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  • Walmart is reportedly closing its innovation hub. It’s the latest in retailer cost cuts.

    Walmart is reportedly closing its innovation hub. It’s the latest in retailer cost cuts.

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    Walmart Inc. will shut down Store No. 8, the big-box retailer’s startup incubator and innovation hub, the Wall Street Journal reported on Friday. It’s the latest move by a retailer to trim expenses and protect profits as shoppers continue to grapple with higher prices.

    Chief Financial Officer John Rainey told employees in a memo that much of what Store No. 8 did had already been incorporated into the company’s operations as a whole, the Journal said.

    “We’ve graduated capabilities from this operating approach that are now fully embedded in our organization,” Rainey said in the memo, according to the Journal.

    “The responsibility to shape the future of retail is now shared by all segments,” he continued.

    Walmart launched Store No. 8 in 2017 in an effort to experiment with new ideas, including augmented reality, artificial intelligence and new ways of delivering products, and to stay nimble in a retail landscape increasingly defined by online shopping. The Journal said that Scott Eckert, who led Store No. 8, was leaving the company.

    Walmart did not immediately respond to a request for comment. Shares were up fractionally after hours, after finishing 0.5% lower during the day.

    Some analysts think that Walmart could hold onto the higher-income shoppers it attracted over the past two years of high inflation. But in a possible sign of its priorities, the retailer on Thursday announced pay raises for store managers and a bonus program that hinges more on store profits.

    Walmart and other retailers have signaled that they are rethinking what technology to invest in and what stores to keep open. Those decisions would follow years of online-sales adoption, pandemic-related disruptions to shopping and a jump in prices for basics that began in 2022 and led people to shy away from buying things like laptops and clothing.

    Elsewhere on Thursday, Macy’s Inc.
    M,
    -1.67%

    said it would lay off corporate staff and close a handful of stores amid efforts to adapt to “an everchanging consumer and marketplace” and “evaluate the right mix of on- and off-mall locations.”

    The Wall Street Journal, which first reported that news, said Macy’s intended to bring more automation to its supply chain and invest “in areas that impact consumers,” like visual displays in stores and efforts to smooth out the online-shopping experience.

    CVS Corp.
    CVS,
    +0.01%
    ,
    meanwhile, said it would close some pharmacies at Target Corp.
    TGT,
    +0.54%

    stores as it pivots toward health services.

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  • Russian hacking group accessed Microsoft executive emails, company says

    Russian hacking group accessed Microsoft executive emails, company says

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    Microsoft Corp. said Friday a Russian hacking group illegally gained access to some of its top executives’ email accounts.

    In a regulatory filing, the software giant
    MSFT,
    +1.22%

    said a group called Nobelium was responsible for the attack.

    In late November, the group accessed “a legacy non-production test tenant account and [gained] a foothold, and then used the account’s permissions to access a very small percentage of Microsoft corporate email accounts, including members of our senior leadership team and employees in our cybersecurity, legal, and other functions, and exfiltrated some emails and attached documents,” Microsoft’s Security Response Center wrote in a blog post.

    Microsoft’s senior leadership team, which includes Chief Financial Officer Amy Hood and President Brad Smith, routinely meets with Chief Executive Satya Nadella.

    The company reported that there were no signs Nobelium had obtained customer data, production systems or proprietary source code.

    A Microsoft spokesperson provided this comment late Friday: “Our security team recently detected an attack on our corporate systems attributed to the Russian state-sponsored actor Midnight Blizzard. We immediately activated our response process to investigate, disrupt malicious activity, mitigate the attack, and deny the threat actor further access. The attack was not the result of a vulnerability in Microsoft products or services. To date, there is no evidence that the threat actor had any access to customer environments, production systems, source code, or AI systems. More information is available in our blog.”

    Nobelium, also known as APT29 or Cozy Bear, is a shadowy hacking group that attempted to crack the systems of the U.S. Defense Department and did breach the Democratic National Committee’s systems in 2016.

    Netskope Threat Labs, which tracks Nobelium, said the hacking group uses a variety of techniques to compromise accounts, including compromised Azure AD accounts to collect victim emails. “This hack underscores the importance of securing corporate email accounts, even those in non-production and test environments,” a Netskope spokesperson said. “Even if the email account isn’t regularly used or doesn’t contain anything sensitive, it can still be used to launch additional attacks.”

    Microsoft’s disclosure comes amid new U.S. requirements to report cybersecurity incidents.

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  • JetBlue, Spirit Airlines appeal court ruling blocking their proposed merger

    JetBlue, Spirit Airlines appeal court ruling blocking their proposed merger

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    JetBlue Airways Corp. and Spirit Airlines Inc. said late Friday that they have appealed a court ruling that earlier this week blocked their planned merger.

    JetBlue
    JBLU,
    -1.19%

    and Spirit
    SAVE,
    +17.19%

    announced the appeal in a terse press release that provided no more details, adding only that the process is “consistent with the requirements of the merger agreement.”

    Wall Street was split on whether the airlines would be legally obliged to appeal the Tuesday ruling, which sided with the Justice Department in saying that a merger between low-cost JetBlue and ultra-low-cost Spirit would hurt competition.

    Shares of Spirit rallied 12% after hours Friday, while JetBlue shares fell nearly 2%. Analysts at JP Morgan said this week that the ruling freed JetBlue from a “costly merger.”

    Earlier Friday, Spirit sought to reassure investors about its liquidity and issued an upbeat fourth-quarter revenue guidance. Spirit has amassed about $5.5 billion in debt, and is reportedly seeking advisers to help restructure it.

    The likelihood of Spirit attracting a new merger or takeover bid is considered low without a debt restructuring. Frontier Group Holdings Inc.
    ULCC,
    -2.13%

    and JetBlue competed for Spirit in 2022, with Frontier ultimately bowing out in July of that year.

    Raymond James analyst Savanthi Syth said in a note earlier Friday that it was “clear to us that Spirit is pressing JetBlue to appeal the antitrust ruling, but we continue to believe the chances of success are low.”

    Syth has estimated that an appeal would take some four to five months.

    Shares of Spirit have lost 67% in the past 12 months, while shares of JetBlue are down 41%. The U.S. Global Jets ETF
    JETS
    has lost 9% in the same period. Those losses contrast with gains of 24% for the S&P 500 index
    SPX.

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  • U.K. Shoppers Bring Little Christmas Cheer as Sales Plunge

    U.K. Shoppers Bring Little Christmas Cheer as Sales Plunge

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    By Joshua Kirby

    Retail sales fell more sharply than expected in the U.K. in December, offering little succor to a listless economy at the end of the year.

    Total trade volumes were 3.2% lower than a month earlier, according to figures published Friday by the Office for National Statistics.

    This was worse than the slight dip expected, according to a Wall Street Journal poll of economists. It reverses rising sales in November, boosted by Black Friday promotions as well as lower inflation. Retailers reported that many shoppers stocked up on Christmas food and gifts in November, weighing on December’s spending.

    For the quarter as a whole, retail sales were 0.9% lower than the previous three months, and will have a negative contribution to wider economic growth over the period, the ONS said.

    Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

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  • Macy’s to lay off 13% of corporate staff, close five stores

    Macy’s to lay off 13% of corporate staff, close five stores

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    Department-store chain Macy’s Inc. plans to cut 2,350 jobs and close five stores, the Wall Street Journal reported on Thursday, as the company tries to curb expenses and meet the demands of what it said was “an everchanging consumer and marketplace.”

    The cuts, which amount to around 13% of Macy’s
    M,
    +0.39%

    corporate staff and 3.5% of its staff overall, are part of an effort to shed costs, eliminate management layers and redirect spending toward improving customers’ shopping experience, the Journal said. The dismissals will begin on Jan. 26, according to a memo sent to employees cited by the publication.

    “As we prepare to deploy a new strategy to meet the needs of an everchanging consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” a Macy’s spokesperson said in a statement to MarketWatch.

    The spokesperson said that the store closures were part of an effort to “reposition our store portfolio and evaluate the right mix of on- and off-mall locations,” adding that the five stores would close this year.

    Shares of Macy’s were up 0.2% after hours on Thursday, after gaining 0.4% in the day’s trading.

    The Journal reported that Macy’s plans to develop a more automated supply chain and would outsource some jobs. Citing a person familiar with the matter, the publication said the company would be “investing in areas that impact consumers, such as adding more visual-display managers to enhance the look of stores and upgrading digital functions to make online shopping more seamless.”

    The job cuts were announced as the landscape for retailers remains uneven, as higher prices for groceries and other basics have hindered what inflation-hit shoppers can spend elsewhere.

    “Despite our strong and tangible progress over the last few years, we remain under pressure,” according to the Macy’s memo cited by the Journal said.

    The moves come as Macy’s President Tony Spring prepares to succeed the outgoing Jeff Gennette as the company’s chief executive next month. Macy’s is also facing a nearly $6 billion takeover bid by an investor group that’s looking to take the retailer private.

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  • Pepco Expects Supply Issues if Red Sea Conflict Continues

    Pepco Expects Supply Issues if Red Sea Conflict Continues

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    By Anthony O. Goriainoff

    Discount retailer Pepco Group said conflict in the Red Sea has had a limited effect on current product availability, but could hurt supply in the coming months if it continues.

    The discount retailer–which houses Poundland in the U.K. and Dealz and Pepco in continental Europe–said Thursday that attacks on vessels in the Red Sea by Houthi fighters was leading to higher spot freight rates and delays to container lead times.

    Although Pepco’s freight costs are contracted until the end of its third quarter, it faces additional surcharges from carriers stemming from the longer routes being taken by shipping companies avoiding the Red Sea.

    Meanwhile, the company said that for its fiscal first quarter ended Dec. 31, group like-for-like revenue fell 2.3% although there was an improving trend during the period.

    Revenue grew on a constant currency basis grew 11% from a year earlier to 1.9 billion euros ($2.07 billion), with the Pepcobusiness’s like-for-like revenue falling 3.7% against a tough comparative period when sales were up by 20% from the year-prior period.

    Revenue at Dealz fell 4.6%, driven by planned lower stock availability in general merchandise categories. Poundland’s performance continued to be robust with a strong Christmas performance driven by demand for fast-moving consumer goods, the company said.

    Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com

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  • Oaktree Capital calls commercial real estate ‘most acute area of risk’ right now

    Oaktree Capital calls commercial real estate ‘most acute area of risk’ right now

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    Distressed-debt giant Oaktree Capital sees big opportunities in credit unfolding over the next few years as a wall of debt comes due.

    Oaktree’s incoming co-chief executives Armen Panossian, head of performing credit, and Bob O’Leary, portfolio manager for global opportunities, see a roughly $13 trillion market that will be ripe for the picking.

    Within that realm is high-yield bonds, BBB-rated bonds, leveraged loans and private credit — four areas of the market that have only mushroomed from their nearly $3 trillion size right before the 2007-2008 global financial crisis.

    “Clearly, the most acute area of risk right now is commercial real estate,” the co-CEOs said in a Wednesday client note. “That’s because the maturity wall is already upon us and it’s not going to abate for several years.”

    More than $1 trillion of commercial real-estate loans are set to come due in 2024 and 2025, according to the Mortgage Bankers Association.

    A retreat in the benchmark 10-year Treasury yield
    BX:TMUBMUSD10Y,
    to about 4.1% on Wednesday from a 5% peak in October, has provided some relief even though many borrowers likely will still struggle to refinance.

    Related: Commercial real estate a top threat to financial system in 2024, U.S. regulators say

    “There’s a need for capital, especially for office properties where there are vacancies, rental growth hasn’t materialized, or the rate of borrowing has gone up materially over the last three years. This capital may or may not be readily available, and for certain types of office properties, it absolutely isn’t available,” the Oaktree team said.

    With that backdrop, the firm expects to dust off its playbook from the financial crisis and acquire portfolios of commercial real-estate loans from banks, but also plans to participate in “credit-risk transfer” deals that help lenders reduce exposure.

    Oaktree also sees opportunities brewing in private credit, as well as in high-yield and leveraged loans, where “several hundred” of the estimated 1,500 companies that have issued such debt are likely “to be just fine” even if defaults rise, they said.

    Another area to watch will be the roughly $26 trillion Treasury market, where Oaktree has some concerns “about where the 10-year Treasury yield goes from here” — given not only the U.S. budget deficit and the deluge of supply that investors face, but also how foreign buyers, once the “largest owners in prior years, may be tapped out.”

    Related: Here are two reasons why the 10-year Treasury yield is back above 4%

    U.S. stocks
    SPX

    DJIA

    COMP
    fell Wednesday after strong retail-sales data for December pointed to a resilient U.S. economy, despite the Federal Reserve having kept its policy rate at a 22-year high since July.

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  • Hang Seng leads selloff for Asia stocks, with 4% slump after China data

    Hang Seng leads selloff for Asia stocks, with 4% slump after China data

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    TOKYO (AP) — Asian shares slid Wednesday after a decline overnight on Wall Street and disappointing China growth data, while Tokyo’s main benchmark momentarily hit another 30-year high.

    Japan’s benchmark Nikkei 225
    NIY00,
    -0.95%

    reached a session high of 36,239.22, but reverted lower, last down 0.3% to 35,477. The Nikkei has been hitting new 34-year highs, or the best since February 1990 during the so-called financial bubble. Buying focused on semiconductor-related shares, and a cheap yen helped boost exporter issues.

    Don’t miss: Wall Street firms catch up to Buffett enthusiasm on Japan as Nikkei keeps hitting records

    Hong Kong’s Hang Seng
    HK:HSCI
    tumbled 4% to 15,220.72, with losses building after data showed China hitting its economic growth target of 5.2% for 2023, surpassing government expectations, but short of the 5.3% some analysts expected. The Shanghai Composite
    CN:SHCOMP
    shed 2% to 2,833.62.

    Read on: China hit its economic-growth target without ‘massive stimulus,’ boasts Premier Li Qiang

    Australia’s S&P/ASX 200
    AU:ASX10000
    slipped 0.2% to 7,401.30. South Korea’s Kospi
    KR:180721
    dropped 2.4% to 2,435.90.

    Investors were keeping their eyes on upcoming earnings reports, as well as potential moves by the world’s central banks, to gauge their next moves.
    Wall Street slipped in a lackluster return to trading following a three-day holiday weekend.

    See: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

    The S&P 500
    SPX
    fell 17.85 points, or 0.4%, to 4,765.98. The Dow Jones Industrial Average
    DJIA
    dropped 231.86, or 0.6%, to 37,361.12, and the Nasdaq
    COMP
    sank 28.41, or 0.2%, to 14,944.35.

    Spirit Airlines
    SAVE,
    -47.09%

    lost 47.1% after a U.S. judge blocked its takeover by JetBlue Airways
    JBLU,
    +4.91%

    on concerns it would mean higher airfares for flyers. JetBlue rose 4.9%.

    Stocks of banks were mixed, meanwhile, as earnings reporting season ramps up for the final three months of 2023. Morgan Stanley
    MS,
    -4.16%

    sank 4.2% after it said a legal matter and a special assessment knocked $535 million off its pretax earnings, while Goldman Sachs
    GS,
    +0.71%

    edged 0.7% higher after reporting results that topped Wall Street’s forecasts.

    Companies across the S&P 500 are likely to report meager growth in profits for the fourth quarter from a year earlier, if any, if Wall Street analysts’ forecasts are to be believed. Earnings have been under pressure for more than a year because of rising costs amid high inflation.

    But optimism is higher for 2024, where analysts are forecasting a strong 11.8% growth in earnings per share for S&P 500 companies, according to FactSet. That, plus expectations for several cuts to interest rates by the Federal Reserve this year, have helped the S&P 500 rally to 10 winning weeks in the last 11. The index remains within 0.6% of its all-time high set two years ago.

    Treasury yields
    BX:TMUBMUSD10Y
    have already sunk on expectations for upcoming cuts to interest rates, which traders believe could begin as early as March. It’s a sharp turnaround from the past couple years, when the Federal Reserve was hiking rates drastically in hopes of getting high inflation under control.

    The Tell: No rate cuts in 2024? Why investors should think about the ‘unthinkable.’

    Easier rates and yields relax the pressure on the economy and financial system, while also boosting prices for investments. And for the past six months, interest rates have been the main force moving the stock market, according to Michael Wilson, strategist at Morgan Stanley.

    He sees that dynamic continuing in the near term, with the “bond market still in charge.”

    For now, traders are penciling in many more cuts to rates through 2024 than the Fed itself has indicated. That raises the potential for big market swings around each speech by a Fed official or economic report.

    Yields rose in the bond market after Fed governor Christopher Waller said in a speech that “policy is set properly” on interest rates. Following the speech, traders pushed some bets for the Fed’s first cut to rates to happen in May instead of March.

    On Wall Street, Boeing fell to one of the market’s sharper losses as worries continue about troubles for its 737 Max 9 aircraft following the recent in-flight blowout of an Alaska Air
    ALK,
    -2.13%

    jet. Boeing
    BA,
    -7.89%

    lost 7.9%.

    In energy trading, benchmark U.S. crude
    CL00,
    -1.55%

    lost 90 cents to $71.75 a barrel. Brent crude
    BRN00,
    -1.37%
    ,
    the international standard, fell 78 cents to $77.68 a barrel.

    In currency trading, the U.S. dollar
    USDJPY,
    +0.44%

    rose to 147.90 Japanese yen from 147.09 yen. The euro
    EURUSD,
    -0.10%

    cost $1.0868, down from $1.0880.

    MarketWatch contributed to this report

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  • Beware ‘pricey’ stocks as inflation may ‘roller-coaster back up,’ says BlackRock

    Beware ‘pricey’ stocks as inflation may ‘roller-coaster back up,’ says BlackRock

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    U.S. stocks appear on course for “another year of flip-flopping market narratives” as falling inflation may “roller-coaster back up” and rattle investor expectations for a “soft landing,” according to BlackRock. 

    “Market jitters in early January suggest there is some anxiety about macro risks further out,”  said BlackRock Investment Institute strategists in a note Tuesday. “We stay selective as we expect resurgent inflation to come into view.” 

    The strategists also pointed to “pricey valuations” in the U.S. stock market.

    Markets have favored a small group of seven megacap stocks “for their ability to leverage artificial intelligence,” they said. Those stocks’ price-to-earnings ratios for the next 12 months are “about a third higher than for the S&P 500 and when excluding them,” a chart in their note shows.

    BLACKROCK INVESTMENT INSTITUTE NOTE DATED JAN. 16, 2024

    Price-to-earnings ratios, which “divide a company’s share price by its earnings per share,” fell in the second half of 2023 as stronger earnings expectations supported the megacap rally, the BlackRock strategists said. The so-called Magnificent Seven, as those market-leading megacap tech stocks are known, skyrocketed last year, fueling the S&P 500 index’s 24% surge.

    “Even after the market-wide rally in December, market concentration in a handful of megacaps — firms with ultra-large market capitalizations — remains high,” the strategists said.

    The seven companies with massive market values — Apple Inc.
    AAPL,
    -1.24%
    ,
    Microsoft Corp.
    MSFT,
    +0.49%
    ,
    Google parent Alphabet Inc.
    GOOGL,
    -0.11%

    GOOG,
    -0.11%
    ,
    Amazon.com Inc.
    AMZN,
    -0.94%
    ,
    Nvidia Corp.
    NVDA,
    +3.09%
    ,
    Facebook parent Meta Platforms Inc.
    META,
    -1.88%

    and Tesla Inc.
    TSLA,
    +0.49%

    — have an outsized weighting in the S&P 500.

    Chip maker Nvidia was among the best-performing stocks in the S&P 500 in afternoon trading on Tuesday, with a sharp gain of 2.7% at last check, according to FactSet data. By contrast, the broad S&P 500  index
    SPX
    was down 0.7% on Tuesday afternoon, while the Dow Jones Industrial Average
    DJIA
    and technology-heavy Nasdaq Composite
    COMP
    were also declining.

    Read: What’s next for stocks as ‘tired’ market stalls in 2024 ahead of closely watched retail sales

    Potential catalysts

    “We find valuations tend to matter more for long-term rather than near-term stock returns, and that’s why they usually aren’t enough to spoil market sentiment without a catalyst,” the BlackRock strategists wrote.

    “Earnings could be a catalyst,” as well as inflation, they said.

    Consensus expectations for earnings growth rose last year, with forecasts now calling for an increase of as much as 11% in the next 12 months, their note says, citing LSEG data.

    BlackRock expects that U.S. inflation will this year subside to near the Federal Reserve’s 2% target. For now, that may support the soft-landing scenario the stock market and Fed have “largely embraced,” in which the U.S. may avoid a recession as inflation falls to that desired target, according to the strategists.

    Many investors expect the Fed may start cutting interest rates this year as inflation eases, after the central bank hiked rates aggressively in a bid to tame it.

    “The problem: Inflation won’t remain at that target, in our view, and this risk becoming clearer could challenge upbeat sentiment,” the BlackRock strategists said. “So we monitor earnings season for any signs of cracks given pricey valuations.”

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  • Roche's Cancer Injection Tecentriq SC Gets European Commission Approval

    Roche's Cancer Injection Tecentriq SC Gets European Commission Approval

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    By Andrea Figueras

    Roche said that the European Commission approved Tecentriq SC, a cancer immunotherapy subcutaneous injection for multiple cancer types.

    The Swiss pharmaceutical company said Tuesday that it has been granted marketing authorisation for Tecentriq SC, which reduces treatment time by approximately 80% compared with standard IV infusion.

    The subcutaneous injections take between four and eight minutes, while until now the treatment had been given directly into patients’ veins by IV infusion, which takes approximately 30-60 minutes.

    Last year, more than 38,000 people in the EU received Tecentriq to treat different types of lung, liver, bladder and breast cancer, Roche said.

    The company is also working closely with several providers in Europe to include Tecentriq SC in cancer homecare initiatives where possible.

    The injections can also be administered by a healthcare professional outside of the hospital, in a community care setting or at a patient’s home, depending on national regulations and health systems.

    Write to Andrea Figueras at andrea.figueras@wsj.com

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  • Why Donald Trump is unlikely to get his wish for a 2024 U.S. stock-market crash

    Why Donald Trump is unlikely to get his wish for a 2024 U.S. stock-market crash

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    Donald Trump is unlikely to get his wish that a U.S. stock-market crash occurs this year.

    I’m referring to the former U.S. president’s comments last week that he hopes the market crashes in 2024, since if he is elected in November and takes office a year from now, he doesn’t want to be another Herbert Hoover. Hoover was President when the stock market crashed in 1929.

    The stock market did plunge in two of the last four presidential-election years, so it’s understandable why one would worry that 2024 could see a repeat. In 2008, in the middle of the Global Financial Crisis, the S&P 500
    SPX
    lost 38.5% for the year. In 2020, as the economy ground to a halt because of the COVID-19 pandemic, the S&P 500 lost 34% in little more than a month’s time.

    It’s possible that a crash could occur at any time, of course, so a crash this year can’t be ruled out. Nevertheless, the odds of one occurring this year are significantly below average. That’s according to the latest “State Street US Froth Forecasts,” which are derived from research on crashes conducted by Robin Greenwood, Professor of Banking and Finance at Harvard Business School.

    In that research, Greenwood and his co-authors found that it’s possible to identify when there is an elevated probability of a crash. In an interview, Greenwood said that “crash probabilities are low” right now, not only for the market as a whole but “across the board” for individual market sectors as well.

    Greenwood’s model is based on a number of factors, such as performance over the trailing two-year period, volatility, share turnover, IPO activity and the price path of the trailing two-year runup. For example, he and his fellow researchers found that when an industry beats the market by 150 or more percentage points over a two-year period, there’s an 80% probability that it will crash — which they define as a drop of at least 40% over the subsequent two years. As you can see from the accompanying chart, State Street is reporting low crash probabilities for all sectors — in each case well below the average forecasted crash probabilities of the past five years.

    These probabilities don’t mean that stocks will have a great year in 2024. A new bear market could begin this year without the decline satisfying the researchers’ definition of a crash.

    Nevertheless, the takeaway from the State Street US Froth Forecasts is that there are bigger things to worry about this year than the possibility of a crash.

    Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

    More: Trump says he hopes market crashes in 2024 under Biden: ‘I don’t want to be Herbert Hoover

    Also read: Iowa caucuses are make-or-break for Donald Trump

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  • Eurozone Industrial Production Slumped for Third-Straight Month

    Eurozone Industrial Production Slumped for Third-Straight Month

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    By Ed Frankl

    Industrial output in the eurozone contracted for the third month in a row November, reflecting the continued downturn in the sector.

    Total production fell 0.3% on month in November, according to figures published Monday by European Union statistics agency Eurostat, after a 0.7% decline recorded in October. It matched expectations of economists polled by The Wall Street Journal.

    Durable consumer goods led the decline, with output falling 2.0%. Production of intermediate goods declined 0.6% while for capital goods it tumbled 0.8%. Energy production, however, recorded a rise in output of 0.9%.

    However, there has been evidence that recent struggles in the industrial sector in the eurozone could be bottoming out. A key survey of purchasing manufacturers said sentiment rose in December in the manufacturing industry.

    Among larger eurozone nations, output dipped on month by 0.3% in Germany and 1.5% in Italy, but expanded by 0.5% in France and 1.1% in Spain.

    Write to Ed Frankl at edward.frankl@wsj.com

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  • SEC weighing ‘additional measures’ after hacked post on bitcoin ETF approval

    SEC weighing ‘additional measures’ after hacked post on bitcoin ETF approval

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    The Securities and Exchange Commission on Friday said that a social-media post on X falsely stating that it had approved spot bitcoin exchange-traded funds was created after an “unauthorized party” obtained control over the phone number connected with the agency’s account on the platform.

    The markets regulator said its staff would “continue to assess whether additional remedial measures are warranted” in the wake of the breach, which occurred Tuesday and raised questions about cybersecurity at both the agency and the social-media platform, formerly known as Twitter.

    The agency said it was coordinating with law enforcement on the matter, including with the FBI and the Department of Homeland Security.

    “Commission staff are still assessing the impacts of this incident on the agency, investors, and the marketplace but recognize that those impacts include concerns about the security of the SEC’s social media accounts,” the SEC said in a statement.

    The confusion began on Tuesday afternoon, when the hacked post appeared on the SEC’s X account.

    “Today the SEC grants approval for #Bitcoin ETFs for listing on registered national securities exchanges,” the post read. “The approved Bitcoin ETFs will be subject to ongoing surveillance and compliance measures to ensure continued investor protection.”

    A second post appeared two minutes later that simply read “$BTC,” the SEC noted in its statement. The unauthorized user soon deleted that second post, but also liked two other posts by non-SEC accounts, according to the agency. The price of bitcoin
    BTCUSD,
    -0.71%

    rose sharply in the wake of the posts, before soon pulling back.

    In response to the hack, SEC staff posted on the official X account of SEC Chair Gary Gensler announcing that the agency’s main account had been compromised, and that it had not yet approved any spot bitcoin exchange-traded products. Staff then deleted the initial unauthorized post, un-liked the liked posts and used the official SEC account to make a new post clarifying the situation, the agency said Friday.

    The SEC also said that it had reached out to X for assistance Tuesday in the wake of the incident, and that agency staff believe the unauthorized access to the SEC’s account was “terminated” later in the day.

    “While SEC staff is still assessing the scope of the incident, there is currently no evidence that the unauthorized party gained access to SEC systems, data, devices, or other social media accounts,” the agency said.

    The following day, the SEC announced that it had, in fact, approved the listing and trading of spot bitcoin ETFs.

    Wednesday’s move marked a breakthrough for the crypto industry, which for years has tried to get such ETFs off the ground in hopes of drawing more traditional investors to the digital-asset space.

    Bitcoin was down 7.6% over a 24-period as of Friday evening.

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  • After Bitcoin ETFs, watch for the next most popular crypto to go the same route

    After Bitcoin ETFs, watch for the next most popular crypto to go the same route

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    After long-awaited spot bitcoin exchange-traded funds made their debut this week, investors are now weighing the prospects of eventual approval of similar ether ETFs.

    The U.S. Securities and Exchange Commission on Wednesday greenlighted 11 spot bitcoin
    BTCUSD,
    -1.58%

    ETFs for the first time. The products, which made its debut trading on Thursday, logged a relatively strong first day

    However, bitcoin fell 6.8% on Friday, leaving it with a 3.2% gain over the past seven days, according to CoinDesk data. It underperformed ether
    ETHUSD,
    +1.82%
    ,
    which rose 17.6% over the past seven days while it declined 1.2% on Friday.  

    The news about bitcoin ETFs was mostly priced in, while investors are now looking past it to a potential approval of ether ETFs, analysts said.

    “I see value in having an ETH ETF,” Larry Fink, chief executive at the world’s largest asset manager BlackRock, told CNBC’s Squawk Box on Friday. BlackRock, which just launched its iShares bitcoin Trust
    IBIT,
    in November filed an application for a spot ether ETF.

    “It’s hard to know exactly what the U.S. regulators would do” about ether ETF applications, said Alonso de Gortari, chief economist at Mysten Labs, an internet infrastructure company.

    However, “I would expect that once you open the door, it becomes easier and I think the industry is very excited about it,” de Gortari said. If bitcoin ETFs see an impressive institutional inflow in the coming months, it could make such products more established and set a good precedent for other crypto ETF applications, he said.

    Read: Vanguard’s decision to shun bitcoin ETFs triggers backlash — with some customers moving to crypto-friendly competitors like Fidelity

    Also see: Why the debut of bitcoin ETFs could be bad news for crypto stocks, futures ETFs

    The enormous competition and huge inflows into bitcoin ETFs will only boost investors’ interests in an ether ETF, according to Paul Brody, EY’s global blockchain leader. “There’s no doubt that ETH is the next big market and has immediately become a priority for financial services companies,” Brody said in emailed comments.

    Compared with bitcoin, the Ethereum blockchain offers more utility and has unique advantages, noted Fadi Aboualfa, head of research at digital assets custodian Copper. 

    Sandy Kaul, head of digital asset and industry advisory services at Franklin Templeton, said she eventually expects the arrival of ETFs that track a basket of cryptocurrencies. Such products, instead of those based on single crypto, would dominate the space if they are approved, she said.  

    “Just like the S&P 500 has 500 stocks in it, right? You don’t have just one stock.” Kaul said in a phone interview. The arrival of a bitcoin ETF, is just a “baby step into really beginning to think about the future market structure of crypto,” Kaul added. 

    However, not everyone is that optimistic. Will McDonough, founder and chairman of Corestone Capital, said the approval of an Ethereum ETF has “a long way to go.” 

    SEC chairman Gary Gensler previously said bitcoin was the only cryptocurrency he was prepared to publicly label a commodity, rather than a security. 

    The agency also went after companies that offered crypto staking, which allows investors to earn yields by locking their coins to secure blockchains such as Ethereum. The SEC shut down crypto exchange Kraken’s staking business in the U.S. last year.  

    One possibility is that “companies will be able to offer an ETH ETF, but they will not be allowed to stake that ETH and earn yield,” noted EY’s Brody.

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  • Even Cloudflare's CEO says that viral firing video is 'painful' — here's what went wrong

    Even Cloudflare's CEO says that viral firing video is 'painful' — here's what went wrong

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    A tech employee’s recording of the meeting firing her from a sales role at Cloudflare
    NET,
    -1.79%

    has spurred criticism of the company — and a broader conversation about the right way to let employees go.

    Viewers have called the roughly 10-minute TikTok video, which went viral this week, “sad” and a “disaster.” Even Cloudflare CEO Matthew Prince responded on X (formerly Twitter) that it was “painful for me to watch.”

    In the video captioned, “POV: You’re about to get laid off,” former Cloudflare account executive Brittany Pietsch logs into a virtual meeting with an HR representative and a director at the company, both of whom she says she’s never met before. In a caption, Pietsch writes that she assumed they were meeting to let her go, because she had heard from coworkers who had been axed already.

    In the video, the company reps say that Pietsch hadn’t met performance expectations, and that Cloudflare had decided to “part ways” with her. Pietsch’s response is what has pushed this clip to be shared all over social-media newsfeeds: She asks for an explanation for why she, specifically, is being let go by the company, particularly because she’s a new employee who hasn’t heard any negative feedback. She also asks why her manager isn’t a part of this termination meeting.

    “Every single one-on-one [meeting] I’ve had with my manager, every conversation I’ve had with him — he’s been giving me nothing but ‘I am doing a great job,’” she says during the meeting. “I’m just definitely very confused and would love an explanation that makes sense.” 

    The director, who can’t be seen in the video, says he “won’t be able to go into specifics” on Pietsch’s performance. 

    In a statement to MarketWatch, a Cloudflare spokesperson clarified that the company did not conduct layoffs, and is not engaged in a reduction of force. “When we do make the decision to part ways with an employee, we base the decision on a review of an employee’s ability to meet measurable performance targets,” the Cloudflare statement said. “We regularly review team members’ performance and let go of those who aren’t right for our team. There is nothing unique about that review process or the number of people we let go after performance review this quarter.”

    Pietsch did not immediately respond to a request for comment. 

    Company CEO Prince added on X, formerly known as Twitter, that the company fired 40 salespeople out of 1,500 in its go-to-market division. “That’s a normal quarter,” he wrote in his post. “When we’re doing performance management right, we can often tell within 3 months or less of a sales hire, even during the holidays, whether they’re going to be successful or not.” 

    But he also added: “We try to fire perfectly. In this case, clearly we were far from perfect. The video is painful for me to watch. Managers should always be involved. HR should be involved, but it shouldn’t be outsourced to them … We don’t always get it right.”

    Many viewers seem to agree, as the video has drawn close to 200,000 views on TikTok and millions of views on X, along with going viral on Reddit.

    “Total disaster on both sides,” lawyer Eric Pacifici said. 

    “Totally unfair to her,” wrote Austen Allred, CEO of the online-coding bootcamp Bloom Institute of Technology. “Pretty sad across the board.” 

    On LinkedIn, Pietsch gave her own response to the social-media uproar. She said that her manager was unaware that she was being let go, and that she asked questions during the meeting not to try and save her job, but rather to get greater clarity on why she had been singled out for termination. 

    “I’ll never be able to wrap my mind around it,” she wrote in the post. “We as employees are expected to give 2 weeks notice and yet we don’t deserve even a sliver of respect when the roles are reversed?”

    What’s the right way to fire an employee? 

    It’s never easy to part ways with an employee, according to Molly, a human-resources consultant who runs the TikTok account HR Molly, which has 80,000 followers. She asked only to be identified by her first name for privacy reasons. 

    But that being said, it’s very important to treat affected employees with respect. That can include sharing as much information as possible about why the decision is being made. 

    “I tell people that even if you catch someone stealing, even that termination meeting should have a level of decency,” she said. “It seems like there’s a significant consensus that the meeting [in the viral video] lacked some dignity.”

    It’s also important to understand these kinds of conversations will be difficult for an employee no matter what, Molly added. 

    “We know this impacts people and we know this is emotional and that it’s harmful. How can we do it in a way that creates the least amount of additional harm?” she said, noting that she picked up the concept from fellow TikTok creator and diversity consultant Ciarra Jones. “Companies need to prioritize the well-being of the employee that’s impacted.” 

    As for recording your layoff or firing meeting — that can be risky, Molly said, and downright illegal in states that require you to receive consent before doing so.

    But companies and HR professionals would be wise to remind themselves that, in this day and age, it can happen, she said. And if a camera or tape recorder would change the way you handle an interaction, it’s a good sign to reevaluate.

    According to its company website, Cloudflare has dozens of job postings for open positions across the company, including sales roles.

    In her LinkedIn post, Pietsch said that she’s not very concerned about any backlash over the video that might impede her chances of getting another job. 

    “Any company that wouldn’t want to hire me because I shared a video of how a company fired me or because I asked questions as to why I was being let go is not a company I would ever want to work for anyway,” she wrote.

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  • NFL has ‘decided to rip off fans’ with playoff game on Peacock, congressman says

    NFL has ‘decided to rip off fans’ with playoff game on Peacock, congressman says

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    ‘You’ve decided to rip off fans by exclusively broadcasting tomorrow’s Chiefs vs. Dolphins wild-card game on Peacock. For the first time ever, fans will be forced to choose between signing up for yet another expensive streaming service or missing out on a major playoff game.’

    That was part of a letter that Rep. Pat Ryan penned to leaders of the NFL and NBC Sports lamenting that an NFL playoff game this weekend will be available via steaming only for the first time.

    “How much more profit do [NFL commissioner Roger] Goodell and NBC need to make at the expense of hard working Americans?” the New York Democrat’s letter went on to ask.

    He wrote: “Congress granted the NFL an antitrust exemption in its broadcast deals with the expectation that you wouldn’t use it to screw over fans. That was clearly a mistake.” 

    Peacock, a streaming service operated by Comcast’s
    CMCSA,
    -0.65%

    NBCUniversal, is one of several streaming platforms that now broadcast NFL games. Some of those services, like Amazon’s
    AMZN,
    -0.36%

    Prime Video, have exclusive rights to certain games, meaning there is no other option to watch on network or cable television, or through a cord-cutting live TV subscription. But while there have been NFL games available only on a streaming platform before, never before has it been a playoff game.

    Part of the reason that Ryan, along with many NFL fans, are upset that the Chiefs-Dolphins game is available exclusively on Peacock is that it’s been getting more expensive to watch the NFL in recent years — because, increasingly, games are not broadcast on network TV. In fact, the price to watch every NFL game this season for cord cutters was $1,603, not including the cost of internet service. 

    That commitment includes the cost of six streaming services and five username and password combinations. Those digital streaming services include Google’s
    GOOG,
    +0.40%

    GOOGL,
    +0.40%

    YouTube TV, NFL Sunday Ticket, Amazon Prime Video, Peacock, NFL+ and ESPN+
    DIS,
    +1.01%
    .

    And the NFL is reaping the rewards. A decade ago, the league made about $3 billion from its TV deals. But, through all of its broadcast deals today with both networks and streaming companies, it makes roughly $10 billion a year.

    Peacock has two plans: a $5.99-per-month subscription with ads, and another option for $11.99 a month that’s ad-free. While fans who live in the local broadcast areas of where the teams play (the media markets around Kansas City and Miami, in this case) will have the ability to watch the game on local TV, the rest of the country will have to pay for Peacock.

    According to the Wall Street Journal, NBC paid $110 million for Peacock’s exclusive NFL broadcast rights. 

    Many fans took to social media to vent their frustrations about having to buy another streaming service to watch an NFL game this weekend.

    Responding to the backlash, an NFL spokesperson said in a statement: “The NFL’s media strategy has been to make our games available in as many ways as possible to meet our fans where they spend their time. As streaming video becomes commonplace, we are increasingly expanding the digital distribution of NFL content while continuing a longstanding policy that all NFL games be shown on free, over-the-air television in the markets of the participating teams.”

    NBCUniversal did not respond to MarketWatch’s request for comment.

    Clermont, Fla., resident Calicia Landry, 53, has been a Dolphins fan for decades. Her family had season tickets during the historic 1972 season when the Dolphins went undefeated — the first and only time that has happened in NFL history.

    When asked if she will pay for Peacock to watch the game, Landry, whose town is in the Orlando, Fla., market, told MarketWatch that, despite Peacock’s cost of just $5, “it’s the principle now.”

    “I bought NFL Sunday Ticket already. I already pay for television service with DirecTV
    T,
    +1.54%
    .
    I had to have Prime to watch the Black Friday game,” she said. “It’s too much.”

    Read on: Here’s how much the major streaming services are set to cost are all the price increases

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  • U.S., British launch massive retaliatory strike against Houthi rebels in Yemen

    U.S., British launch massive retaliatory strike against Houthi rebels in Yemen

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    WASHINGTON — The U.S. and British militaries were bombing more than a dozen sites used by the Iranian-backed Houthis in Yemen on Thursday, in a massive retaliatory strike using warship-launched Tomahawk missiles and fighter jets, several U.S. officials told The Associated Press. The military targets included logistical hubs, air defense systems and weapons storage locations, they said.

    Associated Press journalists in Yemen’s capital, Sanaa, heard four explosions early Friday local time but saw no sign of warplanes. Two residents of Hodieda, Amin Ali Saleh and Hani Ahmed, said they heard five strong explosions. Hodieda lies on the Red Sea and is the largest port city controlled by the Houthis.

    Oil prices
    CL.1,
    +1.99%

    jumped more than 2% immediately after news of the attacks, on fears that a wider Middle East war could imperil oil production and shipments.

    The strikes marked the first U.S. military response to what has been a persistent campaign of drone and missile attacks on commercial ships since the start of the Israel-Hamas. The coordinated military assault comes just a week after the White House and a host of partner nations issued a final warning to the Houthis to cease the attacks or face potential military action. The officials confirmed the strikes on condition of anonymity to discuss military operations.

    The warning appeared to have had at least some short-lived impact, as attacks stopped for several days. On Tuesday, however, the Houthi rebels fired their largest-ever barrage of drones and missiles targeting shipping in the Red Sea, with U.S. and British ships and American fighter jets responding by shooting down 18 drones, two cruise missiles and an anti-ship missile. On Thursday, the Houthis fired an anti-ship ballistic missile into the Gulf of Aden, which was seen by a commercial ship but did not hit the ship.

    The rebels, who have carried out 27 attacks involving dozens of drones and missiles just since Nov. 19, said Thursday that any attack by American forces on its sites in Yemen will spark a fierce military response.

    “The response to any American attack will not only be at the level of the operation that was recently carried out with more than 24 drones and several missiles,” said Abdel Malek al-Houthi, the group’s supreme leader, during an hour-long speech. “It will be greater than that.”

    The Houthis say their assaults are aimed at stopping Israel’s war on Hamas in the Gaza Strip. But their targets increasingly have little or no connection to Israel and imperil a crucial trade route linking Asia and the Middle East with Europe.

    Meanwhile, the U.N. Security Council passed a resolution Wednesday that demanded the Houthis immediately cease the attacks and implicitly condemned their weapons supplier, Iran. It was approved by a vote of 11-0 with four abstentions — by Russia, China, Algeria and Mozambique.

    Britain’s participation in the strikes underscored the Biden administration’s effort to use a broad international coalition to battle the Houthis, rather than appear to be going it alone. More than 20 nations are already participating in a U.S.-led maritime mission to increase ship protection in the Red Sea.

    U.S. officials for weeks had declined to signal when international patience would run out and they would strike back at the Houthis, even as multiple commercial vessels were struck by missiles and drones, prompting companies to look at rerouting their ships.

    On Wednesday, however, U.S. officials again warned of consequences.

    “I’m not going to telegraph or preview anything that might happen,” Secretary of State Antony Blinken told reporters during a stop in Bahrain. He said the U.S. has made clear “that if this continues as it did yesterday, there will be consequences. And I’m going to leave it at that.”

    The Biden administration’s reluctance over the past several months to retaliate reflected political sensitivities and stemmed largely from broader worries about upending the shaky truce in Yemen and triggering a wider conflict in the region. The White House wants to preserve the truce and has been wary of taking action in Yemen that could open up another war front.

    MarketWatch contributed to this report.

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  • Bitcoin ETFs finally approved after a chaotic, ‘embarrassing’ 24 hours for SEC

    Bitcoin ETFs finally approved after a chaotic, ‘embarrassing’ 24 hours for SEC

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    On Wednesday, the U.S. Securities and Exchange Commission for the first time greenlighted several exchange-traded funds investing directly in bitcoin.

    But the 24 hours leading up to that approval were chaotic, to say the least.

    The SEC approved the launch of 11 bitcoin
    BTCUSD,
    +0.09%

    ETFs, according to a filing posted on the regulatory agency’s website. The ETFs are due to start trading on Thursday.

    On Tuesday, however, the SEC’s official account on X, formerly known as Twitter, published what the agency described as an “unauthorized” post indicating that it had approved the spot bitcoin ETFs. In reality, the regulator had not approved any such ETFs as of Tuesday and its X account had been “compromised,” SEC Chair Gary Gensler said on the social-media platform. The SEC subsequently deleted the unauthorized post.

    The agency found “there was unauthorized access to and activity on” the its X account by “an unknown party,” an SEC spokesperson said on Tuesday, adding that the “unauthorized access has been terminated” and that the SEC would work with law enforcement to investigate the matter.

    Bitcoin’s price briefly shot 2% higher after the unauthorized tweet went out on Tuesday before soon pulling back.

    Then on Wednesday, shortly before the U.S. stock market closed for the day, the SEC posted an actual approval order of bitcoin ETFs on its website — but the link was soon broken, leading to an “error 404” page. The same filing was later reposted by the SEC. 

    It is unclear why the first link was broken. A SEC spokesperson did not respond to an email seeking comment on the matter.

    The events of the past 24 hours have proven “a bit embarrassing” for the SEC, especially as the agency has stressed that cryptocurrencies are exceptionally risky and vulnerable to market manipulation, according to Greg Magadini, director of derivatives at Amberdata. 

    Despite those warnings, Magadini said he doesn’t expect investors to be deterred from investing in the bitcoin ETFs.

    Bitcoin has actually seen lower volatility on Tuesday and Wednesday than options traders had priced in, Magadini said. The crypto was up about 0.4% over the past 24 hours to around $46,400 on Wednesday evening, according to CoinDesk data.

    Investors have been pricing in $1 to $2 billion of initial flows into the bitcoin ETFs.

    Read: Bitcoin in spotlight as SEC approves new ETFs, ether rallies. Here’s why.

    Steven Lubka, head of private clients and family offices at Swan Bitcoin, echoed Magadini’s point, noting that the hiccups on the way to SEC approval are unlikely to impact investor interest in the funds.

    “Ultimately, the SEC is not the one that launches the ETFs,” Lubka said in a call. “If anything, it shows how much attention is on these ETF products.”

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  • U.S. stocks little changed in cautious trading ahead of inflation report, bank earnings

    U.S. stocks little changed in cautious trading ahead of inflation report, bank earnings

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    U.S. stock indexes were edging higher on Wednesday with technology stocks looking to extend gains ahead of the December inflation report, which is expected to shed more direct light on when the Federal Reserve could dial back its two-year-long effort to tighten monetary policy and cool the economy.

    How are stock indexes trading

    • The S&P 500
      SPX
      rose 8 points, or 0.2%, to 4,764

    • The Dow Jones Industrial Average
      DJIA
      was up 38 points, or 0.1%, to 37,562

    • The Nasdaq Composite
      COMP
      gained 43 points, or 0.3%, to 14,901.

    On Tuesday, the Dow industrials fell 0.4%, to 37,525, while the S&P 500 declined 0.2%, to 4,757, and the Nasdaq Composite gained less than 0.1%, to 14,858.

    What’s driving markets

    Inflation and its impact on bond markets and the Federal Reserve’s monetary-policy trajectory are the primary focus for markets this week as investors remain on hold ahead of Thursday’s December inflation reading and high-profile corporate earnings reports on Friday, when some of the big banks will kick off the fourth-quarter 2023 earnings season.

    The S&P 500 sits less than 0.7% shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes that easing inflation will allow the Fed to lower interest rates sooner and faster than the markets previously anticipated.

    The yield on the 10-year Treasury
    BX:TMUBMUSD10Y,
    the benchmark for borrowing costs, has fallen from 5% in October to 4.014% on Wednesday.

    But for this bullish narrative to play out, inflation must be seen continuing to fall back to the central bank’s 2% target. That’s why great importance is therefore being placed on the consumer-price index for December, which will be published at 8:30 a.m. Eastern on Thursday.

    See: These traders bet on surprise blip higher in key December inflation reading

    Economists forecast that annual headline CPI inflation inched up to 3.2% last month from 3.1% in November. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.

    Adam Phillips, director of portfolio strategy at EP Wealth Advisors, said the CPI report may give investors enough confidence that the disinflation is likely to continue, even if the price levels are “still a very long way from anything that is considered healthy.”

    However, he cautioned that the economy has “certain factors” that are beyond the Fed’s control, such as the volatility in supply chains and growing geopolitical risks, as well as a potential resurgence in inflation, he told MarketWatch via phone on Wednesday.

    “[E]quities have remained broadly range-bound since just before Christmas, with little to push them in either direction,” said Jim Reid, strategist at Deutsche Bank.

    “That might change soon, since we’ve got the U.S. CPI print tomorrow, and then the start of earnings season on Friday, but for now at least, there’s been few headlines for investors to latch onto, just a bit of indigestion after over exuberance before New Year left markets with a little bit of an extended hangover,” Reid added.

    In U.S. economic data, the wholesale inventories declined 0.2% in November, in line with Wall Street expectations, as manufacturers continue to juggle with a fragile economy, according to the Commerce Department.

    New York Fed President John Williams will speak in White Plains, N.Y., at 3:15 p.m. Eastern time.

    Companies in focus

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  • Hewlett Packard Enterprises to buy Juniper Networks in $14 billion deal

    Hewlett Packard Enterprises to buy Juniper Networks in $14 billion deal

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    In an effort to keep up in the accelerating AI arms race, cloud-services provider Hewlett Packard Enterprise Co. on Tuesday agreed to buy Juniper Networks, Inc. in a deal worth around $14 billion.

    Under the terms of the deal, Hewlett Packard Enterprises
    HPE,
    -8.92%

    will acquire Juniper
    JNPR,
    +21.81%

    — which makes communications-networking products and also has an AI segment called Mist AI — for $40 a share. The companies expect the deal to close late this year or in early 2025.

    “The acquisition is expected to double HPE’s networking business, creating a new networking leader with a comprehensive portfolio that presents customers and partners with a compelling new choice to drive business value,” the companies said in a release.

    After the deal is completed, Juniper Chief Executive Rami Rahim will lead the combined HPE networking business, and report to HPE CEO Antonio Neri.

    “This transaction will strengthen HPE’s position at the nexus of accelerating macro-AI trends, expand our total addressable market, and drive further innovation for customers as we help bridge the AI-native and cloud-native worlds, while also generating significant value for shareholders,” Neri said in a statement.

    HPE said the addition of Juniper will boost margins and result in up to $450 million in annual cost savings within three years of the deal’s completion, as well as accelerate growth. HPE’s networking segment was the company’s top source of quarterly earnings before taxes, $401 million, on $1.4 billion in revenue.

    HPE’s deeper plunge into networking closes a chapter of sorts. Then-Hewlett-Packard Co. acquired Aruba Networks for about $3 billion in March 2015, months before Silicon Valley’s original garage startup split in half, resulting in the formation of HPE, which sells servers and other equipment for data centers, and HP Inc.
    HPQ,
    -2.71%
    ,
    which makes PCs and printers.

    The Wall Street Journal reported the possibility of a deal on Monday, sending shares of Juniper higher.

    Shares of Juniper
    JNPR,
    +21.81%

    rose 0.5% after hours, after jumping 21.8% during regular trading hours. Hewlett Packard
    HPE,
    -8.92%

    shares were down 0.4% after hours, after falling 8.9% during the day.

    As of Tuesday’s close, Juniper had a market cap of $9.64 billion, while HPE’s was $23.04 billion.

    The companies hope the deal can provide a much-needed jolt after a series of lackluster quarterly earnings. Juniper shares have gained 15.7% over the past 12 months, while HPE shares are down 5.4% over that span. The S&P 500
    SPX,
    in comparison, is up about 21.4% over the past year.

    For decades, Juniper has lagged rival Cisco Systems Inc.
    CSCO,
    -1.09%

    in the networking-equipment market. In its most recent quarter, Juniper reported net income of $76 million on revenue of $1.4 billion, down 1% from the same quarter a year earlier.

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