Key Takeaways

1. U.S. Initial Jobless Claims Up 12,000 to 218,000 in Latest Week;
2. Breakthrough Expected for S&P 500, Says Morgan Stanley;
3. New York Times Sues Microsoft and OpenAI Over AI Training;
4. US Dollar Hits 5-Month Low, Faces Potential Rate Cuts;
5. Tesla Expected to Achieve Record-High Deliveries in 2023;

I. Market Report

S&P 500 futures are near flat Thursday as the benchmark index closed in on a new all-time high.

As of 08:52 am, EST (or 4:52 pm in Riyadh), S&P 500 futures were little changed. Futures tied to the Nasdaq 100 were 0.23% higher. Dow Jones Industrial Average futures slipped 69 points, or 0.18%.

II. Flash Headlines

U.S. Initial Jobless Claims Up 12,000 to 218,000 in Latest Week

There were 218,000 initial jobless claims in the week ending December 23, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 206,000 (revised from 205,000) and came in worse than the market expectation of 210,000.

Breakthrough Expected for S&P 500, Says Morgan Stanley

After experiencing significant market volatility in recent years, the S&P 500 index is now almost back to its early 2021 levels. Andrew Slimmon, Senior Portfolio Manager at Morgan Stanley Investment Management, pointed out that as investors recover from pain and shift strategies, the stock market is poised for a breakthrough. He noted that market breadth is expanding. Following a 24% surge in the S&P 500 index this year, it is less than 1% away from its all-time closing high, driven by expectations of no recession in the US economy and subdued inflation, enabling the Federal Reserve to signal rate cuts next year. This marks a sharp turnaround since 2022, when the benchmark index plummeted 20%, prompting investors to adopt defensive postures. With the stock market poised to end the year on a strong note, the current market sentiment undoubtedly favors bulls over bears.

New York Times Sues Microsoft and OpenAI Over AI Training

New York Times Company Class A(NYT.US) is suing Microsoft Corporation(MSFT.US) and ChatGPT-creator OpenAI claiming the publisher’s intellectual property was improperly used to train large language models. The Times is seeking to hold Microsoft and OpenAI accountable for what it says is “billions of dollars in statutory and actual damages” for the “unlawful copying and use of The Times’s uniquely valuable works.” It’s the latest in a string of complaints against the use of publicly available information to train AI tools as the segment has boomed in recent months.

US Dollar Hits 5-Month Low, Faces Potential Rate Cuts

The US dollar fell to a new 5-month low on Thursday, heading for an annual loss of just under 3% after two years of strong gains. The US Dollar Index, which measures the dollar against six other currencies, was down 0.18% at 100.81, its lowest since July. The Federal Reserve's unexpectedly dovish stance at its December meeting, signaling potential rate cuts next year, has been a major factor in the dollar's recent decline. Other major central banks, such as the ECB and the Bank of England, have also paused rate hikes but emphasized their commitment to controlling inflation. Market expectations suggest an 88% chance of a Fed rate cut in March 2024, with futures indicating over 150 basis points of easing next year.

Oil Prices Decline Before U.S. Inventory Data

Oil prices experienced a decline on Thursday as traders processed ongoing tensions in the Red Sea and new evidence of increasing U.S. crude stockpiles. The drop in prices, nearly 2% on Wednesday, followed the return of major shipping firms to the Red Sea. Germany's Hapag Lloyd expressed concerns about the safety of the Red Sea and announced its decision to continue sending ships around the Cape of Good Hope. In addition to the Middle East situation, data from the American Petroleum Institute revealed a 1.84 million barrel increase in U.S. crude stocks for the week ending December 22. Official figures from the Energy Information Administration, expected later on Thursday, are anticipated to show a rise following the prior week's increase of 2.9 million barrels, coinciding with a record U.S. crude output of 13.3 million barrels per day.

III. Stocks To Watch

Tesla Expected to Achieve Record-High Deliveries in 2023

Tesla Motors, Inc.(TSLA.US) is expected to have record-high electric vehicle deliveries in 2023, but it still has a long way to go to reach Musk’s ambitious target of 2 million. According to LSEG’s survey of 14 analysts, Tesla is projected to deliver 1.82 million electric vehicles globally in 2023, a 37% increase from 2022. The fourth quarter is estimated to see 473,000 deliveries. The challenges of losing tax exemptions in the US and Germany may require Tesla to further reduce prices and weaken profit margins in 2024. Analyst Jairam Nathan has lowered his delivery volume expectation to 2.04 million vehicles and predicts a 4% decrease in average revenue per vehicle in 2023.

Wedbush Raises Microsoft’s Target Price to $450

Microsoft Corporation(MSFT.US)’s collaboration with OpenAI is pushing the software giant to the forefront of the AI revolution. Analyst Dan Ives from Wedbush Securities predicts that after a strong performance in 2023, Microsoft’s stock price could further rise in the next year. Ives maintains an “outperform” rating on Microsoft’s stock and raised the target price to $450, suggesting a 20% potential increase. He also believes that Microsoft’s cloud computing and Office 365/Windows ecosystem will drive growth and profitability in the coming years.

SQM and Codelco Announce Lithium Mining Agreement in Chile

Chile’s second-largest lithium producer, Sociedad Quimica Y Minera De Chile S.A. Sponsored ADR Pfd Class B(SQM.US), and state-owned copper company, Codelco, have announced a partnership for lithium mining. The agreement involves the formation of a new company, with Codelco holding the majority stake, and operations set to commence in January 2025. This collaboration allows Chilean authorities to explore similar partnerships for lithium extraction in other salt flats.

Qatar and Shell Sign 5-Year Crude Oil Supply Agreement

Qatar has agreed to supply Shell PLC(SHEL.US)'s Singaporean subsidiary with 18 million barrels of oil annually over the next five years. This marks the first time the country’s energy company has entered into a five-year crude oil sales agreement. Qatar Energy has reached an agreement with Shell International Eastern Trading Company, with the oil supply set to commence in January of next year.

US Appeals Court Suspends Apple Smartwatch Ban

Apple Inc.(AAPL.US)’s latest smartwatch, which was only banned for a day, has unexpectedly emerged victorious. On Wednesday, a Washington appeals court temporarily suspended the US International Trade Commission’s (ITC) ban on certain Apple smartwatches. Meanwhile, Apple is appealing the ITC’s ban and requesting an extension of the suspension during the appeal process. The court has given the ITC until January 10th to respond to Apple’s request for an extension of the suspension period.

IV. Upcoming Events

Economic Calendar

Earnings Calendar

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