Netflix Gets Beyoncé Football Boost, Closing the Gap on Legacy Media

The untrained eye might not see much in what happened across U.S. financial markets on Thursday. The day started off in a sort of "sleep" mode. Many traders, even those that had not taken on a light holiday week schedule, still had candy canes dancing in their heads early on and it stayed that way until well into the afternoon. At the headline level, equities did not do much, but did manage to post a very slight "down" day, which broke the winning streak for these indices at three days. That allows for some space, and a potential upward confirmation of the day one change in trend (if we are to have one) experienced last Friday.

Below the headline level, smaller-cap stocks stole the show, and had a rather nice session, as treasury yields, which had been moving higher earlier in the session, reacted to a strong auction of U.S. seven-year notes and compressed as the session wore on. It wasn't just the auction though. There was more.

Earlier, despite the weekly report for Initial Jobless Claims that printed at a less than alarming 219,000 new filers for state level unemployment benefits, the print for continuing claims (which runs one week behind initial claims) soared from 1.864 million last week to a frightening 1.91 million (seasonally adjusted for the week ending December 14) this week.

This is the most U.S. workers receiving continuing unemployment benefits since the week ending November 13, 2021, and really shows just how hard it is right now to land a new job once a worker loses a job. Not quite the robust labor market that we keep hearing about. Not a disaster yet. This number had been almost perpetually above 2 million from the 1970s through late 2016. 2017 into the onset of the pandemic of 2020 had been the golden era (really, less than four years) for U.S. labor markets. Demand for U.S. labor is back where it was ahead of 2017.

About That Auction...

Demand for new seven-year U.S. paper was off the hook on Thursday afternoon, which ultimately gave some types of stocks that had been left behind, a boost. On Thursday, the U.S. Treasury Department "raffled off" $44 billion worth of seven-year notes with tremendous demand shown from abroad. Bid to cover soared to 2.758, which was the highest bid to cover since March 2020. The high yield printed at 4.532%, stopping through the "when issued" by a whopping 2.1 basis points. This was the fourth consecutive "stop through" for this series and the largest "stop through" in nearly two years.

Check these internals out: Indirect Bidders or foreign accounts took down a jaw-dropping 87.9% of the issuance. That was up from just 64.1% for this same auction one month ago. Direct Bidders (domestic accounts) took down a mere 2.85% of the auction. This left dealers with 9.3% of the pie, which is on the low side. Why the huge demand from abroad? We're grateful for it. The more thoughtful question, despite the strong auction might be: Why the almost total lack of domestic demand? Problems ahead? Yields are moving higher this morning, as U.S. equity index futures are moving lower.

Thursday Equities

As mentioned above, the major U.S. equity indices were about as dead as a doornail on Thursday. The S&P 500 gave up 0.04%, while the Nasdaq Composite gave back 0.05%. They barely moved, but they did end winning streaks which could end up being a Santa Claus rally positive. The period is supposed to have some give and take. The small caps excelled for the day, as the Russell 2000 popped for a gain of 0.9% and the S&P 600 rallied 0.53%.

The quantum computing stocks were about as hot as it gets again on Thursday. Rigetti Computing RGTI ran 36%, while D-Wave QBTS ran 24%, Quantum Computing QUBT gained 12.6% and IonQ IONQ gained 8.2%. British supplier of quantum encryption software services Arqit Quantum screamed ahead by 50.5% for the session. On a trading note, I am not yet completely out of D-Wave and remain long Quantum Computing, so both will appear in the disclaimer.

Six of the 11 S&P sector SPDR ETFs shaded into the green on Thursday, while five of these funds shaded into the red. That said, none of these 11 funds gained more than 0.31% on Thursday or lost more than 0.37%. The Staples XLP led, while the Discretionaries XLC lagged. Almost nothing else, at least on the sector-wide level, really moved.

Breadth was strong though, thanks to those small- and mid-caps. Winners beat losers by a rough three to two at the NYSE and by about 11 to five at the Nasdaq. Advancing volume took a 67.3% share of composite NYSE-listed trade and a 73.3% share of composite Nasdaq-listed activity. This all happened on increased trading volume from Tuesday's half-day levels, which more or less discounts that day over day change.

Netflix Hits a Home Run... in Football

According to Nielson's fast national ratings, the two NFL games streamed on Netflix NFLX on Christmas Day averaged 24.2 million viewers with viewership peaking at 27 million viewers during Beyoncé's halftime show. I will admit to having to ask my wife who the singer was at halftime. That's how little I keep up with pop culture. While I would not know Beyoncé if I were in an elevator with her, I did recognize the name. Nielson reported that at least 65 million viewers watched at least one minute of the Netflix NFL presentations on Wednesday.

By comparison, the two Christmas NFL games broadcast on the legacy cable networks in 2023 averaged slightly more than 29 million viewers, which shows just how much the streaming services have gained on traditional cable. It's getting very close. That said, for the NFL, Thanksgiving is still the regular-season king, with three NFL games broadcast across legacy media, averaged more than 33 million viewers this year.

In Other News

• South Korean legislature impeached their second president or acting president in two weeks. The political uncertainty on display in a key U.S. Asian ally probably is not helping U.S. equity index futures this morning.
• This comes after the internal political turmoil also on display in key U.S. European allies France and Germany.
• The Panama Canal and Greenland. Important locations from a strategic control point of view. Do we want them? Let me know.

Economics (All Times Eastern)

08:30 - Goods Trade Balance (Nov): Last $-99.08 billion.

08:30 - Wholesale Inventories (Nov-adv): Expecting 0.3% m/m, Last 0.2% m/m.

10:30 - Natural Gas Inventories (Weekly): Last -125B cf.

13:00 - Baker Hughes Total Rig Count (Weekly): Last 589.

13:00 - Baker Hughes Oil Rig Count (Weekly): Last 483.

The Fed (All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights (Consensus EPS Expectations)

No significant quarterly earnings scheduled.

At the time of publication, Guilfoyle was long QBTS, QUBT equity.