What's behind Eli Lilly's down-and-up day after last week's post-earnings surge

An important development from the financial 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 pulled back from earlier-session highs amid ongoing concerns about the war in Iran. Oil prices jumped after the United Arab Emirates said its air defense system faced missile and drone attacks from Iran.

WTI crude climbed roughly $3 per barrel to $105, while Brent crude jumped about $6 to $114 per barrel. Interest rates also increased, with the yield on the 10-year Treasury jumping to around 4. 45% and the 30-year yield crossing above 5%, as the odds of a rate hike by year's end rose to 36% from 23% on Friday, according to CME FedWatch.

Economic Details

We are in the camp that a Federal Reserve led by incoming Chair Kevin Warsh is more likely to cut interest rates this year than raise them, but the committee will be in a predicament the longer energy prices stay elevated. There's some profit-taking in Eli Lilly after last week's 9% post-earnings surge , but the action looked much worse earlier, when shares were down almost $15 on news tied to its oral obesity drug Foundayo. The Food and Drug Administration said in its Adverse Event Reporting System (FAERS) that one patient experienced liver failure following use of Foundayo.

Around the time the FDA approved the medication in April, the regulatory agency asked the company for more safety data, including information on liver injury. That's why the market was initially so sensitive to the headline. However, the stock ultimately rebounded from its session lows and eventually turned positive after the company issued a statement that its patient safety division reviewed the case and determined the adverse event was "not reasonably related to Foundayo.

" The Investing Club received a full statement from a Lilly spokesperson on the matter: "Patient safety is Lilly's top priority. In line with our standard procedures, Lilly Global Patient Safety thoroughly assessed the individual report, which was submitted within days of commercial availability, and determined it was not reasonably related to Foundayo. Our confidence in the safety and efficacy of Foundayo is based on our robust clinical trial program, which followed over 11,000 participants for up to two years.

Analyst Views

Across our seven completed Phase 3 studies, the liver safety profile of Foundayo was similar to placebo and active comparator medicines, including Farxiga, Rybelsus, and insulin. No cases of drug-induced liver injury (Hy's Law) were observed, and there was no hepatic safety signal. " As we learned last week, Foundayo may not be off to the same start that Novo Nordisk's oral version of Wegovy achieved at launch, but more than 20,000 people have started taking the medication, and more than 80% of those users are new to taking GLP-1s.

That means Foundayo is not cannibalizing sales of Lilly's industry-leading injectable drugs, Zepbound and Mounjaro.

Financial markets are tracking the development closely as investors assess the likely impact.