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Equity Indexes Wrap: Energy Stocks Climb with Oil Prices; Chip Stocks Slip Further
January 03, 2024 04:23 PM EST
The Dow
Chevron (CVX) rose 1.9% to lead the index higher, propelled by rising oil prices as tensions in the Middle East ratcheted up and Libya’s largest oilfield was taken offline by protests.
Pharmaceutical stocks outperformed for a second straight day. Merck & Co. (MRK) gained 1.4% and Amgen (AMGN) climbed 1.1%.
Disney (DIS) shares added 1.1% after hedge fund ValueAct vowed to back the company’s slate of elected directors at its 2024 annual shareholder meeting. The entertainment giant is gearing up for a proxy fight with activist investor Nelson Peltz, who in December nominated himself and a former Disney CFO to the board. Investment manager Blackwells Capital also threw its weight behind Disney and CEO Bob Iger with board nominations of its own on Wednesday.
Verizon (VZ) rose 0.7% after KeyBanc upgraded the stock to “overweight,” citing their expectations that the telecom will continue to take market share from competitor AT&T (T).
Shares of Walgreens Boots Alliance (WBA) fell 4.1% ahead of its quarterly earnings report Thursday morning.
Apple (AAPL) stock continued to slide following yesterday’s downgrade by Barclays analysts. Shares fell 0.8% Wednesday.
The S&P 500
Eli Lilly (LLY) was the index’s top-performing stock on Wednesday, rising 4.3%. Pharmaceutical wholesalers Cardinal Health (CAH) and McKesson (MCK) rose 2.1% and 1.4%, respectively.
Marathon Petroleum (MPC) rose 3.6%. Oil companies dominated the index as oil prices surged. EOG Resources (EOG) gained 2.8%, ConocoPhillips (COP) added 2%, ExxonMobil (XOM) rose 0.9%.
Insulin pump maker Insulet (PODD) and solar company Enphase Energy (ENPH) both fell 6.9% to lead the index lower. Other 2023 laggards struggled today, including VF Corp. (VFC), down 6.1%, and FMC (FMC), down 5.6%.
IQVIA (IQV) fell 4.5% after the FTC temporarily blocked its proposed acquisition of Propel Media.
Ford (F) dropped 3.7% after recalling more than 112,000 F-150 pickup trucks due to a manufacturing issue.
The Nasdaq 100
PDD Holdings (PDD) led the index, rising 2.3% after the head of the publishing unit at China’s gaming regulator departed his post. The agency surprised the industry and sent Chinese tech stocks tumbling in late December when it proposed controversial rules to curb gaming.
Diamondback Energy (FANG) gained 2% on the back of rising oil prices.
Alphabet (GOOGL) shook off yesterday’s tech rout to climb 0.6% Wednesday.
Illumina (ILMN) led the index lower, falling 5.3%. It was followed by PayPal (PYPL), down 4.6%, and Tesla (TSLA), which lost 4%.
Semiconductor stocks continued to fall following yesterday’s decision by the Dutch government to restrict the shipment of chipmaking technology to China. Onsemi (ON) fell 2.6% while Advanced Micro Devices (AMD) lost 2.4% and Nvidia (NVDA) slipped 1.2%.
IQVIA Drops as FTC Temporarily Blocks Its Acquisition of Propel Media
January 03, 2024 03:36 PM EST
Shares of IQVIA Holdings Inc. (IQV), dropped 4% in intraday trading Wednesday after the Federal Trade Commission (FTC) announced that its request to temporarily block the health technology company from purchasing Propel Media Inc., a digital advertising firm, was granted.
The FTC filed to block the purchase in July 2023, saying that IQVIA, “the world’s largest health-care data provider,” acquiring Propel Media “would give IQVIA a market-leading position in programmatic advertising for health-care products, namely prescription drugs, to doctors and other health-care professionals.”
The agency, which monitors marketplace competition, said that the merger “would harm competition, raise prices for consumers, and hurt patients.
An administrative trial is scheduled to start on Jan. 18.
Can the Magnificent Seven Keep It Up in 2024?
January 03, 2024 02:45 PM EST
Last year was a big one for stocks—at least, for big stocks.
The Magnificent Seven—the S&P 500’s seven largest companies—posted an average total return of 104% last year and accounted for more than 62% of the S&P 500’s 26% gain.
The rest of the index didn’t fare quite so well. According to Bank of America, just 27% of S&P 500 stocks outperformed the index in 2023, making it the calendar year with the narrowest breadth in the firm’s data going back to 1987. The equal-weight S&P 500 was in the red through October before a 17% rally in the last two months of the year pulled it into positive territory.
The consensus on Wall Street, according to BofA, is that small-caps will continue to rally, gaining ground on the stocks that ran away with 2023.
“Crowding risk in the leaders of 2023 has been cited by many (including ourselves) as a key risk in 2024,” wrote BofA equity strategist Savita Subramanian in a note Tuesday. The Magnificent Seven, she added, “could be used as a source of funds if a hard landing is avoided and leadership broadens beyond secular growth stocks.”
That said, not everyone agrees with that assessment. Some, like analysts at UBS, expect the largest tech companies, which have “the significant resources needed to build and benefit from complex AI models,” to continue to thrive in 2024.
The first two trading days of the year appear a vindication of the bears. The Magnificent Seven are down an average of 2.3% as of Wednesday afternoon, while the equal weight S&P 500 has lost about 1%.
A Chart to Watch Wednesday: XLV ETF
January 03, 2024 01:46 PM EST
The Health Care Select Sector SPDR Fund (XLV) gained nearly 2% Tuesday after COVID-19 vaccine maker Moderna, Inc. (MRNA) gave the group a boost by projecting sales growth in 2025 and receiving an upgrade from independent investment bank Oppenheimer.
CEO Stéphane Bancel told investors the company could launch a respiratory syncytial virus vaccine candidate this year and a two-in-one flu/COVID vaccine in 2025, positioning the drugmaker for future growth. Meanwhile, analysts at Oppenheimer upgraded the stock to “outperform,” saying that the company could have five products on the market by 2026.
Upbeat news from Moderna helped lift sentiment among other leading drug manufacturers, such as Merck & Co., Inc. (MRK) and AbbVie Inc. (ABBV), which each carry weightings of over 5% in the ETF’s portfolio of 66 holdings.
Source: TradingView.com.
The fund’s price cleared the top of a yearlong trading range Tuesday on the highest share turnover since mid-November. Given that the price has rallied sharply from the range’s lower trendline over the past two months, it may need to retest the initial breakout point before potentially attempting another leg higher.
It’s also worth keeping an eye on the $142 level—an area on the chart that may run into resistance from a horizontal line connecting several prominent swing highs over the last two years.
Read more about charts to watch Wednesday here.
Midday Movers
January 03, 2024 12:34 PM EST
Apple (AAPL) shares fell for a second straight day after Barclays raised concerns about iPhone sales and downgraded the stock.
Shares of Charles Schwab (SCHW) also sank after a downgrade from Goldman Sachs, which said that lower interest rates could hurt Schwab’s profits.
Walgreens Boots Alliance (WBA) shares slumped ahead of its financial report tomorrow, as analysts expect a drop in earnings because of a big decline in COVID-19 vaccines and treatments.
Shares of Marathon Petroleum (MPC) and other energy providers gained as oil prices spiked after a disruption in production at a key oilfield in Libya.
Northrop Grumman (NOC) shares advanced as the U.S. Air Force awarded it a $9.2 million contract to improve the range of air-to-air missiles.
Shares of AutoZone (AZO) rose with Phil Daniele officially taking over as CEO from longtime company head Bill Rhodes.
Oil Jumps as Fear of Regional Middle East Conflict Builds
January 03, 2024 11:46 AM EST
Oil futures surged Wednesday morning as fighting in the Red Sea and a deadly attack at the gravesite of an Iranian military commander fanned fears of a larger conflict engulfing the oil-rich region.
More than 100 people were reported dead Wednesday after two bombs detonated near the grave of Qassem Soleimani in the city of Kerman on the fourth anniversary of his killing by a U.S. drone strike. The bombing comes a day after Hamas accused Israel of ordering an air strike that killed a senior official in Lebanon.
This week’s violence has fanned fears that fighting between Israel and Hamas will spill over into neighboring countries like Lebanon and draw in Iran, which supports Hamas and allies like Hezbollah. Iran-backed Houthi rebels in Yemen have for weeks been targeting commercial ships transiting the Red Sea, leading many oil tankers and shipping companies to redirect traffic around Africa. In response, the U.S. and Iran have both sent naval vessels to the waterway.
West Texas Intermediate futures jumped more than 3% Wednesday, rising from below $70 a barrel to nearly $73 by midday. Brent crude, the European benchmark, rose from $75 to about $78 a barrel.
Ford Falls After Recalling Over 112,000 F-150 Pickups For Roll Away Risk
January 03, 2024 10:56 AM EST
Ford (F) shares fell nearly 4% Wednesday morning after the automaker recalled 112,965 F-150 pickups due to roll away risks.
The automaker said that the recall, which potentially affects 112,965 pickup trucks, concerns a rear axle hub bolt that “may fatigue and break” which could “result in damage to the axle hub splines.”
The company reported that a “remedy is currently under development” and that “owners will be instructed to take their vehicle to a dealer for an interim repair if they experience symptoms related to rear axle bolt breakage, such as a clicking or rattling noise.”
Walt Disney Reaches Agreement with ValueAct in Bid to Fend off Peltz
January 03, 2024 10:21 AM EST
Shares of Walt Disney Co. (DIS) rose early Wednesday after the company said it was teaming up with hedge fund ValueAct to fend off a proxy fight with activist investor Nelson Peltz.
The companies said in a joint statement Wednesday that they had reached an agreement allowing Disney to share otherwise confidential information with ValueAct and consult the investment firm on strategic decisions. As part of the pact, ValueAct has agreed to support Disney’s slate of nominees to its Board of Directors.
“ValueAct Capital has a track record of collaboration and cooperation with the companies it invests in, and its Co-CEO Mason Morfit has been very constructive in the conversations we’ve had over the past year. We welcome their input as long-term shareholders,” said Disney CEO Bob Iger in a statement.
Disney is facing a proxy fight with activist investor Nelson Peltz, who through his firm Trian Fund Management nominated himself and former Disney CFO James Result to the company’s board in December. It is Peltz’s second proxy battle with Disney in two years. He attempted to join the board in 2022 before dropping his bid after the company announced sweeping cost-cutting measures.
Stocks Making the Biggest Moves Premarket
January 03, 2024 09:15 AM EST
Gains:
Pure Storage Inc. (PSTG): Shares of the storage company rose about 6% after S&P Global said it would join the S&P 400 MidCap Index effective Jan. 5, replacing Patterson Companies Inc. (PDCO).
Novartis AG (NVS): Shares of the pharmaceutical company rose 2% a day after it announced a gene therapy deal with biotech Voyager Therapeutics that will see it pay $100 million upfront, plus an additional $1.1 billion if certain regulatory and sales milestones are met.
Verizon Communications Inc. (VZ): Shares rose nearly 2% after KeyBanc upgraded the telecom provider to “overweight,” citing its relative strength compared to AT&T, one of its only real competitors.
Losses:
Coinbase Global (COIN): Shares of the cryptocurrency exchange fell more than 6%, adding to yesterday’s losses, as the price of Bitcoin tumbled ahead of the SEC’s decision, expected this week, on a spot ETF.
Royal Caribbean Cruises Ltd. (RCL): Shares of the cruise operator fell nearly 2% as investors continued to sell off 2023’s biggest winners; Carnival was the third-best performing stock in the S&P 500 last year.
Nvidia (NVDA): The chipmaker’s shares fell about 1%, extending yesterday’s losses alongside other chip stocks Arm Plc (ARM), down 2% premarket, and Advanced Micro Devices (AMD), down more than 1%.
Stock Futures Lower Ahead of Jobs Data, Fed Minutes
January 03, 2024 08:25 AM EST
Futures contracts connected to the Dow Jones Industrial Average were down 0.3% in premarket trading Wednesday.
S&P 500 futures fell 0.4%.
Nasdaq 100 futures were off 0.7%.
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