Stocks slid today as Greece fights for emergency funds. What happened to the celebrations of last week that Greece was solvent?
Cigna is starting a $25 million ad campaign crafted to appeal to individual consumers, signaling the industry's growing focus on a segment that is set to expand substantially under the health-overhaul law.
Red envelopes and red faces as Netflix apologizes after price hike and then causes another uproar.
Here are the top financial stories of the day:
1) Stocks slide as worries about Greek debt persist-From the AP
Pessimism about Greece's financial problems returned to the financial markets Monday. Stocks fell sharply as investors once again doubted that the country will be able to avoid a default on its debt.
Even after a late-day rally cut its losses by nearly half, the Dow Jones industrial average closed down 108.08, or 0.9 percent, at 11,401.01. The drop ended five days of gains for stocks and marked the return of the back-and-forth trading that has accompanied the uncertainty about Europe's debt crisis.
The Nasdaq composite fell 9.48, or 0.4 percent, to 2,612.83. The Standard & Poor's 500 index fell 11.92, or 1 percent, to 1,204.09. The S&P 500 gained 5.4 percent last week as it appeared Greece would get its bailout. But European finance ministers said Friday they would delay authorizing an $11 billion installment of emergency funds for Greece until October.
On Monday, the country's finance minister held an emergency teleconference with its international creditors.
They are pressuring the government on austerity measures to reduce Greece's debt. Investors fear Greece won't be able to convince lenders that it can pay its debts -- and that it won't get the money it needs to avoid a default on debts that must be paid next month.
Late Monday, Greece's finance minister said that the 2 1/2-hour conference call was "productive and substantive." Hope that Greece might be closer to qualifying for rescue funds started a late comeback. The
Dow gained about 100 points in the last hour of trading.
But investors also appeared pessimistic about a Federal Reserve policy decision expected Wednesday.
Some economists believe that since the Fed decided to hold a two-day meeting instead of the originally planned one-day session, that it was preparing to take steps to stimulate the economy. However, other analysts doubt that the Fed will announce a new plan for the economy.
There is too much disagreement among Fed officials about monetary policy for a decision right now, said Ralph Fogel, head of investment strategy at Fogel Neale Partners in New York. "They'll have to let it play out at least a little while longer, and I think they'll wait until November," Fogel said.
Separately, President Barack Obama on Monday called for $1.5 trillion in new taxes to help reduce the U.S. deficit. He said, "we can't just cut our way out of this hole."
The proposal is being opposed by House Speaker John Boehner, who has said the Republican Party won't accept any tax increases to lower deficits. Obama's speech marked the start of a new round of deficit-reduction negotiations that are likely to be contentious.
For investors, the day's news added up to more uncertainty. "The market just can't stand not knowing what's going on," Fogel said.
Investors have been sensitive to each development that emerges from Europe, and that has helped feed the volatility in stocks the past few months.
"After every meeting in Europe there's a spin put on it -- either `this was good and a solution's really soon,' or someone looks the wrong way and the media says there's no solution," said Rob Lutts, president and chief investment officer of Boston-based Cabot Money Management.
If Greece were to default on its debt, other European countries with heavy debt would likely be judged less credit-worthy and have difficulty borrowing money. But the problems go beyond Europe. U.S. bank stocks have fallen on concerns that a default would make it hard for European banks to pay their bills -- including the billions of dollars that U.S. banks have lent them. There are concerns about a lending crisis similar to what the world saw in 2008.
There is also concern about a recession in Europe, which already has a weak economy. The companies in the S&P 500 get 20 percent of their net income from European countries. If their business suffers, that could also hurt the struggling U.S. economy.
The uncertainty wasn't limited to U.S. investors. In Europe, Germany's DAX closed 2.8 percent lower. France's CAC-40 fell 3 percent, and the FTSE 100 index of leading British shares fell 2 percent. Those markets closed before the news about the teleconference between Greece and its creditors.
Lutts, the Cabot analyst, said some investors are also uneasy about earnings reports that will start arriving in early October.
"In the last year or so we had a nice ramp-up in earnings -- that's history now," Lutts said. He said companies are contending with the steady rise this year in commodities and raw materials prices, and many are unable to raise their own prices because that hurt their ability to compete.
"The market is worried that (earnings reports) won't be rosy and that we'll see a downshift, not an upshift, in earnings."
Investors were again buying U.S. government debt, which is seen as a safe place when the economy is weak and stocks are falling. The yield on the 10-year Treasury note, which falls as investors buy bonds and push its price higher, fell to 1.95 percent, near its low for the year. It was at 2.07 percent late Friday.
The U.S. dollar, another asset seen as safe, also rose against a basket of foreign currencies. Concerns about the stability of the European economy pushed the Euro lower against the dollar, to $1.36 from $1.38 late Friday.
In corporate news, Goodrich Corp. rose 16 percent on speculation that United Technologies Corp. is interested in buying the aerospace manufacturer. United Technologies fell 1.2 percent.
Tyco International Ltd. rose 2 percent after the manufacturer announced a plan to split into three companies.
Lennar Corp. rose 5 percent after the homebuilder's earnings met Wall Street's expectations and revenue came in stronger than expected. The company said that while it delivered fewer homes in its fiscal third quarter, demand is picking up somewhat, driven by low home prices and all-time low interest rates. The company was cautious about the future, however, because of high unemployment.
Netflix fell 7 percent after the company said it was formally separating its online streaming service from its mail-in DVD rental service, which is being renamed Qwikster.
Chinese solar equipment factory Jinko Solar plunged 28 percent after it was forced to shut down one of its factories because of protests by local residents who claimed it was polluting the air and water.
About six stocks fell for every one that rose. Trading was light, at 3.7 billion shares.
2) Health Law Puts Cigna in Ad Mode-From The Wall Street Journal
Cigna is starting a national ad campaign Monday crafted to appeal to individual consumers, a sign of the industry's growing focus on a segment that is set to expand substantially under the health-overhaul law.
The Cigna marketing push, which is built around the slogan "Go You," will be one of the most high-profile examples so far of how health plans are trying to prepare for 2014, when the major provisions of the law kick in. They include a requirement for most people to carry health insurance, as well as new online exchanges where consumers will be able to purchase coverage, including subsidized plans for people with limited incomes.
Such provisions are expected to increase the number of consumers who choose their own plans. About 14 million people currently are covered through individual insurance, according to the Kaiser Family Foundation, a nonpartisan nonprofit organization. The Congressional Budget Office has projected that the number of people buying their own insurance will more than double by 2016 under the new health law. Some workers also may start getting a lump sum from employers to select coverage.
"The insurance industry is one that has traditionally been oriented around services to an employer or a government entity," said Cigna Chief Executive David M. Cordani. "We want to orient around the individual."
He said that focus includes consumers who get insurance through their jobs, as well as those who will purchase coverage their own.
Goldman Sachs estimates that just 1% to 2% of Cigna's current revenue comes from the individual market, and Goldman analyst Matthew Borsch calls the insurer's presence in the segment "embryonic" so far. Cigna said it doesn't disclose revenue by plan size.
Cigna's current push into the individual market, which started in 2008, is limited to just 10 states. That number is expected to expand in 2014 and beyond, though Mr. Cordani said Cigna still will enter only select markets, where it thinks it can become a strong presence.
Blue Cross and Blue Shield plans tend to have the strongest individual-market presence in most regions. WellPoint Inc., which operates many Blue Cross and Blue Shield plans, has the biggest individual business of the major national insurers.
The Cigna ad campaign, which costs around $25 million, according to a person with knowledge of the matter, will involve ads that appear to pitch health coverage as a path to self-actualization. "Deep inside you there's a person who refuses to be kept deep inside you," says a print ad. Another asks, "When's the last time you did something for the first time?" The campaign will start running nationally this week on several cable and broadcast networks, as well as in magazines and on websites. The company's last major national advertising campaign was in 2002.
Cigna said it also is designing health insurance and other coverage aimed at particular population segments. In Pennsylvania the company is trying a program for families with a member who is autistic, offering advice from a "care manager" and discounts for some types of therapists.
Other possible targets include people who have diabetes or those hoping to lose weight, who could tap into elements of the wellness initiatives Cigna currently offers for employers. These products could be sold alone or potentially wrapped into health plans, the company said. Cigna also said it plans to beef up its direct-to-consumer website and hire around 500 people in customer-service and other positions.
Other companies also are laying the groundwork for expanding sales to individuals. Seventy-three percent of insurers are planning to increase their marketing and sales capabilities in the near term, with a focus on the direct-to-consumer segment, according to a survey of industry executives this spring by Boston Consulting Group.
"Most insurers have not built enough brand equity with consumers," said Raj Bal, a former WellPoint executive who is now an industry consultant. Also, employer sales often come through brokers, whose role will likely be less important in starting in 2014, he said.
The Blue Cross and Blue Shield Association recently forged a deal with H&R Block Inc. for members' plans to be promoted at the tax-preparation firm's storefronts. The association also is targeting the growing
Hispanic population through a tie-in with Spanish-language media company Univision Communications Inc. The group is also in talks with a number of retailers about partnerships.
"You have to think about channels differently" to reach consumers, said Maureen Sullivan, a senior vice president at the association.
Aetna Inc. is working with health-care providers to create insurance products. These can take advantage of hospitals' or clinics' local name recognition and might appeal to individual consumers more than to big employers that want to ensure access to a broad range of physicians and facilities. For example, the insurer has said it will create plans with Carilion Clinic in Roanoke, Va., that will carry the Carilion and Aetna brands and be sold to individuals and businesses.
3) Netflix says it's sorry, then creates new uproar-From the AP
The CEO of Netflix said he was sorry for mishandling a recent price increase that caused customers to cancel the service in droves. But the apology was drowned out by a decision that angered subscribers all over again.
The company will split into two services -- one with an odd new name that offers the familiar discs in red envelopes and another for online streaming of TV shows and movies.
The DVD service will be called Qwikster, a name that is supposed to signify a commitment to fast service but quickly became an object of ridicule Monday on the Internet. The streaming service will keep the Netflix name.
Netflix, which had 24.6 million U.S. subscribers at the end of June and is the nation's largest video subscription service, redefined home entertainment over the past decade with its DVDs by mail. Now it's trying to prepare for the day when watching movies on a disc goes the way of driving to the video store to pick up a VHS tape.
But lately, it has bungled the transition. The company has lost half its market value since July, when it announced that customers who wanted DVDs and streaming had to pay for them separately -- and pay up to 60 percent more.
The decision to rebrand the best-known part of Netflix's business left some experts wondering whether CEO Reed Hastings is losing the touch that established him as an influential figure in technology and entertainment.
Others see the logic in trying to make sure Netflix keeps a thriving business as customers abandon DVDs and shift in greater numbers to beaming movies and TV shows into their living rooms over high-speed Internet connections.
It's going to be a painful transition, as Hastings acknowledged as he cut loose the DVD service.
"It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best," Hastings wrote on a Netflix blog. The CEO of the rechristened Qwikster service will be Andy Rendich, a longtime Netflix employee.
Hastings found little sympathy among the more than 10,000 people who commented on the blog posting.
Most of them lambasted him for making life more difficult for about 12 million customers who get both streaming and DVD rentals. Those people will have to visit two websites to make requests and update their billing information.
Other critics questioned the sincerity of his apology for the recent price increase and ripped him for giving DVD rentals a different identity -- and for the name Qwikster in particular.
"It's a really dumb name," said Scott Devine of Burbank, Calif., who dropped the DVD service after the price increase was announced two months ago. "You would think they would choose something that at least had `flick" in the name."
The split may seem like the natural next step to Hastings, but he appears tone deaf to subscribers, said John Tschohl, president of the Service Quality Institute, a consulting service, and author of the book "Achieving Excellence Through Customer Service."
"I don't think Netflix is listening to its customers at all," he said. "They have really blown it."
Columbia Business School marketing professor Brett Gordon thinks Hastings knows exactly what he's doing by starting to bury the DVD business, even if Hastings didn't say it in his blog post.
By the end of September, Netflix figures less than 10 percent of its expected 24 million customers in the U.S. will subscribe to DVD-only plans.
"They don't want the Netflix brand to be damaged by the inevitable death of physical digital goods," Gordon said.
Netflix was a Wall Street star until the jarring July 12 announcement about its prices. Its stock rose from about $50 at the beginning of 2009 to more than $300 in early July.
Since backlash to the price increase, investors have grown disillusioned. Netflix's market value has plummeted 53 percent from its high, wiping out about $8 billion in stockholder wealth. On Monday, the stock shed more than $11 to close at $143.75.
The steepest declines have comes since Netflix warned it expected to have 600,000 fewer subscribers at the end of this month than at the end of June, by far the worst downturn in the company's history.
Netflix's stock has been hit so hard that it made Hastings' apology seem like little more than damage control, Devine said.
In his blog post, Hastings wrote that he "slid into arrogance based upon past success" when he decided to raise prices so dramatically. He emphasized the higher prices were the right thing to do, but said he should have done more to explain them.
Hastings said his biggest fear is that Netflix will be left behind by technological upheaval, like what happened to AOL when people switched from dial-up Internet to widely available broadband, or Borders when readers gravitated to the e-book.
Netflix itself has killed off thousands of video rental stores during the past five years, and it devastated Blockbuster, which once dominated the home-video market and went bankrupt last year.
Hastings began Netflix's evolution in early 2007 when he added Internet video streaming. That option grew in popularity even faster than he anticipated, causing video distributors to demand ever higher licensing fees.
Those expenses are one reason Netflix raised prices. Hastings has promised to use the additional money it gets from its subscribers to stockpile its video streaming library with more content.
Some subscribers are upset by Netflix's inability to renew a contract with Starz Entertainment that included many recently released movies from Walt Disney Co.'s studios. The Starz deal expires in February.
More broadly, Netflix customers have complained that its TV and movie titles available for streaming pale next to its menu of more than 100,000 DVD titles. And they have other places to turn for streaming entertainment -- Amazon.com, iTunes and Hulu, among others.
In Monday's blog post, Hastings wrote that Netflix will make "substantial" additions during the next few months.
Michele Lucas of Denver is among the Netflix subscribers who think its streaming library is already losing its appeal. Her family pays only for streaming now. They stopped renting DVDs from Netflix after the price increase.
"We sit down at night and go through and we have a really hard time finding a movie to watch," Lucas said.
Spinning off the DVD services will also allow Netflix to provide studios with a clearer idea of how many people are streaming their content. That could be critical as it negotiates future licensing deals.
In addition to the split, Netflix will expand into an area Hastings had steadfastly resisted -- video game rentals. Adding it to Qwikster may not make investors happy, though, because video games are more expensive and have a shorter shelf life than DVDs.
But video-game availability could win back alienated subscribers. Devine said he might sign up for Qwikster if the selection is good enough. Hastings seems confident he won't be the only one.
"Both the Qwikster and Netflix teams will work hard to regain your trust," Hastings wrote on the blog and a mass email to subscribers. "We know it will not be overnight. Actions speak louder than words. But words help people to understand actions."
Quote of the Day from Dave Ramsey.com:
Life's challenges are not supposed to paralyze you; they're supposed to help you discover who you are. — Bernice Johnson Reagon
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