Madness!
The indexes flew higher at 2pm but, by the time Powell was done speaking at 4pm, they had given it all back and now, this morning, they are kind of in-between and still well below the early April highs.
The Fed held rates steady yesterday but, in a significant policy adjustment, they announced a slowdown in the reduction (QT) of its securities holdings, starting in June. The monthly redemption cap on Treasury securities will be reduced from $60 billion to $25 billion, while maintaining the cap on agency debt and agency mortgage-backed securities at $35 billion. A significant highlight from the statement was the acknowledgment of stagnant progress toward the 2% inflation target.
Powell’s subsequent press conference seemed to pivot market sentiments more significantly than the statement itself. The Fed’s explicit mention of a lack of progress toward the inflation objective could be a double-edged sword. While it indicates potential ongoing support through accommodative policies, it also raises concerns about longer-term inflationary pressures, which could impact future monetary policy decisions.
And, of course, we’re still very Dollar-driven and what is it that the Fed does other than BLATANT currency manipulation but the Bank of Japan and other Central Banksters have their own agendas to carry out – that’s the downside to managing the World’s largest currency.
8:30 Update: Productivity took a dive to 0.3% from 3.2% in Q4 and that has BLASTED Unit Labor Costs up to 4.7% from 0.4% so 10X!!!! That was the saving grace of our economy in Q4 – now we’ve got nothing and rising labor costs is the thing the Fed fears the most. Check your hedges folks!
Congrats to those who followed our Top Trade Alert of April 11th for Moderna (MRNA), who lost $3.07 per share (-$1.2Bn) but it was 0.50 less than expected after cutting SG&A by $274M (10%). MRNA is preparing for the launch of its mRNA-based RSV vaccine in the U.S. in the fall of 2024, marking a significant expansion of its product portfolio. An updated formula for Spikevax is also expected to be introduced this year, transitioning it to a seasonal offering.
Moderna reaffirms its revenue expectations of about $4 billion from its respiratory franchise for the full year 2024, with around $0.3 billion expected from net sales in the first half of the year due to seasonal demand but R&D expenses are expected to be $4.5Bn – so a loss for the year is well-expected. That will still leave MRNA with $9Bn in cash at the end of the year and, at $112, you can buy the whole company for less than $43Bn.
The reduction in costs and strategic reallocation of resources highlight Moderna’s efforts to optimize operations amid evolving market conditions. The reaffirmation of its 2024 revenue targets and significant R&D investment underscore a commitment to sustaining long-term growth through innovation and market adaptation.
The spread we outlined for our Members 3 weeks ago had a very conservative target of $120 for Jan 2026 and the spread carried a net $7,625 credit on the $50,000 spread and had 755% upside potential in anticipation of these earnings. MRNA was $105.14 at the time.
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