The Fed lit the touch paper for a monster rally this week after effectively green-lighting market expectations for rate cuts next year. This was not in the script, and while Fed chairman Jay Powell stopped short of declaring victory over inflation, it’s what the market heard.
‘Declaring victory would be premature,’ Powell actually said, before pondering ‘when will it become appropriate to begin dialing back’, but investors closed their ears to the first bit and focused only on the dialing back talk.
Cue a triumphant mood that sent stocks surging and bond yields tumbling to their lowest in months, with the US 10-year Treasury sinking below 4% and the 2-year to 4.3%.
Stocks surged, taking out big levels, led by the Dow Jones Industrial Average which jumped to a record high and closing above 37,000 for the first time. The S&P 500 rallied to cross 4,700 for the first time since January 2022, while small-caps were given their best week in years, even after a spell of consolidation on 14 December.
All three major U.S. indices remain on course for their seventh straight week of gains.
PFIZER / MODERNA
There were contrasting fortunes for two of the big Covid winners this week after Pfizer (PFE:NYSE) shares sank to 10-year lows and Moderna (MRNA:NASDAQ) received a boost from a cancer therapy breakthrough.
Pfizer was forced to reset expectations for Covid-19 sales for a second time this year on weaker than expected demand for its Comirnaty vaccine and antiviral pill Paxlovid.
Having generated over $100 billion of sales in 2022, Pfizer’s Covid drugs are now expected generate just $8 billion of sales in 2024. The company also took a knife to expectations for 2024 earnings per share which are now forecast to be between $2.05 and $2.25, around a third below consensus forecasts.
Meanwhile, vaccine-maker Moderna said a mid-stage trial showed its investigation-based RNA skin cancer drug in combination with Merck’s cancer immunotherapy treatment Keytruda cut the risk of occurrence or death by 49% compared with Keytruda alone.
Moderna chief executive Stephane Bancel told AFP the vaccine could be available as early as 2025, sending the shares soaring 13% in early trading on 14 December.
META PLATFORMS
It has been quite an eventful month for Meta in terms of news flow. Last week, founder and chief executive Mark Zuckerberg sold 682,000 shares through various charitable entities, netting $185 million thanks to the 170% run-up in the shares year-to-date.
This week, news agency Reuters reported that media firms Disney (DIS:NYSE) and Comcast (CMCSA:NASDAQ) had increased their advertising spend on Meta-owned Instagram after pausing commercials on Elon Musk-controlled X last month.
Data from Sensor Tower, cited by Reuters, showed 51 of the top 100 US advertisers on X in October last year, when Musk bought the platform, had ceased to advertise on it as of last month.
This month, Meta releases its social media app Threads, a key competitor to X, in the European Union.
Finally, Bloomberg reported yesterday Cathie Wood’s Ark Invest had raised its stakes in Meta and Microsoft (MSFT:NASDAQ) for the first time in five months and nine months respectively.
MACY’S
Shares in Macy’s (M:NYSE) finished the week 18% higher at almost $20 as investors delighted in news the department store operator had received a $5.8 billion (£4.6 billion) takeover offer from existing shareholders Arkhouse Management and Brigade Capital.
Department store rivals Nordstrom (JWN:NYSE) and Kohl’s (KSS:NYSE) rose on the read-across from the potential take-private deal for Macy’s, with Nordstrom advancing 14% to $18.2 and Kohl’s climbing 20% to $28.6.
Macy’s sales have plunged over the past year, with the retailer struggling to keep pace with online competitors and brands choosing to cut out departments stores and sell their wares direct-to-consumer instead.
On 16 November 2023, Macy’s posted third-quarter results which beat Wall Street expectations although sales of $5 billion were still down 7% year-on-year with bricks-and-mortar and online sales both lower.
