Dow dropped 333 (close to session lows), decliners over advancers better than 5-1 & NAZ fell 298. The MLP index was off 1+ to the 291s & the REIT index was off 3+ to the 397s. Junk bond funds continued weak & Treasuries had modest selling, which lifted yields. Oil closed fractionally higher, above 70, & gold remained weak, down 20 to 2633 (more on both below).
Dow Jones Industrials
With a fair share of familiar obstacles & challenges ahead, 2025 will begin with a largely optimistic view for the US economy. Elevated interest rates, potential weakening in the labor market & a likely volatile political climate on Capitol Hill are just some of the hurdles the nearly $30T economy will face. But with consumers holding strong in the face of persistent inflation, corp profits again expected to surge & the prospect for a more business-friendly environment in DC, the mood of investors is largely buoyant heading into the new year. “There’s a strong probability that this economy accelerates in 2025 and continues to outperform,” said Joseph Brusuelas, chief economist at RSM. “This is the economy we want. It’s the economy we need.” In the scenario Brusuelas considers most likely, real GDP will accelerate at a 2.5% rate in the year ahead, just a bit slower than the approximately 2.7% pace that seems likely for 2024. That's a scenario to which he assigns about a 50% probability. The 2nd most likely case he sees is growth that runs above 3%. A recession, he estimates, carries only about a 15% likelihood. Those numbers are ahead of the Federal Reserve's projection for 2.1% growth & the 2.2% estimate from the Survey of Professional Forecasters. Still, it's consistent with a generally positive outlook for both the economy & the stock market. The main drivers will be “strong household consumption, absolutely rock solid and fixed business investment,” Brusuelas said. “Moreover, I’m very optimistic around the productivity-enhancing investment in equipment, software and intellectual property that firms are making to prepare for the [artificial intelligence] revolution.” “There’s a real investment-driven story embedded inside the economy that portfolio managers really need to keep close track on,” he added. Much of the economic story lately has been related to Pres-elect Trump's agenda of lower taxes, less regulation & tax cuts, along with what is expected to be a strong round of gov spending on things like energy exploration & AI. However, those initiatives are more likely to be a 2026 story, with a growing likelihood that Trump will face stiff resistance in Congress on spending in particular as he tries to push his program through. Rather, the near-term picture could be fueled more by the continued push from tech innovation & business investment, along with a resilient consumer. Equipment spending has been surging through 2024, posting respective gains of 9.8% & 10.8% in the 2nd & 3rd qtrs, part of a surge around 4% in nonresidential investment, according to the Commerce Dept's Bureau of Economic Analysis. Consumer spending also has held up despite higher prices, with retail sales rising 3.8% for the full year thru Nov, according to the Census Bureau. Corp profits also are projected to see another big year. S&P 500 companies are forecast to see growth of 14.8%, or nearly double the previous 10-year average, according to FactSet.
The economic lookout for 2025 is strong, but there’s still a lot that could go wrong
Christmas came right on time for Netflix (NFLX), as the streamer set records for the most streamed NFL games ever in the US., according to Nielsen. Nearly
65M people across the US tuned in to the 2 NFL matchups on
Christmas Day, which NFLX held exclusive rights to show. The
Baltimore Ravens' victory over the Houston Texans averaged 24.3M
viewers, while the Kansas City Chiefs' win against the Pittsburgh
Steelers averaged 24.1M, according to Nielsen. The
US audience for the Ravens versus Texans game peaked during Beyoncé's
halftime show, with more than 27M viewers tuning in to watch the
star-studded performance. “Bringing our members this
record-breaking day of two NFL games was the best Christmas gift we
could have delivered,” Chief Content Officer Bela Bajaria said. “We’re thankful for our partnership with the NFL,
all of our wonderful on-air talent, and let’s please not forget the
electrifying Beyoncé & the brilliant Mariah Carey.” Wed's games were the first in a 3-year deal between the NFL & NFLX to show Christmas matchups exclusively on the streaming giant. The stock dropped 16.59 (2%).
Netflix sets streaming record with Christmas Day NFL games
Duke Energy (DUK) said it had filed a plan
with the Florida Public Service Commission to recover about $1.1B
in direct costs associated with the company's emergency activation &
response to hurricanes Debby, Helene & Milton. DUK,
the largest utility covering North & South Carolina, said the
hurricanes hit its service territories in the past few months & rip
away miles of transmission lines and power poles, leaving tens of
thousands of its customers without electricity. The
company said residential customers will face an increase of
about $21 per 1000 kilowatt-hours (kWh) of electricity in their monthly
bills in Mar 2025 compared to Feb 2025. The stock fell 5¢.
Duke Energy files to recover $1.1 billion in hurricane costs
Gold prices eased but were set for a weekly gain as investors gravitated towards safe-haven assets amid political uncertainty in the Middle East, overshadowing pressure from a firmer $. Spot gold fell 0.8% to $2614 per ounce & US gold futures were down 0.9% to $2629. There remain geopolitical hotspots around the globe, which is keeping gold in play from a safe haven perspective. Between Russia-Ukraine & events in Gaza, investors remain keen on gold in case either situation flares up further. In the Middle East, Israel struck multiple targets linked to the Iran-aligned Houthi movement in Yemen yesterday. Meanwhile, Russian drones struck a multi-story apartment building yesterday in the front line town of Chasiv Yar in the Donetsk region of Ukraine. Limiting further gains in gold, the dollar index headed for a 4th straight week of gains. A stronger $ makes bullion more expensive for other currency holders. Gold has gained this year, reaching a record high of $2790 on Oct 31 on the back of the Fed's rate easing & escalated tensions around the globe.
Gold Set for Weekly Gains Amid Geopolitical Uncertainty
Oil rose 1% & was on track for a weekly gain, spurred by expectations of a stimulus-driven economic recovery in China, the world's biggest oil importer & by forecasts of lower US inventories. The forecast had expected US crude stocks to have declined by about 1.9M barrels last week & market sources said the American Petroleum Institute put the decline at 3.2M barrels. Brent crude futures were up 74¢ (1%) at $74 a barrel. US West Texas Intermediate (WTI) crude rose 80¢ (1.2%) from yesterday's close to $70.42. For the week Brent & WTI were up 1.5% & 1.4% repectively. Optimism over Chinese economic growth & oil demand was buoyed by the World Bank raising its forecast for Chinese economic growth in 2024 & 2025, but it said that subdued household & business confidence would continue to weigh next year. Chinese authorities have agreed to issue special treasury bonds worth 3T yuan ($411B) next year, as Beijing acts to revive the sluggish economy. However, a stronger $ capped oil price gains. The US currency has been boosted by expectations that the incoming Trump administration's policies will boost growth & lift inflation.
Oil Heads for Weekly Gain on China Stimulus Hopes
A sell-off in Big Tech stocks weighed on the broader markets. All 3 of the major indices fell, with the NAZ down as much as 2%. Dow finished up 152 in the shortened week with selling in the last 2 days.
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