Market Overview

The stock market experienced a choppy session with rising rates, as the 10-year yield peaked at 4.73%. Despite the volatility in mega caps and some economic releases, the S&P 500 ended 0.2% higher, while the Dow Jones Industrial Average gained 0.3%. In contrast, the Nasdaq Composite declined by 0.1%.

Treasury Market

The Treasury market showed little change from the previous day. The 10-year yield increased by one basis point to 4.69%, and the 2-year yield decreased by one basis point to 4.29%. Treasuries reacted to economic releases and the $22 billion 30-year bond reopening, which saw strong demand.

Economic Data

• ADP Employment Change for December: 122,000 (consensus 131,000)
• Weekly Initial Claims: 201,000 (consensus 218,000; prior 211,000)

The ADP report showed a below-consensus employment change, while initial claims unexpectedly dropped.

FOMC Minutes

The FOMC Minutes from the December 17-18 meeting reflected Fed Chair Powell's comments, suggesting no immediate rate cut until inflation approaches the 2% target or if the labor market weakens significantly. Stocks and bonds remained steady, while the fed funds futures market adjusted expectations for rate cuts. The probability of a 25-basis point rate cut at the March FOMC meeting decreased to 40.4%, down from 53.0% a week ago and 69.1% a month ago.

NYSE Closure

The NYSE will be closed tomorrow in observance of the National Day of Mourning for former President Jimmy Carter.

Year-to-Date Performance

• Nasdaq Composite: +0.9%
• S&P Midcap 400: +0.7%
• S&P 500: +0.6%
• Russell 2000: +0.4%
• Dow Jones Industrial Average: +0.2%

Additional Economic Data

• Weekly MBA Mortgage Applications: -3.7% (prior -21.9%)
• Weekly Continuing Claims: 1.867 million (prior revised to 1.834 million from 1.844 million)
• November Wholesale Inventories: -0.2% (consensus -0.2%)
• November Consumer Credit: -$7.49 billion (consensus $9.1 billion; prior revised to $17.3 billion from $19.2 billion)

Layoff activity remains low, but finding new employment has become more challenging. Consumer credit contracted in November, marking only the third contraction in 16 months, with revolving credit acting as a drag due to high interest rates.

Guru Stock Picks

Chuck Royce has made the following transactions:

• Add in RELL by 10.6%

Carl Icahn has made the following transactions:

• Add in IEP by 4.06%

Today's News

Costco Wholesale Corporation (COST, Financial) reported a remarkable 9.9% rise in December comparable sales, significantly exceeding the consensus expectation of 5.2%. This growth was driven by a 9.8% increase in the U.S., a 10.3% rise in Canada, and a 9.8% boost in international markets. E-commerce sales surged 35.7%, partly due to a calendar shift that moved Cyber Monday into December. This shift positively impacted total and comparable sales by about 1.5%. Costco's performance highlights its strong market position and adaptability in the e-commerce space.

Mobileye (MBLY, Financial) saw its shares drop by 13% as investors reacted to the company's presentation at the Consumer Electronics Show. Concerns arose because the autonomous driving technology firm did not provide commercial updates, unlike previous years. Analysts noted that while Mobileye is confident about its future roadmap, its next major product, the Chauffeur, isn't expected until 2027. The lack of immediate commercial news weighed heavily on investor sentiment.

Nvidia (NVDA, Financial) and Microsoft (MSFT, Financial) continue to lead in artificial intelligence, as evidenced by a UBS survey of IT executives. The survey revealed that 100% of organizations are exploring AI, with 61% already using AI applications. Despite this, only 11% have scaled AI initiatives, with many planning to do so by 2026. This slower-than-expected adoption may disappoint investors looking for quicker returns from AI innovations.

Eli Lilly (LLY, Financial) received a boost as Medicare began covering its weight-loss drug Zepbound for obstructive sleep apnea in obese patients. This coverage could pave the way for broader Medicare inclusion. Zepbound, also known as tirzepatide, was recently approved by the FDA and is marketed for diabetes under the name Mounjaro. This development strengthens Eli Lilly's position in the obesity treatment market.

Quantum computing stocks, including Rigetti Computing (RGTI, Financial), Arqit Quantum (ARQQ), and D-Wave Quantum (QBTS), suffered significant declines after Nvidia's CEO Jensen Huang suggested that practical quantum computers are still decades away. This statement dampened investor enthusiasm for the sector, leading to substantial stock price drops.

Johnson & Johnson (JNJ, Financial) faced a setback as it paused U.S. treatments with its Varipulse Pulsed Field Ablation Platform due to reported neurovascular events. This pause comes shortly after the platform received FDA approval for treating atrial fibrillation. The news benefited competitors Medtronic (MDT) and Boston Scientific (BSX), whose shares rose as J&J investigates the issue.

AMC Entertainment (AMC, Financial) CEO Adam Aron disclosed his substantial shareholding in the company, reaffirming his commitment despite the stock's poor performance over the past year. Aron plans to acquire more shares, reflecting his confidence in AMC's future despite recent challenges.

Sana Biotechnology (SANA, Financial) experienced a surge, climbing over 200% following positive Phase 1 trial results for its UP421 cell therapy. The trial showed promising results for treating type 1 diabetes without immunosuppression, boosting investor confidence in Sana's hypoimmune platform.

AMD (AMD, Financial) shares dropped over 4% after HSBC downgraded the stock, citing concerns over its AI GPU roadmap compared to Nvidia's offerings. The downgrade reflects skepticism about AMD's ability to compete effectively in the AI GPU market, particularly regarding its upcoming MI325 GPU.

GuruFocus Stock Analysis

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