What Happened?

Shares of global pharmaceutical company Merck (NYSE: MRK) jumped 4.1% in the afternoon session after Wells Fargo upgraded the stock to "Overweight" from "Equal-Weight," citing confidence in the company's future. 

The analyst also raised the price target on the shares to $125 from $90. The upgrade was based on recent business developments and progress in the company's drug pipeline. This news appeared to reduce investor concerns about a potential drop in revenue when the company's key cancer drug, Keytruda, loses its market exclusivity. The firm noted that Merck had de-risked or added significant peak sales opportunities in the previous few months.

After the initial pop the shares cooled down to $101.33, up 3.5% from previous close.

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What Is The Market Telling Us

Merck’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 3 days ago when the stock gained 3.6% on the news that comments from a key Federal Reserve official bolstered hopes for an interest rate cut. 

New York Federal Reserve President John Williams stated he sees “room for a further adjustment” in the near term, sparking a significant market rally. Following his remarks, the probability of the central bank cutting rates at its December meeting jumped from 39% to over 73%, according to the CME FedWatch tool. This positive sentiment provided relief to markets amid concerns over high valuations, particularly in AI-related stocks.

Merck is up 2.2% since the beginning of the year, and at $101.33 per share, it is trading close to its 52-week high of $103.79 from December 2024. Investors who bought $1,000 worth of Merck’s shares 5 years ago would now be looking at an investment worth $1,264.

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