The last time the Dow Jones Industrial Average had a losing streak this bad, Meat Loaf's hit song "Two Out of Three Ain't Bad" was ruling the airwaves.
It's a sentiment being shared by investors right now. The S&P 500 and Nasdaq Composite indexes are up in December and trading near record highs, yet the Dow has fallen for nine consecutive days, its worst stretch since 1978.
But the historic slump isn't as concerning as it may first seem. It's not always the best indicator of the health of corporate America--the S&P 500's run of 12 straight days of negative breadth, or more stocks falling than rising, is more problematic.
After all, the Dow only has 30 constituents and it employs a price-weighted system, as opposed to using market capitalization.
That means if a company with a high share price has an extended slump it leaves the Dow exposed, which is what has happened with UnitedHealth following the fatal shooting of an executive earlier this month. The index has fallen 1,564 points during its nine-day losing run with nearly half of that coming from the health insurer, which contributed 761 points to the drop.
Others have dragged the index lower: paints and coatings company Sherwin-Williams; heavy-machinery maker Caterpillar; banking giant Goldman Sachs; retailer Home Depot; insurer Travelers Companies; and software company Salesforce all accounted for at least 100 points of the fall, while Nvidia has cost the index 96 points.
Things haven't all been bad--nine of its constituents have climbed over the period, including Apple, Amazon, Microsoft, and Boeing. In fact, Apple is closing in on becoming the first ever $4 trillion company.
A recovery, of any sort, by UnitedHealth would likely snap the streak and even herald a more positive period for the index. The Federal Reserve, and its interest-rate path could keep it under pressure, though. President-elect Donald Trump may demand that Fed Chair Powell keeps cutting rates even if inflation rises as a result of tariffs and other policies.
Powell may well do anything to keep his job, but it's reasonable to assume, in the words of Meat Loaf, he won't do that.
-- Callum Keown
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Auto Giants Nissan and Honda Explore Potential Merger
Nissan and Honda -- Japan's second and third largest car makers, respectively -- said they are considering a merger or other future collaboration, signalling that changes are coming to the auto industry.
-- The rationale behind the move is likely the increased importance of size
and scale for auto makers, which are facing an evolving industry
complicated with gasoline, hybrid, and all-electric vehicles demanding
billions in investment capital.
-- Both Honda and Nissan's sales have fallen in China and Southeast Asia
amid increased competition from Tesla and Chinese EV makers such as BYD.
Both companies' profits fell this year amid a price war -- which is
raging especially hard in China.
-- Nissan and Honda are likely looking for solutions before things get even
more difficult. "It is important to prepare for the increasing pace of
transformation in mobility in the mid-to-long term," said Nissan CEO
Makoto Uchida in March.
-- Nissan stock jumped 24% in Tokyo trading Tuesday on the news of a
potential merger, while Honda shares fell 3%. Both stocks are still down
double digits this year, trailing the Japan Nikkei 225 index.
What's Next: While Nissan and Honda confirmed that they are "considering various possibilities for future collaboration" in a joint statement early Wednesday, they said no decision has been made. A coming together of the two car giants could be the start of broader auto industry consolidation.
-- Al Root and Elsa Ohlen
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What Better-Than-Expected Retail Sales Mean for the Fed
Retail sales for November rose by more than expected from the prior month, pushed by strength in car sales and online shopping. The reading suggests consumers are happy to shell out money heading into the holiday sales season, but mixed trends suggest a note of caution.
-- The number jumped 0.7% in November from October compared with projections
for a 0.5% jump. Sales at motor vehicle and parts dealers rose 2.6% from
the prior month. Stripping out auto and gas sales, the monthly figure
ticked up just 0.2%, which was below estimates.
-- Price concessions helped auto sales, said Jim Baird, chief investment
officer with Plante Moran Financial Advisors. Meanwhile, five of the 13
categories tracked saw sales declines, including restaurants and bars,
food and beverage stores, miscellaneous retailers, and general
merchandise.
-- Consumers may have been allocating a bigger share of their budgets toward
gift buying rather than dining out or spending big on groceries.
Thanksgiving and Black Friday fell a week later this year compared with
last year, and retailers have warned this could be a challenge.
-- Costco Wholesale said e-commerce sales were about 15 percentage points
lower in November because of the calendar shift, resulting in a 3.1%
decrease in e-commerce same-store sales for the month. But overall,
e-commerce sales had a good month, rising 1.8% from October.
What's Next: Scott Helfstein, Global X's head of investment strategy, said the general takeaway is that the consumer remains healthy. That bodes well for those hoping for another interest rate cut by the Federal Reserve today, though some see a Fed pause in January as increasingly likely.
-- Sabrina Escobar
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FTC Chair Could Remain a Thorn in Successor's Side
One by one, President Joe Biden's agency heads have announced resignation plans ahead of President-elect Donald Trump's inauguration. Federal Trade Commission Chair Lina Khan is one exception. Analysts expect her resignation announcement soon, but she could remain a thorn in her successor's side for as long as she remains there.
-- Trump named a Republican commissioner at the agency, Andrew Ferguson, to
become chair, and nominated antitrust attorney Mark Meador to replace
Khan, whose spot expired in September. Ferguson is already Senate
confirmed. Meador would have to go through that process. Until Meador
steps in, Khan can remain as a commissioner.
-- An FTC spokesman declined to comment to Barron's on Khan's plans.
Ferguson won't be a total departure from Khan, who won fans in some
conservative circles, including with Vice President-elect JD Vance. Both
favor antitrust action against tech giants. A Republican-led FTC might
pursue less aggressive penalties or breakups.
-- However, Ferguson and a GOP-controlled FTC will likely mark a big change
on other issues. As commissioner, Ferguson criticized Khan's opposition
to mergers. He and other Republicans also opposed much of her rule making,
such as the ban on most employment noncompete agreements.
-- If Khan decides to leave, Democrats will still have a tie on the
commission until Meador's confirmation, but with a three to two majority,
Democrats could technically advance votes on rule making or other actions
even over Ferguson's objection, said George Washington University law
professor Bill Kovacic.
What's Next: There are signs that Khan is racing to cement her legacy. On Tuesday, the agency finalized a rule requiring hotels and ticket sellers to reveal "junk fees" to consumers upfront. The agency last week also filed an antitrust lawsuit against a large alcohol distributor, alleging price discrimination.
-- Joe Light
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Software Start-Up Databricks Raises Money for $62 Billion Valuation
Software start-up Databricks, which helps companies harness their data for machine learning and other AI applications, sidestepped the initial public offering route by raising another round of private capital for a $62 billion valuation, in what has been described as one of the biggest funding rounds in venture capital history.
-- Databricks said it was raising $10 billion and has completed $8.6 billion
so far. The funding is led by Thrive Capital and Andreessen Horowitz,
along with DST Global, GIC, Insight Partners, and WCM Investment
Management. Interest in AI drove 60% growth in the third quarter from a
year ago, Databricks said.
-- The funds will go toward investments in new AI products, acquisitions,
and an expansion of its international go-to-market operations, it said.
Current and former employees can also cash out shares with the funds.
Eleven-year-old Databricks said it would achieve positive free cash flow
this quarter for the first time.
-- Databricks is projecting annual revenue of $3 billion but didn't say when
it would generate net income. Customers use its software to detect and
treat diseases such as cancer earlier, find new ways to fight climate
change, develop pharmaceuticals faster, and other uses, it said.
What's Next: Other than tech giants such as Nvidia, Microsoft, or Oracle, few companies are big enough to acquire a $62 billion target, raising the likelihood of an IPO at some point down the road. Wall Street is hopeful for a revival of the IPO pipeline after successful deals like last week's debut by ServiceTitan.
-- Liz Moyer
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Pfizer's Outlook Meets Expectations Amid Activist Campaign
(MORE TO FOLLOW) Dow Jones Newswires
December 18, 2024 06:44 ET (11:44 GMT)
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