December 5th Market Overview

Happy Friday

Markets grinding towards new highs with inflation data clearing the Fed to cut next week. Netflix buying Warner Bros for $72 billion, reshuffling Hollywood.

I'm watching whether the White House's "heavy skepticism" actually kills this behemoth of a deal or if it's just noisy red tape chirping from Washington.

Let's dig in...

Today's Big Picture

Netflix Buys Warner Bros for $72 Billion Netflix
$NFLX is buying Warner Bros Discovery's $WBD studio and HBO business after WBD splits off its cable networks. Netflix is taking on $60 billion in debt and agreed to a $5.8 billion breakup fee → that's 8% of the deal versus the usual 1-3%.
 
White House already flagged this with "heavy skepticism."
This either reshapes streaming or dies in regulatory hell.

Inflation Came in Light, Fed Cut Is On 
Core PCE hit 2.8% in September, below the 2.9% estimate. Last data point before Wednesday's meeting and it's exactly what the Fed needed to see. Traders pricing 87% odds of a cut now.
The cut itself doesn't matter now, what Powell says about 2026 does.

Tech Rally Now 10 Days Straight 
The tech fund $XLK just notched its tenth straight winning day, longest run since September 2020. Not the mega caps driving it though:

SanDisk $SNDK, Salesforce $CRM, Adobe $ADBE, Micron $MU, and Intel $INTC leading the charge.

Market Overview

Index Performance

Stock Spotlight

Salesforce $CRM ( ▲ 5.3% ) 
heading for its best week since 2023 after beating earnings this week. The stock has risen five straight days as investors love the AI story (or bubble)

Ulta Beauty $ULTA ( ▲ 12.65% ) 
raised full-year guidance after posting strong same-store sales while offering fewer discounts. Management expects margins at or above prior levels. Pricing power is holding.

Southwest Airlines $LUV ( ▲ 5.7% ) 
cut 2025 earnings guidance, citing demand drop during the shutdown plus higher fuel costs. Now expects $500 million EBIT versus prior $600-800 million. Bookings are back to normal.

Big Name Updates

Meta Platforms $META ( ▲ 1.8% ) 
rose again on reports it plans budget cuts up to 30% in its metaverse unit. The company is shifting spend toward AI wearables. Investors like the discipline.

Hewlett Packard Enterprise $HPE ( ▲ 1.88% ) 
missed fourth-quarter revenue as customers hit delays developing AI products. Revenue came below estimates despite earnings beating.

DocuSign $DOCU ( ▼ 7.64% ) 
raised annual sales outlook after quarterly results topped forecasts on subscription growth. Stock dropped anyway.

SoFi Technologies $SOFI ( ▼ 6.15% ) 
fell after announcing a $1.5 billion stock offering. Dilution rarely gets rewarded.

Other Notable Company News

Humana $HUM ( ▲ 1.91% ) 
upgraded to buy by Jefferies, which raised earnings estimates based on better Medicare Advantage star ratings than expected.

Victoria's Secret $VSCO ( ▲ 17.99% ) 
posted its highest quarterly sales growth in over four years while cutting back promotions.

BP $BP ( ▼ 3.76% ) 
downgraded to underperform by Bank of America, which sees execution risks the stock price doesn't reflect. Target implies 19% downside.

Cloudflare $NET ( ▼ 1.57% ) 
dropped on reports of another service outage.

Moore Threads debuted in China with shares up 425% on first day. The AI chip designer raised over $1 billion as Beijing pushes chip independence.

Sector Watch

Bond Market

Treasury yields barely moved after the PCE data came in as expected. The 10-year dropped slightly as next Wednesday's Fed cut became a lock. Fed funds futures are trading at the high end of the 3.75-4% range.

Policy Watch

Fed

Traders see 87% odds of a quarter-point cut Wednesday. NEC director Kevin Hassett told Fox News the Fed should cut and called it "likely." Swaps now price in three total cuts by September 2026.

Bank of America's Michael Hartnett warns a dovish cut could kill the Santa rally if it signals trouble ahead. The market wants support, not panic.

Bank of Japan

Officials leaning toward a 25 basis point hike December 19, taking rates to 0.75% - highest since 1995. Japanese 10-year yields just hit their highest level since 2007. Watch for carry trade pressure heading into year-end.

Netflix-Warner Antitrust

Justice Department is already looking at this. That $5.8 billion breakup fee - 8% of the deal versus the typical 1-3% - tells you Netflix knows regulators will push back hard.

Today’s Sponsor

Learn how to make every AI investment count.

Successful AI transformation starts with deeply understanding your organization’s most critical use cases. We recommend this practical guide from You.com that walks through a proven framework to identify, prioritize, and document high-value AI opportunities.

In this AI Use Case Discovery Guide, you’ll learn how to:

• Map internal workflows and customer journeys to pinpoint where AI can drive measurable ROI

• Ask the right questions when it comes to AI use cases

• Align cross-functional teams and stakeholders for a unified, scalable approach

Get the Guide.

What to Watch

Fed Decision Wednesday

The cut is priced in. What matters is what Powell signals about 2026. If he sounds worried while cutting, markets will read it as a red flag.

Netflix-Warner Regulatory Fight

White House is already skeptical. Watch for DOJ or FTC to weigh in over the next few days. The 12-18 month timeline says Netflix is ready for a battle.

Japan Rate Hike December 19

First hike to 0.75% since 1995. This could rattle currency markets and hit carry trades hard. The yen has driven a lot of positioning this year.

Paramount's Next Move

Paramount $PSKY dropped 8% after losing the Warner Bros bid. They need a Plan B, and there aren't many targets left.

Thanks for reading 🙂

- John

Today’s Sponsor

Shoppers are adding to cart for the holidays

Peak streaming time continues after Black Friday on Roku, with the weekend after Thanksgiving and the weeks leading up to Christmas seeing record hours of viewing. Roku Ads Manager makes it simple to launch last-minute campaigns targeting viewers who are ready to shop during the holidays. Use first-party audience insights, segment by demographics, and advertise next to the premium ad-supported content your customers are streaming this holiday season.

Read the guide to get your CTV campaign live in time for the holiday rush.

Learn more.