Morning Reads

Morning Reads

Open Interest Changes

PREMIUM

Prepper

It finally looks like the Federal Reserve's rate-hiking cycle has come to an end, as the central bank's policymakers signaled that more rate cuts could be in store next year than they had foreseen in September. The Federal Open Market Committee maintained its key policy rate at 5.25%-5.50%, as widely expected, but it still kept the door open for additional firming. Traders cheered the Fed's revised expectations, with all three benchmark indices ending around 1.4% higher each, while yields plummeted.

Dot plot: Fed officials now expect three rate cuts next year and four more in 2025, according to the Summary of Economic Projections. While the new projection implies fewer cuts than what the markets priced in, it means that the Fed is moving closer to easing. In the September median projections, policymakers had forecast one last rate hike for 2023, followed by two cuts in 2024. Most FOMC members expect the key rate to fall within the 4.25%-5.0% range next year.

Powell's speech: Fed Chair Jerome Powell remained cautious in the post-decision press conference, saying the Fed is "just at the beginning" of discussing policy easing. He noted that inflation is still elevated, although it has eased from its highs without a spike in unemployment. Powell reiterated that incoming data will determine the Fed's decision on how long it keeps rates restrictive. "He acknowledges that it is premature to declare victory, but this FOMC meeting gives off a strong sense of achievement," said Yimin Xu on behalf of Investing Group Leader Cestrian Capital Research.

SA commentary: "Despite the message of caution from the press conference, the Fed has clearly taken a dovish tone here," said SA analyst Jeremy LaKosh, adding that the economy needs to achieve significant disinflationary milestones over the next 12 months. Wolf Richter noted that the FOMC's statement toned down the chance of additional rate hikes, but left the door cracked open, "just in case." Meanwhile, ING Economic and Financial Analysis thinks the Fed will end up being more aggressive on rate cuts than both they and the market are currently expecting. (119 comments)

Autopilot recall

Tesla (TSLA) is recalling more than 2M vehicles after the National Highway Traffic Safety Administration determined that its Autopilot driver-assistance system does not go far enough to keep drivers engaged. The recall follows an NHTSA investigation into a series of crashes involving Autopilot. The agency will keep the investigation open while it monitors the efficiency of Tesla's over-the-air software fixes. Wedbush believes Tesla's decision to make the requested software update could clear a path for broader acceptance. However, Investing Group Leader Jonathan Weber warned that the indirect costs of the recall, such as brand damage, could be significant. (155 comments)

FTC probe

Adobe (ADBE) shares fell around 7% in extended-hours trading on Wednesday after the Photoshop maker issued weaker-than-expected outlook for the coming year, despite its Q4 results topping estimates on account of strong performance in its Digital Media segment, particularly Creative Cloud. Adobe also disclosed that it was being probed by the Federal Trade Commission over its subscription practices. The company said its practices comply with the law and it is working with the government agency about a possible settlement or resolution on the matter. This could "involve significant monetary costs and could have a material impact on financial results," Adobe warned. (35 comments)

Dim outlook

Pfizer (PFE) shares reached a new 52-week low on Wednesday after the COVID-19 vaccine maker set its 2024 outlook below expectations, dragging its peers including Moderna (MRNA) and Novavax (NVAX), as well as its partner BioNTech (BNTX). Pfizer expects its revenue to reach $58.5B-$61.5B in 2024, which includes about $8B from its COVID treatments and a $3.1B contribution from newly-acquired Seagen (SGEN). While J.P. Morgan said the COVID sales forecast likely represents "a floor for 2024 sales," Investing Group Leader Stone Fox Capital said Pfizer "will no longer have a strong COVID profit machine to help repay debt from the Seagen deal." (184 comments)

Today's Markets

In Asia, Japan -0.7%. Hong Kong +1.1%. China -0.3%. India +1.3%.
In Europe, at midday, London +2.2%. Paris +1.3%. Frankfurt +0.7%.
Futures at 6:30, Dow +0.3%. S&P +0.3%. Nasdaq +0.4%. Crude +1.9% to $70.78. Gold +2.6% at $2,049.30. Bitcoin +4.6% to $43,001.
Ten-year Treasury Yield -9 bps to 3.95%.

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Retail Sales
8:30 Import/Export Prices
10:00 Business Inventories
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet

Companies reporting earnings today »

What else is happening...

Apple (AAPL) notches new record closing high amid market rally.

Berkshire boosts Occidental (OXY) stake again after CrownRock deal.

Bitcoin erases week's losses as FASB rules may beef up adoption.

U.S. Steel (X) gains after getting multiple bids above $40 a share.

GM's (GM) Cruise shakes up management in effort to rebuild trust.

SEC now requires more Treasury trades to be centrally cleared.

Farfetch (FTCH) in talks with Apollo (APO) for emergency funding.

Can Alibaba (BABA) regain its crown as China's e-commerce king?

Etsy (ETSY) falls after announcing restructuring moves, job cuts.

Mattel's (MAT) American Girl is heading to the big screen.


Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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