Fed Hikes Look Done, Bond Yields Drop. Why a Fairy-Tale Ending Isn’t Certain.

Separately, the Treasury said it would slow down issuing longer-term debt. That helped push up bond prices, which move inversely to yields. The yield on the 10-year U.S. government bond popped above 5% not too long ago, but now it’s back down around 4.7%—more good news for stocks, since higher borrowing costs have been going hand in hand with falling share prices.

Separate data this week show job openings remain elevated—maybe too much, but that remains to be seen. Overall, it looks like the Goldilocks fairy tale really is coming true. The economy appears to be just hot enough to be a fertile ground for company earnings, but not so hot that it stops inflation from falling back to an acceptable level.

If the porridge is just right, the Fed really can stop raising rates for the foreseeable future, and even have room for cuts if the economy weakens. More data on the labor market are due Friday.
Apple
reports earnings Thursday, which can give more insight into the strength of consumer demand.

Of course, it could still all go horribly wrong. Powell didn’t rule out more hikes, either. Higher oil prices or some other catalyst to push up inflation rates could make the economy too hot again.
JPMorgan
CEO Jamie Dimon said Wednesday afternoon there’s a higher chance of more Fed hikes than people think.

But for now, it’s no wonder that stocks are rising this week. Maybe there’s a happy ending for the year after all.

—Brian Swint

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Powell Keeps the Door Open to Another Increase

Federal Reserve Chairman Jerome Powell said the committee is moving cautiously and that monetary policy might not be restrictive enough, leaving a door ajar for a possible rate increase in December. But he was optimistic that progress has been made on inflation.

• The Fed kept interest rates unchanged for the second-straight meeting on Wednesday. The unanimous decision keeps the target for the federal-funds rate at 5.25-5.5%. Powell said officials hadn’t made any decisions about the next meeting, and were relying on a full range of economic data.
• The latest quarterly Employment Cost Index showed compensation costs were up 4.3% in September from a year earlier, compared with a 5.2% annual pace last year. Powell said the decline was close to the Fed’s internal expectations, adding: “We feel good about that.”
• Policy makers are also watching rising bond yields, which have also contributed to tighter financial conditions. He cautioned against reading too much into the policy committee’s Summary of Economic Projections, which indicated that officials saw one more rate hike this year.
• The Fed didn’t make many changes to its statement. The opening paragraph said job gains “have moderated since earlier in the year but remain strong.” That line in September said job gains had slowed. The change acknowledges strengthening in the labor market since then.

What’s Next: The Fed will get its next big dose of economic data on Friday in the form of the jobs report for October. Analysts expect the economy to have added 189,000 workers, which would be down from the 336,000 added in September.

—Megan Cassella, Megan Leonhardt, and Janet H. Cho

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Novo Nordisk Earnings Surge on Weight-Loss Drug Demand

Novo Nordisk reported a jump in earnings and revenue on Thursday as it continues to benefit from the popularity of its weight-loss drugs. However, the company is still struggling to increase the supply of the drugs to meet demand.

• Novo said its quarterly earnings came to 5.00 Danish kroner per share, rising 58% from the same period a year earlier. Sales came to 58.7 billion Danish krone ($8.3 billion), up 38% from the same period a year earlier at constant exchange rates.
• The company’s sales growth was driven by the demand for weight-loss drugs Ozempic and Wegovy in the U.S. but Novo said it was having to restrict supplies of some doses.
• Novo Nordisk reiterated recently raised guidance for sales in 2023 to climb between 32% and 38% and full-year operating profit to grow between 40% and 46%.

What’s Next: Novo Nordisk will hope to ramp up drug supplies fast so it has the advantage. It is in a race with rival Eli Lilly, which expects to gain approval for its Mounjaro diabetes drug to treat obesity in the near future. Eyes will also be on the American Heart Association conference this month, where Novo is set to present full details of a study on Wegovy’s cardiovascular benefits.

—Adam Clark

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Sam Bankman-Fried Case Headed to Jury Deliberation

The federal fraud case against one-time crypto magnate Sam Bankman-Fried is moving to the jury’s hands after prosecutors and the defense wrapped up their closing arguments. The two sides painted differing portraits of the 31-year-old former CEO of defunct crypto exchange FTX.

• Prosecutors called the events leading up to FTX’s collapse a year ago a “pyramid of deceit,” saying Bankman-Fried used $10 billion of customer money for personal projects, including buying luxury real estate. Bankman-Fried has pleaded not guilty.
• Defense lawyer Mark Cohen told the jurors that prosecutors were portraying Bankman-Fried as a villain and a monster because they couldn’t prove he stole billions of dollars from customers. He also said the prosecution was trying to portray his client as a character in a Hollywood production.
• Prosecutors highlighted testimony from three former top lieutenants of Bankman-Fried who said they committed crimes at his direction. Cohen said bad business decisions and mistakes aren’t crimes and that the government hadn’t proven that Bankman-Fried operated with criminal intent.
• Bankman-Fried faces seven criminal charges including fraud and money-laundering related to the collapse of FTX and related company Alameda Research. If convicted on all charges, he could receive what amounts to a life sentence.

What’s Next: U.S. District Judge Lewis Kaplan said the jury would begin deliberations today, bringing the trial closer to a conclusion after starting in early October. He also said the jury might stay later than usual.

—Liz Moyer

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Disney set to Buy Hulu Stake from Comcast After Valuation

Walt Disney
confirmed widely expected plans to buy the remaining 33% stake in streaming platform Hulu that it doesn’t own from
Comcast’s
NBCUniversal for at least $8.61 billion. The next stage is for the two companies to hash out how much more Comcast might get from the sale.

• Comcast exercised its right to sell based on a longstanding agreement between the two companies. Disney hired JPMorgan to help determine Hulu’s value, while Comcast hired Morgan Stanley, The Wall Street Journal reported. Disney must make its initial payment on or before Dec. 1.
• If the sides can’t find valuations within 10% of each other, they will use a third appraiser, the Journal reported. Resolving Hulu’s future is one of Disney CEO Bob Iger’s priorities along with partnerships or deals for sports channel ESPN. Disney also faces a possible proxy fight with activist Nelson Peltz.
• Another streaming-media company,
  Roku,
  beat expectations with a nearly 20% gain in third-quarter revenue. Active accounts were 75.8 million, up by 2.3 million from the second quarter. Analysts were expecting 75.3 million.
• Roku saw a “solid rebound” in third-quarter video ads and expects the growth rate in the fourth quarter to be similar to the same time last year. While cautious on the uneven ad recovery, it is committed to positive earnings before interest, taxes, appreciation, and amortization for full-year 2024.

What’s Next: Roku forecast fourth-quarter 2023 revenue of about $955 million, which would beat expectations. It also projected $10 million in adjusted earnings before interest, taxes, depreciation, and amortization.

—Janet H. Cho

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Senators Urge FTC to Scrutinize ExxonMobil, Chevron Acquisitions

Twenty-three mostly Democratic senators led by Majority Leader Chuck Schumer urged Federal Trade Commissioner Lina Khan to closely scrutinize two proposed multibillion-dollar deals in the oil industry for their potential consequences on competition, domestic oil supplies, and gas prices for U.S. consumers.

• Exxon Mobil
  plans to buy
  Pioneer Natural Resources
  for $60 billion, while
  Chevron Corp.
  has a $53 billion deal for
  Hess Corp.
  Because Exxon Mobil and Chevron are already the two largest corporations in the industry, “any further consolidation could harm American consumers,” lawmakers wrote.
• The senators urged Khan to oppose the mergers if the FTC finds they would violate antitrust law. Exxon Mobil told Barron’s the combined companies represent about 5% of U.S. oil production, citing potential benefits for the economy and the environment. Chevron could not be reached for comment.
• After Americans were paying more than $5 a gallon for gasoline last June, ExxonMobil reported $56 billion in 2022 profit, while Chevron posted profit of $36.5 billion. The lawmakers said Exxon’s expansion of refinery and exporting operations suggest the company plans to increase exports.
• Pioneer owns more drilling acreage than any other producer in Texas’ Permian Basin, a prolific oil-and-gas field. After the potential merger, Exxon-Pioneer could produce “a staggering 1.2 million barrels per day,” lawmakers wrote. Hess is one of the largest producers in North Dakota’s Bakken Shale area.

What’s Next: The FTC, which failed to stop
Microsoft’s
acquisition of Activision Blizzard, is in the middle of an antitrust case against
Amazon.com.
The Justice Department is separately at trial on antitrust cases against
Alphabet’s
Google in Washington, D.C., and against
JetBlue Airways
in Boston.

—Janet H. Cho

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Winter is generally a slow season for the real-estate sector, but will it stay frozen or thaw out—and more importantly, will home prices keep rising, or fall?

MarketWatch asked six economists for their take on whether home prices could fall—and if so, when.

For more, read here.

—Aarthi Swaminathan

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner