Investors continued to ride 2024’s year-end, post-election wave of momentum further into uncharted territory. Some potential signs of frothiness surfaced which included Bitcoin crossing $100K for the first time and another brief bout of meme stock volatility related to Roaring Kitty. Corporate credit spreads remained pinned at or near all-time lows over risk free rates. Equity markets were un-phased with the S&P trading north of 22.5x next year’s earnings, climbing towards 6100 for the first time. Strong earnings/investor update commentary from a host of tech, travel and retail companies supported sentiment. Also the extension of a ‘Goldilocks’ soft landing narrative for the US economy overshadowed a growing wall of worry related to geopolitics globally. Importantly, US interest rates continued to back away from the post Nov 7th highs as expectations solidified that the ECB, BOE and Fed remained on track to bring rates down. For the week, the S&P500 gained 1%, the DJIA lost 0.6%, and the Nasdaq surged 3.3%.
Trump 2.0 remained a driving force, creating cross currents globally and here in the US. Emerging market currencies came under pressure after he threatened BRIC nations with significant tariffs. He also continued to fill out key posts in his upcoming administration. Meanwhile, the current US administration and China continued to jab at one another over export controls in the semiconductor industry. Separately, France’s political crisis came to a head as opposition forces in the Parliament on the left and right joined together to pass a no confidence vote on PM Barnier. By Friday though spreads between the Bund and OAT had narrowed after Macron indicated he plans stay on and work to find a suitable budget resolution. The stunning decision by South Korea’s President Yoon to declare emergency martial law while accusing the opposition party of North Korean sympathies was not met well. Parliament quickly voted it down leaving the President’s political fate in jeopardy. Ukraine, Syria, Iran, and the ongoing Israel conflicts continued to simmer amid a growing vacuum of international leadership ahead of the US presidential transition.
The November employment report revealed payrolls that were marginally stronger than expected when revisions were taken into account, but the unemployment rate was somewhat weaker than most forecasted. While the numbers weren’t necessarily decisive, they did tilt the odds further in favor of a Fed rate cut this month. Wages ran hotter than expected, but investors seemed take more solace in the rebound seen following October’s weak payrolls print. The report seemed to support what was heard earlier in the week from Fed Chairman Powell who repeated he still believes both the economy and policy remain in a very good place. Regardless, Powell and others on the Fed continued to emphasize the December meeting was not a lock with CPI and other influential data due out next week within the Fed’s lock-up period. Friday saw two potential hawks emerge when former dissenter Bowman and December voter Hammack suggested they believe the Fed is at or near the point where rate cuts should slow.
Corporate reports continued to provide a picture of mixed results among retailer but generally robust tech industry results. Discount retailer Five Below solidified its place as a destination for teens and preteens as it easily beat analyst expectations for the quarter. The same was not true for Foot Locker, which reported disappoint results and said apparel remained a significant headwind. Import tech names include Salesforce, Hewlett Packard Enterprise, and Docusign reported quarterly numbers that were well received by the investment community, continuing a string of generally positive news from the tech sector. Intel’s CEO Pat Gelsinger said he would retire, but the market was not inspired by the choice to name a co-CEO structure to replace him at the beleaguered tech firm. Another troubled hardware company, Super Micro, gained some relief as it announced a one-person special committee had found no evidence of misconduct by the board or audit committee over questions raised by the company’s former auditor. In M&A news, President-elect Trump affirmed that he opposes the Japanese takeover of US Steel, casting further doubt over the Nippon Steel deal.
MON 12-02
(CN) US Dept of Commerce: Announces new crackdown on Chinese chipmakers
(EU) ECB's Kazaks (Latvia, voter, hawk): Reiterates rate cuts must continue; Likely to discuss bigger December cut, but uncertainty is high
(FR) France PM Barnier: France must have a budget for 2025; Confirms have decided to use constitutional powers [Article 49.3] to push social security bill without vote
(IT) ITALY NOV MANUFACTURING PMI: 44.5 V 46.0E (8th month of contraction and one-year low); Notes most pronounced depletion in backlogged work for over 15 years
(US) Atlanta Fed GDPNow: Raises Q4 GDP forecast from 2.7% to 3.2%
(US) Axios piece: Trump has been telling friends he denied Robert Lighthizer a Cabinet role because he's "too scared to go big"; Elon Musk, discussing administration picks with Trump, often asks if the person embodies "radical reform", like massive cuts and blow-it-up-to-rebuild instincts
(US) Punchbowl: There are no automatic recounts in California, so one of the House Election campaigns must request a recount; Per California law, county election officials must finalize the final results by Dec 5th; Eight days later, the California secretary of state will certify the results.
(US) Fed's Waller (voter for 2024 and 2025): Recent data have raised concerns that inflation progress is stalling meaningfully above 2.0%
(US) TTN Research Alert: Only one outstanding House race yet to be called, with Dem Gray leads GOP Rep. Duarte by 227 votes in California's 13th Congressional District, with results set to be certified in coming days; According to CNN's senior political data reporter, GOP's House majority looks to be the smallest after any election since 1930 with current results; Only one defection from the Republican ranks could bring down entire pieces of legislation [**Reminder: If Democratic challenger Adam Gray wins California’s 13th District, House Republicans would hold 220 seats to 215 for Democrats heading into the next Congress; Then factor in the resignation of former Rep. Matt Gaetz (R-Fla.) and the looming departures of GOP Reps. Stefanik (N.Y.) and Waltz (R-Fla.) for Trump administration posts, the margin would be down to 217R-215D until early April 2025 (v existing 221R-214D split)]
(US) US confirms tightened China curbs on AI memory and semiconductor tools; New rules affect 27 types of chip design and fabrication tools; US to sanction 140 Chinese entities; curb US, foreign-made HBM – press
(US) NOV FINAL S&P MANUFACTURING PMI: 49.7 V 49.0E; Notes rebound in business optimism leads to renewed job creation; Optimism about the year ahead has improved to a level not beaten in two and a half years; Note that November’s fall in overall new orders was the smallest seen over the past five months
(US) NOV ISM MANUFACTURING: 48.4 V 47.6E
AMZN Orbital Materials and AWS enter strategic partnership to develop and pilot test technologies for data center decarbonization and efficiency
INTC CEO Pat Gelsinger retires; David Zinsner and Michelle Johnston Holthaus named interim Co-CEO, effective immediately
SMCI Independent Special Committee supported by forensic accounting firm Secretariat Advisors, finds no evidence of misconduct on the part of management or the Board and that the Audit Committee acted independently; Appoints new CAO and approves transition to new CFO; No restatement of reported financials expected
STLA US DOE announces proposed loan of up to $7.5B for Samsung SDI and Stellantis JV, StarPlus Energy, to build EV battery plants in Indiana
X US Pres-elect Trump says remains "totally against" Co being bought by Nippon Steel (or any foreign company) - financial press
ZS Reports Q1 $0.77 v $0.63e, Rev $628M v $606Me; Guides Q2 about in line with estimates
TUES 12-03
(CH) SWISS NOV CPI M/M: % V -0.1%E; Y/Y: 0.7% V 0.7%E
(CN) CHINA COMMERCE MINISTRY (MOFCOM): BAN GERMANIUM, GALLIUM, ANTIMONY AND SUPERHARD MATERIALS EXPORTS TO US "IN PRINCIPLE"; EFFECTIVE DEC 3RD; TO IMPOSE STRICTER REVIEW OF GRAPHITE EXPORTS TO US - PRESS [**Note: There have been no Chinese shipments of germanium or gallium to the US in 2024 through Oct; Germanium and gallium are critical for semiconductors, military applications, solar panels, and telecommunications equipment; China refines more than 90% of the world’s natural graphite - used in virtually all EV battery anodes]
(US) Adobe Analytics: consumers in US spent record $13.3B on Cyber Monday e-commerce, +7.3% y/y v Abode projection $13.2B
(KR) SOUTH KOREA PRESIDENT YOON DECLARES 'EMERGENCY MARTIAL LAW'" accusing opposition party of North Korea sympathies and paralyzing the govt with anti-state activities
(KR) SOUTH KOREAN PRES YOON TO WITHDRAW MARTIAL LAW DECREE FOLLOWING PARLIAMENTARY VOTE TO BLOCK IT
(US) Cleveland Fed’s Inflation Nowcast forecasting Nov US CPI Y/Y (to be out next week) to accelerate to 2.7% from 2.6% for Oct US CPI Y/Y; Also forecasting Dec US CPI Y/Y to accelerate again to 2.8%
(US) OCT JOLTS JOB OPENINGS: 7.744M V 7.470ME
AMZN Said to plan massive AI supercomputer powered by 64 of its Trainium chips interconnected – press
CTRN Reports Q3 -$0.86 v -$0.47 y/y, Rev $179M v $180M y/y; Notes strong start to holiday season; To resume buyback activity in Q4
CRM Reports Q3 $2.41 v $2.43e, Rev $9.44B v $9.34Be; Raises FY cash flow and margin guidance and low end of rev
CRM TTN Summary of 17:00ET Earnings Call: Launch of Salesforce Agentforce 2.0 scheduled for December 17th, promising further advancements in AI capabilities and accuracy; Expects Agentforce to significantly expand total addressable market, becoming the largest supplier of digital labor, with thousands of deals in the pipeline after delivering 200 deals in Q3.
MRVL Reports Q3 $0.43 v $0.40e, Rev $1.52B v $1.45Be; Guides strong
T Guides initial FY25 adj $1.97-2.07 v $2.31e; Targets 2025-27 service Rev growth 'low-single-digit'; Adj EBITDA growth 3% or better; Capex ~$22B annually
WMT TTN Summary of 12:45ET Morgan Stanley Global Consumer & Retail Conference: Seen some softness in US demand post-election
WEDS 12-04
(FR) FRANCE PARLIAMENT PASSES VOTE OF NO-CONFIDENCE IN PM BARNIER'S GOVT
(IT) ITALY NOV SERVICES PMI: 49.2 V 50.8E (1st contraction in 11 months and lowest print since Oct 2023)
(US) Fed Discount Minutes: Fed directors noted steady economic activity. Directors reported generally positive conditions in labor markets, though some cited limited labor availability in certain sectors
(US) Fed's Musalem (non-voter in 2024; voter in 2025): Time may be approaching to slow or pause rate cuts; Too much policy easing carries risk but additional easing likely needed over time
(US) Fed’s Barkin (voter for 2024; non-voter for 2025): Encouraged where with inflation is headed; Can't ignore Oct jobs report, also inflation still >2%
(US) Reportedly, with narrow majorities in the House and Senate, Republicans have a plan to convert their legislative plans into reality in 2025 using budget reconciliation; Passing the sort of bill Republicans are discussing, with the sort of expansive policies they want, would be incredibly difficult; Republicans are lining up not one, but two reconciliation bills to subvert the Senate’s 60-vote threshold and get their legislative agenda to the Resolute desk – press
(US) Punchbowl: Confirm the US election is finally over with final House results are 220-215 in favor of Republicans, but House Speaker Johnson, quite literally, has no margin for error; For the first several months of 2025, Johnson will have a 217-215 seat majority when factoring in the resignation of Rep. Matt Gaetz (R-Fla.) and the expected departure of Reps. Michael Waltz (R-Fla.) and Elise Stefanik (R-N.Y.) for Trump administration posts
(US) NOV FINAL S&P SERVICES PMI: 56.1 V 57.0E (confirms 22nd month of expansion)
(US) Pres-elect Trump: Will nominate Peter Navarro to serve as senior counselor for trade and manufacturing
(US) Follow up: Senior US Cyber Official: Chinese access to American telecommunications was potentially broad; We do not believe any have fully removed the Chinese from their networks; Until they address their gaps, the Chinese will maintain their access
(US) NOV ISM SERVICES INDEX: 52.1 V 55.6E
(US) OCT FACTORY ORDERS: 0.2% V 0.2%E
TTN Research Alert: According to new research, the first summer on record that melts practically all of the Arctic's sea ice could occur as early as 2027
BTC/USD *Rises to record high >$99,830, later breaks >$100,000 [Trump selected crypto-friendly Paul Atkins as SEC Chairman]
COST Reports Nov Total SSS +4.9% y/y (ex-gas and FX) v +6.5% prior; US SSS +4.3% (ex-gas and FX) v +5.8% prior; Notes hurricane impacts
FIVE Reports Q3 $0.42 v $0.16e, Rev $843.7M v $801Me; Raises FY guidance
FL Reports Q3 $0.33 v $0.39e, Rev $1.96B v $2.01Be; Cuts outlook; Notes trends in early November landed below its expectations, but saw meaningful and positive acceleration over the key Thanksgiving week period, especially in stores
THO Reports Q1 -$0.03 v $0.67e (unclear if comp), Rev $2.14B v $2.25Be; Notes signs of the return of the normalized market are beginning to show in the form of an uptick in dealer optimism
THRS 12-05
(FR) REPORTEDLY FRENCH PRES MACRON LOOKING TO JOIN FORCES WITH THE SOCIALIST PARTY, A STRATEGY THAT WOULD SPLIT A LARGE LEFT-WING COALITION IN THE NATIONAL ASSEMBLY AND POTENTIALLY RETURN ENOUGH POWER TO MACRON'S CENTRISTS TO BE ABLE TO BREAK THE COUNTRY’S POLITICAL GRIDLOCK - PRESS
(JP) BOJ's December and any other meeting in coming months said to be live; BOJ has eyes set on hiking rates by around Mar 2025, but likely wants to leave itself a ‘free hand’ on the exact timing; BOJ becoming more convinced of wage-inflation cycle; cites sources ‘familiar’ with the thinking of the central bank – financial press
(FR) Moody's: French no-confidence vote is credit negative
(US) Atlanta Fed GDPNow: Raises Q4 GDP forecast from 3.2% to 3.3%
(US) INITIAL JOBLESS CLAIMS: 224K V 215KE; CONTINUING CLAIMS: 1.871M V 1.90ME
(US) WEEKLY EIA NATURAL GAS INVENTORIES: -30 BCF VS. -48 BCF TO -43 BCF INDICATED RANGE
(US) Cleveland Fed’s Inflation Nowcast forecasting Nov US CPI Y/Y (to be out next week) to accelerate to 2.7% from 2.6% for Oct US CPI Y/Y; Also forecasting Dec US CPI Y/Y to accelerate again to 2.8% and Dec US CPI M/M to come at 0.4%
(JP) JAPAN OCT LABOR CASH EARNINGS Y/Y: 2.6% V 2.6%E (continuing fastest pace of increases for 2024 since 1992)
CVX Guides initial FY25 organic capex $14.5-15.5B v FY24 expectation $15.5-16.5B; To take ~$1.5B in Q4 charges
CARD.UK Trading update: Encouraged by the start of the Christmas season; Trading in the second half to date has been in line with our expectations, FY expectations unchanged
DOCU Reports Q3 $0.90 v $0.86e, Rev $754.8M v $744Me; Raises FY guidance
GMS Reports Q2 $2.02 v $2.26e, Rev $1.47B v $1.45Be; Notes stubbornly high mortgage rates and generally tight financing availability continued to weaken the broader construction environment for each of its end markets
HPE Reports Q4 $0.58 v $0.55e, Rev $8.46B v $8.23Be; HPE and Juniper expect that the transaction will close in the early part of 2025
OPEC+ confirms to delay oil production hike for 3 months until Apr 2025; These voluntary production cuts to be reversed from Apr 2026 to Sept 2026 v earlier deadline of Dec 2025; Collective group cut of 2Mbpd has been extended till the end-2026 - financial press citing sources [**Note: earlier, Energy Intel's Bakr said OPEC+ might look to extend the timeline of the planned unwinding which means that the unwinding would end in 2026]
SIG Reports Q3 $0.24 v $0.24 y/y, Rev $1.35B v $1.39B y/y; Cuts outlook
XAI.IPO Reportedly Elon Musk’s xAI plans a tenfold expansion of its Colossus data center to incorporate more than 1 million GPUs in an effort to close the gap with rivals such as Google, OpenAI and Anthropic - FT [**Note: Colossus believed to be the largest supercomputer in the world and currently operating a cluster of 100-200K Nvidia GPUs]
FRI 12-06
(CA) CANADA NOV NET CHANGE IN EMPLOYMENT: +50.5K V +25.0KE; UNEMPLOYMENT RATE: 6.8% V 6.6%E
(US) DEC PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 74.0 V 73.3E; 1-year inflation expectations 2.9% v 2.7%e
(US) Fed's Bowman (voter): Doesn't take a dissenting vote on policy lightly; Wants to proceed cautiously and gradually with rate cuts
(US) Nov Manheim wholesale used vehicle Index: 205.4 v 206.1 prior; -0.1% m/m; 0.2% y/y
(US) BOFA INSTITUTE: WEEK-TO-NOV 30TH TOTAL CARD SPENDING +2.0% Y/Y; The corresponding spending growth rate for holiday items was an impressive 5.3%; The holiday season has only started but so far, so good; A later Thanksgiving this year means we need to wait at least another week to get a clean read on holiday spending.
(US) Mid-Nov Manheim wholesale used vehicle Index: 206.1 v 202.8 prior; +1.6% m/m; +0.5% y/y
(US) NOV UNEMPLOYMENT RATE: 4.2% V 4.1%E (1st increase in 3 months)
(US) Bank of America's strategist Hartnett: Froth is building in US stocks and crypto; The risk of ‘overshoot’ in early 2025 is high, but bull-and-bear signal shows no global exuberance yet
(US) NOV CHANGE IN NONFARM PAYROLLS: +227K V +220KE
(NO) TTN Research Alert: Last week, Norwegian govt has paused its H1 2025 deep-sea mining licensing plans in the Arctic (for lithium, cobalt etc.) following demands from the Socialist Left (SV) party, which threatened to withhold support for the budget unless the mining initiative was postponed
288.HK Board approves proposed Smithfield Foods spin-off and listing in US
GCO Reports Q3 $0.61 v $0.57 y/y, Rev $596.3M v $579M y/y; Notes pleased with Journeys’ start to Q4 including the important Black Friday/Cyber Monday period
QCOM Reportedly Apple is planning 3-year model chip rollout in effort to supplant Qualcomm; Looks to gradually reduce use of parts from QCOM and QRVO - press
SMCI Announces Receipt of Extension from Nasdaq Stock Market; Currently expects to file all the required reports by February 25th deadline