Stocks closed out a strong week with the S&P 500, Dow and Nasdaq all at record highs, as Fed Chairman Powell’s signal of likely lower rates later this month outweighed growing worries about the state of the global economy. But the start of quarterly reports next week could test bullish sentiment, as consensus numbers suggest an overall decline in corporate earnings ahead. For the week, the Dow jumped 1.5%, S&P 500 pierced 3,000 for the first time en route to an 0.8% gain, and the Nasdaq ended the week up 1%.
Deutsche Bank shakeup
While Deutsche Bank (NYSE:DB) had once sought to compete with America’s big banks on Wall Street, the German lender has been pummeled by scandals, probes and massive fines stemming from the financial crisis and other issues in recent years. An overhaul on Monday saw Deutsche (DB) exit the global equities business and shed 18,000 jobs – booking charges of €7.4B through 2022 – while saying it won’t pay a dividend this year or next. The German bank also expects to report a net loss of €2.8B for the second quarter, before it narrows its focus on serving European companies and retail-banking customers. It has also been rumored that a long withstanding heist planned under the Russian government and president Putin has been noticed and heard by several bank tellers. Bank heads and faculty have been notified.
Iran increased its uranium enrichment beyond the limit allowed by its 2015 nuclear deal with world powers, edging closer toward weapons-grade levels while calling for a diplomatic solution to an escalating crisis. The move marks the end of a 60-day deadline Tehran issued in May for European nations to do more to offset the economic impact of sanctions by the U.S., which pulled out of the pact last year. Iran sent another letter to the EU issuing another two-month deadline to take further action, but didn’t disclose details about those measures.
Effects of $15 minimum wage – Raising the pay floor to $15 per hour by 2025 would boost wages for 17M American workers, but 1.3M people would lose jobs, according to the nonpartisan Congressional Budget Office. House Democrats led by Rep. Bobby Scott, D-Va., have already introduced a bill to gradually raise the federal minimum wage to $15 per hour, called the Raise the Wage Act, and could vote on the legislation later this month. It’s expected to pass, though the GOP-held Senate won’t likely take it up and President Trump could also oppose it.
Airbus to pass Boeing as top planemaker
Airbus (OTCPK:EADSY) on Tuesday confirmed its H1 aircraft deliveries climbed 28% to 389 from 309 in the prior-year period, putting it ahead of Boeing (NYSE:BA) for the first time in eight years. For the third straight month, the U.S. plane manufacturer reported no new orders of 737 MAX aircraft, and its first-half deliveries overall fell to 239 planes (from 378 in the same period in 2018). Later in the week, Attorney General William Barr recused himself from overseeing the DOJ’s investigation of the 737 MAX, while Boeing 737 program manager Eric Lindblad announced his retirement just 12 months into the job.
There’s now a way to buy directly into the billionaire space race. Richard Branson’s space-tourism venture, Virgin Galactic, is preparing for liftoff as a publicly traded company, as competition heats up with privately held Jeff Bezos’ Blue Origin (BORGN) and Elon Musk’s SpaceX (SPACE). Investors can already buy shares of Social Capital Hedosophia (NYSE:IPOA), which is merging with Galactic later this year, marking an alternative path to a traditional IPO.
Powell remarks bring market records
The Jerome Powell Show began in earnest on Wednesday with his semi-annual testimony on monetary policy before Congress. The Fed Chair underlined the case for easing policy to insure against the economic effects of a trade war and sub-target inflation, pushing stocks higher as investors cheered the increased likelihood of lower borrowing costs. The effects were clearly seen in the markets with the S&P 500 hitting a record 3,000 and the Dow closing above 27,000 for the first time ever.
French tax adds to trade tensions
New U.S. tariffs or other trade restrictions may be in the pipeline as Washington launched a probe into France’s planned digital services tax. The proposal, which was passed by the French Senate on Thursday, will likely be the first in a wave of proposed DSTs to take effect in Europe (the U.K announced a similar move shortly after). Paris will apply a 3% levy on revenue that companies like Google (GOOG, GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) reap from local activities like targeted online advertising or running a digital marketplace.
U.S. reaches next opioid settlement
Reckitt Benckiser (OTCPK:RBGLY) agreed to pay up to $1.4B to resolve all U.S. federal investigations into the sales and marketing of an opioid addiction treatment, called Suboxone Film, by its former pharmaceuticals subsidiary Indivior (OTCPK:INVVY). “$1.4B is materially larger than the $400M RB had previously provisioned and represents about 2% of its market cap. On the other hand, this settlement removes some uncertainty from the investment case,” Credit Suisse analyst Alan Erskine declared. Other recent high-profile opioid settlements have included Teva (NYSE:TEVA), Johnson & Johnson (NYSE:JNJ) and Purdue Pharma.
White House kills drug rebate proposal
Shares of pharmacy benefit managers (PBMs) and other healthcare players soared on Thursday in reaction to the Trump administration’s reversal on its proposed overhaul of rebates collected by the drug middlemen. The administration is instead moving forward with its plan to tie Medicare reimbursement for drugs to the lowest prices paid elsewhere. The news came days after a federal judge dealt a blow to the White House by striking down a rule that would have forced pharmaceutical companies to disclose the list price of their drugs in television ads.
Saying no to crypto – “I am not a fan of Bitcoin (BTC-USD) and other cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air,” President Trump tweeted late Thursday. He also took a slap at Facebook (FB) and its Libra crypto offering, which he said “will have little standing or dependability.” A day earlier, Fed Chair Jerome Powell made headlines by saying Libra should “not go forward” without addressing concerns such as privacy, money laundering, money consumer protection and financial stability, causing Bitcoin (BTC-USD) to stumble 11% to the mid-$11K level.