It's starting to look like investors have been put on the naughty list this year. Just look at this long list of woes.
There's the threat of a U.S. government shutdown over the holiday period which took a step closer to reality late Thursday as a bill backed by President-elect Donald Trump to keep the government open failed a fast-track vote in the House.
The stock market has also had a rough week, it could do without political uncertainty right now. Federal Reserve Chair Jerome Powell's Christmas message soured the holiday spirit with the prospect of fewer rate cuts next year amid stubborn inflation.
Then Trump issued a fresh tariff threat Thursday -- this time targeting Europe, which won't help on the inflation front given the pressure levies can put on prices.
The market's recovery failed to get going Thursday and now investors are grappling with a potential shutdown.
But a shutdown, if it happens, doesn't necessarily point to pressure on the stock market. During the last shutdown under Trump--the longest in U.S. history between Dec.21, 2018 and Jan. 25, 2019--the S&P 500 jumped 10.3%, according to Dow Jones Market Data. In fact, the index has climbed throughout the last four shutdowns going back to 1995 under President Bill Clinton.
However, the S&P 500 fell during five of the six shutdown periods in the 1970s. Overall the average gain is just 0.1%.
The wider economic impact is also likely to be contained. Goldman Sachs analysts estimated that a shutdown would reduce GDP growth by 0.15 percentage points for every week it lasts. But they said growth would be boosted by the same amount the next quarter once the government is reopened.
The millions of Americans traveling over the holidays could bear the brunt of it all, though. The Transportation and Security Administration said an extended shutdown could cause longer wait times at airports.
With the Santa rally scrapped this year, that's unfortunately one holiday tradition Americans can always bank on.
-- Callum Keown
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House Lawmakers Vote Down Trump-Backed Plan to Avert Shutdown
House Speaker Mike Johnson tried to push through a plan to avert a government shutdown, even getting a key endorsement from President-elect Donald Trump, but that effort failed a vote in the chamber that didn't even get a majority support of Republicans. It's back to the drawing board.
-- Johnson brought the bill to a vote Thursday evening under a fast-track
process that required two-thirds support to pass. The vote was 174 in
favor and 235 against, with 1 member voting present. Nearly all Democrats
joined with 38 Republicans to squash the measure.
-- The bill's failure raises the pressure on Congress to extend funding past
Friday's deadline, or shut down the federal government starting Saturday.
Trump had endorsed the bill, heaping particular praise on a provision
that postponed a decision on raising the nation's debt ceiling.
-- The debt ceiling, which is the government's borrowing limit, was going to
emerge as an issue for Congress early in Trump's second term, potentially
interfering with his ability to drive key legislative priorities. But it
wasn't clear how many lawmakers would support including it in a temporary
spending bill, even among Republicans.
-- Any new plan Johnson arranges overnight faces not only a sharply divided
House vote but a skeptical Senate, the Democratic-controlled chamber
where lawmakers expressed anger that the original bipartisan plan fell
apart after Trump and close advisor Elon Musk trash talked it on
Wednesday.
What's Next: Some lawmakers talked about the possibility of an even shorter funding extension, of mere weeks rather than the three-months Johnson proposed in his bill. GOP Sen. Susan Collins told reporters Thursday that she could support a three-week extension as long as it prevents a shutdown.
-- Liz Moyer and Anita Hamilton
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Musk's Wealth Surges Toward Half a Trillion Dollars Following Election
The wealth of Tesla and SpaceX CEO Elon Musk -- the world's richest person -- is heading toward an unprecedented milestone, half a trillion dollars.
-- Since Donald Trump won the presidential election on Nov. 5, Musk's net
worth skyrocketed 84% from $264 billion to $458 billion as of Wednesday,
according to the Bloomberg Billionaires Index.
-- Tesla's stock has soared by about 75% since the election, through
Wednesday. This has driven Musk's wealth to unprecedented heights,
alongside a secondary offering of SpaceX stock for existing holders that
valued the privately held aerospace and defense company at $350 billion.
-- The Bloomberg Billionaires Index calculates net worth by including public
and private assets, and cash. Musk's net worth includes a 13% stake in
Tesla; a 42% stake in SpaceX; and about 79% ownership of social media
platform X.
-- Musk's closeness to the incoming president has given some investors
confidence in the trajectory of his businesses, particularly Tesla.
"Musk's ties to President-elect Trump have intensified an already-bright
spotlight on Tesla and have been met with an overwhelmingly positive
stock reaction since the election," Baird analyst Ben Kallo said.
What's Next: The full effect of Musk's role in the U.S. government on his businesses, and his wealth, has yet to unfold. On Thursday, Sen. Rand Paul, a Kentucky Republican, floated the idea of Musk becoming speaker of the house -- a position that apparently doesn't require being a member of Congress.
-- Abby Schultz
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FedEx to Split Off Freight Business as It Lowers 2025 Outlook
Logistics giant FedEx Corp. is splitting in two, unveiling plans to spin off its freight division, which makes up a smaller part of its sales than other divisions. Doing so would create two publicly traded companies and "unlock value" for investors, taking a cue from other companies that have recently taken the same step.
-- FedEx said it was considering the move this summer. Sales at the company
are dominated by Express, which is its domestic and international
shipping services for packages. The Freight business, with $9.4 billion
in sales in 2024, provides less-than-truckload $(LTL)$ freight services
across multiple distances.
-- The spinoff is expected to be completed in the next 18 months. CEO Raj
Subramaniam said the timing was right to pursue a separation because of
the unique dynamics of the freight market. The business has an enterprise
value of about $30 billion, according to Bloomberg.
-- The deal follows other recent corporate splits, including 3M's spin off
of its Solventum healthcare unit and General Electric's split into GE
Aerospace, GE Vernova, and GE Healthcare. FedEx announced it as it
trimmed its full-year profit forecast, citing weak demand in its U.S.
Express unit.
-- For the November quarter, FedEx reported adjusted earnings of $4.05 a
share and revenue of $21.97 billion, down 0.9% from a year ago but in
line with expectations. Customers chose not to purchase the more
expensive priority shipping, which fell 4% domestically and 12%
internationally.
What's Next: FedEx lowered its outlook for fiscal year 2025, forecasting adjusted earnings of $19 to $20 a share and expecting revenue that is flat compared with this year. That is down from a prior forecast for revenue to rise by a low-single-digit percentage.
-- Al Root and Liz Moyer
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The End of Lilly's Zepbound Shortage Casts Shadow on Telehealth
The Food and Drug Administration's declaration that longstanding shortages of Eli Lilly's weight-loss drug Zepbound and its Type 2 diabetes medicine Mounjaro are officially over has cast a shadow on the telehealth websites and compounding pharmacies that have been booming thanks to legal sales of copy cat medicine.
-- Shortages of Zepbound and competing Novo Nordisk drug Wegovy triggered
legal protections allowing compounding pharmacies to make knockoff
versions of both medicines. With the end of the Zepbound shortage, the
compounding of that drug will now need to stop, eliminating a cheaper
option for consumers.
-- The FDA has laid out a gradual approach to ending the sale of compounded
Zepbound. Federally regulated compounding pharmacies have 90 days until
they have to stop, until March 19. State-regulated compounding pharmacies
have 60 days, until Feb. 18. The grace periods are significantly longer
than usual.
-- It seems to be an attempt to ease patients who rely on the compounded
drug over to the branded product and sets up the eventual end of the
semaglutide shortage. Semaglutide is the drug name for Novo's Wegovy and
Ozempic. Leading telehealth providers didn't respond to a request for
comment.
-- Compounding industry group the Outsourcing Facilities Association said it
disagrees with the FDA's decision. People are still having difficulty
filling prescriptions for the branded drug, it told Barron's, and
distributors continue to list Lilly's branded drug as out of stock or
limited availability. "That qualifies as a shortage by any definition."
What's Next: The decision is a preview of what will happen when the FDA declares that semaglutide is no longer in shortage. That would force telehealth platforms such as Noom and Hims & Hers to emphasize the costlier branded offerings or more customized products.
-- Josh Nathan-Kazis
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Home Sales Tracking Worst Year Since Mid-1990s
(MORE TO FOLLOW) Dow Jones Newswires
December 20, 2024 06:43 ET (11:43 GMT)
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