Good Morning!
After a turbulent Wednesday, the S&P 500 closed 0.77% lower at 5,867. The NASDAQ dipped slightly, losing 19 points (-0.10%) to close at 19,392. The Dow extended its losing streak to an 11th consecutive session, sliding 0.29% to finish at 42,342. Meanwhile, the DXY weakened slightly to 107.97 (-0.39%), providing some calm to the market, while the VIX surged 7.8% in early trading, ending the day at 26. Small caps in the Russell 2000 continued to struggle, dropping 1.31% to close at 2,231.
When the debt market shows signs of distress, it signals heightened risks for the stock market. Keep a close eye on the yield curve, bond yields, and credit spreads, as they serve as an early warning system for equities.
Crypto Highlights
Overall, the market is down 9%, with $1.17 billion in liquidated positions over the last day, including $241 million from Bitcoin trades.
Bitcoin dropped 7% to $97,020, experiencing a sharp correction following its recent all-time high above $108,000
Ethereum fell 12% to $3,422
XRP dropped 11% to $2.22
Dogecoin plunged 20% to $0.31
Solana saw a significant decline, dropping 12% to $191
We're predicting increased volatility in the crypto space into the beginning of next year. As many people are being shaken out, we suggest holding high-conviction assets and considering strategic entries during dips.
Upcoming Earnings
There are no companies scheduled to report earnings today.
Notable Earnings from Yesterday
NIKE, Inc. Fiscal 2025 Q2 Highlights
NIKE, Inc. reported revenues of $12.4 billion for the second quarter of fiscal 2025, reflecting an 8% decline year-over-year (9% on a currency-neutral basis). NIKE Direct revenues totaled $5.0 billion, a 13% decrease, driven by a 21% drop in digital sales and a 2% decline in NIKE-owned store revenues. Wholesale revenues reached $6.9 billion, down 3%, while Converse revenues fell 17% to $429 million.
The company’s gross margin declined by 100 basis points to 43.6%, primarily due to higher discounts and changes in channel mix, partially offset by reduced product input and logistics costs. Net income for the quarter was $1.2 billion, representing a 26% decrease, with diluted earnings per share at $0.78, down 24% year-over-year.
Inventories remained flat at $8.0 billion, as higher unit counts were offset by shifts in product mix and lower input costs. Cash and equivalents stood at $9.8 billion, slightly reduced due to share repurchases, dividends, and capital expenditures.
CEO Elliott Hill reaffirmed the company’s commitment to revitalizing its focus on sports to drive long-term shareholder value. Under his leadership, NIKE aims to accelerate brand momentum and reposition its business for growth. NIKE continues to demonstrate its commitment to shareholders with 23 consecutive years of increasing dividend payouts.
Accenture Beats Revenue Estimates on Strong GenAI Demand
Accenture exceeded first-quarter revenue expectations, reporting $17.7 billion, driven by rising demand for generative AI (GenAI) services. Its GenAI business achieved $1.2 billion in new bookings and $500 million in revenue, as businesses adopt AI for operations optimization and cost reduction.
The company increased its AI workforce to 69,000, aiming for 80,000 by 2026. Accenture raised its annual revenue growth forecast to 4%-7% and forecasted second-quarter revenue between $16.2 billion and $16.8 billion. Shares rose 6.5% following the announcement.
Headlines
Stock Futures Fall Amid Tough Week for Markets
U.S. stock futures declined on Friday as markets wrapped up a challenging week. The Dow Jones Industrial Average is down 3.4% for the week, its worst performance since March 2023. Futures tied to the Dow fell 0.3%, S&P 500 futures dropped 0.5%, and Nasdaq 100 futures declined 0.9%.
Investor sentiment was dampened by the failure of a House Republican measure to fund the government, potentially leading to a partial government shutdown. Earlier in the week, the Dow plunged 1,100 points in a single session, driven by the Federal Reserve’s cautious approach to interest rate cuts, citing persistent inflation concerns.
Record $6.6 Trillion in Options Set to Expire in Friday’s ‘Triple Witching’
Traders are bracing for heightened market volatility during Friday’s "triple witching," with a record $6.6 trillion worth of options tied to stocks, ETFs, and indexes expiring. The event coincides with the release of the Fed’s preferred inflation measure, the PCE price index, which could further influence market movements.
Congress Nears Shutdown After House Fails to Pass Trump-Backed Funding Bill
Congress faces a looming government shutdown after the House failed to pass a GOP-led funding plan supported by President-elect Donald Trump. The proposal, which included a three-month funding extension, a two-year debt limit suspension, and $110 billion in disaster relief, was rejected 174-235, with 38 Republicans voting against it. Democrats overwhelmingly opposed the bill, accusing Trump of undermining a prior bipartisan deal.
As the shutdown deadline approaches, Democrats remain unwilling to support Johnson’s revised proposals, citing frustration over the derailed bipartisan agreement.
Biden Administration Records Highest Deportations Since 2014
The Biden administration deported 271,484 immigrants in the last fiscal year, the highest number since 2014, according to ICE’s latest report. The deportations primarily focused on public safety, national security threats, and individuals crossing the US-Mexico border illegally. Around 32% of those deported had criminal histories.
Despite limited resources and personnel, ICE managed over 7.6 million immigrants in removal proceedings.
Ukraine Ends Russian Gas Transit Amid Tensions with Slovakia
Ukrainian President Volodymyr Zelenskyy announced that Ukraine will terminate its gas transit agreement with Gazprom at the end of 2024, barring the flow of Russian gas through Ukrainian territory. This decision, aimed at preventing Russian gas from being sold under the guise of Azerbaijani gas, is part of Kyiv's efforts to cut off Russian revenue streams used to fund its invasion of Ukraine.
The move has drawn criticism from Slovakia, which heavily depends on Russian pipeline gas. Slovakia's Prime Minister Robert Fico expressed concerns about increased costs and has sought alternatives, including imports from Azerbaijan.
Putin Acknowledges Inflation Challenges and Overheating in Russian Economy
Russian President Vladimir Putin admitted on Thursday that inflation and economic overheating are pressing concerns for Russia. Speaking during his annual "Direct Line" Q&A session, he noted inflation reached 9.3% in November, driven by rising food prices, a weaker ruble, and increased military spending.
Putin Open to Talks with Trump Amid Ongoing Ukraine War
During his annual year-end press conference, Russian President Vladimir Putin expressed readiness for potential talks with U.S. President-elect Donald Trump, signaling hope for a negotiated end to the Ukraine war. Putin emphasized Russia’s resilience despite recent military setbacks and economic challenges, claiming progress in Ukraine and asserting Russia’s growing sovereignty.
Volkswagen Acquires Stake in Lithium Developer Patriot Battery Metals
Volkswagen has invested C$69 million ($48.18 million) for a 9.9% stake in Canadian lithium developer Patriot Battery Metals, paying a 66.8% premium per share. The deal includes a supply agreement for 100,000 tonnes of spodumene concentrate annually for 10 years to support Volkswagen's battery manufacturer, PowerCo SE.
Rapidus Becomes First Japanese Chipmaker to Acquire ASML's EUV Machine
Rapidus has become the first Japanese semiconductor company to receive extreme ultraviolet (EUV) lithography equipment from ASML. The advanced system has been delivered to Rapidus' chip fabrication facility in Chitose, Hokkaido, marking a significant step in Japan's efforts to produce 2-nanometer semiconductors. This positions Rapidus alongside global leaders like TSMC and Samsung in cutting-edge chip manufacturing.
Japanese Semiconductor Firm Rapidus to Rival TSMC With 2nm Process
Rapidus is the first Japanese company to announce 2nm trial production, aiming to compete with TSMC. Leveraging ASML's cutting-edge EUV equipment, Rapidus plans to begin pilot production by April 2025 and commercial production by 2027, two years behind TSMC.
NVIDIA, seeking to diversify its supply chain, has expressed interest in partnering with Rapidus due to its impressive yield rates and performance. IBM has already adopted Rapidus' 2nm nodes, and other companies are exploring partnerships. This development positions Rapidus as a serious contender in the semiconductor industry
Nvidia's Blackwell AI Chips Promise 30x Performance Boost, CEO Confirms Smooth Production
Nvidia CEO Jensen Huang has confirmed that production of the company’s new Blackwell architecture AI chips, including the GB200 server chips, is "progressing smoothly." These chips are set to deliver a 30x performance boost in AI inference, significantly reducing the time required to gather and train data.
Micron Stock Drops Amid Disappointing Guidance Despite Data Center Surge
Micron shares fell 16% on Thursday, marking their steepest drop since 2020, after issuing weaker-than-expected guidance for the second quarter. The chipmaker projects revenue of $7.9 billion and adjusted EPS of $1.43, missing analyst expectations of $8.98 billion and $1.91, respectively.
CEO Sanjay Mehrotra attributed the slowdown to delayed PC refresh cycles and elevated customer inventory in smartphones. Despite the setback, Micron's data center revenue soared 400%, driven by demand for AI applications.
Google's TPUs Challenge NVIDIA's Dominance in AI Chip Market
Google’s Tensor Processing Units (TPUs) are emerging as strong competitors to NVIDIA’s GPUs in the AI chip market, with Omdia Research estimating TPU-related sales for Broadcom between $6 billion and $9 billion in 2024. Custom AI chips, favored for their cost-efficiency, are increasingly preferred by cloud providers like Google, Meta, and ByteDance.
The custom AI chip market, driven by cloud providers, is projected to grow from $120 billion in 2024 to $300 billion by 2027, outpacing GPU market growth. While NVIDIA remains dominant, bolstered by large orders for its Hopper GPUs and upcoming Blackwell GPUs, TPUs and ASICs are gradually denting its market share. By 2028, the AI chip market is expected to reach $380 billion, with GPUs holding 75% and ASICs 25% of the market.
Google Unveils Experimental 'Reasoning' AI Model, Gemini 2.0 Flash Thinking
Google has introduced Gemini 2.0 Flash Thinking Experimental, a reasoning AI model designed for complex problem-solving in fields like programming, math, and physics. Available on AI Studio, the model aims to improve reasoning by "using thoughts" and fact-checking itself during inference.
Apple and NVIDIA Collaborate to Accelerate Large Language Model Performance with ReDrafter
Apple and NVIDIA have partnered to develop a "Recurrent Drafter" (ReDrafter) technique aimed at improving text generation performance in Large Language Models (LLMs). Combining beam search and tree attention methods, ReDrafter enhances speed and efficiency, achieving a 2.7x increase in token generation per second while reducing latency and power consumption on NVIDIA GPUs.
This technique has been integrated into NVIDIA's TensorRT-LLM framework, enabling faster inference for production LLM applications.
