US Open: Wall Street starts higher on Monday; Nasdaq 100 annual reconstitution

• Wall Street with higher open on Monday
• Honeywell shares rose after announcing it is exploring a potential separation of its aerospace business
• Ford Motor shares declined after Jefferies downgraded the stock to Underperform and cut its price target to $9, citing inventory challenges and strategic uncertainties
• Capri Holdings is reportedly exploring the sale of its Versace and Jimmy Choo brands through Barclays bank
• Nasdaq 100 announced major index changes effective December 23, with MicroStrategy, Palantir Technologies , and Axon Enterprise joining the index

US equity markets are showing positive momentum, with larger indices leading gains. The US100 advances 0.56% to 21916.93, while the US500 rises 0.27% to 6071.4. The US30 shows modest gains of 0.05% to 43886. The VIX remains unchanged at 16.18. However, some weakness is seen in smaller indices with the US2000 declining 0.04% to 2348.1. Latin American markets are underperforming with the BRAComp down 0.20% to 124376 and the MEXComp falling 0.22% to 51314.

European markets are broadly lower, with France's FRA40 showing the steepest decline of 0.81% to 7350.7, followed by Austria's AUT20 dropping 0.69% to 3603. Among other major markets, Italy's ITA40 falls 0.57% to 34710, while the EU50 declines 0.47% to 4947.2. The UK100 is down 0.43% to 8268.5, and Germany's DE40 loses 0.40% to 20348.1. Only Spain's SPA35 manages to stay positive with a modest gain of 0.04% to 11733.

Looking at S&P 500 sectors, Communication Services leads gains with a 1.15% advance, followed by Consumer Discretionary up 0.80% and Consumer Staples adding 0.23%. Utilities, Health Care, Financials, and Information Technology show modest gains between 0.01-0.16%. However, several sectors are trading lower: Real Estate (-0.10%), Materials (-0.32%), and notably Energy showing the largest decline at -0.78%. The overall market remains slightly positive with the S&P 500 up 0.21%.

Current volatility observed on Wall Street. Source: xStation 

The Nasdaq-100 index, represented by the US100 contract, is trading at all-time highs. The mid-November high at 21,255 acts as the initial support level for bulls, with the mid-July high of 20,895, closely aligned with the 50-day SMA at 20,851, providing additional support. For bears, key targets include the 100-day SMA and the August highs near 19,917, which serve as critical downside levels.

The RSI is consolidating near the overbought zone, reflecting sustained bullish momentum. Meanwhile, the MACD is narrowing but continues to display bullish divergence, underscoring the strength of the prevailing upward trend. Source: xStation

News

• Honeywell (HON.US) shares rose 3.2% after announcing it is exploring a potential separation of its aerospace business, which generates about 40% of annual revenue. The move comes a month after activist investor Elliott Investment Management, which holds a $5 billion stake, pushed for breaking up the conglomerate. CEO Vimal Kapur indicated the company will provide an update on its portfolio review with Q4 results. Honeywell has already announced plans to spin off a $10 billion advanced-materials business and recently sold its personal-protective-equipment unit for $1.33 billion.
• Ford Motor (F.US) shares declined after Jefferies downgraded the stock to Underperform and cut its price target to $9, citing inventory challenges and strategic uncertainties. Despite 15% higher U.S. sales, Ford's inventory has ballooned to 96 days, significantly above competitors. The automaker faces tough decisions regarding its European operations and electrification strategy, while dealing with an $8.5 billion warranty and quality provisions gap since 2020. Separately, Ford agreed to a $165 million settlement with NHTSA over recall issues.
• Capri Holdings (CPRI.US) is reportedly exploring the sale of its Versace and Jimmy Choo brands through Barclays bank, following the collapse of its $8.5 billion merger with Tapestry in October. The potential divestment comes as both brands struggle, with Versace reporting a 22.1% revenue drop and Jimmy Choo declining 0.6% in the first half of 2024. Previous reports suggested Exor and Kering showed interest in acquiring Versace. The move would allow Capri to focus on its Michael Kors brand despite its recent underperformance.
• Nasdaq 100 announced major index changes effective December 23, with MicroStrategy (MSTR.US), Palantir Technologies (PLTR.US) and Axon Enterprise (AXON.US) joining the index. MicroStrategy, up 500% this year as Bitcoin's largest corporate holder, and Palantir, which gained 343% on AI-driven growth, highlight the increasing influence of cryptocurrency and artificial intelligence in tech. The additions will replace Moderna (MRNA.US), Super Micro Computer (SMCI.US), and Illumina (ILMN.US), with Bloomberg Intelligence estimating at least $22 billion in ETF-related trading activity.

Other news coming from individual S&P 500 index companies. Source: Bloomberg Financial LP