US markets surge on hopes of QE3, Netflix, NewsCorp, Kinetic Concepts in focus
Markets reacted positively to remarks by Federal Reserve Chairman Ben Bernanke, who told Congress that a new stimulus program entailing asset purchases is in the works. If implemented, it will be the third such accommodative measure since.
The Dow rose 83 to 12,519, Nasdaq increased 22 to 2,804, and the S&P 500 gained 8 to 1,322.
Spurred by investor concerns over U.S. debt ceiling talks and a European debt crisis, gold soared to a new record, hitting $1,586 an ounce.
Fitch ratings agency downgraded Greece’s debt three notches to junk status and only one grade above default, citing increased uncertainty surrounding the role of private creditors in future funding and a weakening economic outlook. This follows similar downgrades by Moody’s and Standard and Poor’s last month.
Ben Bernanke continued issuing his stern warnings to Congress of a possibly catastrophic fallout if an agreement to raise the debt ceiling is not reached. A default on U.S. debt he indicated would lead to interest rate increases and send shock waves throughout the global financial system, contrary to some Republican suggestions that continued payment of interest on the debt would satisfy bondholders. If the debt ceiling is not raised by August 2, it is possible some payments including social security and military pay will be affected.
In a surprising shift, Senate Minority Leader Mitch McConnel proposed allowing President Barack Obama to raise the debt limit on his own by $2.4 billion in three installments before the end of 2012 unless two-thirds of Congress votes against it. It is a sign of anxiety on both sides of the aisle that time is running out to reach a deal before the government defaults on its debt. Although some Republicans complain the plan gives up the leverage they have been attempting to use against Democrats to enact budget cuts, it also places the onus on the President alone. Under the plan, President Obama will be authorized to raise the debt limit $700 billion by August 2, then two additional $900 billion increases the next year.
Researchers have found that currently used AIDS drugs can significantly reduce the risk of acquiring HIV. Two studies conducted in Kenya and Uganda tested either the drug tenofovir or tenofovir plus emtricitabine in heterosexual couples where one partner had AIDS and the other did not. Daily doses of tenofovir, brand name Viread, reduced the rated of infection by 62% compared to placebo while the combination known as Truvad resulted in a 73% reduction vs. placebo. Both drugs are made by Gilead Sciences Inc. (NASDAQ:GILD). The study was stopped a full year and a half early after an independent data and safety monitoring board review due to the strength of the results.
BP (NYSE:BP) plans to invest about $4.77 billion to redevelop two oil fields in the U.K. North Sea. It estimates the fields contain 450 million barrels of oil. BP expects to spend about two-thirds of its commitment on a new floating, production, storage and offloading vessel, to be installed by 2015 and able to process and export 130,000 barrels a day. The company decided to make the investment despite a recent tax hike on oil and gas profits from 20% to 32% by the U.K. government, demonstrating its faith in the overall economics of the project.
Amazon.com (NASDAQ:AMZN) will offer a less expensive version of its Kindle 3G reader in a sponsorship deal with AT&T (NYSE:T). The regular Kindle 3G goes for $189. The new device will go for $139, but has built-in ads on its screensavers.
Netflix Inc. (NASDAQ:NFLX) is raising the price of its cheapest movie rental plans that include both DVDs and streaming video by 60%, jumping from $9.99 a month to $15.98 a month. Some analysts believe the move will lead to a loss of customers accustomed to receiving cheap DVD rentals. The company has not said how it expects the price increase to affect customer switching. Netflix’s streaming service has become increasingly popular and is seen by CEO Reed Hastings as the future of the company.
Rupert Murdoch's News Corp (NASDAQ:NWS) has dropped its bid to take over the remaining 61% of British broadcaster BSkyB (LON:BSY) that it does not already own, after weeks of scandal erupted around the publisher. The company said it would keep the significant share of BSkyB that it already owns. The proposed $12 billion deal has been in the works for more than a year, and not long ago, it looked as though it was going to be approved, until Murdoch announced his company's refusal to spin off the Sky News division, a condition of the acquisition. The deal was submitted to Britian's Competition Commission for approval, which would have delayed the transaction for up to several months. Since the start of July, News Corp's stock has dropped over 12%, as the company's News of the World tabloid was the centre of a huge phone hacking scandal in Britain.
Capital One Financial Corp (NYSE:COF) announced Wednesday its second quarter profit rose nearly 50% from the year ago period, as the company set aside less money for loan losses. For the three months ending June 30, the bank posted net income of $911 million, or $1.97 per share, beating out analysts' estimates of $1.71 per share. The year-ago period saw profits of $608 million, or $1.33 per share.
Earnings from continuing operations for the latest quarter rose to $2.04 from $1.78 a year earlier. Despite rising a modest 2.3%, the McLean, Virginia-based company's revenues were $3.99 billion, below the $4.02 billion expected by analysts. Revenue from lending rose just over 1%. Provisions for loan losses dropped to $343 million from $723 million a year earlier, driven mainly by a $214 million reduction in net charge-offs, Capital One said. The bank reported a total charge-off ratio, the percentage of loans it doesn't expect to collect and as a result wrote off, of 2.9%, below 3% of total loans for the first time since 2007.
OpenText (NASDAQ:OTEX), a content management software company, has purchased Texas-based Global 360 Holding Corp. for $260 million. OpenText said the acquisition continues to expand its business process management market. The deal is also expected to add to its technology, services, and geographical capabilities, as well as giving the company a new presence in the case management market. Waterloo-based OpenText specializes in enterprise content management, providing software that helps companies and organizations organize and manage information.
Medical technology company Kinetic Concepts (NYSE:KCI) announced Wednesday it has agreed to be bought by a consortium of investors led by private equity giant Apax Partners, in an all-cash deal valued at $6.3 billion, including debt. The deal, which is subject to shareholder approval and other regulatory conditions, will see the consortium pay $68.50 per Kinetic share. The price represents a 21% premium to the one month average stock price of Kinetic through July 5, the day before there was speculation of the transaction in the press, and is around 6% higher than Kinetic's closing price yesterday. In addition to Apax, the buyers include the Canada Pension Plan Investment Board (CPPIB), and the Public Sector Pension Investment Board, the group responsible for managing the investments for public service members' pension funds.
Biotech company RXi Pharmaceuticals (NASDAQ:RXII) announced it acquired new patent rights covering the use of its NeuVax drug in combination with trastuzumab (Herceptin), and the use of the drug to treat breast cancer patients not eligible for Herceptin. RXi licensed the new patents, which expand its worldwide rights to the drug, from the Henry M. Jackson Foundation for the Advancement of Military Medicine (HJF). The company achieved top-line results in its June phase 2 study of NeuVax, in combination with Herceptin, which found zero recurrence in HER2 over-expressing patients after 48 months. Breast cancer that tests positive for HER2, a type of protein, is particularly aggressive, as elevated levels of the protein promotes the growth of cancer cells.
Biopharmaceutical company Array BioPharma (NASDAQ:ARRY) has struck a deal to license its cancer drug to drug developer ASLAN Pharmaceuticals. According to the agreement, Singapore-based ASLAN will fund and globally develop ARRY-543 through proof of concept, targeting patients with gastric cancer through a development program being carried out in Asia. ASLAN plans to seek a global partner for phase three development and commercialization, after achieving proof of concept, Array said in a statement. As part of the deal, Array also said it will share a large slice of the proceeds of such a partnership. Additionally, the agreement also includes an option for both companies to negotiate a license to a second undisclosed compound.
Stocks on the Move
Avid Technology Inc. (NASDAQ:AVID) rose 5.4% as Brigantine Advisors raised the stock to buy from hold
Kinetic Concepts Inc. (NYSE:KCI) increased 5.7% on news it will be acquired by a group of private equity firms including Apax Partners for $4.98 billion
Micron Technology Inc. (NASDAQ:MU) climbed 4.3% due to a new neutral rating from MKM Partners LP
Transcept Pharmaceuticals (NASDAQ:TSPT) plunged 40% when the company said it would not receive FDA approval for its sleep aid drug
