US equities rise in the final stretch of 2023

In the final week of the year, major US equity indices, led by the S&P 500, neared all-time highs with solid gains across all 11 sectors. Energy and small caps thrived on rising crude oil prices amid Middle East tensions. The market benefited from expectations of Federal Reserve rate cuts and easing inflation, sustaining a broad rally. Despite weakness in tech giants, 90% of S&P 500 stocks traded above their 50-day moving averages. Post-Christmas trading was characterised by subdued volumes. 

Summary for 27.12.2023 

• Most Asian shares rose on Wednesday as investors celebrated the prospect of early Federal Reserve rate cuts, following Wall Street’s rally. However, Chinese shares lagged due to a grim economic outlook. Australia’s ASX 200 and Hong Kong’s Hang Seng surged, while Japan’s Nikkei 225, boosted by dovish Bank of Japan signals, marked a stellar 2023 performance. In contrast, Chinese equities, facing economic challenges, were the region’s worst performers for 2023. 
• European equity markets are seen advancing as trading resumes after the Christmas break, while US equity futures remained stable after a positive start to the final week of 2023. 
• Oil prices declined slightly this morning after recent gains, attributed to Red Sea supply disruptions and the potential for early US interest rate cuts in 2024. The US finalizing contracts to buy 3 million barrels for the Strategic Petroleum Reserve also supported prices. Geopolitical tensions, including the conflict involving the Iran-aligned Houthi group and the Israel-Hamas war, continued to influence the market. Despite recent gains, Brent and WTI futures were still on track for around 7% losses each in 2023. 
• China’s industrial profits declined 4.4% YoY to CNY 6,982.28 billion in the first 11 months of 2023, a slower rate compared to the previous period’s 7.8% fall. State-owned firms saw a smaller decline (-6.2% vs -9.9%), while private sector profits rose (1.6% vs -1.9%). Profits declined in various sectors but surged in ferrous metal smelting, the electric/power industry, and others. Industrial profits grew 29.5% YoY in November, the fourth consecutive month of growth, driven by government stimulus measures. 
• US consumers defied economic concerns during the holiday season, driving retail sales (excluding automotive) up 3.1% YoY from November 1st to December 24th, according to Mastercard SpendingPulse. Online retail sales grew 6.3%, surpassing the 2.2% growth in brick-and-mortar stores. Apparel and restaurants saw rises of 2.4% and 7.8% YoY, respectively. The Mastercard Economics Institute noted a favourable economic backdrop, with healthy job creation and easing inflation, empowering consumers to spend deliberately. 
• The S&P CoreLogic Case-Shiller 20-city home price index in the US rose 4.9% YoY in October 2023, the largest increase since November 2022. The surge aligns with market expectations amid a shortage of available homes for sale. Detroit maintained its position as the fastest-growing market, with an 8.1% annual gain, followed by San Diego (7.2%) and New York (7.1%). On a monthly basis, the 20-city composite index posted a 0.1% increase. 
• In November, Toyota’s global production reached a record 926,573 vehicles, up 11% from the previous year, benefiting from strong demand and overcoming supply chain disruptions. With robust sales in Japan, the US, China, and Europe, the automaker is poised for a record-breaking year, targeting over 10 million global sales of Toyota and Lexus vehicles in 2023, with hybrids comprising about one-third of the total. 
• Apple has appealed a ban on the import of its watches, following a complaint from Masimo, which accuses Apple of stealing pulse oximetry technology. The US International Trade Commission (ITC) banned imports of Apple Watches reading blood-oxygen levels. Apple filed an emergency request with the US Court of Appeals to halt the ban until the US Customs and Border Protection decides on redesigned watches. The ITC’s decision became final on Dec. 26, and Apple has temporarily paused sales of affected smartwatches in the US while pursuing legal actions. 
• A federal judge ruled that Twitter, now known as X Corp, violated contracts by not paying millions of dollars in promised bonuses to employees. The lawsuit, filed by Mark Schobinger, Twitter’s former senior director of compensation, alleged a breach of contract, claiming that the company promised but failed to pay 50% of 2022 target bonuses to employees, including Schobinger. The judge denied Twitter’s motion to dismiss, stating that Schobinger had plausibly stated a breach of contract claim under California law. 
• Bristol Myers Squibb is set to acquire RayzeBio for $4.1 billion, following its recent $14 billion buyout of Karuna Therapeutics. The move reflects Bristol’s strategic urgency to bolster its drug portfolio as some older therapies face patent losses. The RayzeBio deal provides access to late-stage radiopharma therapy RYZ101 and the Indianapolis manufacturing site. The cash deal values RayzeBio at $62.50 per share, a 104% premium to the share’s last close, prompting RayzeBio’s shares to double in yesterday’s trading session. 
• Bayer has won a trial in a lawsuit brought by a California man who claimed he developed cancer from exposure to its Roundup weedkiller. This marks the end of a five-trial losing streak for Bayer in similar cases. The company has faced around 165,000 claims for personal injuries allegedly caused by Roundup, acquired through its purchase of Monsanto in 2018. Bayer is appealing previous verdicts, and more cases are expected in the coming year. 
• Piper Sandler reiterated an Overweight rating on Tesla ahead of the company’s 4Q delivery report, with a 12-month price target on the shares. Analysts expect Tesla to report deliveries of 507,000 vehicles in the quarter, and even if estimates prove optimistic, they anticipate a record-breaking quarter with an annualised production rate exceeding 2 million vehicles per year. Piper Sandler also expects improved margins compared to 3Q. Tesla shares were up 1.61% on Tuesday.