First time unemployment filers remained above 400,000 for the 15th consecutive week as they exceeded the projected rate of 406,000 coming in at 418,000.
A colossal merger between two of the nation's three largest pharmacy-benefit managers happened today when St.Louis based Express Scripts agreed to buy Medco of Franklin Lakes, NJ.
Here are the top financial stories of the day:
1) Progress On Debt Rubs Off On Stocks-From The Wall Street Journal
Signs of progress in dealing with debt woes on both sides of the Atlantic Thursday propelled U.S. stocks, European bonds and the euro sharply higher in volatile trading.
In the U.S., the good news came in the form of hints that talks between the White House and congressional Republicans are moving closer to a deal that would raise the federal debt ceiling and slice the U.S. government's deficit.
In Europe, officials agreed to a plan designed to reduce Greece's debt burden and, more important for most investors, limit the potential for contagion that could send Italy and Spain into crisis.
The Dow Jones Industrial Average posted its second straight day of triple-digit gains, rising 152.50 points, or 1.2%, to 12724.41. The blue-chip index is now less than 100 points shy of its 2011 high of 12810.54 reached in late April. In Europe, Spanish and Italian stock markets were the big winners, gaining 2.9% and 3.8%, respectively, recovering ground lost in recent weeks.
The euro went for a roller-coaster ride on its way higher, as traders were once again whipsawed by comments from European officials. During European trading hours, it fell to around $1.4150 from more than $1.42 on news suggesting a meeting of European leaders wouldn't result in a comprehensive plan aimed at thwarting contagion. But then traders were spun around as news of a deal trickled out. The euro was up 1.5% against the U.S. dollar at $1.4424 in late New York trade.
The hope among investors is that the day's events bring the financial markets another step closer to resolving the major risks that have been bedeviling investors. In recent weeks, fears have been growing that the political bickering over the U.S. debt ceiling could lead ratings firms to take away the U.S. government's AAA rating. At the same time, Italy and Spain were once again being dragged down by worries that a default by Greece would ricochet through financial markets.
2) Jobless claims rise above expectations-From Reuters
The number of Americans filing new claims for unemployment benefits rose more than expected last week, pointing to a labor market that is struggling to regain momentum.
Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 418,000, the Labor Department said on Thursday.
Economists polled by Reuters had forecast claims rising to 410,000 from a previously reported 405,000.
"We're just stuck in this trend between 410,000 and 430,000. Generally we're just really not seeing any improvement but also not much worsening," said Jeffrey Greenberg, an economist with Nomura Securities in New York.
Stock index futures held earlier gains after the data, while the dollar extended losses against the euro.
The claims data covered the survey period for the closely watched nonfarm payrolls count for July, which will be released on August 5.
Initial claims fell 11,000 between the June and July survey periods, suggesting a modest improvement in payrolls after June's paltry 18,000 gain.
Job growth has faltered in the last two months, in line with the generally weak tone in the economy.
A rise in layoffs held back payroll growth in May, according to the department's latest Job Openings and Labor Turnover Survey, which was released last week.
Layoffs were probably behind the downshift in employment growth in June as well.
A major consumer food producer, PepsiCo Inc, tempered its full-year outlook on Thursday due to economic uncertainty, sending its shares down slightly in premarket trading.
The maker of Pepsi-Cola, Frito-Lay snacks and Quaker oatmeal said it now expects 2011 earnings to grow at a high single-digit rate.
The company said the new goal reflects greater uncertainty regarding macroeconomic and consumer trends for 2011, high global commodity cost inflation and ongoing investments in emerging markets and brand building.
A government shutdown in Minnesota following a budget impasse resulted in an additional 1,750 state employees filing claims for jobless benefits last week, the Labor Department said. The shutdown ended this week.
Initial claims have now been above the 400,000 mark for 15 straight weeks. That level is usually associated with a stable labor market.
The four-week moving average of claims, considered a better measure of labor market trends, slipped 2,750 to 421,250.
The number of people still receiving benefits under regular state programs after an initial week of aid dropped 50,000 to 3.70 million in the week ended July 9.
The number of Americans on emergency unemployment benefits declined 80,133 to 3.15 million in the week ended July 2, the latest week for which data is available.
A total of 7.33 million people were claiming unemployment benefits during that period under all programs, down 159,000 from the prior week.
3) Express Scripts-Medco Deal Unites Two Giants-From the Wall Street Journal
Express Scripts agreed to buy Medco Health Solutions Inc. for $29.1 billion in cash and stock, merging two of the nation's three largest pharmacy-benefit managers as the industry faces a new rival from managed-care giant UnitedHealth Group Inc.
By joining forces, Express Scripts and Medco will become the largest manager of drug prescription services, with nearly a third of the market. They aim to leverage their newfound heft to lower the cost of prescription drugs—indicating more pressure on pharmaceutical companies at a time they're already facing the loss of patent protection for top products.
"The cost and quality of health care is a great concern to all Americans; this is the right deal at the right time for the right reasons," said Express Scripts Chief Executive George Paz, 55 years old, who will lead the combined company.
PBMs help employers and health-insurance companies administer prescription-drug benefits, process claims and control drug costs by securing discounts from drug makers.
Medco—larger than Express Scripts by revenue but smaller by market capitalization—also confirmed its contract with UnitedHealth won't be renewed when the current one expires after next year. UnitedHealth, which represents 17% of Medco's sales, said it will run that business itself.
UnitedHealth's OptumRx pharmacy-benefit manager is "fully capable of delivering outstanding service," company spokesman Don Nathan said.
As a result, the news Thursday changes the dynamics of the PBM industry, long dominated by the threesome of Medco, Express Scripts and CVS Caremark Corp., a hybrid PBM and drugstore. After the deals, according to Bernstein Research, the merged company will control nearly a third of the market, followed by CVS at 21% and UnitedHealth at 12%.
The emergence of UnitedHealth, ironically, could ease regulatory approval, said Bernstein analyst Helene Wolk, who also cited the industry's "competitive intensity." Nonetheless, she predicted that the review process would be "challenging."
The companies, meanwhile, emphasized that the deal would help lower drug costs and create a more efficient health-care system. "We wouldn't be doing this if we didn't think we didn't have a very good chance of getting this through," Mr. Paz said.
He also disagreed with the suggestion this is "a borderline case," and said "I believe it's what America needs." The companies expect the deal to close by first half of 2012.
Under the deal, Medco holders will receive $28.80 in cash and 0.81 Express Scripts shares for each share, valuing Medco at $71.36, a 28% premium to Wednesday's close.
Thursday morning, Medco was trading at a more than 10% discount to the deal, suggesting that Wall Street has doubts about the deal's regulatory chances. The deal—based on Express Scripts trading at $54.77, up 4.2%—was valuing Medco at $73.16 a share. Medco shares were trading at $62.85, up 12.7%.
Should the deal close, Express Scripts shareholders are expected to own about 59% of the combined company, and Medco shareholders will have the remainder. The combined company will be headquartered in St. Louis, where Express Scripts is now, and could have $1 billion less in costs. Mr. Paz noted that the companies spend more than $100 billion combined.
"I feel very comfortable there's a lot of opportunities to take costs out of the equation," he said.
While the catalyst for the Express Scripts-Medco deal is "ultimately offensive," it's "initially defensive," Barclays analyst Larry Marsh said. He noted Medco's UnitedHealth loss plus Express Scripts "weaker-than-expected scripts" for the second quarter.
Express Scripts on Thursday reported its second-quarter earnings climbed 15% to $334.2 million, or 66 cents a share. Excluding items, per-share earnings were 71 cents. Revenue edged up 0.6% to $11.36 billion.
Meanwhile, Medco reported its earnings fell 4% to $342.8 million, or 85 cents a share. Excluding write-downs, per-share earnings rose to 96 cents from 87 cents. Revenue rose 4.1% to $17.07 billion.
There has been consolidation in the pharmacy-benefit-management industry. Express Scripts officials have said the company was on the hunt for acquisitions. In 2009, it acquired the prescription unit of WellPoint Inc., a health insurer, in a $4.7 billion deal.
In 2007, Express Scripts lost out on acquiring rival Caremark Rx to CVS, which acquired Caremark for about $26 billion. At that time, Medco was seen as a possible next target for Express Scripts. Express Scripts, which employs about 13,000 people, also distributes injectible biopharmaceutical products to patients or doctors, and provides cost-management and patient-care services.
Medco, spun out of drug giant Merck & Co. in 2003, provides clinical research and pharmacy services aimed at improving care while reducing health-care costs for private and public employers, union and government agencies. The company took in $66 billion in 2010 net revenue.
The advisers for Express Scripts are Credit Suisse Group AG, Citigroup Inc. and law firm Skadden, Arps, Slate, Meagher & Flom LLP. Medco is advised by J.P. Morgan Chase & Co., Lazard Ltd., and law firms Sullivan & Cromwell LLP and Dechert LLP.
This deal is the second-largest announced this year, after AT&T Inc.'s planned purchase of T-Mobile USA from Deutsche Telekom AG.
Quote of the Day from Dave Ramsey.com:
Be careful the environment you choose for it will shape you; be careful the friends you choose for you will become like them. — W. Clement Stone
No comments:
Post a Comment