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Senate Passes Flagship Bill, CVS/Signify, SoftBank Loss - What's Moving Markets

Economy Aug 08, 2022 12:12
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By Geoffrey Smith

Investing.com -- U.S. stocks are set to open higher after the Democrats' long-awaited and much-diluted tax and spending bill finally cleared the Senate at the weekend. A more comfortable vote in the House of Representatives is due later this week. SoftBank reported a record quarterly loss of nearly $24 billion after its famous (infamous?) aggressive bets on tech stocks soured. Palantir and Tyson Foods report earnings. CVS is looking to buy Signify and BHP is looking to buy Oz Minerals, but both are struggling to find acceptance from boards who think their stock drops are just a blip. Recession fears in Europe and elsewhere continue to weigh on oil and energy prices. Here's what you need to know in financial markets on Monday, 8th August.

1. Senate passes flagship tax and spending bill

The U.S. Senate passed a watered down version of a bill expanding spending on healthcare and renewable energy, among other things, after making key concessions on tax increases to moderate Senators over the last couple of weeks, notably with regard to the tax treatment of carried interest.

The bill passed 51-50, with Vice President Kamala Harris needing to use her tie-breaking vote in the face of unified Republican Party resistance. It now passes to the House of Representatives, where the Democrats have a more comfortable majority (for now). A vote is expected by Friday.

The bill also creates a new 15% minimum corporate income tax and imposes a 1% levy on companies’ stock buybacks. It aims to reduce the federal budget deficit by $300 billion.

2. SoftBank reports record loss

Japanese venture capital company SoftBank (OTC:SFTBY) reported a record loss of $23.3 billion for the three months through June as its big bets on technology stocks soured due to rising interest rates.

The company’s two Vision Funds, which include some of the most aggressive of those bets, posted investment losses of 2.33 trillion yen ($17.2 billion). Those losses have forced Masayoshi Son’s company to raise liquidity by selling down its biggest and most successful position in Chinese e-commerce giant Alibaba (NYSE:BABA).

“For private portfolio companies, the fair value decreased in a wide range of investments, reflecting markdowns of those with recent funding rounds and/or weaker performance, as well as share price declines in market comparable companies,” SoftBank said.

3. Stocks set to open higher. Palantir, vaccine makers eyed

U.S. stock markets are expected to open in cautiously optimistic fashion after Friday’s wild ride, driven by the much larger-than-expected rise in employment (and stronger-than-expected wage gains) that defied talk of a slowdown and refocused the market squarely on the inflation outlook.

The market seemed largely untroubled by reports of China continuing its live-fire drills off the coast of Taiwan past their originally-scheduled end data.

By 6:15 AM ET, Dow Jones futures were up 92 points, or 0.3%, while S&P 500 futures were up by a similar amount, and Nasdaq 100 futures were up by 0.5%.

Stocks reporting later include Tyson Foods (NYSE:TSN), which will provide an insight into one of the more pressing aspects of current inflation – food prices. Vaccine makers BioNTech (NASDAQ:BNTX) and Novavax (NASDAQ:NVAX) are also due, while Palantir (NYSE:PLTR) and Take-Two (NASDAQ:TTWO) Interactive report after the bell.

4. CVS eyes Signify, while BHP is rebuffed by Oz

CVS Health (NYSE:CVS) wants to buy Signify Health (NYSE:SGFY), according to The Wall Street Journal, aiming to expand its push into the provision of medical services. Its sources suggested that Signify is looking around for rival suitors to help it get a better price.

The Democrats’ tax and spending bill contains some far-reaching provisions for the health sector, allowing Medicare to negotiate the prices of certain drugs and capping out-of-pocket drug costs for Medicare beneficiaries at $2,000 a year from 2025 onward, as well as allowing free vaccines for Medicare enrollees from next year. A $35 monthly cap on insulin costs takes effect next year already.

Other companies seeking to exploit the opportunity created by the last quarter’s selloff included miner BHP, whose $5.8 billion bid for smaller rival Oz Minerals was rejected on valuation grounds.

5. Oil weakens further amid slowdown fears

Crude oil prices fell (along with bond yields), as even the strong jobs report failed to sustain prices at what are still painfully high levels for most of the world.

By 6:30 AM ET, U.S. crude futures were down 1.2% at $87.98 a barrel, struggling to hold above last week’s seven-month low. Brent futures were down 1.1% at $93.90 a barrel.

Natural gas prices also eased further, as the market prices in expected demand destruction in Europe due to energy-saving measures and an expected recession. European power prices also eased further from last week’s highs, despite no improvement in the supply situation, which has been compounded by a lack of water for hydropower and for cooling nuclear reactors.

Senate Passes Flagship Bill, CVS/Signify, SoftBank Loss - What's Moving Markets
 

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