Dow dropped 396, decliners over advancers 4-1 & NAZ retreated 84. The MLP index was off 3+ to the 219s & the REIT index declined 3+ to 367. Junk bond funds edged higher & Treasuries were purchased which reduced yields (more below). Oil sank 2+ to the 73s & gold recovered 3 to 1995.
AMJ (Alerian MLP Index tracking fund)
Treasury yields fell ahead of the start of the Federal Reserve's next meeting, which is expected to conclude with a fresh interest rate policy decision. The yield on the 10-year Treasury was down by more than 3 basis points to 3.536% & the 2-year Treasury was trading at 4.129% after falling by 1 basis point. Yields & prices have an inverted relationship & one basis point is equivalent to 0.01%. The Fed's latest meeting is due to start today, with fresh policy decisions & guidance expected at its conclusion tomorrow. Investors are anticipating a further 25 basis point interest rate hike from the central bank. They will also be closely watching for hints about when rate hikes are likely to be paused or rate cuts could begin. Since the Fed's last meeting, officials have hinted that rates may have to remain elevated for longer as inflation remains uncomfortably high. On Fri, the Fed's favored inflation gauge, the personal consumption expenditure price index, came in 0.3% higher on a monthly basis, in line with expectations. Meanwhile, concerns about higher rates putting pressure on the economy & leading to a downturn have spread among investors. In Q1, GDP rose by 1.1% at an annualized pace, far below estimates.
Treasury yields fall as investors await Fed meeting start, weigh policy outlook
Treasury Secretary Janet Yellen warned that the US may run out of measures to pay its debt obligations by Jun 1, earlier than the gov & analysts had been expecting. In a letter to House Speaker Kevin McCarthy, Yellen said new data on tax receipts forced the dept to move up its estimate of when the Treasury Dept “will be unable to continue to satisfy all of the government’s obligations” to potentially as early as Jun 1, if Congress doesn't raise or suspend the debt limit before then. This date is earlier than analysts were expecting. Goldman Sachs' latest estimate this week put the deadline at some point in late Jul, though the bank's economists acknowledged that weaker-than-expected tax receipts could advance that timeline. Pres Biden called the “big four” congressional leaders — Senate Majority Leader Chuck Schumer, Senate Minority Leader Mitch McConnell, McCarthy & House Dem Leader Hakeem Jeffries — to invite them to a May 9 meeting at the White House to discuss the debt limit. The Congressional Budget Office also revised its estimate for the x-date yesterday. “Because tax receipts through April have been less than the Congressional Budget Office anticirpated in February, we now estimate that there is a significantly greater risk that the Treasury will run out of funds in early June,” wrote CBO director Phill Swagel. While there is technically a month between the date of the letter & the earliest x-date, congressional calendars showed yesterday that there are only 8 legislative days this month when both the House & Senate will be in session at the same time. This could significantly impact any effort to hammer out a last-minute deal in person on a debt-ceiling hike, one that could win enough support to pass in the Rep-controlled House & the Dem-led Senate.
The U.S. could hit the debt ceiling by June 1, much sooner than expected, Yellen warns
Pfizer (PFE) reported Q1 revenue & adjusted earnings that topped expectations, despite a decline in sales driven by the lower demand for
the company’s Covid vaccine. EPS was 97¢ which compares with $1.37 for Q1-2022. The company reported Q1 sales of $18.3B, down 29% over the same period a year ago. Sales
of the Covid vaccine declined $10B (75%) compared
with the same qtr last year, primarily driven
by lower contracted deliveries & demand in intl markets. The
decline was also due to lower US gov contracted deliveries as
the country prepares to shift Covid products to the commercial market
later this year. Excluding Covid product sales, Q1 revenue grew 5% over the same period a year ago. The company maintained its 2023 sales forecast of $67-71B & PFE also reiterated its full-year adjusted EPS outlook of $3.25-3.45. But PFE continues
to expect Covid-related sales to decline this year. The company
reaffirmed its forecast of $13.5B in Covid vaccine sales in 2023 & $8B in revenue for Paxlovid. A Pfizer spokesperson said
the company expects this year to be a “transition year” for Covid sales
before “potentially returning to growth in 2024 and beyond.” Excluding Covid products, PFE expects 7-9% revenue growth this year. The stock fell 15¢.
If you would like to learn more about PFE, click on this link:
club.ino.com/trend/analysis/stock/PFE_aid=CD3289&a_bid=6aeoso5b6f7
Pfizer earnings and revenue top expectations despite Covid vaccine sales decline
While traders are waiting to hear from the Fed, nervous ones are buying safe haven investments (gold & Treasuries). Meanwhile increasing the debt ceiling is becoming a very big decision which will probably be decided at the last minute (as usual). And that could be felt in the stock market.Dow Jones Industrials
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