Here are five things you must know for Monday, August 8:
1. -- Stock Futures Higher as Wall Street Looks to Notch More Gains
U.S. stock-index futures were little changed on Friday ahead of a key economic report that investors hope will provide further clarity on the direction of the economy and whether the Federal Reserve’s inflation-fighting rate hikes are proving effective.
Futures on the Dow Jones Industrial Average gained 82 points or 0.25%. S&P 500 futures and Nasdaq 100 futures advanced 0.24% and 0.36%, respectively.
Futures tied to the Dow Jones Industrial Average were up 82 points, or 0.25%, while S&P 500 were up 0.24% and tech-focused Nasdaq-100 futures were up 0.36%.
In bond markets, U.S. Treasury yields fell on Monday after unexpectedly robust jobs data increased the likelihood of aggressive rate hikes by the Federal Reserve.
The yield on the benchmark 10-year Treasury note fell 4 basis points to about 2.7993%, while the yield on the 30-year Treasury bond was down 2 basis points to 3.0383%. Yields move inversely to prices.
In Europe, The pan-European Stoxx 600 index climbed 0.5% by mid-morning, with utilities adding 1.2% to lead gains as most sectors and major bourses entered positive territory.
Markets in Asia-Pacific were mixed overnight, with Hong Kong’s tech-heavy Hang Seng index weighing down the region.
A key focus for investors this week will be Wednesday’s July inflation data after Friday’s much stronger-than-anticipated jobs report quashed hopes that the Federal Reserve may relent in its aggressive campaign to tame the highest inflation in decades.
Economists are expecting the annual pace of inflation to have moderated to 8.7% in July from 9.1% in June, which was the largest increase since 1981. But core CPI is expected to increase by 0.5% month-over-month, pushing the annual rate up to 6.1% from 5.9% in June, underlining the difficulty the Fed faces trying to get inflation back in line with its official 2% target.
Any indication that inflation is still not close to peaking could test the recent rally in U.S. stock markets. Investors will also get to hear from several Fed speakers, with policymakers under renewed pressure to deliver a third 75 basis point rate hike at their upcoming meeting in September.
As of Monday, markets are pricing in a chance of about 70% that the Fed raise rates by 75 basis points in September.
Producer price index figures for July will be released on Thursday, along with the weekly report on initial jobless claims, while the University of Michigan consumer sentiment index will be published on Friday.
On the corporate earnings front, Disney (DIS) is expected to release its quarterly results after the market close on Wednesday. Other names set to report this week include Take-Two (TTWO), Palantir (PLTR), Wynn Resorts (WYNN), Six Flags (SIX) and travel stocks Norwegian Cruise Line (NCLH) and Spirit Airlines (SAVE).
2. -- U.S. Senate Narrowly Passes ‘Inflation Reduction Act’
The Senate on Sunday passed a bill spending hundreds of billions of dollars on climate and healthcare programs while raising taxes on large, profitable companies, as Democrats unified around elements of President Joe Biden’s agenda after a year of frustrated efforts to advance a broader package.
The legislation, which passed the Senate 51-50 on Sunday with a tie-breaking vote by Vice President Kamala Harris, offers tax incentives for reducing carbon emissions, seeks to allow Medicare to negotiate the price of some prescription drugs, allots roughly $80 billion to the Internal Revenue Service and extends subsidies for health insurance under the Affordable Care Act.
Along with a new 15% corporate minimum tax, it creates a 1% excise tax on companies’ stock buybacks and sets aside roughly $300 billion toward reducing the deficit.
Senate passage of the bill through the evenly divided chamber is a victory for Democrats that seemed improbable just weeks ago after talks fell apart between Senate Majority Leader Chuck Schumer of New York and Sen. Joe Manchin of West Virginia. Every Republican lined up against the bill, meaning any one Democratic defection could have sunk the effort in the Senate.
The deal is the product of difficult negotiations among Democrats to translate their control of Congress and the White House into progress on a series of longtime policy ambitions before the midterm elections, when inflation and the economy are set to be top of many voters’ minds.
One other thing the Inflation Reduction Act does not appear to do: reduce inflation. The nonpartisan Congressional Budget Office said the bill would have a “negligible” effect on inflation this year and into 2023.
The package will still need to clear the narrowly Democratic House in a vote scheduled for Friday. Speaker Nancy Pelosi (D., Calif.) and progressive caucus leader Pramila Jayapal (D., Wash.) have backed the proposal, putting it on course for likely approval.
3. -- Softbank Vision Fund Posts Massive Fiscal Q1 Loss
SoftBank (SFBQF) posted one of its biggest losses at its Vision Fund investment unit for its fiscal first quarter, as technology stocks continue to get slammed amid rising interest rates.
The Japanese giant’s Vision Fund posted a 2.93 trillion Japanese yen ($21.68 billion) loss for the June quarter, the second-largest quarterly loss for the fund to date.
SoftBank’s Vision Fund, which began in 2017 and is known for its investments in high-profile technology companies, has been hit by a slump in high-growth stocks as a result of rampant post-pandemic inflation that has led the Fed and other central banks to raise interest rates.
SoftBank said it saw a decline in the share prices of a wide range of its portfolio companies, which was “mainly caused by the global downward trend in share prices due to growing concerns over economic recession driven by inflation and rising interest rates.”
Shares of companies ranging from DoorDash (DASH) to South Korea e-commerce firm Coupang were hit hard in the second quarter of the year as investors moved away from tech stocks amid rising rates.
Masayoshi Son, SoftBank’s outspoken founder and the mastermind behind the Vision Fund, said in May the company would go into “defense” mode and be more “conservative” with the pace of investments after posting a record 3.5 trillion Japanese yen loss at the investment unit for the last fiscal year.
4. -- CVS Health Reportedly Looking to Buy Signify Health
CVS Health (CVS) is seeking to buy Signify Health (SGFY) as the drugstore and insurance giant looks to expand in home-health services, according to The Wall Street Journal.
Signify Health is exploring strategic alternatives including a sale, the Journal reported last week. Initial bids are due this coming week and CVS is planning to enter one, people familiar with the matter told the Journal, though CVS could face competition from other managed-care providers and private-equity firms.
There is no guarantee any of them will reach a deal for Signify, which has a market value of around $4.7 billion after its shares rose on the news of a potential sale.
For Woonsocket, R.I.-based CVS, which has a market value of $134 billion, a deal would help fulfill its stated ambition of becoming an even bigger provider of medical services. The company has indicated it hopes to have a deal in place to help it do so by year-end.
CVS, parent of the eponymous drugstores and the Aetna health-insurance operation, had eyed a deal for the parent of One Medical, people familiar with the matter said, before Amazon.com (AMZN) agreed to buy the primary-care clinic operator for about $3.9 billion last month.
Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care. It also offers in-home health evaluations for Medicare Advantage and other government-run managed-care plans. At the close of its deal this year to buy Caravan Health Inc., Signify said it supported roughly $10 billion in total medical spending.
Signify went public in February 2021. Even after rallying recently, the shares, which closed Friday at $19.87, are below their $24 IPO price. In July, the company said it planned to wind down one of its units after changes to a government-payment model and focus on more-profitable businesses.
5. -- Carlyle Group CEO Unexpectedly Steps Down
Carlyle (CG) CEO Kewsong Lee is stepping down as head of the private-equity firm as it struggles to expand and its shares lag.
Carlyle said late Sunday after The Wall Street Journal inquired about the matter that Lee will step down as CEO immediately and will leave the firm when his five-year employment agreement ends at the end of this year. William Conway, a co-founder and former co-CEO of the firm, will serve as interim chief executive until a permanent successor can be found.
Shares of the Washington, D.C., firm have lagged behind its publicly traded peers since its 2012 initial public offering. Carlyle was slow to branch out beyond the volatile private-equity business and into others, such as credit and insurance, that generate the steady, predictable management fees prized by shareholders.
Mr. Lee’s departure marks a rare instance in which a handpicked successor to a private-equity firm’s founders has been shown the door. Firms such as Blackstone Inc. and KKR & Co. worked for years on their succession planning, telegraphing it to fund investors and shareholders long before a formal announcement was made.
Conway and a fellow co-founder, David Rubenstein, served as the firm’s co-CEOs until 2018 when they handed the title to Lee and firm veteran Glenn Youngkin. Daniel D’Aniello, the third co-founder, was chairman until the start of 2018.
Lee, 56, became sole CEO in 2020 when Youngkin, now governor of Virginia, stepped down to focus on public service.
