Good Morning!
On December 27, the S&P 500 closed at 5,970, down 1.11%, while the NASDAQ and Dow Jones Industrial Average recorded modest declines of 1.49% and 0.77%, respectively. U.S. markets will be closed on Wednesday, January 1, for New Year’s Day. This week is expected to see light trading volumes as many professionals extend their holiday breaks, with most offices returning to normal operations on Monday, January 6.
2024 performance remains exceptional with Nasdaq up 31%, the S&P 500 rising 25%, and the Dow gaining 14%. However, profit-taking and Federal Reserve concerns appear to have dampened momentum, particularly among large tech stocks like Nvidia and Amazon. Palantir and Tesla are struggling in pre-market trading falling 3.14% and 2.78% respectively. The Russell 2000 small-cap index is on track for its worst monthly performance since 2022, down 7.8% in December.
Treasury Secretary Janet Yellen warned Congress that the U.S. is expected to reach its debt ceiling between January 14 and 23, prompting the need for "extraordinary measures" to avoid default. These special accounting maneuvers would temporarily prevent breaching the nation’s borrowing limit, suspended until January 1, 2025, under the Fiscal Responsibility Act. The federal debt currently stands at $36.2 trillion, with rising costs for debt servicing outpacing national security spending.
Crypto Highlights
Bitcoin (BTC): Currently trading at $92,800, down 0.91% over the past 24 hours.
Ethereum (ETH): Holding steady at $3,343, down slightly by 0.30%.
Ripple (XRP): Has shed 5.14% since Friday and is trading 2.79% lower in the last 24 hours at $2.03 per coin.
The overall trading volume continues to be very small during the holidays. We don't expect to see a large price movement until 'whales' (large holders) return in early January. Retail investors will likely sell some of their holdings as the price moves sideways.
Upcoming Earnings
There are no significant earnings announcements scheduled for today.
Headlines
U.S. Disburses $3.4 Billion in Budget Aid for Ukraine
The United States has provided Ukraine with $3.4 billion in additional budgetary assistance to support government operations amid ongoing Russian attacks. Treasury Secretary Janet Yellen announced this as the final installment under the 2024 Ukraine Security Supplemental Appropriations Act, bringing the total U.S. budget aid to Ukraine since 2022 to over $30 billion.
This funding helps maintain Ukraine's government services, including salaries for teachers and state employees. Separately, President Joe Biden announced $2.5 billion in military aid, bringing the total U.S. commitment to Ukraine to $175 billion across nearly three years of war.
US Economy Defies Expectations in 2024 Despite Challenges
The U.S. economy exceeded projections in 2024, solidifying its position as the top performer among Group of Seven countries, according to the International Monetary Fund. Despite elevated interest rates, election-related uncertainty, and a cooling labor market, economic growth remained robust. American consumers played a key role, with household spending advancing 2.8% for the year, driven by steady wage growth and record household wealth.
However, cracks in the economy began to show. Many Americans have depleted their pandemic-era savings and are increasingly relying on credit cards and loans, leading to rising delinquency rates. The labor market also exhibited strain, with hiring slowing, unemployment edging higher, and job openings declining. Although the Federal Reserve cut rates by a full percentage point in response, inflation progress stalled, and mortgage rates approached 7%, further hurting the struggling housing market.
The manufacturing sector faced additional headwinds, with high borrowing costs dampening investment and global demand remaining weak.
US Credit Card Defaults Surge to Highest Levels Since 2010
Defaults on U.S. credit card loans have reached their highest levels since the 2008 financial crisis, signaling financial strain among lower-income consumers after years of high inflation and dwindling pandemic-era savings. In the first nine months of 2024, credit card lenders wrote off $46 billion in seriously delinquent loan balances, a 50% increase compared to the same period in 2023, according to data from BankRegData.
While high-income households remain financially stable, the bottom third of U.S. consumers are struggling, with savings rates effectively at zero, according to Mark Zandi of Moody’s Analytics. Capital One, the third-largest U.S. credit card issuer, reported a write-off rate of 6.1% in November 2024, up from 5.2% the previous year. Delinquency rates peaked in July 2024 and have only slightly declined, remaining almost a percentage point higher than pre-pandemic levels.
Finland Investigates Undersea Cable Damage by Russia-Linked Tanker
Finnish authorities have moved the oil tanker Eagle S closer to port near Porvoo to investigate its suspected role in damaging the Estlink-2 undersea power cable, which links Finland and Estonia. The cable was disrupted when the vessel allegedly dragged its anchor along the seabed, causing minimal service impact. The Eagle S, flagged in the Cook Islands, is linked to Russia’s “shadow fleet” of aging tankers that operate without Western-regulated insurance, raising environmental and operational concerns.
Azerbaijan Accuses Russia of Downing Airliner in Christmas Day Crash
Azerbaijan’s President Ilham Aliyev has accused Russia of accidentally shooting down an Azerbaijan Airlines flight on Christmas Day, killing 38 people, and subsequently attempting to cover up the incident. The plane, en route from Baku to Grozny, Chechnya, made an emergency landing near Aktau, Kazakhstan. Aliyev stated that perforations in the fuselage resembling shrapnel damage ruled out earlier explanations of bird strikes or other causes. A U.S. official also indicated evidence pointed to a Russian air defense system.
Aliyev criticized Russia’s conflicting accounts, including claims of Ukrainian combat drones and fog forcing the plane out of Russian airspace. He accused Russia of using electronic warfare to disrupt the aircraft and damaging it with ground fire. Though Russian President Vladimir Putin apologized for the incident occurring in Russian airspace, he stopped short of admitting fault. Aliyev called for full accountability and transparency from Russia, rejecting an investigation by the Interstate Aviation Committee due to its Russian ties.
Russia Ramps Up Drone Production With Chinese Support Amid Winter Offensive Preparations
Russia has significantly expanded its domestic production of Iranian-designed Shahed drones in preparation for its Winter offensive against Ukraine, according to the Institute for the Study of War (ISW). The Alabuga Special Economic Zone in Tatarstan, Russia’s main Shahed drone production site, manufactured 5,760 drones between January and September 2024—more than double the output in 2023. Satellite imagery shows recent facility expansions, including new buildings and anti-drone mesh installations.
The facility has also begun producing decoy drones, designed to overwhelm Ukraine’s air defenses by mimicking the Shahed drones. These low-cost decoys, nearly 10 times cheaper than armed Shaheds, have become a key strategy, with plans to produce 10,000 by year-end.
Healthcare Organizations in the U.S. May Face Major Cybersecurity Overhaul
The Department of Health and Human Services’ (HHS) Office for Civil Rights has proposed new updates to the HIPAA Security Rule aimed at bolstering cybersecurity across the healthcare sector. The proposed changes include mandatory multifactor authentication, data encryption, anti-malware protection, and routine vulnerability scans to safeguard patient data. Additional measures, such as network segmentation, separate controls for data backup and recovery, and annual compliance audits, are also part of the overhaul.
These updates come in response to a sharp rise in large-scale cyberattacks on the healthcare industry. From 2018 to 2023, reports of major breaches grew by 102%, with the number of affected individuals skyrocketing by 1,002%. In 2023 alone, over 167 million individuals were impacted by cyberattacks targeting systems like Ascension and UnitedHealth, which disrupted hospitals, pharmacies, and doctors' offices. The implementation of the proposed requirements is expected to cost $9 billion in the first year and $6 billion annually for the next four years.
AI Data Centers Blamed for Power Quality Issues in Residential Areas
A Bloomberg report reveals that massive AI data centers are causing power quality issues in nearby residential areas, impacting nearly 3.7 million Americans. Poor power quality, detected by Whisker Labs' Ting sensors, reportedly reduces the lifespan of electrical appliances and increases risks of malfunctions, overheating, and fires. The worst distortions occur within 50 miles of major data centers, affecting the reliability of home electrical systems.
TSMC Arizona to Begin 4nm Production in Late 2025 with 30% Higher Costs
TSMC’s Arizona facility is set to start mass production of its 4nm semiconductor process in the second half of 2025, primarily serving major clients like Apple, NVIDIA, AMD, and Qualcomm. This marks a significant milestone in TSMC’s US operations, bolstered by the CHIPS Act and the establishment of one of the largest foreign semiconductor facilities in the country. However, production costs in Arizona are expected to be up to 30% higher than in Taiwan.
The Phase 1 plant in Arizona is projected to produce 20,000 wafers per month initially, with plans for 2nm production in Phase 2 by 2028. However, challenges related to "technology transfer" and supply chain issues between the US and Taiwan may complicate future expansions.
China Races to Stockpile U.S. Chip Materials Amid Tightening Trade Restrictions
Chinese companies are accelerating purchases of advanced chip and electronics materials from U.S. suppliers ahead of the new year, fearing stricter export restrictions as Donald Trump prepares to return to the White House. Sources report a significant surge in orders since November from U.S. companies like DuPont, Entegris, and Chemours. The orders include essential materials such as chemical-mechanical polishing pads, filters, advanced lubricants, specialized containers, and high-end light bulbs for testing and inspection.
China’s move reflects growing concerns over the Biden and Trump administrations' tightening controls on semiconductor-related exports, which aim to curb China’s technological advancements.
Nvidia Unveils Upgraded Blackwell GPU and Hints at New Grace-Blackwell Component
Nvidia has reportedly taped out the B300 GPU, an enhanced version of its Blackwell architecture, and is working on the Grace-Blackwell GB300 component, according to SemiAnalysis. The B300 GPU is designed on the same 4nm process (4NP) by TSMC as its predecessors, the B100 and B200, but boasts up to 50% higher FLOPS performance. It also incorporates 12-layer HBM3E DRAM, increasing memory capacity to 288GB per GPU, though memory bandwidth remains at 8 terabytes per second.
Intel Reportedly Prepping 24GB Arc Pro Battlemage GPU for Productivity and AI Markets
Intel is rumored to be developing a 24GB model of its Arc Pro Battlemage GPU, targeting creators and productivity markets, according to a report by Quantum Bits. This upgraded GPU would double the memory capacity of the current Battlemage series, which includes the Arc B580 (12GB) and the upcoming Arc B570 (10GB). The 24GB version is expected to cater to AI inference, generative AI, and other high-memory-demand applications like large language models (LLMs).
Tesla Offers Year-End Discounts on Model Y, Model S, and More
Tesla is offering substantial year-end discounts on its inventory vehicles to clear stock before 2025. Discounts of up to $4,870 are available on select Model Y vehicles, while the Model S and Model X are seeing even greater price reductions. These deals apply to both new and low-mileage demo vehicles, making it a prime opportunity for buyers seeking a Tesla at a reduced price.
Apple Discontinues iPhone 14 and iPhone SE in 29 Countries, Including Northern Ireland
Apple has ceased sales of the iPhone 14, iPhone 14 Plus, and iPhone SE (3rd generation) in 29 countries, including Northern Ireland, due to compliance with the EU Common Charger regulations mandating USB-C connectors for electronic devices. This move eliminates the last iPhones with Lightning ports, effective December 28, 2024.
