac muscles thicken, causing the inside of the left heart valve to become smaller and stiffer. Consequently, the heart's pumping function becomes limited, reducing one's ability to exercise by causing dizziness, chest pain, shortness of breath, or fainting during physical activity. The disease can also lead to cardiac arrest.
- In the U.S., there are approximately 280,000 people diagnosed with HCM, but it's estimated that another 400,000-800,000 people have undiagnosed HCM. Based on the promising Phase 3 clinical trial results, CYTK believes that aficamten can become the treatment of choice among physicians and patients.
- Notably, the drug demonstrated significantly improved exercise capacity compared to placebo, increasing peak oxygen uptake as measured by cardiopulmonary exercise testing (CPET) by a least square mean difference of 1.74 mL/kg/min.
- Additionally, aficamten showed significant and clinically meaningful improvements in all ten prespecified secondary endpoints and was generally well-tolerated.
- Adverse events occurred in eight (5.6%) and thirteen (9.3%) patients on aficamten and placebo, respectively.
- The next step for CYTK is to submit the drug for FDA approval, which the company expects to occur in 2H24. Based on the promising clinical trial data to date, and the fact that Bristol-Myers Squibb (BMY) already has a similar drug on the market, the odds of approval are looking quite favorable.
- If approved, aficaten would represent a game-changer for CYTK, marking its first commercially available treatment. The drug will likely become a multi-billion-dollar product, and perhaps making CYTK even more attractive to possible suitors.
- In late October, Bloomberg reported that the company was receiving takeover interest. While deal-making has been generally slow, M&A activity in the pharmaceutical and biotech industries has been robust lately as companies look to bolster their drug portfolios and identify new growth catalysts.
The main takeaway is that CYTK appears to be on the cusp of transitioning from a late-stage biopharmaceutical company to a commercial-stage company, raising the stakes for any would-be acquirer.
Amazon gets into the advertising game for tis Prime Video service; we think it's a good idea (AMZN)
Amazon (AMZN) is joining the advertising game with an ad tier for its Prime Video service, set to roll out on January 29. This was not a surprise as the company had signaled last fall it planned to do this. Its Prime Video service is lumped in with its Prime "free" delivery service, Amazon Music, pharmacy benefits and all the other services. As such, we do not expect a lot, if any, churn with its Prime annual service.
- The cost is pretty minimal at just $2.99 per month if Prime members want to continue being ad-free. We suspect most members will pony up the small monthly fee. Or if they opt not to do that, Amazon said the commercials will be pretty limited, so some members may just deal with it. Amazon aims to have meaningfully fewer ads than linear TV and other streaming TV providers.
- Also, there are likely some Prime members who do not use the video service much, if at all. They are Prime members mainly because they like the "free" delivery of goods and maybe the Music. So they may not even notice or care. Amazon says it needs to do this to allow it to continue investing in compelling content and to keep increasing that investment over a long period of time.
- Most every streaming service has an advertising tier. The idea is to offer a cheaper version for people on a tighter budget and maybe they do not care about ads too much. Even streaming giant Netflix (NFLX) has recently gotten into the ad-tier business, after years of saying they would not do so. In fairness, Amazon already has ads for its Thursday Night Football telecasts and that will not change. This is more about adding ads to regular on demand programming.
Overall, we think it's a smart move by Amazon to monetize its video streaming service. The $2.99/mo price is pretty miniscule, so we suspect most video users will pay the fee to avoid the hassle of commercials. Also, Prime is a good deal already at $139/yr or $14.99/mo. And that is with Video thrown in. That is cheaper than many competitive streaming services and Amazon throws in delivery, Music etc. Our fear is that Amazon may slowly start to raise this price over time and they likely will.
We also think this is good news for online ad platforms, like TTD, MGNI. Finally, the stock is seeing a muted reaction. We think that is because this news was telegraphed by Amazon a few months ago, so it's not really a surprise. In addition to the ad news, Amazon also received an FDA letter regarding potentially harmful active pharmaceutical ingredients, so that may be weighing on the stock today.
RayzeBio investors gets a nice holiday gift; BMY paying a rich premium for its RPT platform (RYZB)
It may have been a day late, but Bristol Myers Squibb (BMY -2%) gave RayzeBio (RYZB +101%) investors a nice stocking stuffer today. BMY will acquire RayzeBio for $62.50 per share in cash, for a total equity value of $4.1 bln, or $3.6 bln net of cash. RayzeBio closed at $30.57 on Friday, so that is a whopping 104% premium. The deal has been unanimously approved by both boards of directors and is expected to close in 1H24.
- RayzeBio is a clinical-stage radiopharmaceutical therapeutics ("RPT") company with a focus on actinium-based RPTs and a pipeline of development programs.
- What seems to make RayzeBio so attractive to BMY is the potential for RPT technology to attack various cancerous tumors. The companies explain that there is a need for more effective treatments in solid tumors. RPTs bind to tumor cells and deliver targeted radiation to induce cancer cell death. Actinium-based RPTs offer potential advantages over currently available RPTs since the high potency and short firing range of the alpha-emitter create the possibility for stronger efficacy and more targeted delivery.
- RayzeBio does not yet have products commercially available. However, its lead program, RYZ101 is in phase 3 development for treatment of gastroenteropancreatic neuroendocrine tumors and early-stage development for small cell lung cancer and potentially other tumor types. So while BMY will not get an immediate financial bump, the company sees the deal as bolstering its oncology portfolio and strengthens its growth opportunities in the back half of the decade and beyond.
- Bristol Myers explains that RPTs are already transforming cancer care, and RayzeBio is at the forefront of pioneering the application of this novel modality. BMY would seek to accelerate RayzeBio's preclinical and clinical programs. Also, acquiring RayzeBio's RPT platform would establish Bristol Myers Squibb's presence in one of the most promising and fastest-growing new modalities for the treatment of patients with solid tumors. Besides just the RPT technology, BMY will also be gaining a manufacturing facility. RayzeBio is completing construction of a state-of-the-art in-house manufacturing facility in Indianapolis. GMP drug production is expected to begin in 1H24.
Clearly, BMY sees a lot of potential in RayzeBio's RPT platform. Paying such a rich premium, and all in cash, speaks volumes about how management sees this potentially transformational technology. BMY currently has a $105 bln market cap, so while RayzeBio's roughly $4 bln price tag is not gigantic, it is still pretty significant.
RayzeBio benefits not just from the premium, which is great. However, having a larger pharma company with deeper pockets like BMY should accelerate its development pipeline and open many doors with potential new customers, assuming approval down the road. On a final note, Fusion Pharma (FUSN) is trading higher in sympathy. It also is a clinical-stage oncology company focused on radiopharmaceuticals as precision medicines.
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