Stock Region Market Briefing
Stock Region Market Briefing Newsletter - Monday, December 23, 2024.
Stock Region Market Briefing Newsletter - Monday, December 23, 2024
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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice. Investors are encouraged to conduct their own research or consult an advisor before making investment decisions.
Key Headlines
Oil Prices Surge Amid Supply Tensions
Oil prices climbed in early Asian trading due to concerns over falling inventories and tightening supply. With potential disruptions looming, energy stocks are seeing renewed investor interest. ExxonMobil (XOM), up 2.1% in pre-market trading, and Chevron (CVX), showing a 1.8% rise, are among the beneficiaries. Smaller players like Occidental Petroleum (OXY) also gained traction, climbing 3.4% yesterday.
Growth Stocks to Watch: Energy sector players innovating in renewable assets, such as NextEra Energy (NEE) and ConocoPhillips (COP), could see long-term growth as they diversify operations.
Xerox to Acquire Lexmark in $1.5 Billion Deal
Xerox (XRX) has announced plans to acquire Lexmark, marking a strategic move to expand its footprint in the printing and imaging sector. The $1.5 billion deal includes associated debt and will diversify Xerox's product portfolio. Following the announcement, Xerox shares jumped 4.9%, signaling investor confidence in the firm’s growth potential.
Key Metrics:
Xerox 2024 YTD performance: +18%
Lexmark 2024 revenue (est.): $3.2 billion
Honda and Nissan’s EV Merger Takes Shape
Honda (HMC) and Nissan (NSANY) aim to create the world's third-largest automaker by sales through an ambitious $50 billion merger targeted for completion in 2026. Mitsubishi Motors (MSBHY) is also in talks to join the partnership as the companies pool resources to counter Tesla’s (TSLA) dominance and China's expanding EV market. Critically, Honda will lead the management initially, reflecting confidence in its financial stability relative to Nissan, whose earnings dropped 90% this year.
Growth Stocks to Watch: Tesla, Rivian Automotive (RIVN), and BYD Co. Ltd. (BYDDY) remain key players in the EV revolution, while competitors like Honda and Nissan pursue scale through consolidation.
WhatsApp Wins Spyware Case Against NSO Group
Meta Platforms Inc. (META), the parent company of WhatsApp, scored a major legal victory in a spyware case against Israel’s NSO Group. The court found NSO liable for breaches, with damages to be determined in 2025. As privacy concerns grow globally, Meta continues to reinforce its commitment to user data protection—critical to its long-term value proposition.
Key Metrics:
META YTD performance (2024): +53%
Current P/E Ratio (Meta): 39.2
Nordstrom Goes Private in $4 Billion Deal
Nordstrom (JWN) will go private through a $4 billion acquisition, jointly led by its founding family and Liverpool, a Mexican department store operator. Amid reduced consumer spending, Nordstrom’s shares surged 42% to $24.25 — the offering price per share.
Growth Stocks to Watch: Retailers adapting to current challenges, such as Target Corporation (TGT) and Walmart (WMT), may appeal to investors seeking resilience against shifting consumer habits.
Europe's Gas Prices Skyrocket
European natural-gas futures surged as uncertainty regarding the Russia-Ukraine transit deal raises fears of supply disruptions during winter. Companies like Shell (SHEL)—a major player in liquefied natural gas (LNG)—stand to benefit from rising gas prices, with its stocks up 1.9% at last close. Utilities focused on renewable energies could play a crucial medium-to-long-term role as Europe seeks to reduce its dependency on Russian gas.
Treasury Yields Climb Amid U.S. Government Avoiding Shutdown
With the approval of a stopgap spending bill, treasury yields are rising and boosting investor confidence. Financial services companies, such as JPMorgan Chase (JPM) and Bank of America (BAC), saw slight trading gains as the market stabilizes under strengthened economic conditions.
Sector Updates
Energy: The tight oil supply and Europe's gas price surge underline strong near-term prospects for energy sector investments. Renewable energy and LNG-focused companies remain growth candidates as investors consider diversification.
Technology: Legal wins, like Meta’s case against NSO Group, emphasize the staying power of firms prioritizing consumer privacy. Cloud, AI, and cybersecurity stocks remain critical areas of interest.
Consumer: Nordstrom going private highlights challenges in the luxury retail sector. Investors could pivot towards mass-market retailers with broader economic resilience.
Automotive: The EV market offers continued opportunities through Tesla’s leadership and the upcoming Honda-Nissan merger. Watch out for breakthroughs in solid-state battery technologies to drive new growth narratives.
Growth Stocks to Watch
Tesla Inc. (TSLA): Still a market leader in EVs, with aggressive global expansion efforts.
NextEra Energy Inc. (NEE): Dominant in renewable energy, heavily investing in future-tech solar batteries.
Advanced Micro Devices (AMD): Poised for continued growth as AI and high-performance chip demand accelerate.
Rivian Automotive Inc. (RIVN): Benefiting from partnerships with Amazon and growing production efficiencies.
Brookfield Renewable Partners (BEP): Strategic focus on clean energy investments positions it well for future returns.
Overall Market Forecast
Despite uncertainties in energy pricing and international geopolitical tensions, the broader outlook for global equity markets remains cautiously optimistic. Growth-oriented sectors like technology and renewable energy are expected to fare well, bolstered by strong consumer and institutional demand. However, sectors like retail and traditional automotives may face headwinds tied to economic softness and reduced spending power.
The S&P 500 is currently trending upwards, supported by holiday spending data and stabilization in treasury yields. Significant upside potential exists in sectors driven by technological innovation and green energy plans. International markets, particularly Asia and Europe, will likely see patchy performances as regional challenges weigh on outlooks.
The first trading day of this holiday-shortened week set the stage for a promising end-of-year rally. While not officially part of the "Santa Claus rally" period—which spans the last five trading days of the year and the first two of the next—many stocks posted gains on Monday. Major indices closed higher, bolstered by robust performances in semiconductor and mega-cap stocks. Here's a comprehensive breakdown of today’s market performance, major corporate announcements, and growth opportunities you'll want to keep an eye on.
Major Market Movements
Dow Jones Industrial Average (DJIA): +0.2% to close slightly higher.
S&P 500 Index: Gained +0.7%, supported by strength in health care and tech sectors.
Nasdaq Composite: Advanced +1.0%, powered by tech stocks, now up a stellar +31.7% year-to-date.
Sector Highlights:
Semiconductors: PHLX Semiconductor Index surged +3.1%.
Health Care: Propelled by strong performance from Eli Lilly (+3.7%).
Communication Services & Information Technology: Both gained +1.4%.
Corporate Spotlight
RTX (Raytheon Technologies)
Announcement: Awarded a $976 million U.S. Army contract modification.
Stock Update: Closed at $116.63, up +$0.15.
Takeaway: RTX continues to benefit from strong defense spending, making it a key player in the industrial and defense sectors.
LMT (Lockheed Martin)
Announcement: Secured two significant U.S. Navy contracts worth $3.37 billion and $336 million.
Stock Update: Closed at $486.49, down -$2.53.
Takeaway: Despite today’s minor decline, these contract wins solidify Lockheed Martin's position as a dominant force in defense contracting.
INSW (International Seaways)
News: Set to replace Consolidated Communications (CNSL) in the S&P SmallCap 600.
Future Outlook: Joining this index may attract passive funds tied to the S&P indices, providing a potential boost to INSW’s trading volume and valuation.
Eli Lilly (LLY)
Update: FDA approved Zepbound, the first prescription treatment for obstructive sleep apnea tied to obesity.
Stock Performance: The stock jumped +3.7%.
Note: LLY's innovative pipeline highlights its prominence in the growing biotech and pharmaceutical space.
Other Highlights from Monday's Announcements:
Ashland (ASH): Exiting the fragrance fixative business with the sale of its Avoca unit.
Builders FirstSource (BLDR): Acquiring Alpine Lumber to expand its homebuilding materials footprint.
Vertical Aerospace (EVTL): Secured up to $50 million in committed funding, setting its sights on scaling operations in Q1 2025.
Growth Stocks to Watch
Qualcomm (QCOM, $158.24 | +3.5%)
Catalyst: Won a legal dispute over design agreements with Arm Holdings.
Why Watch: Chipmakers remain essential for AI, 5G, and computing growth.
NVIDIA (NVDA, $139.67 | +3.7%)
Catalyst: Continued strength in semiconductor demand and AI applications.
Why Watch: Leader in GPUs and critical in accelerating AI technology.
Broadcom (AVGO, $232.35 | +5.5%)
Catalyst: Strong performance in the chip market underscores its business resilience.
Why Watch: Its diversity in offerings, spanning data centers and wireless, positions it as a critical tech player.
These companies are thriving in high-potential sectors like semiconductors, cloud computing, and AI innovation. Their strong year-to-date performances reinforce their appeal for growth-focused investors.
Economic Data Recap
Durable Goods Orders: Fell -1.1% in November but showed strength in non-defense capital goods, which increased by +0.7%. This indicates continued resilience in business spending.
Consumer Confidence: Dropped to 104.7 in December, reflecting a cautious outlook by households for future economic conditions.
New Home Sales: Rose to 664,000 in November, driven by lower home prices that helped soften the impact of high mortgage rates.
Market Forecast | Closing 2024 on a Strong Note?
The "Santa Claus rally" officially begins tomorrow, and historical trends suggest a reasonable chance of continued gains through the end and the start of the new year. Concern over macroeconomic uncertainties and global conflicts has been outweighed by optimism in the U.S. economy's resilience, as shown by rising market leaders in tech and healthcare.
Year-to-date performance signals a banner year for equities so far, with the following gains across indices:
Nasdaq Composite: +31.7% YTD
S&P 500 Index: +25.3% YTD
Dow Jones Industrial Average: +13.8% YTD
Although risks remain, including inflationary pressures and rising interest rates, the equity market seems poised to end the year on a positive note. Investors should remain cautious but optimistic as high-momentum sectors like technology and healthcare continue to outperform.
Disclaimer: Stock performance and projections mentioned in this newsletter are subject to market risks and uncertainties. Past performance is not necessarily indicative of future returns.
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