Central Bankers Rethink Views on Inflation
Symposium reexamines forces that impacted consumer prices during the financial crisis
JACKSON HOLE, Wyo.—Central bankers aren’t sure they understand how inflation works anymore.
Inflation didn’t fall as much as many expected during the financial crisis, when the economy faltered and unemployment soared. It hasn’t bounced back as they predicted when the economy recovered and unemployment fell.
The conundrum challenges much of what central bankers thought they understood about the world, as well as their ability to do their job. How will they know when to raise or lower interest rates if they’re unsure what causes consumer prices to rise and fall?
“There is definitely less confidence, a lot less confidence” about how inflation works,James Bullard, President of the Federal Reserve Bank of St. Louis, said in an interview here Friday.
The mysterious path of inflation during the crisis and post-crisis era is the main topic at the Federal Reserve Bank of Kansas City’s annual economic symposium here, where Fed officials, academics and global central bankers gather every August to discuss economic issues.
Inflation dynamics are more than an academic issue. Fed officials are considering whether to raise short-term interest rates from near zero, where they have been since December 2008. The Fed’s main sticking point is that inflation has run below its 2% target for 39 straight months. Inflation is lower than central bank objectives throughout the developed world, despite exceptionally low interest rates and other extraordinary measures aimed at driving it higher.
Before raising rates, Fed officials want to be confident inflation will rise to 2%. They have a theory it will. Unemployment is falling—reaching 5.3% in July—and slack in the economy appears to be diminishing. As supplies of labor and productive capacity become more constrained, officials believe wages and prices will rise.
So far, however, there are few indications that’s happening. The Commerce Department reported Friday that U.S. consumer prices rose 0.3% in July from a year earlier, well below the Fed’s goal. Stripping out volatile food and energy categories, officially measured inflation also runs below 2%.
The economy’s performance has “really challenged” the notion of a strong link between unemployment and inflation, Mr. Bullard said on the sidelines of the conference. The existence of such a link was also challenged in the 1970s, an era of high inflation and high unemployment.
“The inflation process has not been responding as much as many have expected to the cycle of the economy,” said Athanasios Orphanides, former governor of the Central Bank of Cyprus and a longtime Fed staff economist who now is a professor at MIT’s Sloan School of Management, in an interview. As a result, he said, the Fed “should be a little more uncertain about forecasting inflation than it was.”
One paper presented at the conference here shows how economists are rethinking basic notions about how inflation behaves. Economists typically expect firms to cut or hold down prices in a downturn to keep customers. Simon Gilchrist, a Boston University professor, and Egon Zakrajsek, a Fed board economist, found some firms behave much differently in a financial crisis. When cash is constrained and credit drying up, financially stretched firms instead tend to raise prices to get more cash on hand right away, even if it means losing customers in the long-run, they found.
“Firms behave oddly in a crisis,” Mr. Gilchrist said here during a panel discussion of his paper.
Other trends are challenging the Fed’s inflation forecast, including the decline in oil prices and the rising value of the U.S. dollar against other currencies. In theory a strong currency should put downward pressure on imported prices and inflation. Another conference paper found relatively little pass-through from movements in the dollar to U.S. import prices and domestic inflation. However exchange rate effects on inflation can be strong in other economies.
Today’s uncertainty is a turnabout in a community that gave itself credit for figuring out and taming inflation after bringing it down sharply from double-digit rates in the 1970s.
The Fed’s thinking about inflation forces has changed before. For a while in the 1980s the central bank focused on managing the growth of the supply of money in the banking system. One view was that the purchasing power of dollars was closely connected to the supply of dollars in the economy. The Fed gave up on this approach in the 1990s when links between measures of money supply and measured consumer prices seemed disconnected.
Since then, central banks moved toward setting inflation targets and trying to reach them by adjusting interest rates, often in response to the amount of slack in the economy, as shown in unemployment rates and other measures.
Fed officials had grown highly confident right up to the financial crisis that they could manage inflation. In 2006, then-Federal Reserve Bank of San Francisco President Janet Yellen said the Fed had “earned its credibility: It has a long track record of delivering low and stable inflation."
Two years later, Ms. Yellen said that different forces contributed to U.S. inflation’s decline in the 1980s and 1990s, but much of the credit should go to Fed policy—and the public’s trust that the Fed had both the ability and will to control inflation.
Credibility and trust today are a centerpiece of the Fed’s thinking on how to manage inflation. Economists believe that inflation in the present is driven importantly by the expectations that households and businesses have for inflation in the future. When expectations are anchored, they believe, inflation will remain stable. If expectations shift up or down, actual inflation could follow.
Here, too, the Fed is getting mixed messages. Low yields on government bonds suggest investors expect very low inflation well into the future. Surveys of households and businesses, on the other hand, have been stable since the crisis.
If bond yields are right and the Fed is losing the public’s trust that it can return inflation to 2%, it might become a self-fulfilling prophecy.
Weekly Market Update: Volatility Shakes Up Complacent Markets
After China refrained from expected stimulus moves over the weekend, global markets went into hysterics on Monday morning. Chinese stocks went negative on the year, helping to trigger a mini flash on at the New York open, sending the S&P 500 into its first correction in three years. China fears hit emerging markets again, exacerbating tensions in the market that were already on edge about the uncertainties surrounding an impending Fed rate hike. Chinese stimulus finally materialized after the Shanghai market closed on Tuesday, helping to reverse US stocks that morning though they retested the Monday lows by the end of the session. The fever broke on Wednesday as Chinese stocks stabilized, and bargain hunters began pouring in, sending most global equity markets higher through the back half of the week. Trading volumes remained very heavy during what is normally a quiet late August week and currency and commodity markets experienced wild volatility spikes as well. By the end of a week that shook complacent markets, the DJIA ended with a 1.1% gain, the S&P500 was up 0.9%, and the Nasdaq added 2.6%.
With markets on fire, all eyes were on Beijing to do something (chatter favored a big, meaty RRR reserve ratio cut) before the open of trade on Monday to stop the bleeding. China's policy response did not impress: regulators said China's national pension fund was now authorized to invest in the stock market, and the stock slide continued unabated. The action was so bad that Apple CEO Cook was compelled to release a statement to help calm markets saying the company was seeing strong growth in China in July and August, with iPhone activations up over recent weeks. No further extraordinary Chinese actions arrived during the Asia session on Tuesday and the Shanghai tanked another 7.6%. With the smell of fear everywhere, the PBoC finally stepped in with a 50 basis point RRR cut and lowered key deposit and lending rates, in a move that seemed to be timed to trap the short sellers that the government has been railing against.
Massive volatility once again called into question the ability of market infrastructure to function efficiently and effectively in times of heightened stress. The NYSE opened Monday amid price dislocations that harkened back to the 2010 Flash Crash. Historically liquid market bellwethers opened down as much as 20% in some cases, before buyers swooped in and prices gapped higher, never to get near those opening lows again. At those opening levels the DJIA was down over 1,000 points, while the VIX volatility index was unable to get reliable data until 30 minutes later, when it opened above 50, the highest level in the fear gauge since 2008. The eye popping volatility was not just limited to the equity markets. Currency markets went haywire on Monday as well when three big figure ranges were seen in the USD/JPY and EUR/JPY. Talk of carry trade unwinds and recalibration resulting from potential changes in central bank outlooks resulted in excessive selling in the Greenback. By Friday the Euro fell more than 550 pips from the week's 1.1712 high while the USD/JPY rallied 3 big figures from a 1.1818 low. Emerging markets and their respective currencies remained notably weak as macroeconomic trends and political concerns continue to weigh on sentiment.
The second reading of US Q2 GDP was much improved, rising to an annualized rate of +3.7% from the advance reading of +3.2%. The surprise gains were concentrated in private domestic spending, which was revised higher to +3.3% from +2.5% prior. Note that import and export growth rates were both revised slightly lower from the advance data.
July economic data published this week continued to look pretty strong, with one exception. New home sales rose at an annualized rate rising to +507K from June's slightly revised rate of +481K, for a 26% y/y growth rate. Supply remains an issue, with the stock of new homes still half of what was on offer at the height of the boom years, but still at its highest level since 2010. In the advance durable goods report, both the headline and key capital goods orders crushed expectations. Capital goods orders saw their second straight increase and the biggest gain in over a year. The exception was the July PCE report, where the key core y/y figure dropped to 1.2% from 1.3% in June. The slight deceleration adds to the Fed's headaches, as it strengthens the perception that inflation levels are headed in the wrong direction.
Fed speak was rampant ahead of a weekend packed with central bank speeches at Jackson Hole. Overall the comments indicated that while the market turmoil would factor into the FOMC's considerations, September remains live for a possible rate hike depending on the data, and even if they don't act next month, its unrealistic to think the Fed will push liftoff to next year. Kansas City Fed President Esther George said there would be sufficient time before the September meeting to assess the impact of volatile markets, and reiterated that it has been her view for a while that the US is ready for rate hikes. Moderate Fed President Lockhart was more cautious, warning in two speeches that he was less positive about a September hike given what's going on, but that the Fed would most likely raise rates this year. Even the dovish New York Fed President Dudley said that while a September rate hike might look less compelling now than it did a few weeks ago, normalization could very well look more attractive by the time of the September FOMC meeting if the data pans out. Finally, Fed Vice Chair Fischer said on Friday he was watching in particular how China's devaluation unfolds, but that there is still a pretty strong case to be made for a September rate hike. Fischer noted the Fed still has two more weeks of data to observe before making a rate decision.
Poised on the ledge of $40/bbl as trading opened on Sunday, WTI crude futures plunged to an intraday low of $37.75 on Monday as the dollar weakened and equities burned, settling at $39 that day, the lowest level since March 2009. Brent bottomed out on Monday around $42. The snapback began almost immediately and prices rallied through Friday's close, breaking a 10-week run of declines, driven by short covering. Prices gained 10% on Thursday alone, the biggest one-day rise since the rally off the bottom in March 2009. Both the weekly API and DoE reports showed big, unexpected crude inventory drawdowns, and Venezuela was reportedly clamoring for an emergency OPEC meeting to address falling prices (reports suggest Gulf OPEC states still believe the price declines will help lower market oversupply, despite plenty of evidence to the contrary).
Coal names saw very strong gains this week as troubled industry players disclosed reorganization plans and investors picked over the bones of the beleaguered sector. Walter Energy filed plans for reorganization under Chapter 11 bankruptcy and Peabody Energy hired Lazard to help advise in the restructuring of its $6.3 billion debt load. Just a week ago, Arch Coal began a debt exchange with its creditors in order to avoid filing for bankruptcy. At its best levels, BTU was up 50% on the day, but has come off those levels. ACI is up 25% on the day. Arch gained more than 100% on the week, while Peabody was up about 40%. Elsewhere, activist investor Carl Icahn picked a bottom in Freeport McMorran, disclosing a $1 billion position in the copper mining giant.
Best Buy had an excellent week, gaining 20% over last Friday's close after the firm's second-quarter results firmly topped consensus expectations on solid y/y growth in both net income and revenue. Apparel retailers Abercrombie & Fitch reported a positive surprise with a small profit versus expectations for a loss in its second quarter, and while comps remain negative they appear to be moving off their worst levels, which helped the stock achieve double digit percent gains on the week.
The biggest deals this week came in the energy sector, with Southern Company reaching a deal to buy AGL Resources and Schlumberger snapping up Cameron International. Southern will pay $8 billion in cash for AGL, or $66/share, a 38% premium to the close. The deal gives Southern a large network of natural gas transport pipelines, complementing its gradual move away from coal and toward natural gas and renewable power generation. Schlumberger grabbed flow equipment specialist Cameron for $14.8M in cash and stock. Monsanto abandoned its unsolicited $45 billion bid to acquire Swiss agribusiness giant Syngenta after some large Monsanto holders aired their objections to the deal. Heath care was not left out: there were press reports that medical device name Abbott was preparing to make a $25B bid for St. Jude, but Abbott quickly rebutted the report. On Friday, there were also reports that Ariad has been in talks to be acquired by Baxalta as part of a plan by the larger firm to ward off an approach from Shire.
Closing Market Summary: Stocks End Wild Week on Higher Note
After enduring a whirlwind week, the major averages ranged near their flat lines throughout the Friday session, ending little changed. The S&P 500 (+0.1%) and Nasdaq Composite (+0.3%) eked out slim gains while the Dow Jones Industrial Average (-0.1%) underperformed throughout the day. Despite the sideways action on Friday, the rally on Wednesday and Thursday allowed the S&P 500 to end the week higher by 0.9% while the Nasdaq jumped 2.5% for the week.
With one more session remaining in August, the S&P 500 is on track to lose 5.8% for the month while the Nasdaq is down 6.2% since the end of July.
Equities began today's affair with losses in most sectors, but the energy space (+2.3%) was an early standout following yesterday's 10.0% spike in crude oil. The energy component wasn't done there, rallying 6.3% today to end the pit session at $45.22/bbl. For the week, WTI crude gained 10.6% after dipping below $38.00/bbl on Monday.
The early strength in the energy sector served as an encouraging factor and other sectors began climbing in sympathy shortly after the start. The advance briefly placed the S&P 500 above its flat line, but the index slid back into the red after Federal Reserve vice chair Stanley Fischer appeared on CNBC.
Mr. Fischer's appearance did not provide that much fresh insight as he indicated that a September rate hike remains a possibility and that it's still too early to make the call right now; however, that was enough for the jittery market to slide back into negative territory. That move coincided with a jump in the Dollar Index (96.12, +0.37) while Treasuries surrendered their intraday gains, ending the day unchanged with the 10-yr yield at 2.18%.
The slide from highs was fairly broad-based and it pulled the energy sector from its high. Still the group ended with a solid gain while other sectors joined energy in the green during the final hour thanks to a broad surge that lifted the market back into positive territory. For the week, the energy sector jumped 3.7%, ending ahead of the technology sector, which spiked 2.9% for the week. The top-weighted group saw a stunning reversal after being down 6.9% at its lowest point on Monday.
Although the volatility appeared to have subsided on Friday, the CBOE Volatility Index (VIX 26.16, +0.06) was up almost three points before a late unwind saw the gauge surrender its entire increase. That being said, the VIX remains elevated at 26.00%, indicating that investors remain on the lookout for large swings.
With the broad market stumbling about like an overserved sailor, stock-specific news had been largely ignored this week. However, investors did receive a few earnings reports since Thursday's closing bell. Retail names posted mixed results with Aeropostale (ARO 0.92, -0.34) and bebe stores (BEBE 1.35, -0.52) missing bottom-line estimates while Big Lots (BIG 48.58, +6.58), Gamestop (GME 42.49, -3.71), and Ulta Salon (ULTA 159.00, -1.24) reported bottom-line beats.
Once again, participation was well above average with more than a billion shares changing hands at the NYSE floor.
Economic data was limited to Personal Income/Spending data and Michigan Sentiment:
- Personal income increased 0.4% for a fourth consecutive month in July while the Consensus expected an increase of 0.4%
- Wages and salaries increased 0.5% in July after increasing 0.2% in June, which was slightly weaker than what was implied in the July employment report
- Personal spending increased 0.3% for a second consecutive month in July, following an upward revision to June spending (from 0.2% to 0.3%) while the consensus expected an increase of 0.4%
- Core PCE prices increased 0.1% for a fourth consecutive month in July
- The University of Michigan Consumer Sentiment Index was revised down to 91.9 in the final July reading from a preliminary reading of 92.9 while the consensus expected a revision up to 93.0
- The move in consumer sentiment was opposite of the trend in the Conference Board's Consumer Confidence Index, which spiked to 101.5, its highest level since January
Monday's data will be limited to the 9:45 ET release of the Chicago PMI for August (consensus 54.7).
- Nasdaq Composite +1.9% YTD
- S&P 500 -3.5% YTD
- Russell 2000 -3.6% YTD
- Dow Jones Industrial Average -7.1% YTD
BFW 08/28 18:27 *BAXALTA SAID IN TALKS TO BUY ARIAD TO BOOST ONCOLOGY OFFERINGS
BN 08/28 18:26 *TALKS WITH ARIAD SAID TO CONTINUE, MAY NOT RESULT IN DEAL
BN 08/28 18:26 *BAXALTA SAID IN TALKS TO BUY ARIAD TO BOOST ONCOLOGY OFFERINGS
BN 08/28 18:26 *TALKS WITH ARIAD SAID TO CONTINUE, MAY NOT RESULT IN DEAL
BN 08/28 18:26 *BAXALTA SAID IN TALKS TO BUY ARIAD TO BOOST ONCOLOGY OFFERINGS
Baxalta Said in Talks to Buy Ariad to Boost Oncology Offerings
2015-08-28 18:28:29.351 GMT
By Catherine Larkin
(Bloomberg) -- Talks with Ariad said to continue, may not
result in deal.
* ARIA up as much as 38%
* NOTE: Earlier, Ariad Pharma Gains; Baxalta Said to Pursue
Unidentified Co. Link
Link to Company News:{ARIA US <Equity> CN <GO>}
Link to Company News:{BXLT US <Equity> CN <GO>}
Link to Company News:{SHP LN <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the editor responsible for this story:
Catherine Larkin at +1-312-443-5968 or
clarkin4@bloomberg.net
2015-08-28 18:28:29.351 GMT
By Catherine Larkin
(Bloomberg) -- Talks with Ariad said to continue, may not
result in deal.
* ARIA up as much as 38%
* NOTE: Earlier, Ariad Pharma Gains; Baxalta Said to Pursue
Unidentified Co. Link
Link to Company News:{ARIA US <Equity> CN <GO>}
Link to Company News:{BXLT US <Equity> CN <GO>}
Link to Company News:{SHP LN <Equity> CN <GO>}
For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}
To contact the editor responsible for this story:
Catherine Larkin at +1-312-443-5968 or
clarkin4@bloomberg.net
Baxalta Said in Talks to Buy Drugmaker to Bolster Independence
2015-08-28 16:21:47.197 GMT
By Ed Hammond, Manuel Baigorri and Cynthia Koons
(Bloomberg) -- Baxalta Inc., the drugmaker fending off a
$30 billion takeover offer from Shire Plc, is in talks to make
an acquisition of its own to bolster its status as an
independent company, people with knowledge of the matter said.
Baxalta is working with bankers on the acquisition of a
U.S.-based hematology-oncology specialist valued at about $2
billion, said the people, who asked not to be identified because
the information is private. The discussions continue and there
is no certainty a deal will be reached.
The target couldn’t immediately be identified and it’s
unclear how any deal by Baxalta would affect Shire’s pursuit of
the Deerfield, Illinois-based company, spun off from Baxter
International Inc. in July.
A representative for Baxalta declined to comment.
Shire Interest
Shire is interested in Baxalta to bolster its focus on rare
diseases, whose treatments have become one of the hottest
properties for drugmakers because of the potential for high-
priced products and incentives offered by regulators, including
tax breaks and seven years of market exclusivity. The FDA
defines rare diseases as those that affect fewer than 200,000
people in the U.S.
Since Shire went public with its all-stock takeover
proposal, Baxalta’s management has sought to paint the Irish
drugmaker as trying to buy it cheaply.
“Is it trying to opportunistically acquire our attractive
hemophilia, immunology and growing oncology platforms without
true synergies?” Baxalta Chief Executive Officer Ludwig Hantson
said in an interview earlier this month. “We have an attractive
set of franchises and it would be a shame to hand it over for a
low-ball valuation.”
Deal Pursuit
Baxalta’s management has made public its interest in
pursuing deals in the hematology sector. Oncology is also ripe
for deal activity, with pharmaceutical companies seeking out the
newest therapies in an area that’s seen significant scientific
advances in recent years.
AbbVie Inc. beat out Johnson & Johnson in March with a $21
billion bid for Pharmacyclics Inc., the maker of a blockbuster
blood cancer therapy that sells for $100,000 a year. Companies
such as Juno Therapeutics Inc., Kite Pharma Inc. and Bluebird
Bio Inc. are viewed as possible takeover targets as well. They
are working on experimental medicines called chimeric antigen
receptors, or CAR, that engineers the body’s T-cells, which
normally fight infections or abnormal cells, so they can
recognize and destroy tumors. These therapies are being studied
in a range of hematologic cancers.
Immuno-oncology has also seen significant advances in
recent years, with the approval of drugs such as Merck & Co.’s
Keytruda and Bristol-Myers Squibb Co.’s Opdivo. Those treatments
stimulate the immune system to help fight cancer and are being
studied in a number of different types of tumors. Bristol-Myers
has done a number of deals recently, spending $1.6 billion
earlier this year for Flexus Biosciences Inc. and Rigel
Pharmaceuticals Inc., both in the area of cancer immunotherapy.
For Related News and Information:
Top Stories:TOP
To contact the reporters on this story:
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net;
Cynthia Koons in New York at +1-212-617-5253 or
ckoons@bloomberg.net
To contact the editors responsible for this story:
Jeffrey McCracken at +1-212-617-8517 or
jmccracken3@bloomberg.net
Elizabeth Wollman, Beth Williams
2015-08-28 16:21:47.197 GMT
By Ed Hammond, Manuel Baigorri and Cynthia Koons
(Bloomberg) -- Baxalta Inc., the drugmaker fending off a
$30 billion takeover offer from Shire Plc, is in talks to make
an acquisition of its own to bolster its status as an
independent company, people with knowledge of the matter said.
Baxalta is working with bankers on the acquisition of a
U.S.-based hematology-oncology specialist valued at about $2
billion, said the people, who asked not to be identified because
the information is private. The discussions continue and there
is no certainty a deal will be reached.
The target couldn’t immediately be identified and it’s
unclear how any deal by Baxalta would affect Shire’s pursuit of
the Deerfield, Illinois-based company, spun off from Baxter
International Inc. in July.
A representative for Baxalta declined to comment.
Shire Interest
Shire is interested in Baxalta to bolster its focus on rare
diseases, whose treatments have become one of the hottest
properties for drugmakers because of the potential for high-
priced products and incentives offered by regulators, including
tax breaks and seven years of market exclusivity. The FDA
defines rare diseases as those that affect fewer than 200,000
people in the U.S.
Since Shire went public with its all-stock takeover
proposal, Baxalta’s management has sought to paint the Irish
drugmaker as trying to buy it cheaply.
“Is it trying to opportunistically acquire our attractive
hemophilia, immunology and growing oncology platforms without
true synergies?” Baxalta Chief Executive Officer Ludwig Hantson
said in an interview earlier this month. “We have an attractive
set of franchises and it would be a shame to hand it over for a
low-ball valuation.”
Deal Pursuit
Baxalta’s management has made public its interest in
pursuing deals in the hematology sector. Oncology is also ripe
for deal activity, with pharmaceutical companies seeking out the
newest therapies in an area that’s seen significant scientific
advances in recent years.
AbbVie Inc. beat out Johnson & Johnson in March with a $21
billion bid for Pharmacyclics Inc., the maker of a blockbuster
blood cancer therapy that sells for $100,000 a year. Companies
such as Juno Therapeutics Inc., Kite Pharma Inc. and Bluebird
Bio Inc. are viewed as possible takeover targets as well. They
are working on experimental medicines called chimeric antigen
receptors, or CAR, that engineers the body’s T-cells, which
normally fight infections or abnormal cells, so they can
recognize and destroy tumors. These therapies are being studied
in a range of hematologic cancers.
Immuno-oncology has also seen significant advances in
recent years, with the approval of drugs such as Merck & Co.’s
Keytruda and Bristol-Myers Squibb Co.’s Opdivo. Those treatments
stimulate the immune system to help fight cancer and are being
studied in a number of different types of tumors. Bristol-Myers
has done a number of deals recently, spending $1.6 billion
earlier this year for Flexus Biosciences Inc. and Rigel
Pharmaceuticals Inc., both in the area of cancer immunotherapy.
For Related News and Information:
Top Stories:TOP
To contact the reporters on this story:
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net;
Manuel Baigorri in London at +44-20-3525-4457 or
mbaigorri@bloomberg.net;
Cynthia Koons in New York at +1-212-617-5253 or
ckoons@bloomberg.net
To contact the editors responsible for this story:
Jeffrey McCracken at +1-212-617-8517 or
jmccracken3@bloomberg.net
Elizabeth Wollman, Beth Williams
Gapping down
In reaction to disappointing earnings/guidance: VMEM -13.6%, BEBE -12.8%, (announces entry into Greater China, via a partnership with Longgoal LLC to open 60 to 150 stores), ADSK -5.5%, ZOES -4.9%, CLCT -3.3%, ARO -3.2%, OVTI -2.3%, GME -1%
M&A news: HAL -1.4% (Bloomberg's Real M&A column profiles a positive view on BHI given the large arbitrage in its pending merger with Halliburton)
Select EU financial related names showing weakness: NBG -11.3%, BCS -2.2%, CS -1.7%, HSBC -1.6%, DB -1%
Select EU notable heavyweights trading lower: SAP -1.6%, ALU -1.2%, NOK -1.1%, UN -1.1%, ABB -1.1%Select large pharma names trading lower: SHPG -2.5%, GSK -1.7%, NVO -1.3%, MRK -1.0%
Other news: BTU -9.2% (following 50% move higher yesterday), QIHU -3.5% (WSJ reports that the investor group who offered to take QIHU private is considering lowering its offer amid valuation concerns), CRK -3% (after spiking higher on volume in late trade), SYT -2% (cont weakness after Monsanto (MON) walked away from its efforts to acquire Syngenta), NFLX -1.8% (pulling back following recent strength), STXS -1.3% (following 120%+ move higher yesterday), BBRY -1.3% (still checking)
Analyst comments: N/A
Fed's Kocherlakota interview on CNBC
- Says market moves are a tail risk for the U.S. outlook and need to be taken into consideration.
- Forecasting in 2016 we will get back to 3% growth; says 1H growth not meeting that target.
Fed's Kocherlakota interviewed on CNBC
- Says inflation remains very low.
- Says baring big changes ion the data, He does not believe an increase is appropriate.
- Beleives a rate hike would hurt credibility.
- Says situation right now given consideration of inflation outlook, it would call for further stimulus.
- Mr. Kocherlakota is widely considered to be one of the more dovish Fed members.
- Mr. Kocherlakota is not a voting member until 2017.
Gapping up
In reaction to strong earnings/guidance: BIG +10.2%, SWHC +6.4%, SPLK +4.3%, VEEV +1.4%, ULTA +1.1%
M&A news: AHP +4.1% (will explore strategic alternatives to increase shareholder value, including a possible sale of the company), MU +3.8% (Tsinghua Unigroup's Chairman is said to be meeting with Micron Board members this week to revive its takeover bid, according to reports), SPIL +1.4% (rejects ASX's bid; co and and Hon Hai Precision form strategic alliance through a share exchange), PRGO +1% (Mylan Labs (MYL) announces that shareholders have approved its proposed acquisition of Perrigo; Perrigo comments on Mylan's (MYL) shareholder vote, reaffirms its belief that the offer substantially undervalues it)
Other news: CYTX +20.7% ( lifting premarket on insider transaction), FCX +15.8% ( Carl Icahn discloses 8.46% active stake in 13D; intends to have discussions with management ), HK +11.7% (reduces its long-term debt by ~$548 mln), UAL +6.2% (to replace HSP in the S&P 500), NVTA +5.9% (Baker Bros filed 13D, switching classification from a passive investor to active investor; maintained 20.6% stake), ATVI +5.6% (to replace PLL in the S&P 500), ISNS +4.8% (still checking), AMGN +1.6% (confirmed FDA approval of Repatha (evolocumab) Injection for the treatment of high cholesterol)
Analyst comments: LOGM +1.3% (upgraded to Overweight at Pacific Crest), ASML +0.6% (upgraded to Buy at Berenberg)
Early premarket gappers
Gapping up: NVTA +14.4%, FCX +13%, STXS +12.7%, ATVI +6.6%, SWHC +6.2%, UAL +5.9%, SPLK +5.7%, ISNS +4.8%, YOKU +4.5%, SHI +4%, ULTA +3.6%, BIG +3.2%, AU +1.7%, SSL +1.6%, SPIL +1.4%, AKS +1.4%, VEEV +1.4%, RESN +1.2%, MU +1.1%, ACI +1%, TOT +0.9%, AMGN +0.8%
Gapping down: VMEM -13.6%, BEBE -9.1%, BTU -7.9%, CRK -7.6%, MTL -6%, SDRL -5.3%, ADSK -5%, NBG -4.9%, ZOES -4.9%, QIHU -4.5%, CLCT -3.3%, OVTI -2.3%, CS -2.1%, BCS -1.9%, HSBC -1.8%, HAL -1.7%, BP -1.7%, ARO -1.6%, RIO -1.5%, NOK -1.4%, GFI -1.3%, GSK -1.3%, NVO -1.3%, BBRY -1.3%, SAP -1.3%, NFLX -1.2%, ALU -1.2%, UN -1.1%, DB-1.1%, ABB -1.1%, JPM -1%, MRK -0.9%
Gapping down: VMEM -13.6%, BEBE -9.1%, BTU -7.9%, CRK -7.6%, MTL -6%, SDRL -5.3%, ADSK -5%, NBG -4.9%, ZOES -4.9%, QIHU -4.5%, CLCT -3.3%, OVTI -2.3%, CS -2.1%, BCS -1.9%, HSBC -1.8%, HAL -1.7%, BP -1.7%, ARO -1.6%, RIO -1.5%, NOK -1.4%, GFI -1.3%, GSK -1.3%, NVO -1.3%, BBRY -1.3%, SAP -1.3%, NFLX -1.2%, ALU -1.2%, UN -1.1%, DB-1.1%, ABB -1.1%, JPM -1%, MRK -0.9%