After Hours Summary: FUL -10%, CSX / AA / KMI -2% following earnings/guidance, CARS +8% on strategic alternative review newsAfter Hours Gainers:
Companies trading higher in after hours in reaction to news: ADMP +14.4% (Adamis Pharma's partner Sandoz launched SYMJEPI epinephrine to the U.S. market), TA +10.5% (to acquire travel center properties from HPT and amend existing leases), CARS +7.7% (announces review of strategic alternatives in pursuit of enhancement of shareholder value), PCG +6.8% (ongoing volatility), MNKD +4.5% (announces direct purchase insulin program for Afrezza), MTG +4.2% (ahead of earnings tomorrow before the open), FOLD +3.5% (upgraded to Buy at Citigroup), MS +1.5% (ahead of earnings tomorrow before the open), SAVE +1.3% (ticking higher; reports prelim Q4 total revenue per available seat mile +11.4% y/y - better than revised guidance provided on November 26), KEY +1.3% (to acquire online lending business Laurel Road; reports earnings tomorrow), SQ +1.1% (following CNBC Fast Money mention), GSK +0.9% (announces two positive phase III studies of tafenoquine for the radical cure of Plasmodium vivax malaria were published in The New England Journal of Medicine)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: FUL -10.1%, CSX -2.1%, AA -2%, KMI -1.7%
Companies trading lower in after hours in reaction to news: ACB -7.5% (proposes to offer pursuant to a private placement US$250.0 mln convertible senior notes due 2024), MRTX -1.5% (announces proposed public offering of $75.0 mln of its common shares), GCI -1.1% (after seeing late spike higher on WSJ report suggesting that Tribune Media recently tried to renew merger talks with GCI), UNFI -0.9% (pulling back from today's 28% surge higher)
>>> Up
* Axa Upgraded to Buy at Citi
* HolidayCheck Upgraded to Buy at Bankhaus Lampe
* Just Eat Upgraded to Overweight at Morgan Stanley
* Stora Enso Downgraded to Hold at Jefferies
* Takeaway Upgraded to Outperform at RBC; PT 70 Euros
>>> Down
* Aegon Downgraded to Sell at Citi
* Bulten Downgraded to Hold at Kepler Cheuvreux; PT 98 Kronor
* DBV Tech Downgraded to Neutral at Oddo BHF; PT Set to 15 Euros
* Generali Downgraded to Sell at Citi
* Genkyotex Downgraded to Reduce at Oddo BHF; PT 1 Euro
* Munich Re Downgraded to Sell at Citi
* Prosegur Cash Downgraded to Hold at Santander; PT 2.18 Euros
* RWE Downgraded to Equal-weight at Morgan Stanley
* SIF Downgraded to Hold at ING; PT 10.50 Euros
* Stora Enso Cut, Jefferies Lowers 2019 Pulp Price Estimates
>>> Initiation
* Aperam Resumed at Morgan Stanley With Equal-weight; PT 30 Euros
* Cellectis Rated New Buy at Oddo BHF; PT 26 Euros
* Celyad Rated New Buy at Oddo BHF; PT 28 Euros
* Deutsche Telekom Rated New Outperform at MainFirst; PT 17 Euros
* KPN Rated New Underperform at MainFirst; PT 2.35 Euros
* Natixis Rated New Overweight at Barclays; PT 5.90 Euros
* Telefonica Deutschland Rated New Neutral at MainFirst
* Uniper Resumed Underweight at Morgan Stanley; PT 21.50 Euros
* Valneva Rated New Neutral at Oddo BHF; PT 4.20 Euros
>>> Call
The S&P 500 gained 0.2% on Wednesday, as strong earnings from Bank of America (BAC 28.45, +1.90, +7.2%) and Goldman Sachs (GS 197.08, +17.17, +9.5%) helped keep the rally going. The benchmark index was up as much as 0.6%, but succumbed to selling pressure into the close.
The Dow Jones Industrial Average gained 0.6%, the Nasdaq Composite gained 0.2%, and the Russell 2000 gained 0.7%.
The S&P 500 financial sector carried the load on Wednesday with a sizable gain of 2.2%. Conversely, the consumer staples (-0.5%) and communication services (-0.4%) sectors underperformed the broader market.
Bank of America and Goldman Sachs climbed 7.2% and 9.5%, respectively, after both exceeded Wall Street's expectations for revenue and earnings in the fourth quarter.
Their outperformance helped underpin the strength in the financial sector, which is now up 6.6% in January. The overwhelmingly positive response to their earnings news was rooted in the idea that the results demonstrated the December negativity surrounding the stocks -- and the sector -- was overdone.
United Continental (UAL 86.36, +5.16, +6.4%) also reported better-than-expected top and bottom lines. Its strong report, and a reassuring outlook, helped lift the Dow Jones Transportation Average (+0.5%) and airline stocks as a whole.
The market has had its fair share of earnings warnings during this rally and Wednesday was no exception. Still, the stock market seemed unaffected by a fourth quarter earnings warning from Ford Motor (F 8.29, -0.55, -6.2%) and retailer Nordstrom (JWN 45.01, -2.25, -4.8%) saying its full-year earnings are expected to be at the low end of its previous outlook due to weaker-than-expected holiday sales.
The warnings may have tempered some buying interest, but it was the upbeat earnings reports that swayed investors, keeping the broader market afloat all session.
The positive reaction to earnings had the S&P 500 flirting with its 50-day moving average (2628.59) for the first time since early December -- that is, until a Wall Street Journal report indicated that the U.S. Department of Justice is pursuing criminal charges against Huawei for IP theft. The news preceded the late selling action into the close.
Separately, there was some merger news of note on Wednesday. Fiserv (FISV 72.57, -2.47, -3.3%) announced a $22 billion, or $22.74 per share, all-stock offer to acquire First Data (FDC 21.24, +3.70, +21.1%).
U.S. Treasuries ended on Wednesday on a lower note, pushing the 2-yr yield and 10-yr yield up two basis points each to 2.54% and 2.73%, respectively. The U.S. Dollar Index was flat at 96.08. WTI crude reversed course to finish higher by 0.8% at $52.33/bbl.
Overseas, UK Prime Minister Theresa May survived a no-confidence vote a day after her Brexit plan was soundly defeated. Her ability to survive the no-confidence vote was widely expected and, like Tuesday, the outcome was a non-factor for U.S. markets.
Reviewing this Wednesday's economic data, which included the NAHB Housing Market Index, Import and Export Prices for December, the Fed's Beige Book for January, and the weekly MBA Mortgage Applications Index:
- The NAHB Housing Market Index for January came in at 58 (consensus 56), up from 56 in December.
- Import prices declined 1.0% month-over-month and were down 0.6% year-over-year. Excluding fuel, they were unchanged in December and up just 0.5% year-over-year. Export prices declined 0.6% and were up 1.1% year-over-year. Excluding agricultural products, they were down 1.1% in December and up 1.0% year-over-year.
- The key takeaway from the report is that it didn't ring any inflation alarm bells that would compel the Fed to be less patient with its monetary policy approach.
- The Federal Reserve's January Beige Book noted that eight out of twelve districts reported modest to moderate growth, but contacts had become less optimistic about their expectations due to increased volatility in financial markets, rising short-term rates, falling energy prices, and trade/political uncertainty.
- The weekly MBA Mortgage Applications Index rose 13.5% versus last week's increase of 23.5%.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report and the Philadelphia Fed Index for January on Thursday.
- Russell 2000 +7.9% YTD
- Nasdaq Composite +6.1% YTD
- S&P 500 +4.4% YTD
- Dow Jones Industrial Average +3.8% YTD
Fed Beige Book SummaryOverall Economic Activity
- Economic activity increased in most of the U.S., with eight of twelve Federal Reserve Districts reporting modest to moderate growth.
- Nonauto retail sales grew modestly, as several Districts reported more holiday traffic compared with last year. Auto sales were flat on balance.
- The majority of Districts indicated that manufacturing expanded, but that growth had slowed, particularly in the auto and energy sectors.
- New home construction and existing home sales were little changed, with several Districts reporting that sales were limited by rising prices and low inventory.
- Commercial real estate activity was also little changed on balance.
- The energy sector expanded at a slower pace, and lower energy prices contributed to a pullback in the industry's capital spending expectations.
- The agriculture sector struggled as prices generally remained low despite recent increases.
- Overall, lending volumes grew modestly, though a few Districts noted that growth had slowed.
- Outlooks generally remained positive, but many Districts reported that contacts had become less optimistic in response to increased financial market volatility, rising short-term interest rates, falling energy prices, and elevated trade and political uncertainty.
Employment and Wages
- Employment increased in most of the country, with a plurality of Districts reporting modest growth. All Districts noted that labor markets were tight and that firms were struggling to find workers at any skill level.
- Wages grew throughout the country, with the majority of Districts reporting moderate gains.
Prices
- The majority of Districts reported modest to moderate increases in prices.
- Most Districts indicated that firms' input costs had risen, but reports were mixed on whether they could pass the higher costs on to customers.
- Reports often cited rising materials and freight prices as sources of cost increases, and a number of Districts said that higher tariffs were also a factor.
- While prices of most inputs were up, several Districts noted that fuel costs had gone down.
- A number of Districts reported rising home prices, while prices for commercial and industrial space either increased or were flat. Prices for agricultural commodities were generally somewhat higher.
Click here to read the full comment.
Apple is in talks with private Medicare plans about bringing its watch to at-risk seniors
* Apple is in talks with private Medicare plans about getting Apple Watches into the hands — or wrists — of millions of people over the age of 65.
* It makes a lot of sense for Apple to do that, health experts tell CNBC, since it could prevent pricey doctor or hospital visits.
* Apple has previously signed a deal with insurance giants Aetna and United Healthcare about subsidizing the cost of the watch.
Apple has been in talks with at least three private Medicare plans about subsidizing the Apple Watch for people over 65 to use as a health tracker, according to people familiar with the discussions.
The insurers are exploring ways to subsidize the cost of the device for those who can’t afford the $279 price tag, which is the starting cost of an older model. The latest version of the device, which includes the most extensive health features including fall detection and an electrocardiogram to measure the heart’s rhythm, retails for a minimum of $399, which many seniors could benefit from but can’t afford.
The talks have not resulted in any official deals just yet, the people said. Apple has paid a visit to several of the largest insurers in the market, as well as some smaller, venture-backed Medicare Advantage plans. The people declined to be named as the discussions are still private. Apple declined to comment.
Health experts say that seniors are an ideal market for the Apple Watch, which has introduced features that can be used by anyone, but are most beneficial to seniors, including fall detection and cardiac arrhythmia monitoring. It also makes sense as a business model for insurers, as seniors are a particularly lucrative market.
“It’s the segment of health insurance with the highest dollar revenue and margin per member,” explains Augustin Ruta, a health insurance consultant with A2 Strategy Group. Ruta also noted that Medicare members enrolled in these private plans tend to have lower churn rates, which gives insurers more of an incentive to invest in members’ long-term health outcomes.
A win for Apple, insurers and patients
About 19 million seniors, and growing, are enrolled in a Medicare Advantage plan, which are private health plans that receive government payouts for providing services to seniors — about $10,000 per member, on average. Consulting firm PricewaterhouseCoopers expects the Medicare Advantage market to generate more than $350 billion in annual revenue by 2020, although the market is regulated to limit insurers’ profits.
The government payments provide more flexibility for insurers running Medicare Advantage plans to invest in new technologies, like the Apple Watch, if they have a demonstrated benefit.
Apple Watch might be pricier than other trackers, such as the Fitbit, but insurance executives say they’d work with Apple if the company can show that it helps its members detect potentially serious health problems before they require an expensive intervention.
“Avoiding one emergency room visit would more than pay for the device,” said Bob Sheehy, CEO of Bright Health, an insurance start-up with a Medicare Advantage plan and the former CEO of United Healthcare.
Apple is increasingly invested in this kind of research, such as its Heart Study with Stanford University and its partnership with Zimmer Biomet to better understand through the Apple Watch how patients can more quickly recover from knee and hip replacement procedures.
The latest Apple Watch now includes an electrocardiogram, which is designed to pick up on atrial fibrillation, a condition that impacts far more people over the age of 65 than their younger counterparts, and puts them at a higher risk for stroke and other potentially fatal health outcomes. While Apple Watch doesn’t diagnose disease or replace a doctor, the company is positioning it as an “intelligent health guardian.”
Apple CEO Tim Cook told CNBC in an interview last week that health technology would be a major initiative for the company in the future.
“We are taking what has been with the institution and empowering the individual to manage their health. And we’re just at the front end of this,” Cook said. “But I do think, looking back, in the future, you will answer that question: Apple’s most important contribution to mankind has been in health.”
Cook also tweeted Tuesday about a customer who used an Apple Watch to detect a heart condition.
Glad to hear your husband is feeling better, Elissa. Stories like yours inspire us — thanks for letting us know!Elissa Lombardo@elissalom@tim_cook New Apple watch saved my husbands life this week! Only two days old and it diagnosed A-Fib and 150bpm. He went to ER which he never did with same symptoms. Found major blockage in arteries as a result. Two stents later, he is as good as new! Telling the world. Thank U!
1,789 people are talking about this
Apple’s health team is also looking to work with other large insurers outside of Medicare.
It signed a deal with Aetna in August of last year; and in November of 2018, it integrated with United Healthcare for a program that rewards those who walk at least 10,000 steps per day to subsidize the cost of watch. It is also working with life insurer John Hancock to offer a steeply discounted watch to those who live healthy lifestyles.
Business Worries About Climate Intensify; Their Actions, Less So
Though businesses consider climate change a leading global risk, they often shrink from remedies designed to address it
Every year the World Economic Forum asks 1,000 business, policy and thought leaders to rank about 30 risks facing the world by both impact and likelihood. In this year’s report, released Wednesday, climate-related risks top the list.
The WEF, which hosts its annual meeting in Davos, Switzerland, next week, has been running this exercise for 14 years. While some risks come and go with the headlines, climate has been rising steadily through the ranks and has led the list for the last three years.
If the first step to solving a problem is admitting you have a problem, this should mean climate change is well on its way to being solved. The reason it isn’t is that the world is much readier to admit climate change is a problem than to do anything about it. This is especially true of businesses in the U.S., many of whom claim concern about climate change then fight solutions that hit their bottom line.
Digging a little deeper into the WEF’s findings sheds light on this dichotomy. Asked additionally to rank only short-term risks, respondents ranked climate only 11th, well behind economic conflict between big countries, protectionism, and cyberattacks. In other words, the closer businesses and others focus on the here and now, the less pressing climate change becomes.
Perhaps this dichotomy shouldn’t surprise. Any individual business can adapt to the consequences of a warming climate, from more intense hurricanes and wildfires to rising sea levels and warming oceans. Insurers can charge higher premiums, a real-estate developer can avoid the coasts. But none can solve it. Many are investing in clean-energy technology, but customers won’t pay for that technology unless it’s cheaper than the fossil-fuel alternative. That almost always requires a policy intervention such as a carbon tax, a cap on emissions with tradable permits, or mandates such as requiring a fixed percentage of electricity to come from renewables.
Small wonder, then, that among WEF respondents’ top climate-related concern is “failure of climate change adaptation and mitigation,” in other words, an absence of policies.
It’s not that policy makers are doing nothing. On the contrary, the World Bank counted 47 carbon-tax or emissions-trading programs around the world last year covering roughly 15% of annual greenhouse-gas emissions. When China kicks off its emissions-trading system next year, that should rise to 20%.
The problem is that these schemes don’t go far enough. The vast majority charge a small fraction of the $40 to $80 per ton of carbon dioxide the World Bank says will keep emissions on track with levels agreed to in the Paris accord. The reason is to avoid a backlash from taxpayers and businesses. “You’re trying to get industries to buy into the tax initially and hope that once the regulations persist for some time, the strength of the regulation can be ratcheted up,” says Solomon Hsiang, an economist specializing in climate at the University of California, Berkeley.
And there’s the rub: businesses that are supportive of climate action become notably less so when faced with a tax, regulation or cap-and-trade plan that really bites. The U.S. Chamber of Commerce calls climate change a serious issue, yet worked to defeat Democrats’ proposed cap-and-trade plan in 2010. After it collapsed, President Barack Obama’s Environmental Protection Agency enacted a Clean Power Plan to cut power-plant emissions. The chamber and a dozen other business groups, along with Republican attorneys-general, promptly sued to overturn it. The Supreme Court stayed the plan in 2016 and last year President Trump’s EPA moved to kill it. Asked where the Chamber now stands, an official said: “We would evaluate a specific carbon tax or cap-and-trade proposal in consultation with our members.”
Since then, many businesses have concluded some sort of tax or cap-and-trade system will be necessary; some quit the chamber over the issue. They see it as a way to avoid heavier-handed regulation. Even the oil industry is coming around: BP PLC, ConocoPhillips, Exxon Mobil Corp. and Royal Dutch Shell PLC have thrown their support behind a carbon tax proposed by the Climate Leadership Council, a bipartisan advocacy group, that would be revenue neutral—i.e. the revenue it raises would be returned to households. Yet when a revenue-neutral carbon tax was put before Washington state in a 2016 ballot initiative, the oil industry declined to support it. The initiative was defeated. Last November, a second ballot initiative asked the state to approve a carbon tax that wasn’t revenue neutral. BP spent heavily to defeat it, because it exempted some carbon emitters and didn’t pre-empt future regulations. That initiative also failed.
If business opposes all but the most-flawless, market-friendly climate remedies, it is likely to end up with one of two outcomes. Legislators will ignore their advice and turn to mandates, regulations and public investments such as in the “Green New Deal” some newly-elected Democrats are touting. Or there will be no remedy at all.
Activist investor Cevian has helped solicit a bid for subscale freight group Panalpina. - https://reut.rs/2VUUMaV
Denmark’s DSV, worth $13 billion, on Wednesday lobbed an offer Panalpina’s way worth 170 Swiss francs per share in cash and stock – one-quarter above the Swiss group’s undisturbed price. Shares in the target surged to almost 180 Swiss francs, anticipating either a counterbid from long-time Swiss suitor Kuehne + Nagel or a higher offer from the Danish group.
Credit goes partly to Cevian Capital, the activist investor and 12 percent Panalpina owner which last year successfully pushed the board to fire its chairman and consider a sale. Shares fell 14 percent in 2018, but more than made that up after Wednesday’s deal-linked surge.
Panalpina’s board, which is currently pondering what to do, will probably say the DSV offer is too low and that the company has a promising independent future. That’s questionable: global trade is slowing as tariffs rise, which means fragmented air and ocean freight groups need cost-saving M&A to keep their bottom lines growing. Panalpina, which in 2017 had a 1 percent share of the global ocean freight market and a 4.2 percent chunk of air freight services, will struggle to compete with bigger peers offering lower prices to the companies whose supply chains they help manage. Analysts covering Panalpina reckon 2018 operating profit was just 8 percent of gross profit, according to Refinitiv, compared with 13 percent at larger rival Kuehne + Nagel.
Yet it’s less clear that DSV or another buyer could make a return by going much higher. At 180 Swiss francs per share – roughly where Panalpina’s stock currently trades – the effective purchase price stripping out net cash is 4 billion Swiss francs. Next assume 1.5 billion Swiss francs in 2018 gross profit rises a healthy 5 percent a year and that 16 percent of it translates into operating profit by 2023 – double the current margin. After tax at Panalpina’s 29 percent rate, the buyer’s return after five years would be 217 million Swiss francs, or just 5 percent of the purchase price. Given the sector’s probable cost of capital is 6.5 percent, using broker Baader Helvea’s estimate, the incipient M&A freight battle has questionable cargo.