FT : DeepMind spin-off aims to halve drug discovery times following Big Pharma d

DeepMind spin-off aims to halve drug discovery times following Big Pharma deals
Chief of Google’s AI unit and Isomorphic Labs spells out targets following $3bn Eli Lilly-Novartis partnerships

The head of Google DeepMind believes its drug discovery spinout will halve the time taken to find new medicines, attracting the attention of the world’s biggest pharmaceutical companies which are looking to artificial intelligence to revolutionise the lengthy process.

Speaking to the Financial Times, Demis Hassabis, who co-founded Google’s AI unit and also leads the drugs offshoot Isomorphic Labs, said the goal was to reduce the discovery stage — when potential drugs are identified before clinical trials — from the average of five years to two. “I think that would be success for us and be very meaningful,” he said.

Hassabis stated the goal days after announcing Isomorphic Lab’s first two pharmaceutical partnerships with Eli Lilly and Novartis, which came to a combined value of up to $3bn, in deals set to transform the finances of the unprofitable group.

Isomorphic Labs uses an AI platform to predict biochemical structures, which aids the creation of new drugs by recommending which potential compounds will have the desired impact in the body.  

Including clinical trials, it often takes up to a decade to discover and develop a new drug, costing on average about $2.7bn, according to research by the Tufts Center for the Study of Drug Development. 

Large drugmakers, under pressure to fill their pipelines with new potential medicines while existing ones face patent cliffs, when they will face far cheaper generic competition, are eager for new ways to shorten the process. As healthcare systems around the world put pressure on drug prices, pharma companies are also looking for ways to cut costs in research and development. 

Hassabis said that many drugmakers had also been eager to partner with Isomorphic but the company wanted to focus on collaborations that could improve its technology. “We could probably sign up a dozen partnerships today, if we wanted to, but then it will cause us to fragment too much, to make more bespoke solutions for the individual programmes,” he said. 

Instead, Isomorphic chose to sign deals with just two pharmaceutical companies. On Sunday, it announced Lilly would pay $45mn upfront, with another $1.7bn to be paid when the project reached performance milestones, such as drugs reaching trials or approval.

Novartis would pay $37.5mn upfront with an additional $1.2bn in performance-based incentives.

Isomorphic said it planned to build up in-house experimental facilities or “wet labs” at some point in the future, and intended to partner these assets with pharmaceutical companies. 

Isomorphic’s deals come as Google faces fierce competition on the development of AI software from the likes of Microsoft-backed OpenAI and smaller start-ups such as Anthropic and Cohere. Last year, the search giant merged its internal AI unit Brain with DeepMind, in an effort to concentrate its efforts and resources in the fast-moving technology.

The partnership deals follow several others in the industry. Oxford-based Exscientia is working with Sanofi and Bristol Myers Squibb, among others, and Insitro has a deal with Bristol Myers, while Owkin is also collaborating with Sanofi. 

But even drugs discovered by artificial intelligence can fail in clinical trials, as human biology is hard to predict. Several start-ups specialising in AI for drug discovery have had to abandon drugs after studies showed they were not as effective as hoped.

Isomorphic Labs’ AI platform builds on the scientific breakthroughs achieved by DeepMind’s AlphaFold technology, AI software that can predict the structure of nearly all existing proteins from their DNA sequence.

New generations of the technology use deep learning to predict interactions between proteins and other molecules, including DNA and RNA, and therefore the side effects and efficacy of new chemical structures in the body.

Isomorphic Labs was founded in 2021 as a subsidiary of Alphabet, to advance DeepMind’s initial breakthroughs with an exclusive focus on using AI for drug discovery. The company in 2022 widened its loss to £16.9mn from £2.4mn the year before, according to Companies House filings.

Hassabis said that, although Isomorphic was not “focused on” when it would generate a profit, “the two deals we have done are pretty meaningful from a financial point of view too”.

Interest in using AI in drug discovery is soaring, with companies in the sector raising $4.4bn in 2022, up from $1.8bn in 2018, according to research firm PitchBook.

But Hassabis said Isomorphic was “pretty unique” in trying to build fundamental models of biology and chemistry, rather than using AI for analysis of existing data.

​​“It’s almost like a generative model that is designing the compounds with the different constraints,” he said. “But those constraints are modelling real biochemistry constraints. So that’s what we’re really good at.” 

FT : Why EU efforts to use Russia’s frozen assets are progressing at a snail’s p

Why EU efforts to use Russia’s frozen assets are progressing at a snail’s pace
Also in this newsletter: How the EU is trying to soothe concerns of belligerent farmers

Laura explains why Belgium’s newfound responsibilities as the holder of the EU’s rotating presidency could complicate the issue of tapping immobilised Russian assets to help Ukraine. And our environment correspondent puts on her wellies to assess anti-EU feelings on the farm.

Deep freeze
To seize, or not to seize Russia’s frozen assets?

While the G7 group of nations considers how to use some €260bn belonging to Russia’s central bank for the benefit of Ukraine, European countries are taking baby steps towards using the assets’ unforeseen spoils, writes Laura Dubois.

Context: Officials are working on how to transfer to Kyiv the Russian sovereign assets immobilised by western sanctions. But EU countries fear adverse effects, and are instead working on seizing only extraordinary profits that financial institutions are making by holding the assets.

Today, representatives of member states meet to discuss a recent proposal that would pave the way for this latter option, stopping short of touching the actual assets.

Countries like Germany, France and Belgium — where the bulk of the €210bn frozen in Europe is held — have been wary of moving from just ringfencing the profits being made at the financial institutions, to actually confiscating them.

“I hear a lot of prudence on the topic of what you would call the second tranche [of seizing the profits],” Belgian Prime Minister Alexander De Croo told reporters this week.

“Let’s listen to the experts on that topic, in the sense that there is the obligation of repairing the damage [to Ukraine] at some point, but there is of course a need for a legal framework.”

Belgium has just assumed the rotating six-month presidency of the European Council and is leading the talks. Some officials, however, worry that the country, where €191bn belonging to Russia is stuck, might not be the best middleman.

“Belgium has promised to proceed with the work but one can sense they are not eager to do that,” one EU diplomat said.

De Croo suggested Belgium would not veto using the assets if the other countries agreed. “Blocking is really the last resort and I don’t think we need to do that. We can convince others.”

The European Central Bank has warned that touching the profits made by Euroclear, the central securities depository holding the assets in Belgium, could destabilise the financial system. Seizing the assets themselves would be even more risky.

Yet while European countries grapple with technical details around the profits, that is exactly what the G7 — led by the US — is discussing.

“The hope is that this will at some point increase the realisation among the member states that this is only one small piece of the puzzle,” one EU official said.

WSJ : Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile U

Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up
Average costs to ship containers have nearly doubled since late November

Western importers are reporting a steep rise in ocean-shipping rates and weekslong delays as carriers divert ships from the Red Sea to avoid Houthi rebel attacks.

Some companies shipping goods on the crucial trade lane are starting to chafe at the rising prices and extra fees that ocean carriers are imposing for the higher cost of routing containerships on longer voyages around the Horn of Africa following drone and missile attacks by Houthi rebels in Yemen.

Average worldwide costs to ship 40-foot-long containers have nearly doubled since late November, according to London-based Drewry Shipping Consultants.

The increases have also accelerated in the past two weeks on routes that traditionally use the Suez. The spot-market price to move containers between China and Rotterdam in the Netherlands reached $3,577 in the week ending Jan. 4, a 115% increase from the week before.

“What every shipper is trying to figure out is if the current proposals are in line with the carrier’s added costs, and not simply a move to offset softer rates in other lanes or raise rates across the board,” said Colin Yankee, chief supply chain officer at Brentwood, Tenn.-based retailer Tractor Supply.

Houthi rebels, since November, have launched roughly two dozen attacks on commercial ships navigating the Red Sea, which provides access to the Suez and trade routes to Western Europe and the U.S. The Suez is used by about one-third of global container cargo and about 30% of freight bound for U.S. East Coast ports, according to Everstream Analytics, a supply-chain risk management company.

The rebels have said their attacks are a response to the fighting between Israel and Hamas in Gaza. The attacks have grown less frequent in recent days, following warnings from a U.S.-led naval coalition and military responses from the U.S. and other countries. Ship operators including A.P. Moller-Maersk and Hapag-Lloyd have said their vessels would continue avoiding the region.

Shipping executives estimate that the 10 largest boxship operators have shifted around $200 billion in cargo away from the Red Sea since early December.

“We will not put our crews and ships in harm’s way under any circumstances,” said Nils Haupt, a spokesman for Germany’s Hapag-Lloyd.

The new cost increases are renewing tensions between importers and ocean carriers after shipping rates skyrocketed during the pandemic, when freight demand outstripped the supply of ships and helped fuel record profits for carriers. The recent increases still leave prices far below those pandemic-era levels.

“There is a certain element of mistrust given where we have come from,” said Goetz Alebrand, head of ocean freight at DHL Global Forwarding Americas.

The higher costs are hitting even importers that negotiate longer-term contract rates, industry experts say, because operators are imposing surcharges ranging from hundreds of dollars to more than $1,000 per box to cover rising costs as a result of the Red Sea diversions. Some shippers’ woes are being compounded by restrictions at the Panama Canal where a drought is limiting the number of vessels that can transit the waterway.

The shift to longer shipping routes around Africa is raising fuel and insurance costs and reducing containership availability, said Lars Jensen, chief executive of Denmark-based consulting firm Vespucci Maritime. But Jensen said the rate increases are “substantially above” what is needed to cover the extra costs.

“What we have right now from a carrier’s perspective is a blessing in disguise,” said Jensen.

Shipping executives say the higher pricing and surcharges are the results of the higher costs to operate vessels on longer voyages and reduced capacity because ships are out at sea for longer stretches.

Overall Red Sea containership crossings were down by around 20% in December compared with November, according to Singapore and London brokers.

“Services will continue to have to run late and with longer transit times in the short term,” said Jonathan Roach, a container shipping analyst at Braemar, a London-based shipping advisory firm. “As a consequence freight rates on the whole will remain elevated and volatile.”

Nathan Strang, director of ocean freight at San Francisco, Calif.-based freight forwarder Flexport, said one customer who brings cargo into the Port of New Orleans has seen import times double to 60 days after the company’s shipments were rerouted.

“How do you tell your end customer when their stuff is going to arrive and when they can put stuff on shelves?” he said.

FT : EU faces potential €450mn post-Brexit bill on empty London offices

EU faces potential €450mn post-Brexit bill on empty London offices
European Medicines Agency saddled with 15-year liability for lease after subtenant WeWork stops paying rent

The EU faces a potential office space bill of more than €450mn after its drugs regulator quit London because of Brexit, adding pressure to its already overstretched budget.

The European Medicines Agency sublet its former headquarters building in Canary Wharf to WeWork in 2019 but the bankrupt desk-space business had suspended rent payments, according to a document seen by the Financial Times.

The EMA told lawmakers in Brussels that it needed €30mn annually to fund rent and bills until and unless a new occupant is found for the Canary Wharf property. The EMA’s lease ends in June 2039, creating a potential liability of more than 15 years totalling €450mn.

It has already asked the EU for more than €3mn to cover rent for the first quarter. Brussels is legally obliged to make up any shortfall in the EMA budget.

European parliamentarians, who must approve any request, will quiz officials on Thursday in private about the future of the building, vacated when the EMA moved to Amsterdam as the UK left the EU. 

In replies to written questions by the European parliament’s budget committee, the EMA said the prospects of recouping much of the money were slim because of the UK’s weakening commercial property market.

Finding a new tenant was likely to take at least two years, since the vacancy rate in Canary Wharf was more than 15 per cent, it said.

Meanwhile, the EU would be liable for rent and service charges, taxes, operating costs and utility bills, totalling about €30mn a year, the EMA said.

In line with UK industry practice, the agency would also have to offer “rent-free periods or equivalent cash payments” of about 15-18 months every five years, in effect a 25 per cent discount, it said. 

The building at 30 Churchill Place was designed in 2008 and is categorised as second-hand, renting at £29-£35 per square foot rather than the £50-£57 for newer space.

“The financial and human resource burden of managing and maintaining the former premises diverts EMA’s attention from its critical human and animal health mandate,” the agency added.

WeWork stopped paying rent on January 1 but continues to pay service charges, according to people familiar with the situation. The two sides are in talks.

“Before any decision can be taken we must await the outcome of negotiations with the subtenant that are confidential,” Olivier Chastel, vice-president of the budget committee, told the FT.

The EMA is urging the European Commission to find a “political resolution”, hinting that British officials could be housed in the building in a deal with Brussels.

But in its answers to MEPs, the commission said the EMA’s relocation was not covered by Brexit agreements and the contract was not its responsibility. “To our knowledge . . . UK authorities visited the premises but did not eventually express interest [in leasing] them,” it said.

The EMA will soon submit its estimate of the likely financial gap for inclusion in the debate over the EU budget. 

The EU is already engaged in tortuous budget talks. The commission has asked for a €100bn increase, with half earmarked for Ukraine. The plan has met fierce resistance from richer member states, which pay the most and who have haggled the non-Ukraine sum down to €21bn. However, a deal remains elusive.  

“The EMA has a €480mn annual budget. This is €30mn a year,” said an EU diplomat on Tuesday. “They can start looking in their own budget before asking for more from the EU.”

FT : Global minimum tax will boost revenues for tax havens, says OECD

Global minimum tax will boost revenues for tax havens, says OECD
Corporate tax take to rise up to a third at hubs for multinationals such as Ireland and the Netherlands

Tax havens such as Ireland and the Netherlands are set to be the big winners from the global minimum tax, which will initially boost state revenues from multinationals by up to a third, according to OECD research.

The global minimum tax, which came into effect from January 1 across the EU, UK and a clutch of other big economies, applies an effective tax rate of at least 15 per cent on profits on large multinationals.

An OECD working paper published on Tuesday estimated participating countries categorised as “investment hubs” would have the largest expected gains from the reforms, with corporate income tax revenues rising from 14 per cent minimum to up to 34 per cent.

The OECD, which oversaw negotiations on the tax reforms, defines investment hubs as jurisdictions with more than 150 per cent of inward foreign direct investment of gross domestic product. These include jurisdictions such as Bermuda, the British Virgin Islands, Ireland, Jersey, Guernsey, Luxembourg, Netherlands, Switzerland and Singapore.


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The global minimum tax, originally agreed in principle by more than 140 countries in 2021, is designed to stop a decades-long downward spiral in headline corporate tax rates worldwide. Under a series of interlocking rules, if profit by a multinational is taxed below a 15 per cent rate in one country, other countries will be able to charge a top-up levy.

Manal Corwin, head of tax at the OECD, said that while investment hubs might gain in the short term, the “key thing to watch for is the decisions that businesses make” in future.

“Those decisions become less likely in the future as it’s costly to set up structures [in investment hubs] and the incentive to do that is reduced by the global minimum tax,” she added.

The predictions about how much additional revenue tax havens would receive involved “a higher degree of uncertainty than other results”, the report added. This was because the countries in question were a relatively “heterogeneous” group.

Commentating on the report, Rasmus Corlin Christensen, an international tax researcher at Copenhagen Business School, said not all tax havens would gain equally from the reforms.

Countries such as Ireland and Netherlands where multinationals had booked large amounts of profits and also had a large economic presence would likely benefit the most from the changes, he predicted.

The OECD research suggests high-income jurisdictions, such as Australia, Germany, Japan and the UK would receive the second-highest amount in additional revenue. But the 7 per cent to 10 per cent increase in tax revenue is significantly less than the boost for some tax havens.

Overall the report estimated that all participating countries adopting the global minimum tax would have gains of at least 3 per cent in their tax take. This was because there was “low tax profit in all jurisdictions groups”, said Ana Cinta González Cabral, one of the report’s authors.

Separate OECD research found more than one-third of global corporate profits were taxed at an effective tax rate of below 15 per cent, while roughly half of these profits were in relatively high tax jurisdictions with effective tax rates in excess of 15 per cent.

However, the OECD working paper also revised down the overall amount of additional tax it expected the global minimum tax to bring in. Last year, this was projected to be up to $220bn. The OECD now estimates it will range from $155bn to $192bn annually. It said the revision was because of a change to its modelling which relied on more up-to-date data.

FT : US used electric vehicle values fall almost a third in 2023

US used electric vehicle values fall almost a third in 2023
The declines mean the cost of financing for new battery cars rises for consumers

The resale value of best-selling electric vehicles fell almost a third in the US last year, amid a wider slowdown in the growth of EVs across the developed world. 

The second-hand value of the top-10 selling battery cars in the US, including models from Tesla, General Motors and Ford, fell an average of 28 per cent in 2023, data from CarGurus and compiled by HSBC show.

In the UK, the value of used EVs fell about a fifth in the UK, far higher than the overall market where resale values dropped only 3.7 per cent, according to the bank which referred to Auto Trader data.

Resale values are a core indicator of a vehicle’s desirability, reflecting what a second-hand buyer is willing to pay for a model that is typically about three years old.

EV pricing “is likely only to get tougher in 2024”, said the bank’s analyst Mike Tyndall, who warned the wind down of subsidies in countries such as Germany and France “could force carmakers to get aggressive on pricing”.

Carmakers are likely to have to erode what little profit margin they have in EVs in order to prevent them being undercut by new, cheaper models from China, he added.

“It is difficult to completely focus on profitability since it risks losing market share to the EV-native new entrants that continue to remain price aggressive in the pursuit of market share.”

Carmakers have warned of deeper than expected scepticism from mainstream buyers over EVs, forcing manufacturers to cut prices or scale back sales targets.

Weaker resale values for battery cars means new EVs will be comparatively less affordable than petrol or diesel models that are expected to lose less value over the same period.

The metric is key for setting lease prices, where a motorist will finance the amount of money that a vehicle loses over a three-year lease. The larger value loss will mean a greater need for finance.

About 60 per cent of new vehicles in Europe are bought on a lease, while in some markets such as the UK it is more than 90 per cent.

The sharp declines in resale value will weigh on carmakers in markets such as the UK and California, where they must increase the proportion of their sales that are fully electric every year, or face hefty fines.

Mike Hawes, head of the Society of Motor Manufacturers and Traders, which represents the UK car industry, said more incentives, as well as cheaper insurance deals and more charging points, were needed to encourage consumers to buy electric models.

“Invariably we’ve got to the stage where we are through the early adopter phase, and we need to get into the mass market, and that’s never a linear transition,” he said.

In the US, the used price of Tesla Model X, the worst performer, dropped 36 per cent compared to a year earlier. While a second-hand Model X would fetch $75,798 in December 2022, by last month this had fallen to $48,511 for an equivalent vehicle. 

Other best sellers fell sharply, including Ford’s F-150 Lightning pick-up truck, which dropped 30 per cent from $90,245 to $62,540, and the Chevrolet Bolt, which fell 32 per cent from $26,325 to $17,901.

In the UK, resale values for the Nissan Leaf and Renault Zoe — both older models — fell by a quarter, while the Porsche Taycan fell 21 per cent and the BMW i4 dropped 18 per cent.

Carmakers are also increasing discounts to try to shift new EVs, both in the UK and US, as they face the challenge of convincing mass market buyers to shift to electric driving.

Roughly half of the new EVs on sale in the UK offer 0 per cent finance, sometimes with offers that effectively cut the price of a vehicle by a third. Other brands are offering straight cash discounts of up to 27 per cent, while the overall cash discounting “is at the highest level we have seen to date”, Tyndall added.

In the US, discounting offers doubled during the course of 2023. All of the top-10 selling US EVs in the country have discounts, including $5,000 from Tesla for its Model 3 or Model Y cars, and more than $8,000 for the Ford Mustang Mach-E and the Hyundai Ioniq 5.

FT : Millennium backs biggest planned hedge fund launch in more than a year

Millennium backs biggest planned hedge fund launch in more than a year
Former portfolio manager at Izzy Englander’s firm strikes out with expected $4bn-$5bn launch

A former Millennium portfolio manager is preparing to launch what would be the biggest new hedge fund in more than a year after securing $3bn of capital from Izzy Englander’s firm and taking up to 30 investment staff with him.

Diego Megia, who worked at Citadel before a five-year stint at Millennium, is targeting $4bn to $5bn of investor capital for the launch of Taula Capital, according to two people familiar with the fundraising effort. The macro hedge fund is expected to start trading in the first half of the year, the people said.

Although other large launches are planned for later in the year — with former Millennium co-chief investment officer Bobby Jain’s new fund Jain Global expected in July — at $4bn, Taula would still be larger than any hedge fund started last year.

Multi-strategy hedge fund Freestone Grove Partners, led by a former Citadel portfolio manager, launched with $3.5bn last week, according to one person with knowledge of the matter.

Millennium’s investment and the fact that Taula is seeking to launch with up to $5bn of capital were previously reported by industry information service With Intelligence.

Hedge fund launches have dwindled as a talent war has enticed portfolio managers to join large existing funds, while institutional investors have become pickier, reserving allocations for well-known managers from big funds with a proven record.

Millennium and other large hedge funds are known for backing talented portfolio managers starting their own funds, usually on the condition that they get preferential investing terms. Millennium declined to comment.

But it is uncommon for a portfolio manager to take a big team of investment professionals with them, as Megia has done. Taula Capital will launch with roughly 60 people, including 26 to 30 investment staff and 30 support staff, a person familiar with the matter said. Taula Capital declined to comment.

After a decade of low volatility in government bonds markets, central bank rate jumps and rising inflation have made macro trading potentially very profitable for hedge funds. Macro hedge funds such as Brevan Howard, Rokos Capital and Caxton posted enormous gains in 2022, though performance was more muted last year.

The launch comes during a difficult capital raising environment for hedge funds, as many talented portfolio managers are opting to join large multi-manager hedge funds such as Millennium, Citadel, Point72 and Balyasny.

These funds have become very popular with institutional investors seeking stable returns that can persist even when equity markets fall.

A fierce talent war between multi-managers has resulted in enormous pay packages, dissuading portfolio managers from setting up their own hedge funds.

Some of the biggest fund launches from 2023 included London-based equity hedge fund Ilex Capital Partners and New York-based hedge fund Surgocap, which launched with $2.1bn and $1.8bn in capital, respectively.

>>> US After Hours Summary: ETWO +12.7%, SGH +9.4%, PSMT +9%, WDFC +6.3% up on e

After Hours Summary: ETWO +12.7%, SGH +9.4%, PSMT +9%, WDFC +6.3% up on earnings; AEHR -15.6% tumbling after slashed FY24 guidance; crypto-related stocks falling after Bitcoin ETF approval head fake
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ETWO +12.7%, SGH +9.4%, PSMT +9%, WDFC +6.3%, ATRO +5.8% (guidance), ISRG +5.2% (guidance), GATO +1.2% (guidance), AZZ +0.1%
Companies trading higher in after hours in reaction to news: AEVA +3.1% (stock offering), NNBR +1.7% (registers record new business wins), ALC +1.7% (positive topline results from COMET trials), LEN +1% (increases dividend and repurchase plan), COOP +0.2% (appoints new President), PFBC +0.1% (approves repurchase plan), BKD +0.1% (reports weighted average occupancy)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: AEHR -15.6% (guidance)
Companies trading lower in after hours in reaction to news: IREN -3.3% (moving on Bitcoin ETF approval head fake), SDIG -2.6% (moving on Bitcoin ETF approval head fake), MSTR -2.4% (moving on Bitcoin ETF approval head fake), RIOT -2.2% (moving on Bitcoin ETF approval head fake), NTST -2.1% (stock offering), MARA -2% (moving on Bitcoin ETF approval head fake), CLSK -2% (moving on Bitcoin ETF approval head fake), HUT -2% (moving on Bitcoin ETF approval head fake), BITO -1.8% (moving on Bitcoin ETF approval head fake), HIVE -1.2% (moving on Bitcoin ETF approval head fake), FTRE -0.2% (partners with VEEV), BA -0.1% (CEO saying it must acknowledge QA issues, according to WSJ)

>>> US Close Dow -0.42% S&P- O.15% Nasdaq +0.09% Russell -1.05%

Closing Stock Market Summary
Today's trade had a negative bias. The A-D line favored decliners by a 7-to-3 margin at the NYSE and by a nearly 2-to-1 margin at the Nasdaq. The major indices were able to close off their highs of the day, though, thanks to support from mega cap stocks that recovered from early weakness.

NVIDIA (NVDA 531.40, +8.87, +1.7%) was a standout winner in that respect after being down as much as 1.1% at its low this morning. Alphabet (GOOG 142.56, +2.03, +1.4%), Amazon.com (AMZN 151.37, +2.27, +1.5%), and Microsoft (MSFT 375.79, +1.10, +0.3%) had all been trading down earlier, too.

Losses in Meta Platforms (META 357.43, -1.23, -0.3%), which had been trading up at its best level of the day, Apple (AAPL 185.14, -0.42, -0.2%), and Tesla (TSLA 234.96, -5.49, -2.3%) countered some of the strength from the aforementioned names. The Vanguard Mega Cap Growth ETF (MGK) logged a 0.3% gain.
The overall negative vibe was partially a reaction to a Q4 revenue warning from Microchip Technology (MCHP 85.34, -0.30, -0.4%) that was tied to a weakening economic environment. In a related action, Samsung Electronics said it expects its Q4 operating profit to be down 35% year-over-year and below analysts' expectations.

Four of the S&P 500 sectors logged a gain while seven of them saw a decline. The information technology sector (+0.3%) was the top performer while the energy (-1.6%) and materials (-1.1%) sectors registered the largest declines.

The 2-yr note yield settled three basis points higher at 4.38% and the 10-yr note yield rose two basis points to 4.02%. On a related note, today's $52 billion 3-yr note auction met strong demand.
  • S&P 500: -0.3%
  • Dow Jones Industrial Average: -0.4%
  • S&P Midcap 400: -1.2%
  • Nasdaq Composite: -1.1%
  • Russell 2000: -1.9%

Reviewing today's economic data:
  • November Trade Balance -$63.2 bln (consensus -$64.7 bln); Prior was revised to _$64.5 bln from -$64.3 bln
    • The key takeaway from the report is that exports were $4.8 billion less than October exports while imports were $6.1 billion less than October imports. The drop in both exports and imports fits with a weakening global economic environment.
  • December NFIB Small Business Optimism 91.9; Prior 90.6

Looking ahead, Wednesday's economic calendar features:
  • 7:00 ET: Weekly MBA Mortgage Applications Index (prior -9.4%)
  • 10:00 ET: November Wholesale Inventories (consensus -0.2%; prior -0.4%)
  • 10:30 ET: Weekly EIA Crude Oil Inventories (prior -5.5 million barrels)