Market Overview

The S&P 500 rose by 0.8%, and the Nasdaq Composite increased by 1.8%, closing above 20,000 for the first time. The Russell 2000 gained 0.6%, while the Dow Jones Industrial Average remained relatively unchanged, closing 0.2% lower. The market showed broad positive breadth, with mega-cap stocks significantly impacting the S&P 500 and Nasdaq Composite.

Mega-Cap Stock Performances

• Amazon.com (AMZN): $230.26, up 2.3%
• Alphabet (GOOG): $196.71, up 5.5%
• Meta Platforms (META): $632.68, up 2.2%
• Tesla (TSLA, Financial): $424.77, up 5.9%

All these stocks reached new record highs today.

Economic Indicators

Investors responded to the November Consumer Price Index (CPI) report, which met expectations and reinforced the anticipation of a rate cut. The CPI increased year-over-year to 2.7% from 2.6%, while the core CPI was at 3.3%, above the Federal Reserve's 2% target.

Interest Rate Outlook

The likelihood of a 25 basis point rate cut by the FOMC next week increased, with the CME FedWatch tool indicating a 94.9% probability, up from 88.9% the previous day and 78.1% last week. Treasury yields initially fell after the CPI release but later moderated. The 2-year yield settled at 4.16%, and the 10-year yield at 4.27%.

Corporate Earnings

• GameStop (GME): $28.97, up 7.6%
• Stitch Fix (SFIX): $6.64, up 44.4%
• Macy's (M): $16.58, down 0.8%
• Dave & Buster's (PLAY): $29.41, down 20.1%

GameStop and Stitch Fix saw significant gains following their quarterly results, while Macy's and Dave & Buster's experienced declines due to disappointing earnings or guidance.

Other Notable Stocks

• General Motors (GM): $52.04, down 1.3% after announcing it will stop funding Cruise's robotaxi development.
• GE Vernova (GEV): $343.80, up 5.0% after raising its FY25 revenue guidance and reaffirming its FY24 outlook.

Year-to-Date Performance

• Nasdaq Composite: +33.5%
• S&P 500: +27.6%
• S&P Midcap 400: +19.1%
• Russell 2000: +18.1%
• Dow Jones Industrial Average: +17.1%

Economic Data Review

Today's economic data included the Weekly MBA Mortgage Applications Index at 5.4%, up from 2.8%. The November CPI was 0.3%, matching consensus and prior figures. Core CPI also matched consensus at 0.3%. The shelter index showed a 0.3% increase, with minimal increases in owners' equivalent rent and rent indices.

Additional Economic Reports

The Weekly EIA crude oil inventories showed a draw of 1.43 million barrels, following a prior draw of 5.07 million barrels. The November Treasury Budget revealed a deficit of $366.8 billion, up from $314.0 billion in the same period last year. The deficit was driven by significant outlays exceeding receipts, particularly in net interest payments.

Today's News

Tesla (TSLA, Financial) closed at a new all-time high of $424.77, surpassing its previous record from November 2021. Despite the bullish sentiment linked to potential regulatory support for autonomous vehicles, Wall Street remains cautious with an average price target of $259.66. Analysts have been bearish, with recent ratings mostly suggesting 'Sell' or 'Strong Sell'.

Apple (AAPL, Financial) is collaborating with Broadcom (AVGO, Financial) to create its first in-house server chip designed for AI, known as Baltra. The chip, expected to enter mass production by 2026, will be manufactured by Taiwan Semiconductor (TSM, Financial). This development saw Broadcom shares rise by 6.5%, while Apple's fell slightly. Nvidia (NVDA, Financial), a key player in the AI market, also saw a 3.5% increase.

Adobe (ADBE, Financial) reported strong Q4 results, with EPS beating estimates and revenue increasing by 11.1% year-over-year. However, its guidance for fiscal 2025 disappointed investors, leading to a 6.5% drop in its stock price. The company anticipates a $200 million revenue shortfall due to forex headwinds and a shift towards subscriptions.

Broadcom (AVGO, Financial) led semiconductor stocks higher, recovering from a previous decline with a 6.6% gain. News of its collaboration with Apple on AI chips contributed to the rise. Nvidia (NVDA, Financial) and AMD (AMD) also saw gains as they invested in startup Ayar Labs. Taiwan Semiconductor (TSM, Financial) rose 1.4% amidst these developments.

A bipartisan bill proposed by Senators Warren and Hawley aims to dismantle pharmacy-benefit managers, impacting companies like CVS Health (CVS), Cigna (CI), and UnitedHealth (UNH), whose shares fell by 5% following the news. The legislation could force these companies to divest their pharmacy businesses within three years.

Walgreens Boots (WBA, Financial) shares dropped 7.3% amid skepticism about a potential sale to Sycamore Partners. Concerns over Walgreens' significant debt and liabilities, including opioid-related claims, have cast doubt on the feasibility of a buyout.

Medtronic (MDT, Financial) continued its losing streak, closing 0.7% lower. Despite a positive outlook for profitability, its growth prospects remain under scrutiny. The stock has underperformed compared to the broader market, with a 6% decline over the past month.

Synopsys (SNPS, Financial) and Ansys both saw a 1.3% rise in their stocks following news that Synopsys may gain EU approval for its acquisition of Ansys by offering to divest PowerArtist. The European Commission is reviewing the deal with a decision expected by January.

Chewy (CHWY, Financial) announced a public offering of $500 million in shares, with an additional $75 million option for underwriters. The company will also repurchase $50 million of its stock from the selling shareholder, separate from its existing repurchase program.

ADC Therapeutics (ADCT, Financial) plummeted 36% after reporting results from a Phase 1b study of its drug Zynlonta. Despite high response rates, adverse events like neutropenia and cytokine release syndrome raised concerns among investors.

Aerospace and defense stocks like Lockheed Martin (LMT, Financial) and Northrop Grumman (NOC) face potential risks from federal budget cuts under the Trump administration. J.P. Morgan analysts have adjusted their valuation estimates, citing possible reductions in defense spending.

GuruFocus Stock Analysis

• Tesla Hits $418 High Amid China Demand Boom and $30K Model Rumors by Muslim Farooque
• Patterson Companies Surges 34% as Patient Square Capital Plans $4.1B Private Buyout by Muslim Farooque
• Google's Gemini 2.0 Takes on Microsoft-Backed OpenAI in the Race for AI Supremacy by Faizan Farooque
• Apple's Tim Cook Highlights $23 billion UK Investment in Talks with British PM Starmer by Faizan Farooque
• Apple's iOS 18.2 Launches AI Features Amid Stock Surge to Record Highs by Faizan Farooque