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The S&P 500 ( SP500 ) ended the week 2.1% lower on Friday amid renewed fears that the economy could slip into recession next year as major central banks may not yet ease rate hikes. The benchmark index has posted losses in three of the five sessions, and hopes of a Santa rally this year are fading fast. Major indexes posted losses for a second week in a row, with the Dow down 1.7% and the Nasdaq down 2.7%. The week saw the Federal Reserve, European Central Bank and Bank of England all tighten as inflation remains stubbornly high. Notably, San Francisco Fed President Mary Daley said the Fed still has a “long way to go” to get inflation down to 2%. Trading was particularly choppy on Friday, when $2.6 trillion worth of options expired as part of a triple magic day. See a preview of next week’s key events that could shake up stock prices in Searching Alpha’s Catalyst Watch.

M&A shenanigans

Looking for a new drug pipeline and some blockbuster treatments, Amgen ( AMGN ) agreed on Monday to acquire Horizon Therapeutics ( HZNP ) for $116.50 per share in cash. That would value the Irish company at nearly $27.8 billion on a fully diluted basis, and nearly $28.3 billion including debt. Horizon is a biotech focused on rare autoimmune and inflammatory diseases, with revenue generators such as Tepezza, Krystexxa and Uplizna adding $2 billion in sales for the company in the first nine months of the year.

Background. Amgen was the last of three suitors standing in the Horizon auction, which included Johnson & Johnson ( JNJ ) and Sanofi ( SNY ). All drugmakers are looking to add to their pipelines, but none are getting as aggressive as Amgen. It faces one of the largest portfolios of patent expirations in the industry, which has fueled strong acquisition growth over the past two years.

In the summer, Amgen bought ChemoCentryx for $3.7 billion to boost its inflammatory disease presence. Last year, the company acquired oncologist Five Prime Therapeutics for $1.9 billion and antibody drug specialist Teneobio for about $1 billion, as well as smaller acquisitions such as tissue regeneration expert Rodeo Therapeutics for $55 million. :

Market movement. Shares of Horizon Therapeutics increased by 14% on the news, while Amgen shares decreased by 3%. The latter expects to use cash and debt to finance the deal, which is expected to close in the first half of 2023 and become accretive to revenue and non-GAAP earnings per share from 2024. However, Amgen did not update the 2022 or 2030 dates. as a result of the guide transaction. (20 comments)

The fusion revolution

On Tuesday, investors watched for an announcement from the US Department of Energy that could shake up how we power our world. In the laboratory of Lawrence Livermore of California, which is based on fusion technology, a great achievement has been recorded. It’s the same process that powers the sun and stars, and could eventually lead to an unlimited source of cheap, clean energy.

Image: A breakthrough, known as a net energy gain (or target gain), means that more energy was produced by the fusion reaction than was consumed. Scientists produced the effect using the world’s largest laser, known as magnetic confinement fusion. A small amount of hydrogen plasma, held together by powerful magnets, was heated to extreme temperatures, resulting in the fusion of atomic nuclei and 20% more energy than used in lasers.

“If this is confirmed, we are witnessing a moment in history,” said plasma physicist Dr. Arthur Turrell. “Scientists have struggled to show that fusion can release more energy than is put in since the 1950s, and researchers at Lawrence Livermore appear to have finally and utterly crushed this decades-old goal.”

Outlook: While things are still in the early stages, the trick will be to make the process self-sustaining, to use enough energy to power the infrastructure, and to do so continuously. Fusion also has no radioactive waste associated with current reactors that use fission, and has the potential to easily outperform other clean energy sources like solar and wind in terms of output. Fusion supporters say the technology could be commercialized in a decade or so, but many are more skeptical of such a timeline, saying there is too much hype from companies seeking government subsidies and private investment. (151 comments)

Long way to go

As widely expected, the Federal Open Market Committee raised its policy rate by 50 basis points to 4.25%-4.50% on Wednesday, as it eased from a 75bp increase in its previous four meetings. While this would be profitable for investors, the so-called “spot plot” was more of a concern. The median forecast of Fed policymakers now sees the federal funds target range widening to 5.1% next year, a rate last seen in 2007, compared with the central bank’s September forecast of 4.6%.

Quote: “We have to be honest with ourselves that there is inflation. 12-month core inflation is 6% CPI. That’s three times our 2% target. It’s good to see progress now, but let’s just realize that we have a long way to go to get there. to return to price stability,” Fed Chairman Jerome Powell said at a press conference. “I don’t think anybody knows whether we’re going to have a recession or not, and if we do, whether it’s going to be deep or not. Simply, it is unknown… The historical record warns. strongly opposes the policy of early relaxation, we will continue until the job is done.”

The three major US stock indexes retreated after the announcement, erasing the previous session’s gains. The sell-off accelerated on Thursday as the ECB and BoE raised interest rates and whispers of a recession turned into screams. Interest rate hikes are tricky in that monetary policymakers may not know for another year whether they tightened too much or not enough (economists call these effects long and variable lags).

Comment: “The Federal Reserve’s decision to lower the pace of interest rate hikes to 50 bps marks the beginning of the end of this rate hike cycle,” said SA investor Ahan Vashi. “However, a reduction in interest rate growth is not key, and the Fed’s quantitative easing program is likely to continue for the foreseeable future. With the Fed tightening into a deeply inverted Treasury yield curve, the near-term environment should be risky. Equity markets may therefore see increased volatility in the coming weeks.” (256 comments)

From famous to infamous

Sam Bankman-Fried’s bust could end up with some jail time. The founder and former CEO of FTX was arrested in the Bahamas this week after the US filed criminal charges against the one-time crypto superstar (and requested his extradition). The charges include wire fraud, wire fraud conspiracy, commodities fraud, securities fraud, securities fraud conspiracy, money laundering and violation of campaign finance laws.

Interesting dates. Just before his arrest, SBF was scheduled to testify before the House Financial Services Committee about the collapse of FTX, which was once worth about $32 billion before it imploded. More information is still needed, but all clues point to acid bets made by SBF’s hedge fund, Alameda Research, which used FTX customer deposits for high-risk trades. There were massive withdrawals from FTX as information emerged about its finances, although to this day SBF has denied any prior knowledge of the situation or providing FTX customer deposits to finance Alameda’s operations.

Some details were later revealed by John J. By Ray III, FTX’s new CEO, during testimony on Capitol Hill. “We continue our painstaking forensic efforts to account for all assets,” said Ray, who has more than 40 years of legal and restructuring experience, including overseeing the high-profile bankruptcy of Enron in 2001. from the absolute concentration of control in the hands of a very small group of highly inexperienced and unsophisticated individuals who failed to implement in practice any of the systems or controls necessary for a company entrusted with other people’s money or assets.”

Civil action. In addition to the criminal charges, SBF is being separately charged by the Securities and Exchange Commission with violating securities laws. Other civil lawsuits have been filed by the Commodity Futures Trading Commission, and state banking regulators may also be involved. “I saw myself as a model CEO who wouldn’t get lazy or disengage. Which made it all the more devastating when I did it,” SBF wrote in his last tweet before his arrest. “I am sorry: I hope people can learn from the difference between who I was and who I could be.” (276 comments)

Economics of the World Cup

The 2022 World Cup in Qatar has proven to be the most controversial to date, but many sides are reaping the benefits the competition offers. There have been a number of upsets in the tournament this year, giving even greater exposure to viewing figures, with France facing Argentina in Sunday’s final. Based on historical growth trends, around 1.5 billion people around the world are expected to watch the championship game, representing nearly one-fifth of the people on Earth.

Bottom line. It’s a great platform to get your message across. In terms of cash, the host countries do not profit from the Games, although it raises their profile on the world stage and projects soft power as a good place to do business. Advertisers, on the other hand, hope to ring the ledger for their marketing efforts, where commercials, jerseys and stadium banners will be seen by billions of eyes. This year’s affiliate sponsors are Adidas ( OTCQX:ADDYY ), Budweiser ( BUD ), Coca-Cola ( KO ), Hyundai ( OTCPK:HYMPY ), McDonald’s ( MCD ), and Visa ( V ).

“If they felt really strongly about it, they could pull out of those markets,” Kieran Maguire of the University of Liverpool said when asked about trade deals, despite controversy over political restrictions on Qatar’s treatment of migrant workers and the LGBT community. phrase and allegations of bribery to organize the tournament. “We had the 2018 World Cup in Russia, and remember Russia invaded and annexed Crimea in 2014, but that didn’t stop any of the sponsors from getting involved.”

A little stretch? Some argue that the World Cup champion country could see a percentage point increase in GDP after the event due to greater international visibility. However, the linkages between exports and trade are difficult to assess and may also be influenced by external factors or trends in the global economy.


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