Stock Region Market Briefing
Stock Region Market Briefing Newsletter - Thursday, December 26, 2024.
Stock Region Market Briefing Newsletter - Thursday, December 26, 2024
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Disclaimer: The information provided in this newsletter is for informational purposes only and should not be considered as investment advice. Please do your own research or consult a financial advisor before making any investment decisions.
Market Highlights
Dollar Strengthens on Slower Rate Cut Sentiment
The U.S. dollar gained ground recently as investors adjusted expectations for the Federal Reserve's approach to rate cuts. A more cautious Fed could bolster the dollar's strength in the coming months. This is particularly significant for U.S.-based multinational exporters that benefit from a stronger dollar and stable global markets, such as Microsoft (MSFT) and Johnson & Johnson (JNJ).
Growth Stock to Watch: Keep an eye on NVIDIA (NVDA) as the company often reacts sharply to currency adjustments due to its international revenue exposure.
European Bonds Edge Higher Amid Low Volumes
European sovereign bond yields rose in low-volume holiday trade. The thin trading conditions typically exaggerate market movements. This phenomenon may persist until the first week of January when market participants return in full force. Bond-related ETFs like iShares Euro Government Bond ETF (IBGE) could see increased attention in early 2025.
American Airlines Grounding Causes Nationwide Disruptions
All flights were grounded due to technical issues at American Airlines (AAL), impacting both operations and investor sentiment. This incident underscores the vulnerabilities in airline tech infrastructure. Despite short-term disruptions, AAL could present a recovery opportunity depending on operational resolutions in the near term.
Growth Stock to Watch: Delta Airlines (DAL) could benefit from investor pivoting while Boeing (BA) remains a strong play in aviation-related hardware and tech infrastructure improvements.
Coke (KO) and PepsiCo (PEP) Lobby Amid SNAP Debate
The proposal to remove sugary drinks from SNAP eligibility has placed Coca-Cola (KO) and PepsiCo (PEP) in the spotlight. Both titans are lobbying to maintain status quo, highlighting the delicate balance between public health policies and corporate influence.
Market sentiment could see fluctuations depending on the legislative outcome. Despite this, KO and PEP maintain broad, diversified portfolios, and consumer staples ETFs like XLP remain resilient under similar conditions in the past.
Games Workshop (GAW.L) Joins the FTSE 100 Index
The U.K.-based developer of the Warhammer franchise, Games Workshop, entered the FTSE 100 with an impressive debut. Shares have been trading robustly, bolstered by a market value of $5.47 billion. GAW.L represents a growth potential in the gaming and entertainment sectors, offering long-term promise.
Growth Stock to Watch: Electronic Arts (EA) and Take-Two Interactive (TTWO) could offer similar enthusiasm for the gaming-focused investor.
Prosus' $1.7 Billion Acquisition of Despegar (DESP)
Investment giant Prosus (PRX.NV) has expanded its foothold in Latin America with the acquisition of Despegar, a leading online travel agency. The strategic move targets e-commerce and fintech growth across the region's emerging markets.
Growth Stock to Watch: Booking Holdings (BKNG), with its global presence, may also see positive knock-on effects from increasing activity in the travel space.
DexCom (DXCM) and Abbott (ABT) Resolve Patent Disputes
Two giants in the medical device industry, DexCom (DXCM) and Abbott Laboratories (ABT), settled their long-standing patent battle. This resolution removes legal overhangs and positions both companies for growth in the diabetes management market.
Natural Gas Futures Are Up on January Demand
Expectations for colder temperatures in January have pushed natural gas futures higher. Energy companies like Chesapeake Energy (CHK) and EQT Corporation (EQT) could see an uptick as demand amplifies in the new year.
Growth Stock to Watch: Consider NextEra Energy (NEE), a renewable energy company poised to benefit from both fossil fuel transition plans and policy-driven initiatives.
Gold and Oil See Modest Gains Amid Geopolitical Tensions
Both gold and oil exhibited marginal gains, with investors responding to geopolitical uncertainties. Barrick Gold (GOLD) and oil majors such as ExxonMobil (XOM) and Chevron (CVX) are stabilizers for many portfolios navigating volatile markets.
Overall Stock Market Forecast
The stock market remains a complex landscape as 2024 draws to a close. We’re seeing mixed signals from multiple fronts:
Federal Reserve policy continues to anchor market sentiment. Expect limited upside in rate-sensitive sectors until more clarity emerges.
Holiday-thinned trade contributes to short-term volatility, particularly in under-active European and Asian markets.
Energy, utilities, and consumer staples are projected to remain steady amid economic uncertainties, while growth sectors like technology and healthcare could see sporadic rallies tied to innovation narratives.
For broader exposure, consider diversified ETFs like SPDR S&P 500 ETF (SPY) or Vanguard Total Stock Market ETF (VTI).
Sectors to Watch:
Technology: Look to leaders like Apple (AAPL) and Alphabet (GOOGL) as they continue to expand on AI and cloud computing advancements.
Energy: Rising demand for natural gas keeps energy stocks appealing.
Healthcare: Resolutions like the Abbott/DexCom agreement create buzz-worthy opportunities.
Market Highlights
U.S. Treasury Yields Rise Amid Strong 5-Year Note Auction
U.S. Treasuries closed the last session before the Christmas holiday slightly higher after a strong $70 billion 5-year note auction, which saw a bid-to-cover ratio of 2.40, slightly exceeding the previous 12-auction average of 2.39. Treasury yields stabilized, with the 10-year yield at 4.59% and the 2-year yield at 4.34%. Expect heightened focus on Thursday's $44 billion 7-year note auction.
Growth Stock to Watch: Charles Schwab (SCHW) and BlackRock (BLK) are favorites as strong yield trends and bond market activity often benefit large firms with fixed-income exposure.
Santa Claus Rally Begins
The "Santa Claus Rally" period officially kicked off with broad-based gains across major U.S. indices in a light-volume session. The S&P 500 gained 1.1%, the Dow Jones rose by 0.9%, and the Nasdaq Composite surged 1.4%. Key drivers included gains in consumer discretionary stocks, with Tesla (TSLA) soaring 7.4% to $462.28 and Amazon (AMZN) advancing 1.8% to $229.05. Year-to-date performance remains strong across the board, with the Nasdaq leading at +33.4% YTD.
Growth Stock to Watch: Tesla (TSLA) continues to dominate the EV market globally and remains a strong contender for future growth.
Natural Gas Surges on January Demand Outlook
Natural gas futures jumped 7.7% during the session to $3.94/MMBtu, driven by bullish forecasts for colder temperatures in January. This marks the highest close since early 2023. Energy producers like EQT Corp (EQT) and Coterra Energy (CTRA) benefited from the jump, rising 1.7% and 2.0% respectively.
Growth Stock to Watch: NextEra Energy (NEE) stands to gain from long-term trends supporting renewable energy and utility demand spikes during colder months.
Consumer Discretionary Sector Leads the Pack
Consumer discretionary (+2.6%) was the standout sector, driven by Tesla and Amazon, along with a strong performance from Starbucks (SBUX), which shrugged off union-related headwinds to rise 2.4% to $89.56. Retail continues to show resilience amid ongoing holiday shopping.
Growth Stock to Watch: Lululemon (LULU) and Bath & Body Works (BBWI) maintain strong brand momentum and are set to capitalize on post-holiday e-commerce activity.
BlackBerry Hits a 52-Week High
BlackBerry (BB) surged 3.8%, continuing its upward trajectory to reach a new 52-week high of $3.93. The rebound follows a favorable earnings report last week, showcasing the firm's focus on cybersecurity and IoT solutions.
Growth Stock to Watch: Palo Alto Networks (PANW), another cybersecurity leader, offers strong growth potential amid increasing global tech security threats.
Crude Oil Gains Momentum as Prices Exceed Key Levels
WTI crude oil futures gained 1.2% to settle at $70.05 per barrel, rising above its important 50-day moving average of $69.68. Global energy plays like ExxonMobil (XOM) (+0.5%) and Chevron (CVX) (+0.5%) stabilized after shedding value earlier in the month.
Growth Stock to Watch: Devon Energy (DVN), known for its shale production efficiency, could see gains if crude demand trends remain positive.
Financial Sector Eyes Fed Stress Test Process and Policy Updates
Major U.S. banks, including JPMorgan (JPM) and Bank of America (BAC), are preparing to file lawsuits targeting the Federal Reserve’s opaque stress testing processes. The ongoing legal maneuvers highlight banking sector challenges and regulatory scrutiny.
Growth Stock to Watch: Morgan Stanley (MS) stands as a strong player with exposure to global investment banking and wealth management.
VersaBank Raises Funds for Growth Initiatives
VersaBank (VBNK) successfully raised over $86 million through an over-allotment public offering, with funds intended for general operations and qualifying as Common Equity Tier 1 capital. Shares traded at $13.43 post-announcement.
Growth Stock to Watch: SVB Financial Group (SIVB) could present similar rebound opportunities post-fundraising events.
Overall Stock Market Forecast
The stock market is set to end 2024 on a strong note, boosted by the "Santa Claus Rally" and improved economic indicators:
Growth Potential in Key Sectors: Technology and consumer discretionary continue to dominate, led by heavyweights like Apple (AAPL), Microsoft (MSFT), and Tesla (TSLA).
Energy Recovery: Rising oil and gas prices will likely stabilize energy stocks, presenting opportunities for investors focused on cyclical growth.
Treasury Auctions and Fed Policy: Stability in the bond markets will be critical as yield adjustments set the tone for risk-sensitive sectors moving forward.
Investors should remain cautious as macroeconomic uncertainties—ranging from Fed policy outcomes to ongoing geopolitical tensions—could trigger volatility in early 2025. For broad exposure, ETFs like SPDR S&P 500 ETF Trust (SPY) and iShares Russell 2000 ETF (IWM) remain solid choices.
Thank you for subscribing to Stock Region's Market Briefing Newsletter. Wishing you a prosperous close to 2024 and a successful year ahead!
Disclaimer: This newsletter is not intended as investment advice and highlights market activity for informational purposes only. Past performance does not guarantee future results. Always evaluate financial decisions with care and seek professional consultation when needed.
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