Wall Street stumbles as oil surges, and Lilly takes a new path on next-gen obesity drug

Breaking news from the markets: 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. Stocks are pulling back Thursday as several crosscurrents weigh on the market. It's a difficult moment, and what's currently holding us back from buying this dip is the move in oil and the impact it has on bond yields.

As the conflict in the Middle East continues, oil prices are surging, with U. benchmark WTI crude back above $90 per barrel and international standard Brent topping $100 per barrel. The move in commodities is fueling inflation concerns and pushing bond prices lower, sending the yield on the 10-year Treasury to 4.

Economic Details

70%, its highest level since January 2025. Monetary policy expectations can change rapidly, but this week has been a tough one for the doves. Although current market probabilities still suggest the Federal Reserve will hold rates unchanged at next week's Federal Open Market Committee meeting, the odds of a hike at the subsequent meeting are rising fast.

The market now sees a roughly 83% chance the Fed hikes in September, compared to 53% one week ago, according to CME FedWatch tool . On top of rate-hike concerns , Alphabet's negative free cash flow in the second quarter and an increased full-year capital expenditure outlook raise concerns that it and other hyperscalers are not earning an adequate return on their invested capital to support the AI buildout. While the company management teams believe otherwise , the market is penalizing them for spending more.

We're inclined to side with Alphabet due to its growing profit dollars across the business, but the results weren't enough to shake the narrative. With a more than 6% decline Thursday, Alphabet shares are on pace for their worst day of the year. In more positive news, Club name Eli Lilly announced positive results for two late-stage trials evaluating retatrutide, its next-gen obesity medication that delivers more weight loss than fellow injectables Wegovy (made by Novo Nordisk ) and Lilly's own Zepbound.

Analyst Views

While some on the Street have viewed this medication as targeted for patients who quickly need to lose weight, a growing number of voices believe the opportunity could have more mass-market appeal than previously thought. Still, the bigger story may be that Lilly plans to submit the drug for approval to the Food and Drug Administration in the first quarter of 2027. At first blush, this was viewed as a disappointment to those who expected to see an FDA filing before year-end.

However, a key difference in the regulatory pathway could have positive implications for long-term investors. There are two primary pathways pharmaceutical companies use to seek FDA approval: the traditional New Drug Application (NDA) and the Biologics License Application (BLA).

Economists are analysing what the news means for the markets.