MARKET WRAPS
Today's Top Headlines/Must Reads:
- Treasury Rally to Be Tested by Fed's Next Move
- U.S. Scores $4 Billion Windfall on Oil-Reserve Sales
- European Energy Ministers Push for Natural-Gas Price Cap
- If Grayscale's Bitcoin ETF Dreams Fail, Firm May Try a Tender Offer, CEO Says
- Tech Companies Make Final Push to Head Off Tougher Regulation
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Stock futures gained ground on Monday, indicating Wall Street will strive to rally after falling to the lowest level since early November on recession fears.
Investors have become increasingly concerned of late about the recession they feel is all but inevitable given the determinedly hawkish stances of major monetary authorities, such as the Federal Reserve and European Central Bank, as they continue to battle high inflation.
"With economic data undershooting expectations, it's not a stretch to think investors may shift their focus from inflation and the Fed to the growing impact that the Fed's actions are likely to have on the economy in 2023," SPI Asset Management said.
Analysts noted that investors had shifted from believing bad news on the economy was good news for both bonds and equities - because it discouraged central banks from being too aggressive in their policy tightening - and were now taking bad economic news for what it is, a scenario that may damage company earnings.
"The biggest change in markets over the last few weeks, in our view, is the shifting correlation between stocks and bonds. For most of this year bonds and stocks traded in tandem, as inflation ruled the roost," BTIG said.
"Recently, that has pivoted and lower rates have been met with lower stocks, presumably on fears of economic slowdown. We expect that theme to grow louder into 2023," BTIG added.
Stocks to Watch
Defense firm L3Harris Technologies said it agreed to buy Aerojet Rocketdyne. Aerojet shares added 0.8% off hours.
Ford is slated to lay out its arguments for a new trial in a truck-rollover lawsuit that resulted in a $1.7 billion jury verdict in Georgia over the summer. Its shares edged up off hours.
Frequency Electronics said Friday it would delay the release of its fiscal second-quarter results. Shares rose 1.1% after hours.
Microsoft's shares added 0.6% off hours. It has signaled it plans to challenge the Federal Trade Commission's lawsuit to block its $75 billion deal for Activision Blizzard.
Neptune Wellness Solutions reported a wider loss for its fiscal second quarter. The company's revenue fell slightly and it faced impairment losses during the period. Shares declined 6% in after-hours trading.
Tesla CEO Elon Musk over the weekend tweeted a poll asking whether he should step down as head of Twitter. Tesla shares climbed 4% premarket.
Y-mAbs Therapeutics said the European Committee for Medicinal Products for Human Use issued a negative opinion recommending a refusal for the marketing authorization for omburtamab in Europe. Shares slid 5% in after-hours trading.
Forex:
The dollar is likely to slip this week on a combination of potentially weak U.S. economic data and Thursday's statement by the ECB that significant further interest-rate increases can be expected in the eurozone, ING said.
U.S. data this week include a variety of housing market data, which are "all expected to be soft," consumer confidence figures and a November core PCE deflator that is likely to be "subdued," ING added.
This is unlikely to support Treasury yields and "all tends to suggest that DXY risks sinking back to the 104.00/104.10 area this week," ING said.
Read Euro Could Stutter as Interest Rates Rise
Energy:
Oil prices edged higher in Europe as U.S. plans to refill its Strategic Petroleum Reserve counteracted concerns about global economic weakness.
Analysts have said the decision to refill the SPR could put a floor under tumbling oil prices, as it creates additional demand for crude just as concerns about slowing demand due to flagging economies have sent Brent below $80 a barrel.
Metals:
Metals prices were mixed in Europe as worries over demand rose in China amid a jump in Covid-19 cases.
"It does seem like the spread of Covid-19 in China is taking its toll on manufacturing and supply chains," Marex said.
However, overall sentiment in western markets still remains strong "buoyed by the prospect of China's reopening," helping to outweigh bearish fundamental price signals, ANZ said.
TODAY'S TOP HEADLINES
If Grayscale's Bitcoin ETF Dreams Fail, Firm May Try a Tender Offer, CEO Says
Grayscale Investments said the firm would explore new options to return a portion of the Grayscale Bitcoin Trust's capital to shareholders if it fails to transform the world's largest bitcoin fund into an exchange-traded fund.
These options could include a tender offer for up to 20% of the outstanding shares of the $10.7 billion trust, Grayscale Chief Executive Michael Sonnenshein said in a letter to investors viewed by The Wall Street Journal. A tender offer would make a direct appeal to shareholders to sell-or tender-their shares at a specific price during a certain time.
Tech Companies Make Final Push to Head Off Tougher Regulation
WASHINGTON-Supporters of tougher tech regulation are making a final push to eke out a few wins before Congress adjourns-and big technology companies are responding with a fresh advertising blitz.
Tech companies have built a perfect record so far in blocking major legislation in Congress that could impede their business interests, with the help of prodigious spending on Beltway lobbying and grass-roots politicking.
Defense Contractor L3Harris Plans to Buy Aerojet Rocketdyne for $4.7 Billion
Defense firm L3Harris Technologies Inc. on Sunday said it agreed to buy Aerojet Rocketdyne Holdings Inc. in a $4.7 billion deal that would cement L3Harris's role as one of six prime defense contractors for the Pentagon.
Aerojet is a major maker of engines used in missiles, such as the Javelin deployed in Ukraine. Its products also help power National Aeronautics and Space Administration rockets and U.S. military hypersonic systems designed to deter China's military expansion.
Elon Musk Polls Twitter Users, Asking Whether He Should Step Down
Elon Musk asked Twitter users to vote Sunday on whether he should step down as head of the social-media platform and pledged to abide by the results, the latest twist in what has been a tumultuous period for the company since his takeover in October.
"Should I step down as head of Twitter? I will abide by the results of this poll," Mr. Musk said in the tweet, posted to his own account. He gave users two options for a response: "Yes" or "No," according to the tweet.
Sam Bankman-Fried Is Expected to Consent to Extradition From Bahamas
FTX co-founder Sam Bankman-Fried is planning to consent to extradition to the U.S. to face criminal charges related to the cryptocurrency exchange's collapse, people familiar with the matter said.
Mr. Bankman-Fried has been in custody in the Bahamas since he was arrested last Monday in connection with several U.S. criminal charges, which were unsealed a day later. Federal prosecutors in Manhattan have charged Mr. Bankman-Fried with fraud and money-laundering offenses, alleging he defrauded customers, lenders and investors. They also alleged he violated campaign-finance rules by making illegal political contributions.
Toyota Chief Says 'Silent Majority' Has Doubts About Pursuing Only EVs
BURIRAM, Thailand-Toyota Motor Corp. President Akio Toyoda said he is among the auto industry's silent majority in questioning whether electric vehicles should be pursued exclusively, comments that reflect a growing uneasiness about how quickly car companies can transition.
Auto makers are making big bets on fully electric vehicles, investments that have been bolstered by robust demand for the limited numbers of models that are now available.
Treasury Rally to Be Tested by Fed's Next Move
U.S. government bonds have continued to rally after a wretched first 10 months of 2022, reflecting Wall Street's optimism that inflation will be controlled sooner rather than later.
Treasury yields, which fall when prices rise, fell last week after a better-than-expected consumer-price-index report. They then maintained those levels after the Federal Reserve's last policy meeting of the year, which contributed to mounting recession fears among stock investors but did little to alter interest-rate bets in the bond market.
U.S. Scores $4 Billion Windfall on Oil-Reserve Sales
Volatile energy markets have made 2022 a big year for commodity traders. One of the biggest and perhaps most unlikely winners: The U.S. government.
Emergency releases from the U.S. Strategic Petroleum Reserve are slated to end this month, concluding an unusual attempt to lower gas prices after Russia's invasion of Ukraine sent oil prices soaring.
European Energy Ministers Push for Natural-Gas Price Cap
BRUSSELS-European energy ministers gathered Monday for the second time in one week, attempting to strike a deal on an emergency limit for natural-gas prices, which have been sent soaring by Russia's invasion of Ukraine.
The debate over how and whether to intervene in the continent's natural-gas market has emerged as one of the most divisive elements of the European Union's response to Moscow's war and its squeeze on the continent's energy supplies. Some countries say a price cap is needed to ease the burden of high prices on consumers and businesses, while others worry such a move could inadvertently lead to shortages.
Oatly, Other Deflated IPO Stocks Haunt New-Issue Market
Hundreds of companies that went public when the market for initial public offerings was booming have suffered such sharp reversals that they now face a stark reality: Their shares may never recover.
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12-19-22 0631ET
