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Volatility in the stock market today is high due to several factors both domestically and abroad.
The Obamacare ruling is the main driver causing uncertainty in the market, followed by the start of the European Union summit today in Brussels.
The Obamacare ruling had been anticipated with such fervor that reporters camped in front of the Supreme Court for days before the decision.
They finally got one – and it may come as a surprise to many.
The controversial mandate that requires everyone to purchase healthcare by 2014 or pay a small fine was upheld. The vote came in at 5-4 with Justices Scalia, Kennedy, Thomas and Alito dissenting.
Chief Justice Roberts said that the mandate is not a valid exercise of Congress's power under the Commerce Clause, but it will survive as a tax.
Republicans had been almost certain that the mandate would be stuck down and President Obama can now breathe a small sigh of relief that his healthcare overhaul has been upheld.
Back to the EU summit, which has been awaited with such pessimism that the yield on Spanish 10-year bonds has risen above 7% again and the euro slipped to a three-week low of $1.24 versus the dollar.
There is an unusual and detrimental air of division and discord among the European leaders heading into the summit. The continent needs to work towards more integration rather than fragmentation if they are to lay down a framework for better fiscal, financial and political union.
U.S. unemployment claims fell slightly from the 392,000 initial claims reported last week to a still alarmingly high number of 386,000 for the week ended June 23. The final estimate for the first quarter's gross domestic product (GDP) came in at the expected 1.9%, but that estimate had already been lowered last week by the U.S. Federal Reserve.
Looking beyond these reports, here are some stocks in the headlines today.
JPMorgan Chase (NYSE: JPM) cannot escape its enormous loss on a credit derivatives bet gone wrong. The London Whale trade, as it is informally known, was originally reported as a $2 billion loss but now The New York Times has reported that the loss will total $9 billion, and maybe even more.
Even though JPMorgan has worked quickly to exit its position in the trade, as it reported to be out of more than half of the trade already, there is no denying the bank is continuing to reel from the loss.
The reputation of JPMorgan and its CEO Jamie Dimon may be the biggest long-term casualty of the loss even after Dimon's strong testimonies before Congress.
"Essentially, JPMorgan has been operating a hedge fund with federal insured deposits within a bank," Mark Williams, a professor of finance at Boston University, who also served as a Federal Reserve bank examiner, told The Times.
Whether or not the final tally for the losses is closer to $6 billion or $9 billion will not really matter as much to the bank compared with the loss of confidence from investors and businesses alike.
JPM stock was down more than 3% in early trading Thursday.
Family Dollar Stores (NYSE: FDO) reported slightly worse-than-expected earnings before the opening bell today. The company reported earnings per share for the fiscal third quarter of $1.06 which is higher than the 91 cents EPS a year earlier, but a penny shy of Wall Street's expectations.
For the current quarter, Family Dollar expects profit of between 71 cents per share and 81 cents per share, with same-store sales rising between 5% and 7%. That compares with analysts' expectations of 77 cents per share.
Family Dollar Stores shares were down 3.5% in early trading.
Tenet is an investor- owned health care whose subsidiaries and affiliates own and operate acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Molina provides Medicaid-related solutions to meet the health care needs of low-income families and individuals. Tenet was up over 6% and Molina was up almost 8% immediately following the announcement.
Related Articles and News:
- Money Morning:
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An Investor Guide to the Supreme Court Obamacare Ruling
- Money Morning:
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- The New York Times:
JP Morgan Loss May Reach $9 Billion