Dow dropped 125, decliners over advancers 5-4 & NAZ inched up 99. The MLP index fell 6+ to the 321s & the REIT index finished up 1 to the 407s. Junk bond funds remained little changed & Treasuries had limited selling which raised yields slightly. Oil was fractionally lower, dipping below 71, & gold retreated 17 to 2875 (more on both below).
Dow Jones Industrials
Pres Trump's agenda is hitting speed bumps on Capitol Hill, as Rep infighting over spending levels threatens to halt a massive package of tax cuts, energy policy, health care & border security funds. Speaker Mike Johnson initially said his conference would take the first steps this week to move the bill. But as the week progressed, Rep lawmakers realized they would miss that deadline, as fiscal hawks said they could not support the massive package without more spending cuts. “We’re stuck in the mud,” Rep Byron Donalds said as he left a meeting of House Reps. “There’s a lot of, what do they call it, paralysis of analysis? And I think at this point, we need to just make a clear decision.” The upcoming effort to pass Trump's legislative agenda offers Reps, who control the House, Senate & the White House, their first opportunity to show voters how serious they are about cutting spending & reducing the national debt. House GOP leaders initially proposed trimming several hundred B $ over a 10-year period by making changes to Medicaid, adding work requirements for able-bodied adults with no dependents. But that was not enough for many of the conference's fiscal hawks, who want to see upward of $2T in cuts. The more cuts Rep leaders agree to make to a top-line number at this early stage, however, the less money they will have to work with later on, when it's time to decide which priorities to fund. For example, Trump has promised to eliminate income taxes on tipped wages. But he has not said how he would make up for that lost revenue in the federal budget.
Trump’s tax cuts are ‘stuck in the mud’ as Republicans split over spending
Eli Lilly (LLY) reported mixed results for the 4th qtr, even as demand for its blockbuster weight loss drug Zepbound & diabetes treatment Mounjaro soared. Quarterly earnings topped estimates, but sales
fell just short as Mounjaro saw lower realized prices. Zepbound &
Mounjaro have now underperformed expectations for 2 straight qtrs,
with the company previously pointing to issues around inventory decreases among wholesalers. The
pharmaceutical giant also issued fiscal 2025 EPS guidance of $22.05- $23.55, which is in line with what was expected. LLY reiterated its fiscal 2025 sales guidance of $58 - $61B, noting that it expects to launch Mounjaro in new
intl markets throughout the year. LLY expects to
see “a continuation of basically the total prescription growth that we
have seen in 2024” for incretin drugs such as Zepbound & Mounjaro, “so
that’s what we built in our 2025 guidance for the market,” CFO Lucas Montarce said. The figures were consistent with the preliminary results LLY
shared in Jan, which disappointed investors. LLY had slashed its 2024 revenue guidance, as it said demand for its weight loss & diabetes drugs would not meet its lofty expectations. LLY said it plans to report late-stage data on its next-generation obesity drug retatrutide later this year, a few months earlier than expected. Retatrutide works
differently from any of the treatments on the market, mimicking 3
different hunger-regulating hormones: GLP-1, GIP & glucagon. 4th-qtr revenue was $13.5B, up 45% from the same period a year ago. EPS was $4.88 per
share, for the 4th qtr which compares with EPS of $2.42 a year earlier. Excluding 1-time
items associated with the value of intangible assets & other
adjustments, EPS was $5.32 for the 4th
qtr of 2024. The stock jumped 28.81 (3%).
Eli Lilly beats on earnings even as weight loss, diabetes drug sales fall short
Mortgage rates moved slightly lower this week, but long-term rates remain elevated in the upper-6% range. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark edged down to 6.89% from last week's reading of 6.95%. The average rate on a 30-year loan was 6.64% a year ago. "Mortgage rates have been stable over the last month and incoming data suggest the economy remains on firm footing," said Sam Khater, Freddie Mac's chief economist. "Even though rates are higher compared to last year, the last two weeks of purchase applications are modestly above what we saw a year ago, indicating some latent demand in the market." The average rate on the 15-year fixed mortgage fell to 6.05% from 6.12% last week. One year ago, the rate on the 15-year fixed note averaged 5.9%.
Mortgage rates edge lower, remain near 7%
Gold prices slid 1% as the $ firmed ahead of a key jobs report & investors took profits, after bullion recorded consecutive record peaks in the previous 5 sessions on the back of escalating trade tensions between the US & China.Spot gold slipped 0.4% to $2853 per ounce after hitting an all-time high of $2882 yesterday. US gold futures settled 0.6% lower at $2876. There's a combination of a stronger $, some profit taking & yields moving a little bit higher off their lows, weighing on gold ahead of the US employment report. Nonfarm payrolls likely increased by 170K jobs after surging to 256K in Dec, a survey showed & the unemployment rate is forecast unchanged at 4.1%. A resilient labor market is fueling economic growth & allowing the Federal Reserve to halt interest rate cuts as it evaluates the inflationary effects of Trump's fiscal, trade & immigration policies. In addition to the volatility in general, inflation is in the background & that's starting to creep up, so gold is responding as a safe haven.
Gold halts record rally, drops 1% as US jobs report looms
Oil prices rose after a sharp overnight decline as traders cautiously assessed escalating US-China trade tensions, while data showing higher US crude inventories reflected weak demand. Brent crude futures were up 0.7% at $75.16 a barrel, while WTI crude futures expiring in Mar were up 0.8% at $71.61 a barrel. Sentiment had improved today after Saudi Aramco, the world's top oil exporter, detailed a sharp increase in prices for Asian buyers. This is consistent with the strength seen in the physical Middle East markets since the start of the year. Both contracts fell more than 2% yesterday's settlement, pressured by a surge in US crude inventories reported by the Energy Information Administration, the biggest weekly build since Nov 2024. For last week, US commercial crude stocks rose by 8.7M barrels, beating expectations for a 2.4M-barrel increase. The substantial build in inventories suggests potential weakness in crude demand. Typically, higher inventories indicate that supply is outstripping consumption, which can put downward pressure on oil prices.
Oil Prices Rise After Sell-Off; Saudi Aramco Boosts Asian Oil Prices
Stocks were lower while investors assess the earnings season &
eyed Pres Trump's fast-moving policy overhaul. Tariff jitters that shook stocks earlier in the week may have eased,
but markets are tracking incoming earnings for company warnings. Bears were in control of the Dow all day.
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