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Stocks Teeter on Edge: Investors Hold Breath for Fed’s Cue while Bond Supply Looms

In a week fraught with anticipation, U.S. stocks managed to inch up, resembling a tightrope walker navigating a tricky line, as investors eagerly awaited the Federal Reserve’s forthcoming guidance. They’re about to get a whole menu of insights from the Federal Reserve policymakers, ready to reveal their hand on the central bank’s policy outlook. And if that wasn’t enough, a substantial heap of bond supply is expected to hit the market, adding further suspense to an already nail-biting scenario.

Last week’s market tango was nothing short of a showstopper, with equities marking their grandest weekly performance in roughly a year. A feeble U.S. payrolls report on Friday orchestrated this spectacular performance, causing Treasury yields to spiral downwards. The prevailing perception that the Fed might bid adieu to hiking interest rates and even start trimming them next year prompted this market theatrics.

The scene is set for the Fed’s December meeting, with market faith in a static interest rate now at 90.4%, a slight dip from Friday’s 95.2%. Nevertheless, it’s a remarkable climb from the 74.4% recorded a mere week ago. The prospects of a 25 basis point rate cut by the May 2024 meeting have ascended beyond 50%, according to the CME’s FedWatch Tool, further adding to the drama.

The spotlight is on the Fed’s speakers scheduled later in the week. Eyes are on key figures like Chair Jerome Powell, alongside pivotal voting members such as New York Fed chief John Williams and Dallas Fed President Lorie Logan. They are expected to provide the much-needed solace to the anxious market, shedding light on the Fed’s intentions and potentially calming the jitters.

The whirlwind of expectations around the Fed’s stance on rate hikes exhilarated the S&P 500, propelling it up by 5.85% last week. Meanwhile, the Nasdaq showcased a staggering 6.61% surge, their most spectacular leaps since the unforgettable November of 2022. Investors hang in suspense as they witness this high-stakes performance on the stock market stage.

Dow ends higher, but rising Treasury yields keep lid on gains

The Dow closed slightly higher Monday as a resurgence in Treasury yields kept upside momentum in check ahead of remarks from Fed officials and a slew of corporate earnings due this week.

At 16:00 ET (21:00 GMT), the Dow Jones Industrial Average was up 34 points or 0.10%, while the S&P 500 was up 0.20% and the NASDAQ Composite was up 0.3%.

Fed speakers out in force as Treasury yields rebound

Treasury yields rebounded from the recent selloff, with the yield on the 10-year Treasury rising 11 basis points to 4.664%, as investors looked ahead to a number of Fed speakers this week, including two appearances by Chair Jerome Powell – the second of which on Thursday includes a Q&A session.

Federal Reserve Governor Lisa Cook said on Monday that an expectation of higher for longer interest rates doesn’t “appear to be causing the increase in longer-term rates.”

The remarks followed a weaker-than-expected October jobs report on Friday that stoked expectations that the Fed is rate hike cycle is nearing end and shifted focus to potential rate cuts next year.Fed fund futures imply around an 85% chance the Federal Reserve is done with its hiking cycle, and an 80% chance it will start cutting in June.

Regional banks slip as lending conditions tighten in Q3

Regional banks included Zions Bancorporation (NASDAQ:ZION), Comerica Inc (NYSE:CMA), and PacWest Bancorp (NASDAQ:PACW) fell on Monday as bank lending conditions tightened in Q3, slowing demand for loans, the Fed’s Q3 senior loan officer survey showed Monday.

The survey resumed concerns somewhat about the health of regional banks following quarterly results from several regional lenders showing rising loan loss provisions and falling deposits.

“High short-term interest rates have driven up interest expense and pressured margins, while higher long-term rates erode asset values,” Morgan Stanley said, though added that the “credit flow to high-quality borrowers through the bond market remains stable.”

Earnings season coming to an end

The earnings season is starting to wind down, with 80% of the S&P 500 companies having already reported their quarterly financial results.

However, there are still a number of key companies that will provide updates this week, including Walt Disney (NYSE:DIS), Wynn Resorts (NASDAQ:WYNN), Occidental Petroleum (NYSE:OXY) and D.R. Horton (BVMF:D1HI34).

Tesla eyes production of cheaper EV at Berlin factory

Tesla (NASDAQ:TSLA) was flat after giving up intraday gains even as the electric vehicle manufacturer is preparing to launch a new EV model at its Berlin plant with a targeted price of €25,000 ($26,813) considerably cheaper than the currently available options in Germany, Reuters reported Monday, citing sources.

Oil rebounds after producers reaffirm supply cuts

Oil prices rose Monday, rebounding after last week’s hefty losses, with traders encouraged by the prospect of tighter supplies, while keeping an eye on events in the Middle East.

Major suppliers Saudi Arabia and Russia confirmed over the weekend that they will maintain their ongoing supply reductions until the end of the year, heralding tighter oil markets.

Both benchmarks slumped about 6% last week as the geopolitical risk premium faded, with the Israel-Hamas war failing, so far, to escalate into a wider conflict in the Middle East.



Vertex Pharmaceuticals Falls Short of Q3 Sales Forecast Amid Sluggish Demand for Cystic Fibrosis Treatments

Vertex Pharmaceuticals (NASDAQ:VRTX) hit a stumbling block in the third quarter, earning the title of Wall Street’s disappointment as it failed to meet sales projections, all thanks to the lackluster enthusiasm for its ancient cystic fibrosis (CF) treatments.

With a dramatic 35.4% nosedive in sales of their traditional CF remedies, the company brought in a meager $209.2 million. Cystic fibrosis, that troublemaker affecting about 100,000 souls globally, wreaks havoc on the lungs, digestive system, and other crucial body parts.

Vertex slightly revised its annual sales forecast for CF treatments, settling at approximately $9.85 billion. Not too far from LSEG’s educated guess of $9.86 billion, but hey, a smidgen can make a big difference in these boardroom sagas.

Their star player, the CF drug Trikafta, swept in sales worth $2.27 billion this quarter. It might seem like a win, trumping estimates by a hair’s breadth at $2.26 billion, but in this game, even a small ‘miss’ can spoil the party.

In more recent tales from the pharma world, Vertex and its buddy CRISPR Therapeutics snagged a golden ticket. They now have the go-ahead to mull over potential safety risks linked to their gene therapy for sickle cell disease post-approval. Picture them considering the hazards after leaping over the regulatory hurdle—no small feat, mind you.

Forecasts predict that this groundbreaking therapy, the pioneer in line for a U.S. Food and Drug Administration review, might just get the nod by December 8. But, like in any thrilling narrative, the drama is far from over.

The Vertex saga unfolds with twists and turns, as the tale of their missed sales marks merges with the suspense of pioneering gene therapy – all unfolding in the riveting world of pharmaceuticals.

Investing is like a grand financial adventure, where your money gets to be the daring hero battling against the villainous forces of inflation and stagnation. It’s a rollercoaster ride where you can either scream in fear or throw your hands up in exhilaration – your choice! Just remember, unlike a blockbuster movie, in the world of investing, you’re both the director and the protagonist, and the plot twists are your balance sheet’s best friends or worst enemies. So, grab your popcorn (or maybe some diversified stocks), because this financial flick is a long-running series, and you’re the star of the show!