Markets slide while waiting for the inflation guide favored by the FED

Dow dropped 97, decliners over advancers 4-3 & NAZ was off 12.  The MLP index was even in the 284s & the REIT index remained in the 424s.  Junk bond funds had a little buying & Treasuries saw limited selling which increased yields modestly (more below).  Oil was off 1+ to the 76s following recent strength & gold retreated 6 to 2549.

Dow Jones Industrials

Even as mortgage interest rates were rising, home prices reached the highest level ever on the S&P CoreLogic Case-Shiller US National Home Price Index.  On a 3-month running average ending in Jun, prices nationally were 5.4% higher than they were in Jun 2023.  Despite being a record high for the index, the annual gain was smaller than May's 5.9% reading.  The index's 10-city composite rose 7.4% annually, down from 7.8% in the previous month & the 20-city composite was 6.5% higher year-over-year, down from a 6.9% increase in May.  “While both housing and inflation have slowed, the gap between the two is larger than historical norms, with our National Index averaging 2.8% more than the Consumer Price Index,” noted Brian Luke, head of commodities, real & digital assets at S&P Dow Jones Indices.  “That is a full percentage point above the 50-year average. Before accounting for inflation, home prices have risen over 1,100% since 1974, but have slightly more than doubled (111%) after accounting for inflation.”  New York saw the highest annual gain among the 20 cities, with prices increasing 9% in Jun, followed by San Diego & Las Vegas with annual increases of 8.7% & 8.5%, respectively.  Portland, Oregon, saw just a 0.8% annual increase in Jun, the smallest gain of the top cities.  Since housing affordability has been a major talking point in this election cycle, this month's report also broke out home values by price tier, dividing each city's market into three tiers.  Looking just at large markets over the past 5 years, it found that 75% of the markets covered show low-price tiers rising faster than the overall market.  The increase in prices came even as mortgage rates rose sharply in Apr-Jun, which is the period averaged on the index.  Usually when rates rise, prices cool.  While home prices should ease month-to-month going into the fall, due to seasonal factors & more inventory on the market, they are unlikely to drop significantly & are expected to still be higher than they were last fall.

Home prices hit record high in June on S&P Case-Shiller Index

Eli Lilly (LLY) is expanding the supply of its weight-loss drug & selling it for ½ the price of other drugs in the highly lucrative market.  LLY announced that it is now offering 2.5 mg & 5 mg single-dose vials of tirzepatide, sold under the brand name Zepbound, in response to growing demand.  In its last fiscal qtr, the company's earnings surpassed expectations due in large part because of the performance of Mounjaro & Zepbound, which have the same active ingredient but have different FDA-approved uses.  The new single doses are also "priced at a 50% or greater discount compared to the list price of all other incretin (GLP-1) medicines for obesity," LLY added.  GLP-1 agonists are a class of Type 2 diabetes drugs that improve blood sugar control but may also lead to weight loss.  LLY said that the additional supply will help "millions of adults with obesity access the medicine they need."  That includes those not eligible for the Zepbound savings card program, those without employer coverage & those who are paying outside of insurance.  "These new vials not only help us meet the high demand for our obesity medicine, but also broaden access for patients seeking a safe and effective treatment option," Patrik Jonsson, LLY's pres of cardiometabolic health, continued.  Jonsson referenced a clinical study in which the 5 mg maintenance dose helped patients achieve an average of 15% weight loss after 72 weeks of treatment.  A recent trial also showed that weekly shots of tirzepatide injections significantly reduced the risk of progression to Type 2 diabetes by 94% among adults with pre-diabetes & obesity compared to the placebo, according to LLY.  In 2023, one in 60 adults were prescribed a GLP-1 medication, according to the American Pharmacists Association.  By 2030, the number of GLP-1 users in the US could reach 30M, around 9% of the overall population, according to JPMorgan.  The market is projected to exceed $100B by that same year, "driven equally by diabetes and obesity usage," the firm noted.  The stock rose 13.08.

Eli Lilly cuts cost of certain Zepbound doses by at least 50%

The US 10-year Treasury  rose as investors monitored fresh economic data after the Federal Reserve boosted already high expectations for imminent interest rate cuts.  The yield on the 10-year Treasury climbed 3 basis points to 3.848%, while the yield on the 2-year Treasury was trading around flat.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Fed Chair Jerome Powell on Friday said that “the time has come for policy to adjust,” bolstering expectations for a rate cut at the central bank's next meeting.  Powell declined to provide exact indications on the timing or extent of the cut, however.  “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said in his keynote address at the Fed's annual retreat in Jackson Hole.  Market participants are firmly pricing in a rate cut at the Fed's Sep 18 meeting.  Traders are currently pricing in a roughly 71.5% chance of a 25-basis-point rate cut next month, with 28.5% pricing in a 50-basis-point rate cut, according to the CME Group's FedWatch Tool.

10-year Treasury yield rises as investors weigh prospect of interest rate cut

Stocks are struggling to find a footing ahead of the next Fed meeting in mid Sep.  They are counting down to a crucial update to the inflation gauge (PCE) favored by the Federal Reserve due on Fri.  In the last hour selling picked up.