Dow Jones Soars Above 37,000

We said yesterday that expectations for a dovish Federal Reserve meeting were high. And for now, it appears that Jerome Powell and the FOMC have delivered just that. 🤩

The Federal Open Market Committee (FOMC) statement changed slightly vs. November, primarily adding verbiage that “inflation has eased over the past year” but remains elevated. As such, they kept rates unchanged to close out 2023.

However, the real information was in the Fed’s updated economic projections. 📝

Below, we can see that the committee’s median projection for the federal funds rate in 2024 has dropped from 5.1 to 4.6, implying three rate cuts in 2024. Additionally, the median core PCE inflation expectation dropped by 20 bps to 2.40%. And although the committee anticipates slower growth in 2024, it’s projecting modest growth, not a recession. 📊

And Jerome Powell’s commentary did little to push back on those views, reinforcing that the battle against inflation will continue but that rates are likely high enough to slow the economy. As always, he hedged his comments by saying that the committee is prepared to tighten policy further if necessary and that a recession is still on the table for 2024. 

Overall, it appears the market has gotten its “soft landing’ after all, which twelve months ago seemed like a dream scenario. The economy slowed enough to bring inflation down but not enough to tip us into a recession. ⚖️

That was all investors needed to hear before getting back to buying stocks and other risk assets. The Dow Jones Industrial Average was the first U.S. stock market index to hit new all-time highs, but the S&P 500 and Nasdaq 100 are close behind. Meanwhile, the small-cap Russell 2000 surged another 3.40% as investors viewed the prospect of lower rates as supportive of the sector. 🐂

While it was a footnote in today’s data, the producer price index confirmed the continued disinflationary trend seen in consumer prices yesterday. Additionally, reports from Redfin suggest that rental rates fell the most in over three years, furthering the view that shelter prices are likely to “catch down” to other inflation components. 🔻

With the Fed meeting out of the way, it’s unclear what’s left to derail the bulls’ epic run. As always, we’ll have to wait and see. But for now, investors are partying like it’s 2023. 🥳

It’s been a rough ride for pharmaceutical giant Pfizer since the end of the pandemic, and that rollercoaster ride continues today. 🎢

The company last announced earnings in October but needed to update Wall Street on its 2024 forecast. It cited weak demand for its Covid products as the reason for a weaker-than-anticipated revenue and earnings forecast.

The company now expects $58.50 to $61.50 billion in revenues, implying essentially zero YoY growth and coming in below the $63.17 billion consensus estimate. As for earnings, it provided a range of $2.05 to $2.25 per share, well below the adjusted profit of $3.16 that analysts expected. 🔻

Since it’s unable to drive revenue growth, management is turning to additional cost-cutting to drive results. It now anticipates $4 billion in savings from its plan, up $500 million from its last estimate.

Pfizer CFO Dave Denton said, “While we do not expect Covid vaccination and infection rates to change materially in 2024 versus this year, we have set our Comirnaty and Paxlovid 2024 revenue expectations lower.”

The company looks to be setting the bar low for next year to give itself a chance to jump over it easily.

However, the short-term impact is that the stock extended its historic drawdown from all-time highs to 55%. This decline matches one of the largest in history, only meaningfully surpassed by the great financial crisis. Its dividend yield is now also the highest in years, though some investors fear it may have to be cut. 😱

As for the price chart, $PFE shares fell another 7% on the day despite the broader market being up handily. Despite prices being in a sustained downtrend for well over a year, the Stocktwits community remains bullish on the stock. We’ll have to wait and see whether their bet pays off. 🤷

Software giant Adobe is the latest tech company to provide a weak revenue forecast. Let’s recap its results. 👇

The company’s fourth-quarter adjusted earnings per share of $4.27 topped analyst estimates of $4.13. Revenues grew about 10% YoY to $5.05 billion, narrowly exceeding the $5 billion anticipated. 

However, a weak sales forecast caused investors to rethink their bullish thesis. Management expects $5.10 to $5.15 billion in revenues, below the $5.16 billion estimate. Its full-year guidance of $21.33 to $21.50 billion was also shy of the $21.73 billion expected. 👎

Analysts anticipated a blockbuster quarter after executives predicted “really strong” performance during their analyst day in October. And with the stock up about 80% since its May introduction of AI tools, there’s little room for error, even if management’s forecast was slightly off.

$ADBE shares fell 6% after hours. With that said, the Stocktwits community remains bullish, so we’ll have to see if investors buy the dip in the days ahead. 👀