Markets were higher as investors digest Powell's recent comments

Dow rose 62, advancers over decliners about 3-1 & NAZ slid back 17.  The MLP index was off 1+ to 260 & the REIT index added 4+ to the 374s.  Junk bond funds were mixed & Treasuries saw buying which reduced yields after their recent strong advance (more below).  Oil edged higher to the 73s & gold gained 9 to 2052.

AMJ (Alerian MLP Index tracking fund)

Treasury yields were little changed as questions lingered over the path ahead for interest rate & when cuts may begin.  The 10-year Treasury was down 2 basis points to 4.144% & the 2-year Treasury yield also slid down 2 basis points to 4.452%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors have been fretting over the timeline for interest rate cuts from the Federal Reserve as concerns that elevated rates could drag the US economy into a recession persist.  Some traders had been hoping for rate cuts as soon as Mar, but recent comments from Fed Chair Jerome Powell dampened these expectations.  Strong economic data in recent days, including a hot Jan jobs report, have further contributed to those fears.  After the Fed meeting last week, Powell suggested that while rate cuts are likely to take place this year, the probability of that happening in Mar was low.  He reiterated that sentiment over the weekend, noting that the pace of rate cuts would probably be slower than markets are expecting.  Markets were last pricing in just a 16.5% chance of a rate cut taking place then, according to CME Group's FedWatch tool.

Treasury yields are little changed as uncertainty over rate cut outlook persists

Eli Lilly (LLY) reported 4th-qtr revenue & adjusted earnings that topped expectations on the strong launch of its new weight loss drug, Zepbound, & higher prices for its blockbuster diabetes treatment, Mounjaro.  Zepbound, which won approval from US regulators in early Nov, raked in $176B in sales for the 4th qtr.  The quarterly results are the first to include sales of Zepbound, which some analysts say could post more than a B $s in sales in its first year on the market & eventually, become the biggest drug of all time.  EPS was $2.42 for the 4th qtr, ahead of $2.14 a share, a year earlier.  Excluding one-time items associated with the value of intangible assets, among other adjustments, the company posted EPS of $2.49 for the 4th qtr.  The pharmaceutical giant booked 4th-qtr revenue of $9.4B, up 28% from the same period a year ago.  LLY also issued its full-year forecast for 2024, which was generally in line with expectations.  The company expects full-year adjusted EPS of $12.20 - $12.70.  LLY also forecast 2024 revenue of $40.4-41.6B.  Analysts had expected full-year adjusted EPS of $12.43 on sales of $39.4B.  Shares jumped almost 60% last year as weight loss drugs skyrocketed in popularity despite hefty price tags, mixed insurance coverage & a handful of unpleasant side effects.  Higher prices for older drugs, particularly Mounjaro, helped drive up revenue.  Mounjaro booked $2.21B in sales for the 4th qtr, up from just $279M in the same period a year ago.  The high priced stock fell 4 (0.6%).

Eli Lilly results blow past estimates on strong Zepbound launch, Mounjaro demand

As Iran-backed attacks rage on in the Red Sea, US-based retailers are raising economic red flags in anticipation of industry disruptions & looming "uncertainty."  "It's a big issue," National Retail Federation CEO Matt Shay said.  "We're helped somewhat by the fact that this is a relatively slower time of year, but what goes on here is not just the increased cost, the increased delay, but it's really the uncertainty here as we look ahead to the future."  Significantly delayed shipping times & pricing spikes could bleed into back-to-school & holiday shopping later this year as Iran-backed Houthi militants continue launching attacks in the Red Sea & Gulf of Aden.  The Houthis, stationed in Yemen, have for months been firing upon commercial vessels passing through the Red Sea.  The militants say the attacks are in support of Palestinians killed in the ongoing Israel-Hamas war in Gaza.  Last Thurs represented the 42nd, 43rd & 44th such attacks since Nov 19.  Retailers are reportedly entering the renewal season for shipping contracts & the conflict has now made it difficult "to negotiate in an environment of uncertainty," according to Shay.  "We don't need this kind of disruption and uncertainty," the CEO argued.  "We need to find a solution as quickly as possible."  Shay claimed a "broader coalition" of countries may need to band together to mitigate timing delays & price increases – & that apparently includes China.  "The Chinese need to be part of this. They need to be talking to the people in the region, in Saudi Arabia and Iran and the rest of the Middle East saying, ‘We need to fix this problem,’ because they're impacted as well," he explained.  "It's a global challenge and it's going to have implications here."

Retailers sound alarm over shipping delays, price spikes

Recent strength in Treasury yields has been sobering.  Investors remain optimistic even after learning that the Fed is going to be cautious about cutting rates this year.  More earnings are coming this week which will move markets.

Dow Jones Industrials