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Citi Economists: Fed Communications Trigger Market Surge, Diverge from Expected Cuts

Recent statements by Federal Reserve speakers have prompted Citi economists to observe an apparent market overreaction, resulting in a significant upswing in stocks and bonds.

Despite the Federal Open Market Committee (FOMC) signaling an anticipated median of 75 basis points (bp) in cuts over the coming year, the market appears to be pricing in a far more substantial reduction, approximating around 150bps.

Interestingly, the impact of the Fed’s verbal cues on market pricing seems restricted, notably evident after Fed Chair Jerome Powell’s remarks. Even preceding a notably accommodative press conference where Powell expressed confidence in a potential decline in inflation without causing major disruptions, the market had already factored in significant cuts for 2024.

Citi highlights Powell’s focus on avoiding prolonged periods of high rates, aiming to uphold or potentially extend the already incorporated cuts in the yield curve.

While some Fed officials express unease with current market pricing, it’s suggested that their discomfort might stem from a disparity in expectations. Contrary to the market’s outlook, most officials might not foresee cuts in March, differing notably from the market’s expectation of a 25 bp reduction.

Citi’s projection leans toward cuts initiating post-March, but the adjustment of market forecasts could hinge on accumulating data, such as robust core Personal Consumption Expenditures (PCE) in December, alongside ongoing signals from officials toning down the probability of March cuts.

Stock Market Moves: Immunovant Soars 6% on Positive Trial Results; Warner Bros. Slips 2% Amid Merger Talks

​Immunovant, Inc. (Nasdaq: IMVT) surged by 6%, announcing that initial results from an ongoing 24-week Phase 2 clinical trial of batoclimab in Graves’ disease patients showed response rates exceeding 50%.

Globalstar Inc (NYSE: GSAT) climbed 6% as director Lynch purchased almost $1.3M worth of stock.

MillerKnoll, Inc. (NASDAQ: MLKN) rose by 5% after beating bottom-line expectations but falling short on the top line in Q2.

Micron Technology, Inc. (NASDAQ: MU) soared 4% after reporting a smaller loss than expected for its first quarter, alongside higher revenue and an optimistic outlook.

Western Digital Corporation (NASDAQ: WDC) gained 2% in response to positive news from competitor Micron.

Warner Bros. Discovery, Inc. (NASDAQ: WBD) declined by 2% as talks of a potential merger with Paramount Global (PARA) caused a nearly 6% intra-day drop, continuing the downward trend after the reports surfaced before the market close.

In after-hours trading, Micron experienced a surge on a beat-and-raise scenario, while Warner Bros. faced a decline due to deal discussions.

AI Startup Anthropic in Talks for $750 Million Funding Round Led by Menlo Ventures, Valuation at $18.4 Billion

According to a source familiar with the matter, Anthropic, an AI startup, is currently in talks to raise a substantial $750 million in a funding round, spearheaded by Menlo Ventures. The startup’s pre-funding valuation stands at a noteworthy $18.4 billion.

Founded by Dario and Daniela Amodei, former executives at Microsoft-backed OpenAI, Anthropic is aggressively pursuing resources and strong backers to challenge OpenAI’s dominance and carve its path as a frontrunner in the tech realm. The Information initially broke the news of this funding round earlier in the day. Anthropic’s Claude AI models have been contending for recognition alongside OpenAI’s esteemed GPT series.

Notably, the company has already secured investments from tech giants like Google (NASDAQ: GOOGL) and (NASDAQ: AMZN), with both companies committing significant sums—up to $2 billion and $4 billion, respectively—over the past few months. Reports from November had also hinted at discussions between Anthropic CEO Dario Amodei and OpenAI’s board, suggesting a potential shift in leadership and the prospect of merging the two AI startups.

Investing is like gardening for your money: you plant the seeds of your savings, water them with knowledge, and patiently watch them grow into a financial forest. Sometimes, you’ll encounter weeds of uncertainty or storms of volatility, but with a little strategy and a lot of resilience, your portfolio blossoms into a diversified wonderland. So, grab your pruning shears of research, tend to your investments with care, and watch your wealth bloom like the most prized flower in the financial garden.