Financial Review

Still Too Hot

…..Oil stockpiles drop and oil prices drop – bears in charge. Drug prices zoom on dereg draft. Repeal and replace unveiling tomorrow – what’s not to hate? Opioids ubiquitous. Existing home sales, tight inventory, higher prices. Bank lending tightens. We’re number 18. Kalanick’s ride ends. Nike goes Amazon. Sears Canada goes bust. UPS’ Christmas gift to us all. London Whale blames Jamie Dimon.

Financial Review by Sinclair Noe for 06-21-2017

 

DOW – 57 = 21,410
SPX – 1 = 2435
NAS + 45 = 6233
RUT – 3 = 1399
10 Y + .01 = 2.16%
OIL – 1.06 = 42.45
GOLD + 3.70 = 1247.30

 

The Energy Information Administration reports American crude stockpiles fell by 2.45 million barrels last week and gasoline supplies slid by 577,999 barrels. Meanwhile, oil production rose to 9.35 million barrels a day, the highest level in almost two years. The report did nothing to sway oil traders from their bearish positions. Brent crude dropped below $45 for the first time in 2017.  West Texas Intermediate dropped 1.06 to 42.45 a barrel. Potentially bullish factors failed to lift prices, including Tropical Storm Cindy halting service at a major oil terminal in the Gulf of Mexico, a shake-up in the Saudi royal family, and Iran’s Oil Minister saying that OPEC may decide to make deeper cuts. That sent energy shares in the S&P 500 Index to the lowest level in two months. Chipmakers helped lift tech stocks. Healthcare and Biotech shares helped lift the Nasdaq to positive territory. The Nasdaq Biotechnology Index is up 8% this week.

 

A draft of an executive order on drug prices appears to give the pharmaceutical industry much of what it has asked for — and no guarantee that costs to consumers will drop. The four-page document, obtained by the New York Times, contains several proposals that have long been championed by the industry, including strengthening drugmakers’ monopoly power overseas and scaling back a federal program that requires pharmaceutical companies to give discounts to hospitals and clinics that serve low-income patients. The proposed order does little to specifically call out the drug industry and instead focuses on rolling back regulations.

 

Senate Republicans have been working for weeks behind closed doors on legislation aimed at repealing and replacing major portions of the Affordable Care Act. Tomorrow, they are expected to unveil their plan. The Republican-controlled House of Representatives narrowly approved its version of repeal last month. An estimated 23 million people could lose their healthcare under the House plan, according to the non-partisan Congressional Budget Office. The Senate proposal cuts off Medicaid expansion more gradually than the House bill, but would enact deeper long-term cuts to the health-care program for low-income Americans. Senate Majority Leader Mitch McConnell said on Tuesday the Senate healthcare bill would be different from the House version, but he did not elaborate. Given the opposition of all Senate Democrats to repealing Obamacare, Republican leaders will need the support of at least 50 of the chamber’s 52 Republicans to ensure passage. The bill will be brought to the Senate floor once the CBO has assessed its cost and impact, likely next week. Even if the Senate measure does pass the upper chamber, it will still have to pass muster with the more conservative House before any legislation could be enacted. A Roper Center analysis shows the proposal with just 29 percent support, making it the most unpopular piece of legislation Congress has considered in decades. There is no state in the union where a majority of voters support the bill.

 

Meanwhile, a new report, released by the Agency for Healthcare Research and Quality (AHRQ), says the coast-to-coast opioid epidemic is swamping hospitals, showing 1.27 million emergency room visits or inpatient stays for opioid-related issues in a single year. The report puts Maryland at the very top of the national list for inpatient care. The state, already struggling with overdoses from heroin and prescription opioids, has seen the spread of the synthetic opioid fentanyl, which can be mixed with heroin or cocaine and is extraordinarily powerful. Opioid-related deaths in Maryland had nearly quadrupled since 2010, and deaths from fentanyl had increased 38-fold in the past decade. Baltimore City saw 694 deaths from drug and alcohol-related overdoses in 2016 — nearly two a day, and a big spike from 2015, when 393 people died from overdoses. Drug overdoses, which range from prescription painkillers to heroin and fentanyl, cause the majority of fatal overdoses. In 2015, opioid overdoses killed 33,039 Americans, according to data that the Centers for Disease Control and Prevention. The sharpest increase in hospitalization and emergency room treatment for opioids was among people ages 25 to 44. The new report shows that women are now as likely as men to be admitted to a hospital for inpatient treatment for opioid-related problems. The report identifies big increases in hospitalizations among people older than 65, but those cases predominantly result from reactions to prescription medication, rather than from overdoses or the use of heroin or other illegal drugs.

 

The National Association of Realtors reports  existing home sales were up 1.1% in May, at a seasonally adjusted annual 5.62 million rate.  April’s sales stood 2.7% higher than a year ago, and marked the third-highest selling pace of the past year. The median number of days a property spent on the market dropped to a fresh low of 27 days. There were 1.96 million homes for sale at the end of the month, 8.4% lower than in the same period a year ago. Lower supply amid sturdy demand nudged prices higher again. The median sales price in May was $252,800, a new all-time high and 5.8% higher than a year ago. May marked the 63rd straight month of yearly price gains. The Realtors called the pace of price appreciation “unsustainable” and noted that “some would-be buyers are having to delay or postpone their home search” because of low supply.

 

Confidence and business activity have climbed since the election. The economy seems to be muddling along. This would typically be good for banks, as demand for loans should be higher. However, bank lending has fallen significantly since last year. Total bank loans have grown just 4.6% since February 2016, the weakest showing since 2014. Business loans rose 3.9%—the slowest growth rate in nearly six years—and were the worst-performing segment. The main reason for the tepid economic growth over the last eight years has been a lack of business investment. Many thought improved consumer confidence and business activity were signs that this trend had reversed. So far, it appears the opposite has happened.

 

America leads the world when it comes to access to higher education. But when it comes to health, environmental protection, and fighting discrimination, it trails many other developed countries. The Social Progress Index released this week is compiled from social and environmental data that come as close as possible to revealing how people live. America came in at number 18.

 

The Trump administration made its final plea to the U.S. Supreme Court to allow its proposed ban on travelers from six Muslim-majority countries to go into effect as the justices weigh how to handle the hotly contested dispute. The court papers filed today complete the briefing on the government’s emergency application asking the justices to block lower court injunctions in favor of challengers to the ban.  Lawyers for the state of Hawaii and individual plaintiffs in Maryland urged the high court not to allow the ban go into effect. The Supreme Court could now act at any time.

 

Travis Kalanick has resigned from his job leading Uber, giving up on his effort to hold onto power as self-inflicted scandals enveloped him and the company he co-founded. Pressure from investors, who have poured more than $15 billion into the company, ultimately did what the board could, or would, not: It convinced the 40-year-old chief executive to step aside. Uber is now in need of a new CEO.

 

The world’s largest sportswear maker and the world’s largest online retailer might finally work together. According to analysts at Goldman Sachs, Nike will start selling directly on Amazon.com. Nike’s shoes, apparel, and accessories are already sold on Amazon, but from third-party sellers and unlicensed dealers that purchased the product wholesale from Nike. Selling directly on the site eliminates a layer between Nike and the consumer, allowing the company to better control pricing and presentation. It’s not quite direct to consumer, but it’s a lot closer. Goldman sees it as a deal worth potentially up to $500 million of revenue yearly — an additional 1% of global sales for the Nike. Nike’s biggest competitors — Adidas and Under Armour — already sell directly on Amazon, and they both have fancy splash pages that highlight the the newest and best product the companies have to offer. Dick’s Sporting Goods and Foot Locker, some of Nike’s biggest retailers, were both down on the news of the increasing competition. Dick’s neared an 18-month low, while Foot Locker fell below a three-year-low.

 

Sears Canada is preparing to seek court protection against creditors in a move that will likely lead to a liquidation, according to reports by Bloomberg and Reuters. The company was spun off in 2012 from Sears Holdings, which owns Sears’ US business. Sears Holdings still holds 12% of the Canadian business’s stock. Eddie Lampert, the CEO of Sears Holdings, owns 45% of Sears Canada’s shares. Sears Canada said earlier this month that it had “significant doubt” about its ability to stay in business, and was looking at a possible restructuring or sale.

 

UPS said today that, for the first time, it will assess a surcharge on peak holiday season deliveries in the US in an effort to recoup the higher costs that come with managing the peak surge.

 

Wal-Mart is telling some technology companies that if they want its business, they can’t run applications for the retailer on Amazon’s cloud-computing service, Amazon Web Services.

 

Bruno Iksil, the former JPMorgan Chase trader at the center of the “London Whale” trading scandal, has accused the bank’s Chief Executive Jamie Dimon of laying the ground for the $6.2 billion loss. In an account on his website, Iksil, who traded credit derivatives for JPMorgan in London, also blamed senior executives at the bank.

 

 

 

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