Market Snapshot
briefing.com
| Dow | 37656.52 | +111.19 | (0.30%) | | Nasdaq | 15099.18 | +24.60 | (0.16%) | | SP 500 | 4781.58 | +6.83 | (0.14%) | | 10-yr Note |
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| | NYSE | Adv 1661 | Dec 1097 | Vol 665 mln | | Nasdaq | Adv 2495 | Dec 1787 | Vol 7.5 bln |
Industry Watch
| Strong: Consumer Discretionary, Health Care, Consumer Discretionary, Real Estate |
| | Weak: Energy, Information Technology, Communication Services, Utilities |
Moving the Market
-- Light participation; investors in vacation mindset
-- Drop in market rates supporting positive bias in stocks; $58 billion 5-yr note sale met excellent demand
-- Lack of conviction on either side of the tape
-- Relative weakness in some mega cap names
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Closing Summary
27-Dec-23 16:30 ET
Dow +111.19 at 37656.52, Nasdaq +24.60 at 15099.18, S&P +6.83 at 4781.58
[BRIEFING.COM] The major indices settled the session slightly higher than yesterday. Volume was light again at the NYSE, which was not surprising ahead of another extended holiday weekend.
A positive response to today's $58 billion 5-yr Treasury note sale, which met excellent demand, saw the major indices jump to session highs. The S&P 500 was up 0.2% at its best level of the session and trading roughly 11 points below its all-time high close.
The major indices ultimately settled below those levels, though. The S&P 500 registered a 0.1% gain; the Nasdaq Composite closed up 0.2%; and the Dow Jones Industrial Average logged a 0.3% gain.
None of the S&P 500 sectors moved more than 0.5% in either direction. The real estate (+0.5%) and health care (+0.5%) sectors closed at the top of the leaderboard while the energy sector declined 0.5%.
Another drop in Treasury yields supported the ongoing positive bias in the stock market today. Market rates were already heading lower in front of the 5-yr note auction results and pulled back further in response. The 2-yr note yield declined 12 basis points to 4.23% and the 10-yr note yield fell ten basis points to 3.79% after today's $58 billion 5-yr note sale met excellent demand.
The market did not receive any top-tier economic data today, but the Richmond Fed Manufacturing Index for December came in at -11, down from -5 that was reported in November. The dividing line between expansion and contraction for this series is 0.0, so the December reading reflects an acceleration in the rate of contraction for manufacturing activity in the Richmond Fed region.
- Nasdaq Composite: +44.3%
- S&P 500: +24.5%
- Russell 2000: +17.3%
- S&P Midcap 400: +15.6%
- Dow Jones industrial Average: +13.6%
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 207,000; prior 205,000), Continuing Claims (prior 1.865 mln), advance November goods trade deficit (prior -$89.8 bln), November advance Retail Inventories (prior 0.0%), and November advance Wholesale Inventories (prior -0.2%)
- 10:00 ET: November Pending Home Sales (prior -1.5%)
- 10:30 ET: Weekly natural gas inventories (prior -87 bcf)
- 11:00 ET: Weekly crude oil inventories (prior +2.91 mln)
Treasury yields decline after solid 5-yr note sale
27-Dec-23 15:35 ET
Dow +84.79 at 37630.12, Nasdaq +14.38 at 15088.95, S&P +3.63 at 4778.38
[BRIEFING.COM] The major indices are sticking to narrow ranges ahead of the close.
The 2-yr note yield declined 12 basis points to 4.23% and the 10-yr note yield fell ten basis points to 3.79% after today's $58 billion 5-yr note sale met excellent demand.
Looking ahead, Thursday's economic calendar features:
- 8:30 ET: Weekly Initial Claims (Briefing.com consensus 207,000; prior 205,000), Continuing Claims (prior 1.865 mln), advance November goods trade deficit (prior -$89.8 bln), November advance Retail Inventories (prior 0.0%), and November advance Wholesale Inventories (prior -0.2%)
- 10:00 ET: November Pending Home Sales (prior -1.5%)
- 10:30 ET: Weekly natural gas inventories (prior -87 bcf)
- 11:00 ET: Weekly crude oil inventories (prior +2.91 mln)
GOOG weighs on communication services sector
27-Dec-23 15:00 ET
Dow +50.62 at 37595.95, Nasdaq +3.05 at 15077.62, S&P -0.50 at 4774.25
[BRIEFING.COM] The S&P 500 (flat) has climbed off its lowest level of the day.
WTI crude oil futures settled 2.1% lower at $74.09/bbl and natural gas futures climbed 2.4% to $2.61/mmbtu. On a related note, the S&P 500 energy sector (-0.7%) has extended its loss recently.
The communication services sector (-0.5%) is also lagging the broader market somewhat due to a loss in Alphabet (GOOG 141.16, -1.66, -1.2%). Meanwhile, Meta Platforms (META 356.41, +1.58, +0.5%) sports a modest gain.
Regeneron atop S&P 500 on Wednesday after patent case win
27-Dec-23 14:30 ET
Dow +47.43 at 37592.76, Nasdaq +13.34 at 15087.91, S&P +1.53 at 4776.28
[BRIEFING.COM] The S&P 500 (+0.03%) tripped up over the last half hour, dipping briefly into the red, but has since regained flat lines.
Elsewhere, S&P 500 constituents Regeneron Pharma (REGN 876.62, +27.09, +3.19%), CarMax (KMX 78.13, +1.95, +2.56%), and Advanced Micro (AMD 145.67, +2.26, +1.58%) dot the top of the average. REGN moves higher after patent suit win vs Viatris (VTRS 10.73, +0.02, +0.23%).
Meanwhile, North Carolina-based chemical manufacturer Albemarle (ALB 148.02, -4.37, -2.87%) sits at the bottom of the S&P.
Gold adds +1.1% on Wednesday
27-Dec-23 14:00 ET
Dow +79.46 at 37624.79, Nasdaq +30.21 at 15104.78, S&P +5.79 at 4780.54
[BRIEFING.COM] With about two hours to go on Wednesday the tech-heavy Nasdaq Composite (+0.20%) is narrowly in second place.
Gold futures settled $23.30 higher (+1.1%) to $2,093.10/oz, pushing month-to-date gains to about +1.7%, helped in recent weeks by 2024 rate cut expectations.
Meanwhile, the U.S. Dollar Index is down about -0.5% to $101.00.
Page One
Last Updated: 27-Dec-23 08:55 ET | Archive
Not doing much, but that's still saying a lot
The only market closed today for a holiday is Bulgaria's Sofia Stock Exchange. The rest of the stock market world is open for business. A positive bias has been seen throughout Asia and Europe, primarily because the U.S. market has retained its remarkably positive bias.
Yesterday, the S&P 500 came within 12 points of its record closing high (4,796.56) seen on January 3, 2022, before backing off just a bit into the close. At yesterday's high, the S&P 500 was up 16.6% from its October 27 low.
It isn't expected to do much at today's open. Currently, the S&P 500 futures are up two points and are trading roughly in-line with fair value, the Nasdaq 100 futures are up 23 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are down four points and are trading roughly in-line with fair value.
Not doing much, though, is still saying a lot. Sellers aren't part of the equation in any meaningful degree.
Sure, there are some outliers on an individual stock basis (there always are), but at the index level it remains a picture of resilience.
Seasonality, momentum, performance chasing, and, frankly, speculative behavior have provided some unyielding support during an eight-week win streak for the stock market. The drop in market rates and the increase in rate-cut expectations, however, have been the foundation.
Market rates are down again today, too. The 2-yr note yield is down eight basis points to 4.27% and the 10-yr note yield is down five basis points to 3.84%.
There hasn't been a specific news driver to account for the drop in market rates. Some might point to geopolitical angst, particularly related to the Middle East, as the causal factor. The dollar is down today, however, as are oil prices ($75.03, -0.54, -0.7%), so that would be a narrative stretch to fit the price action with the headline.
In any case, the stock market at this point isn't going to be perturbed by the ongoing slide in Treasury yields, which is generally viewed as a basis to keep the rally going or at least from falling apart.
Another plain truth is that there is a lack of meaningful news to upset the stock market's bias. Accordingly, in the absence of such news, a material shift in the trading trend is also absent.
There is no U.S. economic data of note today, but there is a $58 billion 5-yr note auction. Results of that auction will be released at 1:00 p.m. ET.
-- Patrick J. O'Hare, Briefing.com
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.
Synopsys investors disappointed by the potential price the company could pay to acquire Ansys (SNPS)
Synopsys (SNPS), an electronic design automation software supplier used to test and design chips, sold off with under an hour to go in Friday's session on a WSJ report that it was potentially looking into acquiring Ansys (ANSS), an engineering simulation software developer. Further details of the rumored transaction materialized after the close on Friday. Reuters reported that Ansys was receiving takeover offers for over $400 per share, a roughly 17% premium to Friday's opening price.
With no deal formalized, there is no guarantee that Ansys will be acquired by Synopsys, or any company for that matter, or if it will ink a deal at a price tag exceeding $400/share, underscored by Ansys still trading well below those levels. Reuters noted a formal announcement should be made within the next few weeks.
- Why would a Synopsys/Ansys acquisition make sense? Ansys has been developing engineering simulation software for decades, steadily expanding its competitive advantage by penetrating numerous industries through its software's wide application range. Because of the high level of training involved, Ansys' simulation software is costly to switch off from, providing the company with a defensive revenue stream. While Ansys' top line did underwhelm last quarter, this was largely due to the U.S. Department of Commerce's additional export restrictions to certain Chinese businesses, a likely short-term headwind.
- Ansys also commands excellent margins, maintaining gross margins of over 90% in Q3, highlighting management's ability to keep expenses in check. However, by that same token, it does not leave much room for Synopsys to come in and slash bloated expenses, keeping a cap on potential synergies.
- So why did shares of Synopsys drop rapidly on reports of an Ansys takeover? The suspected price Synopsys would pay to add Ansys software to its arsenal was too high. If Synopsys were to purchase Ansys for $400 per share, it would translate to approximately 15x estimated FY23 revenue and 46x adjusted earnings, meaningfully above several other software tech giants like ORCL, ADBE, and CRM.
Reports Synopsys could formally offer at least $400 per share for Ansys were met by an immediate backlash by Synopsys investors, primarily because of the lofty price tag. Ansys boasts a sizeable economic moat given its extensive history, embedding itself in numerous industries, and high switching costs. However, Ansys' revenue has cooled recently, slipping into negative territory in Q3 as China restrictions weighed. Still, adding Ansys would be an excellent move for Synopsys over the long run, especially as semiconductor content increases, with short-term stock fluctuations creating attractive entry points.
Bristol-Myers gains possible blockbuster schizophrenia drug in buyout of Karuna Therapeutics (BMY)
While M&A activity continues to be sluggish overall, deal making in the pharmaceutical and biotech industries has been robust as healthcare companies flush with cash look to bolster their drug portfolios. This heightened activity was on display again this morning when Bristol-Myers Squibb (BMY) announced its intention to acquire Karuna Therapeutics (KRTX), a clinical-stage biotech company focused on treating neurological diseases, for $14.0 bln.
- In the past month alone, we have seen several high-profile deals in the healthcare sector, including Roche Holdings' (RHHBY) $2.7 bln acquisition of Carmot Therapeutics on December 4, along with two acquisitions from AbbVie (ABBV). That company purchased Cerevel Therapeutics (CERE) for $8.7 bln on December, preceded by its $10 bln acquisition of ImmunoGen (IMGN) on November 30.
- In fact, this is BMY's second recent acquisition, coming on the heels of its buyout of oncology company Mirati Therapeutics (MRTX) on October 9. While the MRTX addition will strengthen BMY's cancer treatment portfolio, the acquisition of KRTX has the potential to provide its neuroscience business with a major boost.
- The crown jewel of the acquisition is KarXT, a potential first-in-class treatment for schizophrenia and Alzheimer's disease psychosis that may gain FDA approval next September (current PDUFA date is September 26, 2024). In March, KRTX reported positive Phase 3 data for the drug, disclosing that it met its primary endpoint, demonstrating a statistically significant and clinically meaningful 8.4-point reduction in Positive and Negative Syndrome Scale (PANSS) total score compared to placebo.
- Perhaps equally important, the tolerability and safety profile was also very promising. A major issue for currently available schizophrenia treatments is that people oftentimes stop taking their medications due to the serious side effects, which can include Parkinson's disease-like shaking, sedation, insomnia, and weight gain. Since KarXT targets different receptors (M1/M4 Muscarinic Receptors) than current forms of treatment, the unwanted side effects are less severe according to the clinical trial data.
- Should KarTX receive FDA approval next September, it has the potential to become a blockbuster, multi-billion-dollar drug for BMY. There's an estimated 1.6 mln people treated for schizophrenia in the U.S. alone, and if KarTX gains approval for other indications, such as Alzheimer's disease psychosis, the total addressable market expands significantly.
- With the above in mind, it's understandable why BMY was willing to pay such a hefty price for KRTX -- the $330/share offer price represents a 53% premium from yesterday's closing price. BMY is also facing a sharp slowdown in growth as its chemotherapy treatment Revlimid faces increasing competition from generics. In Q3, Revlimid sales plunged by 41% to $1.4 bln, while its blood thinner treatment Eliquis saw flat sales of $2.7 bln.
- Investors seem to be on board with the splurge as BMY shares trade higher on the news. That's interesting in itself since the acquiring company typically trades lower on buyout news -- especially if the deal is dilutive to EPS, as this one is. BMY estimates that the transaction will be dilutive to EPS by approximately $0.30/share in 2024 due to financing costs as it plans to raise debt to pay for the deal.
Overall, we believe that KRTX is a good fit for BMY as it expands its neuroscience treatment portfolio and provides it with a possible best-in-class treatment for a disease that has been notoriously difficult to treat in schizophrenia.
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