December 11, 2024 | Year-End Rally

MARKETS

S&P 500: Up +42 points to 6077, VIX: 13.59

Asia: Japan +0.01%, China +0.29%, Hong Kong -0.77%

Europe: Euro Stoxx 50 +0.03%, FTSE +0.19%, DAX +0.23%

FX: USD (DXY) up 0.25%, EUR down 0.35%, GBP down 0.17%, JPY down 0.34%, CNY down 0.17%

Energy: WTI Crude up 1.34% to $69.55, Brent up 1.07% to $72.97

Cross markets: Terminal rate down ~2bp at 4.44, Implied rate cuts 2-years from terminal down ~5bp at 99bp, 2/10 yield spread +11bp

Treasuries: 2-year yields down ~1bp at 4.134%, 10-year yields up ~2bp at 4.244%, 30-year yields up ~3bp at 4.448%

WHAT WE'RE THINKING

Snapshot: US equities are mostly higher after a largely inline CPI print.  Mega-cap Tech and Comm Services outperform with GOOGL the upside standout for a second day. Semis and data center themes rebound on upbeat AI headlines, while regional banks and asset managers benefit from positive messaging at a sell-side industry conference. GEV is the best performing stock in the S&P 500 (SPX) following yesterday’s analyst day and AVGO is close behind on reports the company is working with AAPL on a new AI chip.  Managed care continues to lag after yesterday’s CNC downgrade with defensive pharma looking like a source of funds. Treasury yields are mixed with more curve steepening and the Dollar Index is higher for a fourth straight session.  Gold is higher, copper is little changed and WTI crude rallies after a US inventory draw.

• November CPI was in line with consensus estimates as the headline and core rate both increased +0.3% MoM. On a YoY basis, the headline number rose to +2.7%, a +0.3% increase from the September low of 2.4%. The core rate remained elevated at +3.3% YoY. The silver linings of the report came from owners equivalent rent (OER) cooling to +0.2% MoM and the services ex-shelter (‘Supercore’) figure rising just +0.19%, its lowest print this year.  
• After the release, the market-based probability for a December (12/18) rate cut rose to ~95%.  
• Tomorrow brings PPI, weekly jobless claims and a $22B, 30-year Treasury auction. November import and export prices on Friday will cap off a fairly busy week of data. 
• The BOC cut its main policy rate by 50bp, as expected but the forward guidance contained incrementally hawkish elements. We expect similar messaging from the Fed next Wednesday.  Brazil’s central bank is expected to hike rates by 75bp later today, while the SNB and ECB are expected to cut by 25bp cuts tomorrow morning.  
• Reports suggest that China could allow some CNY depreciation to combat tariff risks in the year ahead.  
• Reports also downplayed the potential for a BOJ rate hike next week despite November PPI coming in a bit hotter-than-expected.  
• Earnings-driven outperformers include GME, PLAB and SFI, while shares of M and PLAY trade lower after reporting.  ADBE is the afternoon earnings highlight with reports from NDSN and OXM also due.  

Rotation: The post-election cyclical rotation has stalled with the Russell 2000 (RTY)/Nasdaq 100 (NDX) performance ratio pulling back after signaling a potential break above this year’s base pattern near 0.116.  The ratio now stands at 0.110 and needs to extend beyond the November high of 0.117 before signaling that a more durable rotation is underway.  The ratio is an early technical indicator meant to precede a shift in macro fundamentals.  The fundamental backdrop for a sustained cyclical rotation usually requires substantial policy accommodation after an economic slowdown. That doesn’t seem to be in the cards at the moment.  It’s still possible to have a cyclical recovery after a soft landing but that scenario is likely waiting on some important catalysts that could possibly emerge in the ‘first 100 days.’  Tough initial tariff announcements followed by a strong China stimulus response seems like a logical chain of events that would kickstart a global cyclical recovery. 

FACT OF THE DAY

Whilst hiding out at Leatherslade Farm, the robbers involved in executing The Great Train Robbery played Monopoly with the real money they had just stolen; leaving incriminating fingerprints on the board game which led to the arrest and imprisonment of most of the gang. Twelve of the fifteen men involved were ultimately arrested. The three members below were still arguing about the rules of ‘Free Parking’ when they were apprehended.

JSC IN THE MEDIA

Outlook for Mag 7: Andrew joins a Schwab Network panel to discuss the narrowing gap between the Magnificent 7 and the rest of the S&P 500. Watch Now

The Close on Bloomberg:  Andrew discusses AMDs downbeat earnings report and its challenges gaining meaningful market share in AI training. He also highlights a potential opportunity for AMD and others when the majority of AI workloads transition from the training to inferencing. Watch Now

Markets react as tensions rise in the Middle East: Andrew comments on recent events in the context of a market that is richly valued and therefore more sensitive to shocks of all kinds. Read on Reuters

See more of JSC in the Media.

THIS DAY IN HISTORY

December 11, 1985: The single ‘Superbowl Shuffle’ by the Chicago Bears Shufflin’ Crew is released. The song and dance fell in line with the Bears’ high-media attention through their Super Bowl-winning season. It was nominated for a Grammy Award in 1987 for Best R&B Performance by a Duo or Group and thankfully, it didn’t win.  

CATALYST CALENDAR

Tomorrow: 1) Australian jobs for April; 2) Japan machine tool orders for April; 3) ECB economic bulletin; 4) US weekly continuing claims; 5) US import prices for April and; 6) earnings before the open: Deutsche Telecom, DSX, EQM, Merck KGaA, Prudential PLC, WIX and WNC. After the close: AMAT, CDR, FTCH and NLOK.

Friday: 1) China April Industrial Production, retail sales, Fixed Asset Investment and jobless rate; 2) India imports/exports for April; 3) Germany’s Q1 GDP; 4) Eurozone Q1 GDP; 4) Eurozone trade balance for March; 5) US retail sales for April; 6) US Empire Manufacturing Index for May; 7) US Industrial Production for April; 8) US Michigan Confidence for May and; 9) earnings before the open from DKNG, JD and VFC.

Jackson Square Capital produces Inside Markets. We also offer financial planning and investment management services. Learn more here and catch up on our recent media appearances.

Investment Advisory Services offered through Jackson Square Capital, LLC, a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.