Beige Book Paints a Rosy Picture!

Fed’s Beige Book shows economic expansion across all districts

The-Beige-Book-Report showed expansion across all regions. See Stockwinners.com Market Radar

The Federal Reserve’s latest Beige Book reads, “Economic activity expanded across all twelve Federal Reserve Districts in June, with the pace of growth ranging from slight to moderate.

In addition, the majority of Districts expected modest to moderate gains in the months ahead. Consumer spending appears to be rising across a majority of Districts, led by increases in non-auto retail sales and tourism. However, many Districts noted some softening in consumer spending, particularly in auto sales which declined in half of the Districts.

Manufacturing and nonfinancial services activity continued to grow, with most Districts reporting modest to moderate gains since the last report. Loan demand was steady to increasing in most Districts.

Residential and nonresidential construction activity was flat to expanding in most Districts.

Most Districts cited low home inventory levels in certain market segments which were constraining home sales in many areas.

Agricultural conditions were mixed across the nation as moisture conditions varied considerably; several Districts continued to report weakness in dairy and some crop sectors due to low prices.

Energy activity generally improved since the last survey, particularly for oil and natural gas. Coal production remained sluggish although higher than year-ago levels.”

Employment and Wages

Employment across most of the nation maintained a modest to moderate pace of expansion, although the Atlanta and St. Louis Districts noted flat employment levels.

Labor markets tightened further for both low- and high-skilled positions, particularly in the construction and IT sectors.

Contacts across a broad range of industries reported a shortage of qualified workers which had limited hiring. Wages continued to grow at a modest to moderate pace in most Districts, and many firms attributed these wage gains to tighter labor market conditions.

Wage pressures generally trended with employment conditions, and rising wage pressures were noted among both low- and high-skilled positions.

A few Districts also reported rising costs of benefits and variable pay.

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Is Zillow Amazon’s Next Victim?

Zillow latest to slip in response to Amazon expanding services

Zillow tumble on Amazon news. See Stockwinners.com Market Radar

As Amazon (AMZN) seeks to move into several different market sectors, companies including Zillow (Z, ZG), Best Buy (BBY) and Core-Mark (CORE) have been brought into focus on the risk of increased competition.

REAL ESTATE

Amazon seems to be preparing to offer consumers the option to hire real estate agents through its professional services marketplace, real estate news site Inman reports.

The service would likely be in exchange for referral fees, the website says. Inman noted that Amazon has a placeholder webpage, indexed in its Home and Business Services, that allows users to “Hire a Realtor,” and reported the company has sought help to integrate agents into its professional services marketplace.

Following the report, shares of online real estate marketplace Zillow dropped.

TECH REPAIRS:

Meanwhile, Best Buy slid 7% on Monday following a report that Amazon has rolled out its own service to compete with the big box store’s “Geek Squad” installation and repair service.

Best Buy Drops on Amazon entering gadget repair. See Stockwinners.com Market Radar to learn more.

Reports said the tech giant has in-house gadget experts that offer free Alexa consultations as well as product installations for a fee inside customer homes.

#Loop Capital analyst Anthony #Chukumba issued a note on Monday saying he viewed the selloff as overdone as he believes Best Buy’s Geek Squad offers a much more comprehensive set of services than Amazon does. He kept a Buy rating on the name with a $72 price target.

BofA/Merrill analyst Curtis #Nagle had similar views, saying the rollout of Amazon’s service will have a limited impact on Best Buy as it has competitive advantages, a strong head start in services, and there is plenty of room for growth for both companies in smart home devices.

FOOD DISTRIBUTION

Loop Capital analyst Andrew #Wolf said he sees Core-Mark as the least likely company among those he covers to get “Amazoned,” or put at risk by Amazon buying a competitor.

Its closest competitor McLane, which is owned by #Berkshire Hathaway (BRK.A, BRK.B), is highly unlikely to sell to #Amazon given that its largest customer is Amazon’s rival Wal-Mart (WMT), Wolf tells investors.

PRICE ACTION:

Following Inman’s report, Zillow is down 3.5% to $44.53 in Wednesday’s trading.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

PayPal Added as Payment Option by Apple

PayPal rises after being added as payment option by Apple

PayPal added as payment option by Apple. Read Stockwinners.com Market Radar for the latest. Stocks to Buy

PayPal (PYPL) is rising after Apple (AAPL) added it as a payment option, which #JPMorgan analyst #Tien-tsin #Huang sees as a “significant,” but difficult to size, win for the payment company.

Also viewing the announcement as positive, his peer at Craig-Hallum argued that this is the type of “expanding relationships” that makes PayPal a potential “3 year double.”

APPLE AVAILABILITY

In a post to the company’s corporate blog last night, PayPal COO Bill Ready announced that its customers will be able to pay for #AppStore, Apple Music, #iTunes and #iBooks purchases across #iPhone, #iPad and #iPod Touch devices using their #PayPal account.

The functionality across Apple services started yesterday in Canada and Mexico, and will be rolling out in other countries including the U.S. “soon after,” Ready stated in the post.

SIGNIFICANT DEAL

Commenting on PayPal’s announcement, JPMorgan analyst Tien-tsin Huang told investors that while difficult to size, the deal is “significant” as it provides “yet another example of a payment foe” choosing to work with PayPal as a payment partner.  The analyst reiterated an Overweight rating on PayPal’s shares.

THREE YEAR DOUBLE

In a research note of his own, Craig-Hallum analyst Brad Berning pointed out that PayPal’s deal with Apple could expand the former’s total payment volume addressable market by about $70B in 2018 with the potential to contribute 0.7%-2% to the TPV growth and 0.6%-1.7% to net revenue growth. The analyst also argued that this exemplifies the type of “expanding relationships” and “enhancing consumer experience” opportunities that lead him to believe PayPal can be a “three-year double” despite the run in the stock already. Berning reiterated a Buy rating and $65 price target on PayPal’s shares.

PRICE ACTION:

In Wednesday’s trading, shares of PayPal have gained about 3.5% to $56.65. Yesterday, the stock was added to Stockwinners Portfolio at the price of $54.50.

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Royal Bank of Scotland Fined $5.5 Billion

 RBS to pay $5.5B in settlement of U.S. RMBS claims

 

RBS to pay $5.5B in settlement of U.S. RMBS claims, See Stockwinners Market Radar

The Royal Bank of Scotland Group (RBS) announced that it has reached a settlement with the Federal Housing Finance Agency, or FHFA, as conservator of Fannie Mae (FNMA) and Freddie Mac (FMCC), to resolve claims by #FHFA in relation to RBS’s issuance and underwriting of approximately $32B of residential mortgage-backed securities, or RMBS, in the U.S. As part of the settlement, FHFA’s outstanding litigation against RBS will be withdrawn.

Under the settlement, RBS will pay FHFA $5.5B, of which $754M will be reimbursed to RBS under indemnification agreements with third parties. The cost to RBS, net of the indemnity mentioned above, of $4.75B is largely covered by existing provisions.

An incremental charge of $196M will be recorded in the RBS Q2 results which will be published on August 4, the bank noted.

As at end Q1, RBS held a provision of $8.3B against RMBS, of which $4.55B related to FHFA and the remainder principally relates to a number of RBS’s unresolved RMBS litigation matters.

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Fed Chair Tells Congress ‘Gradual’ Rate Raises Likely

Fed Chair to tell Congress ‘gradual’ rate raises likely appropriate  

FOMC raised rates by 25 bp

Federal Reserve Chair Janet #Yellen will tell Congress in her semiannual monetary policy report, “Considerable uncertainty always attends the economic outlook. There is, for example, uncertainty about when–and how much–inflation will respond to tightening resource utilization. Possible changes in fiscal and other government policies here in the United States represent another source of uncertainty.

In addition, although the prospects for the global economy appear to have improved somewhat this year, a number of our trading partners continue to confront economic challenges.

At present, I see roughly equal odds that the U.S. economy’s performance will be somewhat stronger or somewhat less strong than we currently project…The Committee continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time to achieve and maintain maximum employment and stable prices.

That expectation is based on our view that the federal funds rate remains somewhat below its neutral level–that is, the level of the federal funds rate that is neither expansionary nor contractionary and keeps the economy operating on an even keel. Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance.

But because we also anticipate that the factors that are currently holding down the neutral rate will diminish somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our 2 percent goal.

Even so, the Committee continues to anticipate that the longer-run neutral level of the federal funds rate is likely to remain below levels that prevailed in previous decades.”

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Cara Therapeutics Reports Positive Results for Chronic Kidney Disease

Cara Therapeutics announces summary data from Oral CR845 Phase 1 trial

Stockwinners.com/blog

Cara Therapeutics (CARA) announced summary results from its Phase 1 safety and pharmacokinetic trial of Oral CR845 in chronic kidney disease, or #CKD , patients undergoing hemodialysis.

The Phase 1 results showed that all four tablet strengths of Oral #CR845 were generally well-tolerated when administered either daily or after dialysis three times per week.

Top-line pharmacokinetic analysis indicated that plasma levels of CR845 attained after oral administration of doses up to 2.5 mg were comparable to or exceeded those attained with clinically efficacious intravenous doses of CR845 for the treatment of moderate-to-severe CKD-associated pruritus, or CKD-aP, in hemodialysis patients.

The plasma levels of CR845 attained after oral administration of the 1.0 mg tablet strength approximated those attained with the 1.0 mcg/kg I.V. CR845 dose, which demonstrated significant clinical benefit in the recently reported Phase 2/3 trial in hemodialysis patients with CKD-aP.

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ABM to Buy GCA Services for $1.25 Billion

ABM to acquire GCA Services Group for approximately $1.25B in cash, stock, See Stockwinners Market Radar

ABM (ABM) announced it has entered into a definitive agreement to acquire GCA Services Group from affiliates of Thomas H. Lee Partners, L.P. and Goldman Sachs Merchant Banking Division (GS) for approximately $1.25B in cash and stock.

GCA is a leading provider of facility services in the education and commercial industries, specializing in facilities maintenance, janitorial services, grounds management, vehicle services and outsourced workforce solutions.

With over 37,000 employees in 46 states, the District of Columbia, and Puerto Rico, GCA is headquartered in Cleveland, OH. The acquisition of GCA is expected to accelerate ABM’s ability to enhance long-term shareholder value.

While ABM intends to provide greater detail surrounding the long-term financial impact of the transaction after the acquisition closes, ABM expects: Revenue contribution of approximately $1.1B and adjusted EBITDA of approximately $100M, respectively, after the first full year of ownership. Revenue increase of approximately $600M within the Education industry group, with the remaining $500M to be allocated to other key industry groups during the integration process.

Annualized, run rate cost synergies of approximately $20M-$30M, which are expected to be realized by the second full year of ownership.

Total debt, including standby letters of credit, of approximately $1.5B, and total debt to proforma lender-adjusted EBITDA of approximately 4.0x, as calculated under the Company’s amended credit agreement, which is not expected to impact ABM’s current dividend payment policy.

Under the terms of the agreement, ABM will acquire GCA for $851M in cash and $399M in shares of ABM common stock subject to customary adjustments for working capital and net debt. The transaction is expected to close by September 2017, subject to customary closing conditions including required regulatory approvals.

ABM expects to incur approximately $70 million in one-time, transaction-, synergy-, and integration-related costs.

Following the closing of the transaction, affiliates of Thomas H. Lee Partners, L.P. and Goldman Sachs Merchant Banking Division will own, in the aggregate, approximately 14% of ABM’s outstanding shares and will enter into a shareholders agreement with the Company providing for, among other things, customary standstill and voting obligations, transfer restrictions and registration rights.

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