Stocks Face A Nasty Pothole From A Miss In Today's ISM

 by Simon White, Bloomberg macro strategist,

A significant miss in the November manufacturing ISM, released later today, leaves stocks open to downside, as overboughtness and less favorable liquidity conditions meet hard-landing fears.

The US manufacturing ISM is one of the most consequential pieces of macro-economic data for markets.

It is the single largest explanatory factor for the performance of global stock markets, it is leading, and it is minimally revised. Last month it surprised to the downside, coming in at 46.7 versus 49 expected.

It’s a volatile number, and last month’s print could just be noise.

Moreover, short-term leading indicators for the ISM, such as the new orders-to-inventory ratio (see chart below), point to a continued rise in the headline index. Also the manufacturing PMI is more stable, and came in for November at 49.4.

Nonetheless, ISM could surprise negatively again. Stocks would be exposed to more downside this time, as it would happen when they are significantly more overbought - after one of the best November performances on record - and when liquidity conditions are becoming less favorable.

As discussed fully earlier this week, liquidity has been buoyant over the last month, principally due to the ~$200 billion rise in central bank reserves. Money market funds (MMFs) de facto funding the fiscal deficit via the purchase of T-bills, and the government withdrawing funds from the Treasury’s account at the Federal Reserve, combined to boost high-powered liquidity, driving a rally in stocks and bonds.

But that impulse from reserves has started to fade.

The one-month change of the one-month change of Fed reserves is now falling (blue line in chart below), which translates as the absence of a tailwind for stocks.

Thus far, the stock market has been greeting data with a soft-landing lens.

The expectation is the Fed will be able to cut rates a little as inflation softens - a typically Panglossian outlook for stocks - which have rallied as bond yields have fallen.

But a big drop in the ISM would (with some credence) amplify hard-landing fears. Stocks in this case would be likely to sell off as falling bond yields start to reflect a Fed cutting rates to try to stem a recession, which stocks are very much not discounting.

https://www.zerohedge.com/markets/stocks-face-nasty-pothole-miss-todays-ism

Truce Collapses, Missiles Fly Over Gaza, With 137 Israelis Still In Hamas Captivity

 The Gaza truce has collapsed and Israel has resumed its bombing campaign of the Strip, following a full week of ceasefire and seven rounds of hostage/prisoner exchanges.

Qatar and Egypt were reportedly pressing to extend the temporary pause in fighting for another two days, but Israel was not satisfied with the list of captives offered. The Israel Defense Forces (IDF) have been looking into Hamas claims that the two young Bibas brothers were killed. "Israeli military has informed Bibas family members it is assessing a Hamas claim that the youngest Israeli hostage, 10-month-old Kfir Bibas, his brother Ariel, 4, and their mother Shiri are no longer alive," CNN reports

This grim and tragic revelation is likely what left Israel with less incentive to keep the ceasefire going, also as pressure has mounted from ultra-conservative circles within Netanyahu's own ruling coalition to take the fight back to Hamas, and to see through the vow of eliminating the terror group. 

Another big factor was Thursday's terror attack involving a pair of Palestinian gunmen who unleashed M16 and pistol fire on a crowd waiting at a Jerusalem bus stop, killing three Israelis and injuring 16. Shortly after the attack, Hamas claimed responsibility.

It's likely that negotiators in Doha are still scrambling to get a ceasefire urgently back in place. After all, Israel says there are still 137 hostages in Hamas captivity, which also includes some Americans. In total 110 were returned home over the past week, with hundreds of Palestinian prisoners released as part of the swap. The Times of Israel details of those who remain captive: 

Among those still in captivity after the end of the truce Friday are 115 men, 20 women and two children, government spokesperson Eylon Levy says. Ten of the hostages are 75 and older, he says. The majority, or 126, are Israeli and 11 are foreign nationals, including eight from Thailand.

Levy lists the youngest hostage, 10-month-old Kfir Bibas, his 4-year-old brother Ariel and their mother Shiri as among the hostages. The military has said it is investigating a Hamas claim that the boys and their mother were killed.

Dozens of Palestinians have been reported killed after airstrikes started again Friday morning...

Israel and mediators in Qatar were able to secure the release of most of the women and children hostages, as the last days have seen, but still 20 women remain along with the possibly still alive Bibas brothers, fate unknown. Israel as of Thursday welcomed eight more Israelis back from Hamas captivity.

The IDF is meanwhile already dropping leaflets over parts of southern Israel telling civilians to leave their homes and leave the area. Prior to the truce, there were sporadic bombardments of parts of the south. But now it looks like the IDF will take the fight to the southern half too, even after Secretary of State Blinken's urgings not to, conveyed to PM Netanyahu yesterday.

Blinken flew out of Tel Aviv as IDF warplanes began the renewed bombing campaign...

Rockets have resumed being fired from Gaza, and Israel is again evacuating some southern communities, as both sides could once again be settling in for a 'long war'. Rockets could also once again be coming from southern Lebanon. Hezbollah is likely to rejoin the fight. On Thursday Blinken had urged Netanyahu to avoid killing civilians and that the soaring Gaza death toll is increasingly turning world opinion against Israel.

https://www.zerohedge.com/geopolitical/truce-collapses-missiles-fly-over-gaza-137-israelis-still-hamas-captivity

AstraZeneca discontinues STABILIZE-CKD and DIALIZE-outcomes Phase III trials

 AstraZeneca (LSE: AZN) said today it has decided to discontinue the STABILIZE-CKD and DIALIZE-Outcomes Phase III evidence trials for Lokelma (sodium zirconium cyclosilicate).

AstraZeneca explained that the decision was made due to substantially increased enrolment timelines and low event rates, respectively, which made it prohibitive to deliver study results within a timeframe to meaningfully advance clinical practice.

https://www.thepharmaletter.com/article/astrazeneca-discontinues-stabilize-ckd-and-dialize-outcomes-phase-iii-trials

JNJ upped to Buy from Neutral by UBS

 Target to $180 from $167

https://finviz.com/quote.ashx?t=JNJ&ty=c&ta=1&p=d

Phreesia Patient Activation Measure in CMS Merit-Based Incentive Payment System

 Phreesia is very pleased to announce that the Centers for Medicare and Medicaid Services (CMS) has included the Patient Activation Measure Performance Measure (PAM-PM) in its Merit-Based Incentive Payment System (MIPS), as well as in 15 specialty-specific measure sets and five MIPS Value Pathways (MVPs), subsets of measures for specific conditions.

The Patient Activation Measure (PAM) measures a patient’s knowledge, skills and confidence to self-manage their health. Insignia Health, a wholly owned subsidiary of Phreesia, is the measure steward of the PAM. Activated patients feel comfortable advocating for themselves and asking for support from their care team to manage their own health. But many patients who feel discouraged and overwhelmed need more targeted support and resources.

https://finance.yahoo.com/news/cms-includes-patient-activation-measure-110000611.html

Pfizer pulls obesity-drug study following patient reactions

Pfizer slumped lower Friday after the drugmaker said it would not advance a study of its two-dose obesity treatment, following a high level of side effects in patients involved in the Phase II trial.

Pfizer said it would instead focus on a single-dose option. Trials of its danuglipron treated showed good results in weight loss but induced vomiting and nausea in patients, which led to what it called "high discontinuation rates" compared with those taking a placebo.

Pfizer's Mikael Dolsten, president of worldwide research and development, in late October called the danuglipron study "our main opportunity here for getting data to review for obesity, in fact, to diabetes" in a call with investors.

For Pfizer, a setback in weight-loss market

The decision marks a significant setback in Pfizer's ambitions to enter the weight-loss drug market, which is currently dominated by Novo Nordisk's Wegovy. Pfizer rival Eli Lilly  (LLY) - Get Free Report last month also won approval for its own weight-loss treatment, Zepbound, from the Food and Drug Administration.

“We believe an improved once-daily formulation of danuglipron could play an important role in the obesity treatment paradigm, and we will focus our efforts on gathering the data to understand its potential profile,” said Pfizer's chief science officer, Mikael Dolsten. 

“Results from ongoing and future studies of the once-daily danuglipron modified release formulation will inform a potential path forward with an aim to improve the tolerability profile and optimize both study design and execution,” he added. 

Pfizer shares were marked 4.17% lower in premarket trading to indicate a Friday opening bell price of $29.20 each, a move that would extend the stock's six-month decline to around 23%.

Pfizer slashed its full-year sales and profit forecasts in October amid a slump in demand for covid treatments, It told investors it would write off around $4.6 billion in inventories of Paxlovid, its oral covid treatment, while taking a further $5.5 billion noncash charge against its third-quarter earnings.

https://www.thestreet.com/investing/stocks/pfizer-slumps-after-pulling-2-dose-obesity-drug-study-amid-patient-illness

BioNTech cut to Underweight from Neutral by JPMorgan

 Target to $99 from $106

https://finviz.com/quote.ashx?t=BNTX&p=d