Wall Street in Santa mood on chip stimulus and policy boost

·         Gold waved on uncertainty about an imminent Gaza war ceasefire; oil buoyed as Biden may impose fresh sanctions on Russian oil shipment

·         Big Techs and Chip stocks surged after the Biden admin announced a $2B stimulus and some fresh tech/cold war policy for the sector to compete with China

·         US stocks were also boosted by soft landing optimism as US GDP may expand +3.1% in Q4 amid solid consumer spending in this holiday season

Wall Street Futures and gold recovered from Fed panic low on renewed hopes of another Fed rate cut in March’25 after softer than expected core PCE inflation data, although actually, it was in line with the Fed expectations. And Fed will also not take any policy action based on just one month of slightly softer core PCE inflation data as overall core disinflation may have stalled in H2CY24. The last mile of disinflation is always tough for unfavorable base effects.

Fast forward to Monday, Gold slips on hypes of an imminent Gaza and Ukraine war ceasefire. As per reports, negotiations for a ceasefire in the Gaza war are reportedly at an advanced stage, with discussions between Israel and Hamas nearing completion. A senior Palestinian official indicated that the talks are about 90% finalized, although significant issues remain unresolved, particularly concerning military presence and governance in Gaza post-conflict; also Netanyahu is raising fresh demands almost every other day.

The proposed peace framework involves a phased approach to ceasefire and hostage exchanges, with international mediation from the U.S., Qatar, and Egypt playing a crucial role in facilitating these discussions. The main obstacles include Israel's military control over Gaza and the control of the Philphi corridor, which is vital for security arrangements/arms smuggling.

On Monday, there was a report that the hostage and ceasefire agreement between Israel and Hamas regarding Gaza was imminent, but Israeli PM Netanyahu added new demands. Previously, Hamas stated that a ceasefire in Gaza and a hostage deal could be achieved, provided that Israel refrained from setting new conditions, almost every other day: “In light of the serious and positive discussions taking place in Doha today under the auspices of the Qatari and Egyptian mediator brothers, reaching a ceasefire and prisoner exchange agreement is possible if the occupation stops setting new conditions”.

Israeli PM Netanyahu was reportedly en route to Cairo to discuss a potential truce in the enclave and a ceasefire agreement for Gaza will be finalized in the coming days. On Monday, Netanyahu informed the Israeli Parliament (Knesset) that ‘certain advancement’ in the country's negotiations with Hamas about a new ceasefire and prisoner/hostage exchange. Netanyahu also admitted to not knowing how long the talks would last but insisted that Israel will continue to act in every way without respite until brings everyone home from the enemy territory. Furthermore, he highlighted the assassination of then-Hamas Political Bureau Yahya Sinwar as a catalyst for the improvement in the negotiation process. Presently, Netanyahu is under huge pressure both domestically and globally (US/G7) to have some sort of ceasefire with Hamas, ensuring the release of all remaining hostages.

Late Tuesday, Israeli PMO said hostage negotiators returned to Israel for ‘internal deliberations’. The mid-level negotiating team that has been in Qatar for days working on a hostage deal with Hamas returned to Israel, after a “meaningful week” of talks: “The team is returning for internal deliberations in Israel about the continuation of negotiations to bring our hostages home”.

Previously, a spokesperson for Qatar's Foreign Ministry said that the negotiations are ongoing in Doha, although he emphasized that rumors of a ceasefire deal before Christmas are speculative: "We will not leave any door unopened in pursuit of reaching an agreement”.

Now from the Gaza to Ukraine war, on Monday, there was another report that Ukrainian President Zelensky has begun to consider the possibility that the lingering war between Ukraine and Russia might conclude next year as he considers peace negotiations instead of fighting for every inch of occupied land. The sudden shift in Belinsky’s stance came as he may have realized that incoming US President Trump may be quite harder than outgoing Biden in helping Ukraine with this never-ending war with Russia But Zelensky has repeatedly also expressed skepticism about the feasibility of reaching any consensus with Russian President Putin, indicating his doubts about the Putin’s willingness to ‘come to any agreement’.

On the other side, Putin also expressed his doubt about Belinsky’s true intentions for a permanent ceasefire and durable peace. Trump reportedly pressed Zelensky to accept a ceasefire without seeking the return of annexed/occupied land by Russia. Trump insists that Ukraine may seek to return those occupied lands from Russia later in a proper negotiation process, while the US will ensure no NATO membership of Ukraine, the main reason for Putin’s decision to launch a ‘special military operation’ in Ukraine to take control of bordering areas of Ukraine land to create a buffer zone and to prevent any WW-II type land invasion inside Russia.

On Tuesday, Kremlin spokesperson Peskov said Russia is continuing its military campaign because there has been no advancement regarding Ukraine's willingness to engage in discussions: "We remain open to negotiations. But since there is no progress in terms of Ukraine's readiness for negotiations, we are continuing our operation”.

Meanwhile, outgoing US President Biden may be trying to create new hurdles for Putin before he leaves the White House. Biden is looking to potentially impose ‘major’ new sanctions that would target Russia's energy (oil) before he transfers power to his successor Trump. The report said that in the latest attempt to foil Russian President Putin's military plans in Ukraine, the White House aims to go for the ‘dark fleet’ of international ships, which engage in deceptive practices, transporting Russian oil to non-Western countries. In addition, Russian oil exporters which haven't been sanctioned yet are also on the list. The White House source further mentioned that this would give Trump's team ‘more leverage’ in peace negotiations between Russia and Ukraine.

Market Impact:

On X-Mas Eve, in holiday-thinned trade, Wall Street Futures surged amid tech and holiday season consumer spending optimism. Big Techs and semiconductor stocks surged after the Biden admin announced a $2B fiscal stimulus and some fresh tech/cold war policy for the sector to compete or even outpace China. The US (Biden-Harris admin) announced Monday that it would launch an investigation into China's foundational semiconductors to "protect American workers and businesses from the PRC's unfair trade practices in the semiconductor sector."

The Office of the United States Trade Representative is starting a Section 301 investigation to probe China's "targeting" legacy or mature node chips for "dominance and the impact on the US economy." The statement claimed that Chinese semiconductors enter the American market as a part of finished goods, so the Section 301 probe will examine to what extent these chips are incorporated into everyday products in various industries such as medical devices, telecommunications, automotive, and others. The Biden-Harris administration also announced that at least $2 billion will be allocated for legacy chips under the CHIPS and Science Act to "ensure more chips are made in America by American workers."

On Tuesday, Wall Street was in Santa Rally mode (Christmas Eve) with the S&P 500 gaining 1.1% and the Dow Jones adding 390 points, marking its best performance on the holiday since 2022. The Nasdaq 100 led the rally, rising 1.3%, its strongest Christmas Eve performance since 2000. Tech stocks were a key driver of the gains led by Chip/semiconductor stocks amid Biden admin’s fiscal stimulus & policy boost for the sector.

On Tuesday, Wall Street was boosted by consumer discretionary, banks & financials, techs, communication services, consumer staples, industrials, real estate, energy, materials, utilities, and healthcare. Scrip-wise, Wall Street was boosted by Walmart, Amazon, Cisco, Apple, Cisco, and IBM, while dragged by United Health and Verizon.

On Tuesday, Gold got some boost on fading hopes of an imminent Gaza war ceasefire as Israeli negotiators returned home to consult PMO. Oil was also buoyed as Biden may impose fresh energy/oil shipment sanctions on Russia.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 45100) now has to sustain over 45500 for any further rally to 45800/46000-46200/46400 and 46800/47000-47500/48000 in the coming days; otherwise sustaining below 45450/45200, DJ-30 may again fall to 45000/44750-44650/44200, DJ-30 may again fall to 43900/43300-42600/41600 in the coming days.

Similarly, NQ-100 Future (21450) has to sustain over 21200 for a further boost to 21500 and further to 21700/21900-22050/22500 and even 21450 levels in the coming days; otherwise, sustaining below 21150, NQ-100 may again fall to 20950/20850-20500/20300 and 20000/19800-19650/19350 in the coming days.

Technically, SPX-500 (CMP: 6050), now has to sustain over 6100 for any further rally to 6150/6200-6350/6500 in the coming days; otherwise, sustaining below 6075/6050 may again fall to 6000/5950-5900/5850 and 5675/5600-5550/5500 in the coming days.

Also, technically Gold (CMP: 2650) has to sustain over 2680 for a recovery to 2700-2725 and further 2735/2750-2775/2795 and 2815 in the coming days; otherwise sustaining below 2655-2630 may again fall to 2605/2600 and 2590/2565 and further fall to 2550/2500-2470/2450 in the coming days (depending upon Fed rate cuts, Gaza/Ukraine war trajectory); Gold surged almost 75% in the last one year since Gaza war started back in October’23. Now it may retrace to $2100 levels if Trump indeed can mediate both Gaza and Ukraine war ceasefire by early 2025.