Key Takeaways

1. S&P 500 Predicted to Hit Record High in 2024, Survey Reveals;
2. SZSE and Saudi Tadawul Group Ink Deal to Boost Capital Market Ties;
3. Macy's Receives $5.8 Billion Acquisition Offer, Once Up 20% Pre-market;
4. Bernstein Analyst Calls Tesla the Best Shorting Opportunity;
5. Apple's Vision Pro to Enter Mass Production;

I. Market Report

U.S. stock futures were little changed Monday as investors awaited this week’s final Federal Reserve meeting of 2023 for any signals on when central bankers will begin to cut interest rates.

At 08:21 am ET, futures tied to the Dow Jones Industrial Average(DJI.US) and S&P 500 index(SPX.US) hovered near the flatline, Nasdaq, Inc.(NDAQ.US) futures dropped 0.09%.

II. Flash Headlines

Morgan Stanley Forecasts Weak Q4 Earnings, Eyes 2024 Rebound

Morgan Stanley's Michael Wilson anticipates a weak Q4 for US company earnings with a potential rebound in 2024. Fourth-quarter S&P 500 profit estimates have dropped by 5%, and Wilson expects corporate EPS to decline to around $229 by end-2024. Despite a recent 11% gain in the US benchmark, Wilson maintains a cautious stance, focusing on pricing power and upcoming producer prices data. This data could signal whether the trend in pricing power is stabilizing or not, crucial for corporate margin expansion.

S&P 500 Predicted to Hit Record High in 2024, Survey Reveals

Bloomberg’s Markets Live Pulse survey forecasts the S&P 500 to reach a record high of 4,808 points in 2024, surpassing its previous peak of 4,797 in January 2022, but with a more modest gain of about 4% from current levels. The survey, involving 518 respondents, also predicts the 10-year Treasury yield to fall to 3.8%. The optimism is driven by a more favorable economic environment in the US compared to Europe, and expectations of Federal Reserve interest rate cuts before July. Despite this, some strategists, like Bank of America’s Michael Hartnett, caution against over-optimism, citing risks like a weaker consumer.

Survey: Investors Increasingly Eye Private Credit Market

Coller Capital's survey reveals a rising interest in the private credit market among investors, with 44% planning to increase their allocations. This trend surpasses other asset classes like infrastructure and real estate. The $1.6 trillion market is attracting attention due to higher yields from increased interest rates and its senior position in capital structures. Particularly in the APAC region, 72% of investors are looking to boost their private credit investments. Despite a recent decline in capital raised, 45% of investors view the current interest rate environment as favorable for private credit. The survey, including 110 private markets investors managing a combined $2.2 trillion, also predicts private credit managers will outpace banks in lending to the private equity industry in the next 1-2 years.

Record Holiday Air Travel Forecasted in the US

The American Automobile Association (AAA) predicts a record 7.5 million air travelers from Dec. 23 to Jan. 1 in the US, surpassing the pre-Covid peak of 7.3 million in 2019. Despite increased air travel, jet fuel demand may not spike due to larger, more efficient planes, evidenced by a recent 100,000 barrels daily drop in fuel demand. Road travel is also expected to rise, with about 104 million drivers, contributing to an estimated 115 million total holiday travelers, the second-highest on record.

SZSE and Saudi Tadawul Group Ink Deal to Boost Capital Market Ties

The Shenzhen Stock Exchange (SZSE) and the Saudi Tadawul Group signed a Memorandum of Understanding (MoU) in Riyadh on December 10, 2023, to deepen capital market cooperation between China and Saudi Arabia. The MoU, signed by SZSE Deputy General Manager Tang Rui and Saudi Tadawul Group COO AlHasan Ashram, aims to enhance multi-level exchanges and cooperation in fields such as ESG, financial technology, investor services, and corporate nurturing. The agreement also includes exploring collaborations in products like indices, funds, REITs, ETF interoperability, and cross-listing of companies. Additionally, a joint cross-border capital service mechanism will be established, promoting cross-border investment and integration of the two capital markets.

Oil Prices Slide, Supply Overhang Looms

Oil prices have fallen to below $76 a barrel, facing the longest weekly losing streak in five years, despite OPEC+ announcing production cuts. The market briefly recovered following the US's decision to refill its Strategic Petroleum Reserve and a positive jobs report, alongside the busiest US year-end travel season since 2000. However, the contango structure in Brent and West Texas Intermediate suggests persistent supply overhang. This week's assessments by the International Energy Agency, OPEC, and the US Energy Department, along with the Federal Reserve's rate decision, will be crucial. Meanwhile, consumers like airlines and utilities are securing cheaper barrels through call spreads in Brent. Separately, Citigroup Inc. states that OPEC+ must maintain its supply cuts throughout the next year to balance the market, with potential to keep prices between $70 and $80 if the group cooperates.

The Proshares Trust Ii Ultra Bloomberg Crude Oil(Post Rev Splt)(UCO.US) last traded lower by 0.23% to $26.21 at 08:01 am ET while United Sts Brent Oil Fd Lp Unit(BNO.US) dropped 0.93% to $26.70 on Monday.

TikTok Buys Major Stake in Indonesia's Tokopedia Amid Expansion

TikTok, owned by China's ByteDance, has agreed to acquire 75.01% of Indonesian tech giant GoTo's e-commerce unit, Tokopedia, for $840 million, with a total investment of $1.5 billion. This move, enabling TikTok to re-enter Southeast Asia's largest e-commerce market, follows Indonesia's ban on social media-based online shopping. Tokopedia, Indonesia's largest e-commerce platform, reported a 14% rise in half-year gross revenue to $288 million, with a significant reduction in losses.

III. Stocks To Watch

Occidental to buy Permian producer CrownRock for $12 billion, raise dividend

Occidental Petroleum Corporation(OXY.US) has agreed to buy CrownRock, a major privately held producer in the oil-rich Permian basin, for $12 billion. The deal will add 170,000 barrels of oil equivalent per day and 1,700 undeveloped locations to Occidental’s operations in the Permian. Occidental is financing the transaction through $.91 billion in debt and $1.7 billion in stock. The company said it is raising its quarterly dividend to 22 cents a share from 18 cents a share beginning next year.

Macy's Receives $5.8 Billion Acquisition Offer, Once Up 20% Pre-market

Sources familiar with the matter revealed on Sunday that an investment group consisting of real estate-focused investment firm Arkhouse Management and global asset management company Brigade Capital Management has made a $5.8 billion offer to acquire Macy's Inc(M.US) and take it private. The group holds a significant number of Macy's shares through funds managed by Arkhouse. Insiders claim that the acquisition values the retailer at $21 per share. Macy's stock closed slightly above $17 per share last Friday. Today Macy's stock surged 20% pre-market as of 06:31 am ET.

Cigna Abandons Humana Acquisition, Announces $10 Billion Stock Repurchase

Cigna Corporation(CI.US), the American health insurance giant, announced on Sunday a $10 billion stock repurchase plan. Earlier, it was reported that the company had abandoned its plan to acquire rival Humana Inc.(HUM.US) due to failure in reaching an agreement on the acquisition price. Cigna stated that this repurchase will increase its total authorized stock repurchase amount to $11.3 billion. On Monday, Cigna's stock rose by approximately 14% in pre-market trading as of 07:07 am ET.

Bernstein Analyst Calls Tesla the Best Shorting Opportunity

Bernstein analyst Toni Sacconaghi stated in a report last Friday that Tesla Motors, Inc.(TSLA.US) is the ideal candidate for shorting, setting a 12-month target price of $150, indicating a potential decline of approximately 38.5% from current levels. Sacconaghi has maintained a "sell" rating on Tesla since July 2020.

The analyst's latest viewpoint is based on expectations of a slowdown in electric vehicle demand and the possibility of significant price reductions. He also warned of increasing competition, particularly from Chinese rivals. Sacconaghi added that Wall Street analysts may substantially lower Tesla's near-term delivery and revenue expectations in the coming months, which could further pressure the overvalued stock.

Apple's Vision Pro to Enter Mass Production, Accelerating the Development of the MR Industry Chain

Apple Inc.(AAPL.US) is set to officially begin mass production of its first-generation MR (Mixed Reality) product, Vision Pro, in December this year, with an initial batch of approximately 400,000 units. It is expected to be officially released in early next year. Zhu Keli, founder of the National Research Institute of New Economy, believes that the mass production of Vision Pro will first bring growth opportunities to hardware manufacturers. Furthermore, as the application of MR devices expands, it will also create business opportunities for software development and content production companies.

'Tesla Rival' Rivian Lays Off Employee

According to The Information, Rivian Automotive, Inc.(RIVN.US), the American electric vehicle manufacturer dubbed as the "Tesla killer," is cutting approximately 20 employees from its internal battery development team, including the battery engineering supervisor, at its Illinois factory. Victor Prajapati, Chief Battery Engineer in Rivian's internal battery development department, subsequently posted the layoff news on LinkedIn.

IBM, Micron to Be Joined by New York in $10B Chip Research Facility - Report

New York state is collaborating with chip companies to invest $10B in a semiconductor research facility at the University at Albany which is set to include some of the most advanced chip-manufacturing equipment globally, The Wall Street Journal reported. It will also use state funds to buy chip-making equipment from Dutch company ASML Holding NV ADR(ASML.US), the report added. After the machinery is installed, the project and its partners will start work on next-generation chip production there, as per the office of New York Governor Kathy Hochul. The collaborating partners include International Business Machines Corporation(IBM.US), Micron Technology, Inc.(MU.US), Applied Materials, Inc.(AMAT.US) and Tokyo Electron.

IV. Upcoming Events

Economic Calendar

Earnings Calendar

[This newsletter is written and edited by Bruce from Sahm News Team]