Investors remain nervous on the global economic slowdown
Dow 12,573 (-0.25%) S&P 1,335 (-0.50%)
We haven’t seen a double-hat trick this bad since the Mighty Ducks movie that featured a 12-0 loss to Team Iceland (the one with the fictional int’l tournament in hockey hotbed Pasadena, CA). Stocks tumbled to their 6th straight loss on continued concerns over the global economic slowdown and corporate profits. Bank of America analysts lowered their forecasts for upcoming company earnings, the US budget deficit for June widened by over 1/3 and investors remain saddened over the lack of stimulus chatter in yesterday’s “Fed minutes” release. Despite surprising weekly jobless claims and headlines from pharmaceutical firms Merck and Procter & Gamble, the Dow slipped 31 points.
Weekly Jobless Claims fall by 26,000, largest drop in 4 years
The number of Americans filing for unemployment benefits plummeted by 26,000 this past week to reach 350,000 jobless claims total. Are you surprised by this big change after months of watching weekly jobless claims tick up/down by just 2,000-5,000 at a time? Well so were investors – So why did the biggest weekly drop since ’08 have a negligible impact on the markets? Economists point out that seasonal factors can make this number occasionally unreliable. In this case, auto factories usually close in early July, but there were much fewer shutdowns this year – a good sign of stronger-than-anticipated demand in the car industry, but a key variable to take into account for jobless claims. So investors brushed the headline aside to focus on more global econ worries (like the euro hitting a 2-year low value vs. the dollar, concerns over the TomKat divorce, etc.).
Progress on breakthrough Osteoporosis drug is a boon for Merck’s stock
The giant pharmaceutical Merck (MRK) company watched its stock jump 4.13% today due to headlines on a successful new drug to fight osteoporosis. Somebody at Merck’s R&D department better get a promotion. The drug’s trial phases were ended early because the results are too good to hold back any longer. The development of the drug is being accelerated so that post-menapausal women (the target of the drug) can benefit as soon as possible. Drug scouts know they have a star in the making that could make Merck a fortune.
Procter & Gamble rises on hopes “Activist Investor” can fix company from the inside
Personal goods conglomerate (a company that produces all sorts of products with different business segments) Procter & Gamble (PG) jumped 4% when “activist investor” Bill Ackman bought a 5+% stake of the company. People in the know say Ackman’s company bought a large sum of shares of P&G, so he has significant sway in what happens there. “Activist investors” buy shares, then they yell really loudly at the shareholders’ that the CEO’s got it all wrong. Ackman convinces others to change strategy, often against the current plan’s management. Remember, publicly traded companies are owned by shareholders, who can always vote for a new strategy if they think the boss is doing a lousy job. Ackman has a track record of putting companies on a profitable track, so this news generated a buying craze.
Tomorrow:
- Wall Street’s Big Dog JPMorgan announces 2nd quarter earnings…CEO Jamie Dimon will give clarity on the actual hit from the now-infamous trading loss ($2 billion? $9 billion? Do not pass go, do not collect $200, and go directly to jail?)
- West Coast investment bank Wells Fargo takes the stage after its East Coast rival for its quarterly earnings
- Reuters/University of Michigan consumer sentiment poll
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