The Zanta Clause Rally

Everything that happened in the markets this week

Dec 23, 2021

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December 23, 2021

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Today's Letter

Market Update
U.S Equity Market
News Stories Moving the Market
Notable Upgrades/Downgrades
Trending Tickers

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Market Update

The Santa clause rally has been cancelled. What we're seeing now is Santa's "bizarro world" brother, Zanta, as he rallies markets to higher lows just in time for the holiday weekend.

This long awaited rally seemed like it was almost never going to arrive, but alas here we are just a few days before Christmas getting rained on with green candles.

Like being stranded in the desert with no water, small caps were finally given a taste of refreshment. It *feels* like we may have bottomed and could potentially get back on track going into 2022. Only time will tell.

Here are a few notable things that happened this week and everything you need to know as we head into the weekend. I'll have more on the sentiment side this weekend. Enjoy!

US Equity Market

The week so far…

Monday

S&P 500 fell 1.1% on Monday amid growth concerns, although the benchmark index was down as much as 1.9% intraday. The Nasdaq Composite (-1.2%) and Dow Jones Industrial Average (-1.2%) both declined 1.2% while the Russell 2000 lagged with a 1.6% decline.
Growth concerns were driven by new COVID restrictions in Europe, word from Senator Manchin that he won't support the $1.75 trillion Build Back Better Act, and a view that the Fed could be tightening policy at an inopportune time next year.
Sellers maintained control of the market until shortly after the close of European markets (11:30 a.m. ET). Buyers stepped in, spying a good entry point with the S&P 500 trading below its 50-day moving average (4608) and down as much as 4.3% from its intraday high last Thursday.
The S&P 500 still closed below that key technical level, but two of its 11 sectors did sneak into positive territory, namely utilities (+0.1%) and consumer staples (+0.04%). The cyclical financials (-1.9%), materials (-1.8%), industrials (-1.7%), and consumer discretionary (-1.7%) sectors closed sharply lower.

Tuesday

The S&P 500 rallied 1.8% on Tuesday, bouncing back from a three-day skid amid a buy-the-dip mindset. The Dow Jones Industrial Average rose 1.6% while the Nasdaq Composite and Russell 2000 outperformed with 2.4% and 3.0% gains, respectively.
Nine of the 11 S&P 500 sectors closed higher, paced by the energy (+2.9%), information technology (+2.6%), consumer discretionary (+2.5%), and financials (+2.0%) sectors with 2-3% gains. The defensive-oriented utilities (-0.2%) and consumer staples (-0.1%) sectors were the exceptions.
There was a shift in sentiment, precipitated by a belief that the market had gotten oversold on a short-term basis and was due for a rebound. Conviction in buying efforts increased as the S&P 500 reclaimed its 50-day moving average (4614) after closing below the key technical level yesterday

Wednesday

Global stocks climbed for the second consecutive session on Wednesday, reversing recent declines prompted by concerns about the spread of the Omicron coronavirus variant.
The blue-chip S&P 500 benchmark closed 1% higher, led by consumer stocks and with every sector within the index in positive territory.
The tech-heavy Nasdaq Composite climbed 1.2%.
Equity markets have swung back and forth in recent days as investors react to the rapid spread of Omicron and an evolving monetary policy environment, with thin trading volumes ahead of year-end exaggerating the moves.

Thursday

US equities higher in Thursday midday trading, with major averages extending week's solid gains and the S&P on track to set a fresh all-time closing high.
Growth factor a slight outperformer after outpacing value yesterday by ~100bp.
Most sectors higher, with performance fairly bunched. Financials, materials, communication services among the leaders.
Defensives lagging, with REITs the only sector lower.

News Stories Moving the Market

Senator Manchin that he won't support the $1.75 trillion Build Back Better Act

However While Manchin's Sunday statement he cannot vote for the $1.75T BBB social spending and climate plan seemed fairly definitive, some Democrats and White House officials believe there is still a chance to rewrite BBB to suit Manchin's demands and get it passed in early.

Nike Q2 Update

Reported Q2 EPS $0.83 topping Cons $0.63 and the Street high
Revenue above consensus estimates
North America and EMEA beat consensus expectation however Greater China and APLA were below expectations
Gross margin beat by +180bps with SG&A essentially in line.
Inventories up +6.8% y/y compared to sales +1% y/y.
Management notes Q2 revenues were flat on a currency-neutral basis; Greater China and APLA declined, largely due to lower levels of available inventory, while North America and EMEA delivered growth due to higher levels of in-transit inventory entering Q2.

Carnival Cruise Lines Q4 business Update

Q4 adjusted net loss of ($2.0B) vs Cons ($1.58B);
Notes advanced bookings 2H22 and 1H23 are at the higher end of historical ranges and at higher prices, although have experienced an initial impact as a result of the Omicron variant
Shares traded up +3.4% on Monday despite market being down -1%

Elliott Management and Vista Equity considering joint bid for Citrix Systems - Bloomberg

Disney and YouTube Reach Deal, Ending Blackout -WSJ

Meta acquires ImagineOptix;

The Information reports that Meta "officially acknowledged" the purchase of the team specializing in liquid crystal lenses after it was written up on an analyst's personal blog last week.

Meta seeks "deep compatibility" with blockchain technology - NY Times

The NYT reports that in a 21-Dec internal post to employees, the company's rising chief technology officer Andrew Bosworth said:
"My overall guidance is to target a deep compatibility with the blockchain. There aren't many places where I expect us to depend on it exclusively yet, but if we see an opportunity to work jointly with entrepreneurs in the web3 space I expect it will be worth the effort."
The NYT reports that Bosworth also said that Meta should figure out how it might work with NFTs, but warned against overreliance on decentralized technologies: "While most people are happy to use Facebook and Google, some are not. And those that opt out are disproportionately involved in creating a genuinely impressive wave of technology."

China's MIIT suspends partnership with Alibaba Cloud Computing, over accusations BABA failed to report and address a security vulnerability -Reuters

CEO Elon Musk almost finished with his Tesla share sales according to his tweet on Wednesday

"When the 10b pre-programmed sales complete. There are still a few tranches left, but almost done”

Intel is planning an R&D center in France, a test and assembly factory in Italy, and major wafer production fab in Germany -Bloomberg

Tencent Slashes JD.com Stake with $16B Dividend to Shareholders -WSJ

Notable Upgrades & Downgrades

Notable Analyst Upgrades/Downgrades

Initiations

Marqeta - initiated at hold at Loop Capital Markets, target $19
Lucid – initiated at Neutral at Guggenheim
SoFi- initiated at Buy at Citi. Target $20

KeyBanc coverage resumptions:

TEAM unchanged at overweight, target to $442 from prior $270
FROG from overweight to sector weight.

Upgrades

Teradata upgraded to buy from hold at Needham, target is $64, 50% upside
BioNTech upgraded to Buy from Neutral at Kempen
BofA reiterates Buy rating on Disney. Price Target $191

Downgrades

Under Armour price target lowered from $35 to $30 at Cowen

Crypto

Jack Dorsey Goes on Unfollowing Frenzy After Web 3.0 Beef - Coindesk

WallStreetBets - Most Mentioned Equities

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