U.S. Treasury Yields Decline
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The economic landscape in the United States presents a mixed bag of indicators, revealing both optimism and caution as we approach the end of the yearRecently, the initial claims for unemployment benefits stood at 219,000, better than anticipated, suggesting a resilient job marketHowever, the number of people continuing to receive unemployment benefits has surged to 1.91 million, a level not seen in three years, indicating that while some are finding jobs, many are still struggling to stay employedRetail sales from November 1 to December 24 showed a year-on-year growth of 3.8%, boosted by aggressive promotional activities as retailers anticipated fierce competition during the holiday shopping season, inspiring last-minute purchases among consumers.
Meanwhile, monetary policies and a cooling expectation of interest rate cuts from the Federal Reserve have contributed to the strengthening of the U.S
dollar, placing downward pressure on the Japanese yen, which fell below 158. Prices for oil have mildly receded as currency traders predict a 38-basis point cut in interest rates next year, suggesting a roughly 50% chance that the Federal Reserve will opt for a second 25-basis point reduction by 2024.
On the international scene, the Turkish central bank unexpectedly cut its benchmark repurchase rate by 250 basis pointsIn Europe, exchanges in Germany, France, Italy, Denmark, the UK, and Canada continue to observe a market closure at this time.
As investors turn their attention to the so-called "Santa Claus rally," the Dow Jones Industrial Average made a slight recovery, closing marginally higher for five consecutive days despite thin trading volumesThe S&P 500 and Nasdaq experienced minor declines, while small-cap stocks reflected a 0.9% increase, prevailing over the broader market fluctuations
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As of now, the S&P 500 has risen by 1.8% for the week, with the Dow increasing by 1.1%, thanks largely to a rebound in major technology stocks earlier this weekNotably, Apple marked its fourth consecutive day of hitting an all-time high, and Broadcom experienced a boost, lifting semiconductor-related stocks along with itStocks in the drone and quantum computing sectors have seen significant increases.
When examining the three major U.Smarket indices, only the Dow managed to finish in the green, closing at 43,325.80 points with a scant gain of 28.77 points or 0.07%. The S&P 500 experienced a slight slip of 0.04%, while the tech-heavy Nasdaq fell by 0.05%, with the Nasdaq 100 dropping by 0.13%. The Russell 2000 index of small-cap stocks, more sensitive to economic cycles, rose by 0.9%. The volatility index, VIX, increased by 3.22% to finish at 14.73. The ETF sector displayed mixed results; the financial ETF climbed over 0.5%, whereas the consumer discretionary ETF edged down by about 0.4%.
Data from the London Stock Exchange Group's Refinitiv indicates notable outflows from various asset classes in American funds as the year winds down
In the week ending December 25, U.Sshort- and medium-term investment-grade bond funds observed a $780 million outflow, a stark contrast to the inflow of $690 million in the previous weekHigh-yield bond funds saw a massive $2.22 billion net outflow, while U.STreasury funds experienced a $400.4 million withdrawal, following a hefty outflow of $3.76 billion the week prior.
The situation was rather desolate for the major tech companies, affectionately known as the "FANG" stocks, with only Apple managing to post a gainFor instance, Tesla dipped 1.76%, as Deutsche Bank predicted lower-than-expected deliveries in the fourth quarterContrarily, Wedbush, a staunch supporter of Tesla, remained optimisticCEO Elon Musk turned to his social media platform to endorse Eli Lilly's weight-loss drug, Mounjaro, suggesting it as a preferred alternative to Novo Nordisk’s OzempicAdditionally, Tesla kicked off a new 30-day complimentary trial for its Full Self-Driving feature for selected customers in North America, which continues until February 22 of the following year.
NVIDIA saw a decline of over 1.7% before closing down by 0.21%, while preparing for the release of its RTX 50 series graphics cards based on the Blackwell architecture within the next two weeks, projecting a major reveal at the GTC conference in March
Despite experiencing a downtrend, NVIDIA is recognized as a retail favoriteAs of December 17, individual investors had net bought $29.8 billion worth of NVIDIA stockThe plunge continued for Meta, which fell beyond 1.4% before contracting to a decline of 0.72%, while Amazon dipped by 0.87%. Google faced a nearly 0.9% drop, which later shrank to 0.26%, and Microsoft ended down over 0.6% but closed at a reduction of 0.28%. In contrast, Apple rose by 0.32%, maintaining its four-day stretch of record highs.
Furthermore, the landscape among semiconductors painted a grim picture, with a majority falling, as reflected in the Philadelphia Semiconductor Index, which dipped nearly 0.9% before recovering slightly to close up by 0.03%. Arm Holdings plummeted by 1.59%, TSMC by 1.58%, and Onsemi by 1.3%, with AMD, Synopsys, ASML, and Qualcomm also fallingIntel and Micron, however, managed slight rebounds of 0.2% and 0.6%, respectively, whereas Wolfspeed climbed by 1.16%, showing some resilience
On the other hand, Broadcom rebounded remarkably after seeing an initial drop of over 0.8%, eventually closing up by 2.37% due to an uplift in its target price from $250 to $300 by Cantor Fitzgerald.
Amidst the economic fluctuations, AI stocks experienced a favorable uptick, with Serve Robotics soaring 24.75%, bolstered by NVIDIA's considerable stake in SoundHound AI, which rose 19.71%. BigBear.ai and BullFrog AI also saw gains, with C3.ai up 4.51%. However, not all AI-related stocks thrived, as Palantir dipped slightly by 0.29% and CrowdStrike declined by 0.19%. Remarkably, Palladyne AI, an emerging player specializing in autonomous systems for defense and industrial platforms, soared over 79%, settling at a healthier 47.57% increase as it unveiled a groundbreaking AI software platform that supports third-party drone functions.
The dynamics within the U.STreasury market also witnessed some developments, with a robust auction of seven-year bonds leading to a rebound in treasury prices
The yield on the benchmark 10-year U.STreasury note dipped by 1 basis point to 4.5787%, largely due to the strong demand post-auctionThe yields fell from a range of 4.62% to nearly 4.58%. Furthermore, the 2-year Treasury yield went up by 0.21 basis points, closing at 4.3345%.
On the currency front, the U.Sdollar index faced a drop of just over 0.1%, maintaining proximity to the two-year high of 108.54 set last weekThe yen dipped below 158, hitting a five-month low as the offshore yuan stabbed below 7.31, reflecting ongoing pressuresBitcoin futures plummeted over 3%, approaching $95,000 as digital assets remained vulnerable in the current economic climate.
In the trading atmosphere characterized by holiday lull, the surging dollar drew international oil prices lower, with WTI crude slipping back beneath $70. Earlier, geopolitical tensions, such as disruptions in the Bosporus Strait traffic, coupled with API data indicating larger-than-expected inventory drops, had supported earlier price hikes.
West Texas Intermediate crude for February delivery closed down $0.48, approximately a 0.68% dip, settling at $69.62 per barrel after peaking near $70.80. Meanwhile, Brent crude for the same month dipped $0.32 to end at $73.26 after also reaching higher levels pre-market before dropping significantly.
Despite some declines in oil prices, the spot gold market remains relatively strong as prices have shown to surge over 0.8%, nearing $2,640. Gold futures on the COMEX gained 0.71%, finishing at about $2,654.30 per ounce, whilst silver also followed suit after a similar trend in gains.
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