Good Morning Investors!!! Inflation was steady in the latest Consumer Price Index (CPI) report, but shelter (rent) and food prices stayed hot, so the Federal Reserve may not rush to cut rates, so the Federal Reserve (US central bank) may not rush to cut rates. Bond traders also had a fresh worry tied to headlines about the Fed Chair, and that can move Treasury yields (government bond rates) fast. Today brings a jam-packed 8:30 AM ET data drop plus big bank earnings, so expect a few extra market wiggles. We will also zoom in on why pharma is in deal mode and what Boston Scientific’s big bid for Penumbra says about the race in stroke care.
Key Market DriversInflation held steady, but food and rent did not: The Consumer Price Index (a monthly inflation report) rose 0.3% in December and was up 2.7% from a year ago. Core CPI, which excludes food and energy, rose 0.2% and was up 2.6% year over year, with shelter (including rent) doing most of the lifting. That keeps the Federal Reserve (US central bank) in “pause” mode, with traders looking for rates to hold at 3.50% to 3.75% at the Jan. 27-28 meeting. For stocks and bonds, cooler inflation is good news, but the sticky basics mean cuts may come slowly. 
InvestorsGrow Inflation – 20 Year Chart
A Fed drama is leaking into bond rates: News of a U.S. Department of Justice (DOJ) (top federal law agency) probe into Fed Chair Jerome Powell had bond traders reaching for the antacid. Investors fear that if politics leans on the Fed, future inflation (prices rising over time) could be harder to tame. When that fear pops up, buyers often demand higher long-term Treasury yields (the interest paid on government bonds) to lend for 10 or 30 years. Higher long rates can flow straight into mortgages and car loans, and they can also weigh on growth stocks that rely on future profits. Earnings season opens with a tug-of-war: Big banks posted higher profit and loan growth, but investors still sold the group after mixed results and talk of a 10% credit card cap. Bank of America said average loans rose 8%, yet the S&P 500 fell 0.5% at Wednesday’s close. Overnight, Taiwan Semiconductor Manufacturing Co. (TSMC) said it plans to spend $52 to $56 billion in 2026 on new plants. S&P 500 futures were up 0.3% and European chip shares jumped, a nod to artificial intelligence (AI). Oil swung hard on Iran headlines: Oil prices sank more than 4% after comments eased fears of a near-term U.S. strike on Iran, and Brent gave back a jump above $66 from Wednesday. Brent crude was near $63.68 a barrel and West Texas Intermediate (US oil benchmark) near $59.34. The bigger picture is still messy, with unrest in Iran and supply questions from Venezuela and the Black Sea. The Energy Information Administration (EIA) (US energy data shop) expects oil inventories to grow by about 2.8 million barrels a day in 2026, which can cool energy stocks and damp inflation. |
Thoughts from InvestorsGrow:
Today at 8:30 AM ET we’ve got a data bundle (Initial Jobless Claims + Empire State + Philly Fed + Import/Export Prices). If Initial Jobless Claims (weekly count of new jobless filings) comes in much higher than expected, traders may read it as more layoff risk. That can push Treasury yields (bond interest rates) down, but it can also spook stocks if “slowdown” is the headline.
UPDATE: Initial Jobless Claims (weekly count of new jobless filings) came in at 198,000, below the 215,000 forecast we flagged, which keeps layoffs low. That is good for growth since more people keep paychecks and keep spending, but it can also keep Treasury yields (bond interest rates) firm because the Fed has less reason to cut fast. On the factory side, both regional surveys improved, with the Empire State index at 7.7 and the Philly Fed index at 12.6, which suggests manufacturing started the year with more pep. Import prices rose 0.4% and export prices rose 0.5% over the two months through November (October data was skipped), a small hint that price pressure is not fully gone. Net, this data bundle reads “economy still steady,” which can help earnings, but it may keep the market from getting too comfy about quick rate cuts.
On the flip side, a lower-than-expected claims number can say the job market still has good grip. That often lifts yields because fewer rate cuts get priced in. And yes, stocks can still wobble on “good news” if it means money stays pricey.For earnings, big financial names can set the mood early because they touch so many parts of the market. Watch what they say about deal activity, trading days, and client risk-taking. If they sound upbeat, it can feel like the economy is humming. If they sound cautious, it can feel like the music is slowing.
Tomorrow’s Industrial Production and the NAHB Housing Market Index help answer a simple question: is the real economy still moving, or just talking? A strong factory read plus better builder mood tends to support “soft landing” hopes. Weak prints can raise growth worries, especially if rates are still not low.
Pharmaceuticals
Pharmaceuticals are firms that make and sell drugs and vaccines. They matter because people still need medicine in good times and bad, so demand can be steadier. The SPDR Pharmaceuticals ETF (XPH), an exchange-traded fund (ETF), is up about 30% over the past year.
The big driver right now is deal season. Many large drug makers face a “patent cliff” (when key drug patents end and copycats show up), so they are hunting for new products to keep sales growing. That can mean mergers and acquisitions (M&A) and more use of artificial intelligence (AI) to sharpen drug trials. Deals can give a stock a quick pop, but paying too much can hurt for years.
Merck & Co. (MRK):
Merck is best known for Keytruda, a top cancer drug, plus a big vaccine business. Its edge is a deep cancer pipeline and a habit of adding new assets when it needs them. Next update: earnings Feb. 3, with investors listening for plans around patent pressure later this decade.
Pfizer (PFE):
Pfizer is a huge global drug maker, with scale in research, sales, and manufacturing. That size can help it cut costs and push new drugs, but it also has to replace fading COVID-era sales. Next update: earnings Feb. 3, with focus on 2026 guidance and its pipeline.
AstraZeneca (AZN):
AstraZeneca is a Britain-based drug maker with a large American footprint and a heavy focus on cancer drugs. It stands out for steady growth from expanding how its drugs are used, not just one “lottery ticket” product. Next update: full-year results Feb. 10, with attention on pipeline progress and its push to use AI in cancer research.
InvestorsGrow Takeaway:
Pharma can be “boring in a good way” when markets get jumpy. Watch patent cliffs, deal discipline, and real trial results more than headlines.
Boston Scientific (BSX)
Boston Scientific (BSX) makes medical devices, which are the tools doctors use to treat heart and blood vessel problems. If a hospital is a workshop, Boston Scientific sells the precision tools. It tends to earn more when hospitals do more procedures.
This morning, Boston Scientific agreed to buy Penumbra (PEN) for about $14.5 billion. Penumbra focuses on devices that remove blood clots, which is a key part of stroke care and other urgent cases. The offer values Penumbra at $374 per share in a cash-and-stock deal. Penumbra shares were up about 10% while Boston Scientific was down about 4% in premarket trading
Why does this matter? The deal is a clear bet on a fast-growing area as more patients need care for blocked blood vessels. Boston Scientific plans to pay about $11 billion in cash using cash on hand plus new debt, so investors are watching the near-term math closely. Dilutive: the deal can lower profit per share, at least at first. One plain datapoint: Penumbra expects about $1.4 billion of 2025 revenue, up roughly 17% from 2024.
What to watch next is the cleanup work. Penumbra shareholders still have to vote, and regulators still have to sign off. Also watch Boston Scientific’s earnings call on Feb. 4 for detail on how it plans to blend products and keep costs in check.
InvestorsGrow Takeaway:
Boston Scientific is buying growth, not cutting coupons. If Penumbra’s clot-removal tools keep gaining use and Boston Scientific can scale them through its large sales team, the long-term upside is real. The red flags are the price tag, added debt, and the risk that the deal takes longer than planned to deliver results.
