Daily Market Commentary for June 20, 2012
In the wake of concerns over a lack of disclosure in Facebook Inc.’s (NASDAQ: FB) controversial initial public offering in May, regulatory observers urged policy makers on Wednesday to require companies to make road-show discussions available to the broader public.
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Text of the Federal Open Market Committee statement released Wednesday: “Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The FOMC expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The FOMC anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions, including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. The FOMC decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The FOMC is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.”
U.S. Food and Drug Administration gave orphan-drug designation to Medgenics Inc. (MDGN) for its Biopump technology to treat Hepatitis D. Medgenics shares were higher by 16% into mid-afternoon trading on Wednesday, with high on trading session taunting current 52 week high. Including the possibility of an expedited regulatory process, the orphan drug designation carries multiple benefits including the availability of grant money, certain tax credits and seven years of market exclusivity. Orphan-drug designation is granted to advance the evaluation and development of products that show promise for rare diseases or conditions. Medgenics' Biopump technology facilitates the production and delivery of therapeutic proteins in patients using their own tissue. "The novel Biopump platform potentially offers significant advance over current treatment not just for an orphan disease, but also for other diseases where protein therapy is a potential treatment," said Marlene Haffner, regulatory advisor to Medgenics. Bruce R. Bacon, former president of the American Association for the Study of Liver Disease said the Biopump technology, which is intended to be implanted in patients, could offer a safer and more effective treatment for hepatitis than the current treatment, which requires years of weekly injections. "The treatment also has potential for efficacy with greater patient compliance for other forms of hepatitis including the 170 million people infected with hepatitis C and the over 350 million people infected with hepatitis B," he said. According to the U.S. Centers for Disease Control and Prevention, there are 15 million people suffering from hepatitis D worldwide. On Tuesday, Medgenics said it had raised $9.5 million through the sale of 1.94 million shares of common stock and warrants and that it intends to use the proceeds to further its clinical trials related to the Biopump technology, among other purposes.
A report released Wednesday by the U.S. Census Bureau showed shared households increased 11.4% from 2007 to 2010. Shared households accounted for 18.7% of all households during 2010 compared with 17% in 2007. There were 22 million shared households in 2010. Shared households are households with an additional adult, a person 18 or older, not enrolled in school and who is neither the householder nor the spouse or partner of the householder. Compared with 27.7% of all adults in 2007, 30.1% of all adults lived in shared households during calendar year 2010. Official poverty rates for shared households were lower than for other households, while personal poverty rates of the householders were higher than householders not living in shared households. Of additional adults in shared households, 45.9% had personal incomes below their poverty thresholds. "The higher personal poverty rates for adults heading shared households suggests that this group has fewer individual resources than their counterparts," said report co-author Laryssa Mykyta, a Census Bureau poverty statistics branch analyst.
The White House on Wednesday granted Attorney General Eric Holder executive privilege over documents related to the flawed "Fast and Furious" gun-trafficking probe. The assertion of executive privilege came moments before the House Oversight and Government Reform Committee began a hearing about holding Holder in contempt of Congress for failing to produce the documents. A vote is expected later Wednesday.
An EU diplomat said Wednesday that Cyprus will ask Russia for a loan before the weekend in the range of 3.0 billion and 5.0 billion euros ($3.8 billion-$6.3 billion) and will then request aid from euro-zone partners for its ailing banks. "First we will try to get a bilateral loan from Russia," said the diplomat, speaking on condition of anonymity. He said Nicosia would probably request euro-zone aid next week for its banks along the lines of an offer made to Spain.
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