ResMed Drops as Weight-Loss Drugs Threaten Demand

Major U.S. equities indexes ended lower on Wednesday after the Federal Reserve reduced its benchmark interest rate by half a percentage point. Central bank policymakers opted for an aggressive rate cut as the focus shifts toward economic growth and the employment market following a multi-year campaign to fight inflation.

After fluctuating in the morning and jumping higher in the immediate aftermath of the Fed’s announcement, the S&P 500, Nasdaq, and Dow turned negative in the afternoon. All three indexes closed with daily losses of roughly 0.3%.

Shares of medical device maker ResMed (RMD) dropped 5.1%, the steepest decline of any S&P 500 constituent after the investment analysis firm Wolfe Research downgraded the stock to “underperform.” With the Food and Drug Administration (FDA) likely to approve Eli Lilly’s (LLY) blockbuster weight-loss drug Zepbound for the treatment of sleep apnea, analysts expect a disruption in demand for ResMed’s devices that treat the condition. Wolfe pointed to a survey showing that half of doctors expect to prescribe fewer sleep apnea devices as patients gain access to Zepbound and other GLP-1 medications.

Shares of Avery Dennison (AVY), which provides labeling and packaging solutions as well as radiofrequency identification (RFID) tags for various markets, fell 4.9% as the company hosted its 2024 Investor Day. While the company expects the key mega-trends of digitization, sustainability, and personalization to underpin demand for its intelligent labels and other products, Avery Dennison remains sensitive to the availability and pricing of raw materials. Inventory destocking has also weighed on the company’s performance, although the issue has shown signs of improving in 2024.

Addressing a conference on the consumer and retail markets, the chief executive officer (CEO) of wholesale food distributor Sysco (SYY) said global restaurant industry traffic was down around 3% in the recent quarter and is softening further in the current quarter. Although the executive stressed that the company remains confident in its full-year guidance, Sysco shares slid 4.2% on Wednesday.

West Pharmaceutical Services (WST) shares notched the top performance in the S&P 500 on Wednesday, jumping 4.5%. In its most recent earnings report, released in July, the supplier of packaging and delivery solutions for injectable drugs reduced its full-year sales and profit outlook, noting reduced demand from biotech customers as they work through existing inventories. However, the company did predict a potential return to organic revenue growth in the fourth quarter, suggesting the destocking headwinds could abate.

Shares of the discount retailer Dollar Tree (DLTR) added 3.0% on the day. The stock has been under pressure in 2024 as the company navigates a restrained consumer spending environment and considers strategic options for its struggling Family Dollar segment. However, a Wednesday report in The Wall Street Journal highlighted how Dollar Tree and fellow dollar-store chain Dollar General (DG) are pursuing aggressive store-opening targets despite the challenging environment, reflecting confidence that new locations can drive sales growth and market share gains.

General Motors (GM) shares gained 2.4% after the carmaker said it will offer adapters that allow owners of its electric vehicles (EVs) to access the network of charging stations operated by Tesla (TSLA). Drivers of GM EVs will be able to purchase an adapter for $225 through the carmaker’s mobile apps. In other positive news for GM, the company struck a tentative deal with workers at an EV and battery plant in Ontario, Canada, reducing the chance of a work stoppage at the facility.