Markets Higher With Small Caps Leading

A mostly graphical daily curated roundup of the markets and the economy from Nasdaq’s IR team.

#marketseverywhere 

“It will always be possible to raise living standards further by lowering the amount of a resource that is used to produce a given output. Growth is therefore indefinitely ‘sustainable’.”

-Matt Ridley, How Innovation Works

| “Diary: 69 days until 1st Fed cut, 82 ’til US national debt up another $1tn (to $35tn), 172 ’til US yield curve inverted longest period since pre-’29 crash, 299 ’til US election.”

| “geopolitics inflationary…transit volumes through Red Sea/Suez Canal down 35-45% past 4 weeks; Red Sea 12% world trade, 30% container traffic)…global freight rates up 120% past 6 weeks”

-BofA’s Michael Hartnett, The Flow Show

* source: BofA, Michael Hartnett, The Flow Show

1) KEY TAKEAWAYS

1) Equities + Gold + Oil HIGHER / TYields + Dollar LOWER

-BlackRock to buy Global Infrastructure Partners for $12.5 Billion -WSJ

-Wholesale prices unexpectedly fell 0.1% in Dec in positive inflation sign -CNBC

-JPM Chase profit falls after $2.9BN fee from regional bank rescues -CNBC

-Bank of America reports lower Q4 profit, hit by regulatory charge -CNBC

-Citigroup posts $1.8 billion fourth-quarter loss after litany of charges -CNBC

-Wells Fargo higher Q4 profit, helped by higher rates & cost cutting -CNBC

-Uranium gained 4% yesterday, closing at a new high

* source: Oxford Economics

DJ +0.2% S&P500 +0.4% Nasdaq +0.4% R2K +1.2% Cdn TSX +0.7%

Stoxx Europe 600 +1.0% APAC stocks HIGHER, 10YR TYield = 3.924%

Dollar LOWER, Gold $2,059, WTI +3%, $74; Brent +3%, $80, Bitcoin $45,289

2) “the timing and pace of rate cuts are still up for debate, so beware of near term volatility”

* source: Barclays’ Emmanuel Cau

3) 2024 outlook not clear… | large caps vs rest of market | “Sustainable recovery in small caps not happening yet”

Higher Beta Stocks Continue To Exhibit “Zero To Hero” As Sentiment Swings Persist

* source: Piper Sandler’s Michael Kantrowitz

4) 2024 debate: economic soft or hard landing…or maybe no landing? | Citi’s Economic Surprise Index at 0 and has been trending lower, as in economic data has not been surprising to the upside…

* source: Yardeni Research

5) job market may have cooled off but still strong… | jobless claims still at low levels

* source: Oxford Economics

6) Getting bubbly? A market dichotomy

* source: Grindstone Intelligence

7) Is this sustainable?

* source: Oxford Economics

8) all eyes on earnings…

“Given concerns in the market about a possible economic slowdown or recession, have analysts lowered EPS estimates more than normal for S&P 500 companies for the fourth quarter?

THE ANSWER IS YES. During the fourth quarter, analysts lowered EPS estimates for the quarter by a larger margin than average.” -John Butters, Factset Insight

* source: Factset Insight

9) NEXT WEEK:

“Political events will be the big focus with the Taiwanese election, the Iowa Caucus in the US on the Republican side, and the World Economic Forum’s annual
meeting at Davos. In addition, investors will closely monitor developments in the
Middle East following the US and UK strikes against Houthi rebels in Yemen.

In the economic sphere, attention will centre on the US consumer with indicators
including the retail sales report and the University of Michigan survey. In China,
the highlight will be Q4 GDP numbers while in the UK and Japan, investors will
receive inflation reports. From central banks, there will be the Fed’s Beige Book
and ECB’s account of the December meeting. Notable earnings include TSMC
and Goldman Sachs.” -Deutsche Bank

* source: Barclays’ Emmanuel Cau

2) ESG, COMPILED BY NATHAN GREENE

Hedge Funds Are Stepping Up Exposure to ESG Strategies, UBS Says – BNN

-“Hedge funds have continued to step up sustainability integration into investment strategies,” according to UBS. There’s also “a subset pursuing dedicated sustainable investment deployment via equity long/short and credit strategies, mostly within thematic equities and green, social and sustainable bonds.”

-The investment industry is eyeing new possibilities within ESG as the prospect of lower interest rates in 2024 encourages bets that green assets will recover from the beating they received last year.

ESG Fund Flows & Performance by Barclays’ Emmanuel Cau

ESG fund flows in 2023 lagged prior years, however, performance improved. 

* source: Barclays’ Emmanuel Cau

3) MARKETS, MACRO, CORPORATE NEWS

• Rexall pharmacy chain put up for sale; owner rethinks Canadian footprint-TGAM
• CVS to close some pharmacies within Target stores–RTRS
• EU investigators to inspect China’s BYD, Geely and SAIC in EV probe-RTRS
• Tesla shares drop on China price cuts and German plant shutdown–BBG
• Elliott in talks to sell Italian NPL servicer to local firm DoValue-BBG
• Airbus sets sales record in 2023 amid surging jet demand-BBG
• JSW Energy in advanced stages to finalise investors in arm JSW Neo–CNBC

Oil/Energy Headlines: 1) China’s 2023 crude oil imports hit record as fuel demand recovers-RTRS 2) Citi lowers Brent price outlook for 2024 and 2025 on oversupply fears-RTRS 3) Alberta oil production rises to record that tops China’s production-BBG 4) Shipping Advised to avoid key global trade way point after airstrikes-BBG 5) Enforcement of G7 price cap hitting Russian oil- US treasury official-RTRS 6) Bulgaria replacing Russian crude with oil from Kazakhstan, Iraq, Tunisia-RTRS