Stock Market Drops After Fed Rate Cut, Merck Enters Obesity Drug Race

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Rate cut reaction: The stock market reversed its gains and dropped after the Federal Reserve on Wednesday afternoon cut interest rates by 25 basis points to the target range of 4.25% to 4.50. The vote was not unanimous. There was one dissenting vote by Cleveland Fed President Beth Hammack, who was in favor of no cuts.

The December meeting included an update to the monetary policymakers' Summary of Economic Projections — including the excessively analyzed 'dot plots,' which provide a glimpse into where Fed members expect rates to be over the next three years and the longer term. The dot plots showed a median forecast of 50 basis points of easing, or two 25-basis-point rate cuts, in 2025. This suggests the Fed anticipates fewer rate cuts next year than what it expected in September. As a result, the 2-year Treasury yield surged higher. So far, it appears to be the 'hawkish cut' that we expected. Fed Chairman Jerome Powell has previously indicated that central bankers are in no rush to cut rates, and every decision made will be data-dependent. Powell is talking to reporters at his post-meeting press conference. We are monitoring his comments and will update this story as needed. Obesity race: The obesity arms race continues to heat up. This time it was Merck throwing its hat in the ring in a deal with a Chinese drugmaker that could be valued as much as $2 billion. The lead asset acquired in the deal is an experimental oral GLP-1. The Chinese company's drug is in the preclinical stage and hasn't entered human trials. Wall Street has been waiting for Merck to get into this market, but we think it's way too premature to say this is a potential threat to the dominance of Novo Nordisk and Club name Eli Lilly in this class of drugs, which are used primarily to treat obesity and diabetes

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