DAILY MARKET REPORTS
- Amazon’s move to entrench itself in the health sector sent drug stocks sliding on Thursday, but gains in financial and technology stocks helped Wall Street keep its footing.
- Amazon.com said it would buy online pharmacy PillPack, sending shares of drug distributors and retailers tumbling as the e-commerce giant moves deeper into the healthcare sector.
- Walgreens, already under pressure after its third-quarter earnings report, tumbled 10.5% and along with UnitedHealth’s 2.4% drop pulled the Dow Jones Industrial Average lower.
- Shares of CVS Health sank 9.3%, Rite Aid fell 10.1% and Express Scripts was down 3.2%.
- The U.S. economy slowed more than previously estimated in the first quarter, with Commerce Department data showing gross domestic product increased at a 2% annual rate in the period, instead of the 2.2% pace reported last month.
- The revision came amid the weakest performance in consumer spending in nearly five years and with the United States engaged in tit-for-tat trade tariffs with its major trade partners, including China, Canada and the European Union.
US FINANCIAL MARKET
Walgreens to Buy Back $10 Billion in Shares, Raises Dividend
- Walgreens Boots Alliance plans to repurchase as much as $10 billion of its shares and raised its dividend, as the drugstore chain becomes the latest company to return additional capital to investors following the new U.S. tax law.
- Bolstered by the acquisition of Rite Aid stores, sales rose 14% to $34.33 billion. Analysts had expected the company to report $34.1 billion in sales.
- In all for the third quarter, Walgreens posted a profit of $1.34 billion compared with a profit of $1.16 billion in the year-ago period.
- Comparable retail sales fell 3.8% in the U.S. and 1.3% on a constant-currency basis internationally.
- Walgreens said its effective tax rate was 7.6%, compared with 12.4% in the same quarter a year before.
Amazon to Buy Online Pharmacy PillPack
- Boston-based PillPack offers medications in presorted dose packaging, coordinates refills and renewals, and sends shipments to customers’ homes in the U.S. PillPack holds pharmacy licenses in all 50 states. Thursday’s announcement sent shares in several pharmacy operators sharply lower.
- Financial terms of the deal weren’t disclosed.
Amazon Drives Deeper Into Package Delivery
- Amazon.com is pushing further onto the turf of its shipping partners UPS and FedEx, enabling small businesses to carry its overflowing supply of packages in the all- important last-delivery leg to the consumer’s door.
- The online retail giant said it is inviting entrepreneurs to form small delivery companies employing up to 100 drivers and leasing between about 20 and 40 Amazon-emblazoned vans, an initiative that should help it rapidly build out its own delivery network across the country.
- The new initiative will give it a visible presence on the streets in bigger metro areas that could help it to start to resemble UPS, FedEx and the Postal Service. While the new service is unlikely to siphon packages from those partners in the immediate future, having even more delivery drivers will allow Amazon to make more of its own deliveries.
U.S. gives Disney approval to buy Fox amid bidding war with Comcast
- Walt Disney won U.S. approval to buy Twenty-First Century Fox entertainment assets for $71.3 billion on condition it sell Fox’s 22 regional sports networks, giving Disney an edge over Comcast Corp’s competing bid.
- Disney, which also owns sports network ESPN, has agreed to divest all of Fox’s regional sports networks, which provide sports programing for regional and local markets, such as Fox’s YES Network.
- Disney’s agreement with the government could be a setback for Comcast, which has yet to respond to Disney’s latest offer for Fox, unveiled last week. Comcast, whose offer is worth $65 billion, declined to comment.
- If Disney prevails over Comcast, the combination would expand Disney’s unrivaled portfolio of some of the world’s most popular characters, uniting Mickey Mouse, Luke Skywalker and Marvel superheroes with Fox’s X-Men, “Avatar” and “The Simpsons” franchises.
Panasonic flags battery cell shortages as Tesla Model 3 output picks up
- A pickup in production of Tesla’s Model 3 cars, after earlier delays, has resulted in occasional battery cell shortages, a Panasonic official said in a sign Tesla is in overdrive to meet its end-June forecast.
- Yoshio Ito, head of Panasonic’s automotive business, told the company’s general shareholders meeting on Thursday there had been a “sharp improvement in production” that was leading to occasional battery (cell) shortages.
- Panasonic is the exclusive battery cell supplier for Tesla’s current production models, producing them in Japan as well as at Tesla’s so-called Gigafactory in the U.S. state of Nevada, which Panasonic jointly operates.
- Tesla said earlier this month that it was cutting several thousand jobs across the company as it seeks to reduce costs and become profitable, without endangering the critical production ramp-up for the sedan, a closely watched metric.
Visa, Mastercard Near Settlement Over Card-Swipe Fees
- Visa and Mastercard are close to settling a long-running antitrust lawsuit with merchants over the fees they pay when they accept card payments, according to people familiar with the matter.
- Merchants first brought the class-action suit in 2005 against Visa, Mastercard and the largest U.S. card-issuing banks. But many large merchants opted out of the original settlement of $7.25 billion that was reached in 2012 largely due to terms that would have barred them from filing lawsuits against the networks over future swipe-fee increases.
- Merchants were dealt a big loss this week when the Supreme Court backed American Express’s policy of preventing merchants that accept AmEx cards from offering shoppers discounts or other incentives to use cheaper cards. The court’s decision is a setback for the merchants’ broader ambitions to take on credit card swipe fees.
Sempra to Sell Wind and Solar Assets
- Sempra Energy said it plans to sell its wind and solar assets in the U.S., along with some natural-gas assets, as it works to fend off activists investors pushing for six board seats and a review of the entire business.
- Sempra, which is expected to detail its plans during an analyst day Thursday, said it would “continue evaluating” the rest of the company’s businesses.
- Sempra said it expects to take an impairment charge after tax and noncontrolling interests of between about $870 million and $925 million in the second quarter because of the planned sales. Sempra’s board approved the sale of the assets Monday.
Kroger Plans to Introduce Driverless Grocery Deliveries
- The largest U.S. supermarket chain by sales and stores on Thursday said it would work with electric-vehicle startup Nuro to test what they called the world’s first driverless grocery deliveries.
- Kroger and Nuro executives said delivering groceries without drivers would make such services cheaper and easier to introduce in less densely populated parts of the country. Nearly a third of 4,504 adults surveyed by Forrester Analytics earlier this year said they didn’t do more grocery shopping online because those goods often cost more.
- The Nuro partnership is the third deal Kroger has made in the past two months that aims to aid in how it sells to customers as competitors Amazon.com and Walmart move deeper into online food retail.
Apple and Samsung Settle Seven-Year-Old iPhone Patent Dispute
- Apple and Samsung have quietly settled a dispute over Apple’s design patents, putting an end to a costly, yearslong fight that tested some of the central claims of design theft and patent infringement.
- In documents filed Wednesday in a California federal court, the companies said they agreed to end litigation with prejudice, meaning another complaint can’t be filed on the same claims.
- The companies declined to comment on the terms of the out-of-court settlement, which comes nearly four years after they agreed to dismiss all patent disputes outside the U.S.
Lyft valued at $15 billion in latest funding round
- Lyft said it raised $600 million in a new funding round led by Fidelity Management, doubling the ride-hailing firm’s valuation to $15.1 billion in little over a year.
- The funding makes Fidelity one of Lyft’s largest investors with $800 million in investment.
- Lyft, which has 35% market share in the US, has investors including AllianceBernstein, Baillie Gifford, and KKR & Co.
- Rival Uber in May said it would hold a secondary stock sale for employees and existing investors that would value the company at $62 billion, up from the $48 billion valuation it commanded in a secondary sale late last year.
Chipotle CEO plans marketing blitz, closing up to 65 stores
- Chipotle Mexican Grill said the chain will shut up to 65 underperforming restaurants and revamp its marketing under Chief Executive Officer Brian Niccol, but many questions remain unanswered about what to expect under the new leadership.
- Executives said costs from corporate restructuring would cause the chain to take between $115 million to $135 million in charges, including about $50 million to $60 million in the second quarter.
- Chipotle also said it would launch a customer loyalty program in 2019 and is exploring offering $2 tacos with a drink as part of a proposed “happy hour.” The announced changes come as the chain seeks to recover after a rash of food safety lapses dragged on the brand.
Another Equifax executive is charged with insider trading related to data breach
- On Thursday, prosecutors said they charged a former software development manager with insider trading, nearly four months after the former chief information officer of one of Equifax’s business units faced similar charges.
- Bonthu, 44, was fired in March after refusing to cooperate with an internal investigation into whether he had violated the company’s insider trading policy.
- The SEC says Bonthu worked on creating a website for consumers who were affected by the breach.
- His profit was $75,000, the SEC said. Bonthu has agreed to return the money plus interest and to a permanent injunction to settle the SEC charges.
US ECONOMY & POLITIC
The U.S. Economy Was Weaker Last Quarter Than We Thought
- Gross domestic product, a broad measure of the goods and services produced across the U.S., expanded at a seasonally and inflation-adjusted annual rate of 2% in the first quarter. That was weaker than an earlier estimate of 2.2% growth.
- The first quarter saw residential investment weigh on growth. Home building and renovations declined at a revised annual rate of 1.1%.
- Meanwhile, consumer spending, which accounts for more than two-thirds of total U.S. economic output, increased at a 0.9% annual pace last quarter.
- Personal-consumption expenditures, a measure of household spending, increased a seasonally adjusted 0.6% in April from the prior month. That was the largest increase in five months, signaling a rebound in spending.
- Net exports docked 0.04 percentage point from the overall GDP growth rate in the first quarter.
- Change in private inventories subtracted 0.01 percentage point. Both categories tend to be volatile from quarter to quarter.
U.S. Jobless Claims Rise 9,000 to 227,000
- Initial jobless claims, reflecting how many Americans applied for unemployment benefits, rose 9,000 to a seasonally adjusted 227,000 in the week ended June 23. Economists had predicted claims would settle at 220,000.
- Over the past month, claims grew an average of 1,000. That measure, known as the four-week moving average, suggests claims remain exceptionally low, providing additional evidence of a strong labor market.
- Thursday’s report also showed the number of continuing unemployment benefit claims–those drawn by workers for more than a week–fell 21,000 to 1,705,000 in the week ended June 16. Continuing claims are reported with a one-week lag.
Justice Anthony Kennedy’s Exit Sets the Stage for a Fierce Battle Over His Successor
- Justice Anthony Kennedy announced his retirement Wednesday, setting the stage for a monumental battle over the nation’s constitutional direction, handing President Donald Trump the chance to cement the Supreme Court’s conservative course for years to come and stoking raw passions in both political parties going into this fall’s battle for Congress.
- His departure puts in play an array of consequential issues, with liberal rulings on access to abortion, gay rights, capital punishment and voting rights having been decided by his decision to part from fellow court conservatives.
- Senate Majority Leader Mitch McConnell (R., Ky.) immediately promised to confirm Mr. Trump’s nominee, whoever it may be, before the Democrats can potentially recapture the chamber in November.
- Democrats, still furious over Mr. McConnell’s refusal to consider President Barack Obama’s nominee for a 2016 vacancy, Judge Merrick Garland, tried to stop an all-but-inevitable result. If Republicans wanted to give voters a say in the Supreme Court selection in 2016, the Democrats said, GOP leaders should do the same now.
House Defeats GOP Immigration Bill
- The House overwhelmingly rejected an immigration bill Wednesday intended as a compromise between different wings of the GOP, hobbling the party’s efforts to address the issue ahead of the midterm elections.
- The bill failed 301 to 121, with all Democrats and 112 Republicans opposing the measure. The wide margin of defeat marked an embarrassment for GOP leaders and highlighted how divided both the party and the House are on a comprehensive immigration bill.
- The legislation would have provided six years of renewable legal status to young immigrants brought to the U.S. as minors and living in the country without legal authorization, a group often known as Dreamers, and ultimately would have offered them a pathway to citizenship.
- It also would have provided $23.4 billion for border security, ended a diversity-visa lottery program and cut family-based immigration—in line with goals laid out by President Donald Trump earlier this year.
Trump to Meet Russia’s Putin in Finland on July 16
- In a statement, White House press secretary Sarah Sanders said the leaders would meet to discuss relations between their two nations and a “range of national security issues.”
- The Kremlin, which announced the details of the meeting at the same time as the White House on Thursday, said the meeting would discuss “the state and future outlook for developing Russian-American relations, as well as topical international issues.”
- Before meeting with Mr. Putin, the president is scheduled to attend a North Atlantic Treaty Organization summit next month in Brussels and is also planning to visit the U.K. Mr. Trump met twice with Mr. Putin last year on the sidelines of international conferences, but has yet to take part in a formal summit meeting with the Russian leader.
EUROPE & WORLD
China says carefully monitoring U.S. policies on inbound investments
- China’s commerce ministry said it would carefully monitor U.S. policies on inbound investments, stressing that the country opposes using national security as grounds to restrict foreign investments.
- U.S. President Donald Trump said on Wednesday he will use a strengthened national security review process to thwart Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.
- The proposed investment restrictions are part of the Trump administration’s efforts to pressure Beijing into making major changes to its trade, technology transfer and industrial subsidy policies after U.S. complaints that China has unfairly acquired American intellectual property through joint venture requirements, unfair licensing and strategic acquisitions of U.S. tech firms.
North Korea Is Rapidly Upgrading Nuclear Site Despite Summit Vow
- North Korea is upgrading its nuclear research center at a rapid pace, new satellite imagery analysis suggests, despite Pyongyang’s commitment to denuclearization at a summit with the U.S. this month.
- The analysis found that Pyongyang, in recent weeks, appears to have modified the cooling system of its plutonium-production reactor and erected a new building near the cooling tower.
- The pictures, captured on June 21, nine days after the Singapore summit meeting between President Donald Trump and North Korean leader Kim Jong Un, showed no immediate effort to begin denuclearization at North Korea’s key nuclear research site.
Brazil Central Bank Cuts 2018 GDP Growth Forecast to 1.6% From 2.6%
- In its quarterly inflation report released Thursday, the bank forecast gross domestic product growth of 1.6% this year, down from the 2.6% forecast in the March report. In both cases, the figures were in line with market projections.
- As for consumer prices, the bank forecast inflation ending 2018 at 4.2%, up from the 3.8% forecast in March but still below the 4.5% target.
China Rebuffs U.S. Efforts on Behalf of Airlines
- China has rebuffed a U.S. request for talks about China’s demand for international airlines to start referring to Taiwan as part of China, a spokesman at the U.S. Embassy in Beijing said Thursday.
- China wrote to airlines in April demanding that they change their websites and other materials—not just in China, but globally—and adopt language approved by Beijing regarding self-ruled Taiwan as well as Hong Kong and Macau, which are special administrative regions of China.
- Foreign airlines face potential reprisals if they don’t make the changes, China’s aviation authority has warned.
- While China has extended the deadline for making the required changes to late July, it shows no sign of backing down, especially now that most global airlines have already fallen into line. The Chinese travel industry is growing rapidly, with China set to become the world’s biggest aviation market by 2022.
TODAY in HISTORY
- The fourth president of the United States, James Madison, died at Montpelier, his Virginia estate. (1836)
- Archduke Francis Ferdinand of Austria-Hungary and his wife were assassinated, setting off World War I. (1914)
- The Treaty of Versailles was signed in France, ending World War I. (1919)
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