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Investors are on edge as they head into a week that will likely set the market tone for the rest of 2022 and beyond. Fed Chair Jay Powell is still warming up in the bullpen, but he'll be coming out to pitch on Wednesday in a key game of the Monetary Series. Fastball? Changeup? As the speed of the final throw is debated, the crowd is getting antsy if it will clock in at 50 or 75 basis points - following a string of aggressive hurls during the season.
Bigger picture: FOMC policymakers may not even yet know what kind of toss in the making as it will highly depend on the latest CPI print set to be published on Tuesday. If things come in hot, the Fed could go the hawkish route and put further pressure on stocks. Things could also go the other way if inflation shows signs of responding to the hardest-hitting hiking cycle since the 1980s.
"The time for moderating the pace of rate increases may come as soon as the December meeting," Powell said in his last media appearance before the current FOMC blackout period. "We have a broad set of thoughts about where that destination might be, but we could be wrong. We'll have to see."
Brace for volatility: Stock futures are starting the week in the green ahead of the FOMC meeting on Wednesday, which will include updated interest rate and economic projections. While contracts linked to the major averages are up 1% premarket, all three of the indices lost ground last week over several rocky sessions. The Dow Jones Industrial Average declined 2.8% for its worst week since September, while the S&P 500 fell 3.4% and the Nasdaq Composite slumped 4%. (20 comments)
The possibility of a smaller hike has been telegraphed by Jerome Powell, but a hefty CPI print and inflation concerns could keep the Fed aggressive. By how much will the central bank hike rates this week?
· 50 basis points (too far, too fast)
· 75 basis points (fifth in a row!)
Take the survey and see the results here
We're going to leave the poll open through Wednesday, so come back to see updated results after the CPI print tomorrow. Feel free to take the discussion to the Wall Street Breakfast comments section to talk about how the rate hike cycle is impacting the economy, markets or your investing strategies.
While a growing number of economists and CEOs predict that the U.S. will enter a recession in 2023, other market players and policymakers feel that one is not necessary to bring down inflation. Among them is U.S. Treasury Secretary Janet Yellen, who is of the view that inflation has peaked or is already in decline. She's also hopeful that the labor market will remain healthy as the central bank continues to execute policy based on the lessons learned from the high inflation of the 1970s.
The interview: "First of all, shipping costs have come down. Delivery lags, which were very long - those have shortened. Gas prices are way down. I think we'll see a substantial reduction in inflation in the year ahead... if there's not an unanticipated shock," Yellen told CBS's 60 Minutes on Sunday.
"There are always risks of a recession. The economy remains prone to shocks, but look, we have a very healthy banking system. We have very healthy business and household. We are at or beyond full employment. And so it is not necessary for the economy to grow as rapidly as it has been growing to put people back to work."
Track record: This past summer, Yellen, who previously served as Fed Chair under the Obama administration, admitted she "was wrong about the path inflation would take" and that it wouldn't pose a long-term problem. "There have been unanticipated and large shocks to the economy that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly," she told CNN. "At the time I didn't fully understand, but we recognize that now." Will she be right this time around? (16 comments)
Looking for a new drug pipeline and some blockbuster treatments, Amgen (AMGN) has agreed to acquire Horizon Therapeutics (HZNP) for $116.50 per share in cash. That'll value the Ireland-based company at nearly $27.8B on a fully diluted basis, and nearly $28.3B including debt. Horizon is a rare autoimmune and inflammatory disease-focused biotech, with revenue generators like Tepezza, Krystexxa and Uplizna that added $2B in sales for the firm in the first nine months of the year.
Backdrop: Amgen was the last of three suitors standing in an auction for Horizon that included Johnson & Johnson (JNJ) and Sanofi (SNY). All of the drugmakers are looking to replenish their pipelines, but no one is getting as aggressive as Amgen. It is facing one of the biggest portfolios of patent expirations in the industry, prompting a serious shopping spree over the past two years.
In the summer, Amgen inked a $3.7B buyout of ChemoCentryx to boost its inflammatory disease presence. Last year, the company scooped up oncology player Five Prime Therapeutics for $1.9B and antibody drug specialist Teneobio for nearly $1B, as well as smaller purchases like tissue regeneration expert Rodeo Therapeutics for $55M.
Market movement: Shares of Horizon Therapeutics soared 14% on the news, while Amgen's stock fell 3%. The latter expects to use cash in hand and debt to finance the deal, which is expected to close in the first half of 2023 and become accretive to revenue and non-GAAP earnings per share from 2024. However, Amgen did not update 2022 or 2030 guidance as a result of the transaction.
NASA's Orion space capsule landed in the Pacific Ocean on Sunday to conclude a successful mission that tested near passes above the moon's surface. The unmanned crew module - designed to carry astronauts for future lunar missions - splashed down off the coast of San Diego at 12:40 p.m. ET. It was a scorching feat, given that the capsule came back into Earth's atmosphere at a near 25,000 miles per hour following a near month-long journey.
Quote: "This is an extraordinary day," NASA Administrator Bill Nelson said in an agency livestream after Orion's return. "It's historic because we are now going back into space, into deep space, with a new generation."
It was exactly 50 years ago that astronauts on the last mission of NASA's Apollo program, Apollo 17, were the last people to walk on the moon. Artemis is the agency program to bring astronauts back to the moon with an eventual goal of pushing on to Mars, exploring deep space.
Who is involved: NASA is working with a variety of publicly traded companies on the Artemis missions. Boeing (BA) built the 212-foot rocket known as the Space Launch System. Lockheed Martin (LMT) made the Orion spacecraft that circled the moon. Aerojet Rocketdyne (AJRD) manufactured engines and high-pressure tanks for the SLS rocket and Orion spacecraft, while Northrop Grumman (NOC) built the boosters that helped to lift the rocket off the launchpad at Kennedy Space Center in Florida. (19 comments)
In Asia, Japan -0.2%. Hong Kong -2.2%. China -0.9%. India -0.1%.
In Europe, at midday, London -0.1%. Paris -0.1%. Frankfurt -0.2%.
Futures at 6:30, Dow +0.9%. S&P +1%. Nasdaq +1.2%. Crude -0.9% to $70.39. Gold -0.4% to $1803.70. Bitcoin -1% to $16,971.
Ten-year Treasury Yield -3 bps to 3.54%
Today's Economic Calendar
What else is happening...
Microsoft (MSFT) to acquire 4% stake in London Stock Exchange.
Rivian (RIVN) pausing talks with Mercedes-Benz on electric vans.
Carvana (CVNA) is a cautionary tale for zombie companies.
Albertsons (ACI) dividend on hold pending Washington state appeal.
Energy stocks hit as crude suffers biggest slide since April.
China, Saudi Arabia strengthen ties with big oil deals.
Home sales set to drop to lowest level since 2011 - Redfin.