Greenback Flex Triggers Investor Flinch - the Effect on Blue Chip Biz

The U.S. dollar is trading at a 12-year high against the euro and an 8-year high versus the Japanese yen, signaling that the U.S. economy is healthier than many other parts of the world. The surging greenback is good news for Americans traveling overseas and consumers looking for cheaper imported goods, but if Tuesday’s falling market is any inclination, investors aren’t happy.

According to CNN Money, there are two primary reasons for the discord.

First, large American firms with significant foreign sales will likely feel the pinch when it comes time to report quarterly results. Overseas revenues on international units will be weaker as currencies are moved back into America dollars. Big firms like Microsoft, Proctor & Gamble and Caterpillar are among many blue chips that have already issued caveats about the stronger greenback’s effect on sales and profits.

Another downside to the dollar upside: price tag appeal. A stronger dollar makes products manufactured by non-U.S. firms more appealing here in the U.S. when it comes to pricing. In the U.S., homegrown companies may have a harder time competing with cheaper, foreign-made products.

On the other hand, small-cap stocks tend to thrive when on the stronger greenback. Though they’re considered riskier investment options, small-cap stocks typically do little business abroad. Another set of thrivers: S&P 500 companies. According to FactSet Research, 107 companies in the S&P generate more than 85% of their revenues from domestic business.

Overnight Tuesday the euro fell toward $1.07 in dollar terms.

Hefty Price Tags Boost Drug Spending to 12-Year High

Marking the largest annual increase in more than a decade, Express Scripts, the nation’s largest pharmacy benefits manager, says prescription drug spending rose 13% last year driven by expensive specialty drugs that accounted for roughly 31 cents of every dollar spent on prescriptions – or a record 31% increase. In contrast, spending on traditional drugs increased 6.4%.

Advanced medications for complex and chronic conditions like hepatitis C and multiple sclerosis represent only about 1% of all U.S. prescriptions filled – but their heavy price tags contributed to the sharp increase in spending in 2014. How pricey? Specialty drugs can cost between $50,000 and $100,000 – per patient – per year.

While many of these medications are considered breakthrough treatments, the hefty prices are drawing criticism from patient groups, insurers and Express Scripts. The primary focus seems to be on like Gilead Sciences’ hepatitis C treatment Sovaldi, which can cost $84,000 for a 12-week course of treatment. Spending on hepatitis C drugs, driven primarily by Gilead’s medicines, rose an astounding 743% last year.

Drugmakers say the higher cost of their drugs can be recovered over time because the treatments will reduce future healthcare costs. They also say the trend on specialty drugs will hit sustainable levels in the next three years.

In an interview with CNBC’s “Squawk Box,” Express Scripts Chief Medical Officer Steve Miller said, “The reality is, these are great new drugs that are coming to the market. The trouble is it’s not just sustainable pricing. And so we have to do something to bring the products to the marketplace, but also make it affordable for patients.”

Spending on these specialty drugs rose an average of 38% across Medicare (13.8%), Medicaid (10.2%) and commercial insurance plans (13.1%). Express Scripts projects spending among commercial plans to grow an average of 10% annually for through 2017.

Labor Market in the U.S. Hits 14-Year High

Job openings in the U.S. increased 2.5% to 5 million spots in January, representing the most open positions in since 2001, the Labor Department said Tuesday. Also on the rise is the number of people who quit their jobs, which increased 3% to 2.8 million - the most in more than six years. Though the latter may sound contradictory, both figures are signs of a growing job market.

Because people tend to leave their job when a better paying or higher positioned gig comes around, more job quits typically signal confidence in the job market overall economy. Increased openings are also usually followed by stronger job gains as strong consumer spending gives businesses greater confidence in the economy and typically makes them more willing to hire.

The January jobs report follows net figures released by the government last Friday. U.S. employers added 295,000 jobs in February, extending a labor market boom that began last year and cutting the U.S. unemployment rate to 5.5% compared to 6.7% a year ago.

The number of Americans earning paychecks has jumped nearly 3.3 million in the past year, notching best 12-month gain since March 2000.

Tuesday's report also includes revisions to the previous five years of data that economists suggest indicates that employers are either taking their time filling openings or are struggling to find qualified candidates. Job openings in December were downwardly revised from more than 5 million to 4.88 million. Total hiring slowed in January to fewer than 5 million after reaching a seven-year high of 5.2 million in December. The number of layoffs also fell that month.

How does supply fare with demand? There were, on average, 1.8 unemployed workers for every open job in January. Some economists forecast the U.S. might achieve 3% annual growth in 2015 – the first time in a decade the labor market has seen such growth.

“Unbelievable” Year for Apple

Apple CEO Tim Cook addressed shareholders Tuesday calling 2014 an “unbelievable” year, citing the sale of 200 million iPhones and total revenues of $200 billion. For Apple an incredible year looks like this:

Shares of the company are up 65% from a year ago while the company reached a market value of $700 million and is set to bump AT&T to join the benchmark Dow 30 index.

The CEO also promised more diversity in the year ahead as civil rights leader Jesse Jackson and an Apple shareholder urged him to include more minorities in Apple's leadership.

The low-key shareholder address follows yesterday’s unveiling of the Apple Watch, which did little to lift shares of Apple Stock. The company disclosed its smartwatch back in September, but fell short of providing many juicy details. On Monday, the tech giant shed some light on the device, announcing that the Apple Watch will be available on April 24 for customers in Australia, Canada, France, Germany, Hong Kong, Japan, the UK and the U.S.

These are a few of the basics:

• Apple Watch is available in three collections, Apple Watch Sport, priced at $349 (US) and $399 (US); Apple Watch, available from $549 (US) to $1,099 (US); and Apple Watch Edition, crafted from custom rose or yellow 18-karat gold alloys, with prices starting at $10,000 (US).
• Apple Watch is available in two different sizes, 38 mm and 42 mm, and in three distinct collections—Apple Watch Sport, Apple Watch and Apple Watch Edition.
• Communicates with iPhone over Wi-Fi and Bluetooth.
• iPhone will download apps for Watch via Apple Watch Store.
• Designed it with "all-day battery life" across a range of uses. 18 hours in typical day.
• You can connect an Apple Watch to another Apple Watch (direct communication). Draw a sketch and have it pop onto friends' watches. Or tap to get a friend's attention. Or send your heartbeat.

When the news came out, traders were less than impressed. Shares of Apple, which traded as high as $129.57 during the early portion of Monday’s official watch unveiling, closed at $127.14, up 0.4% on the day. Shares of Apple slumped more than 1.5% in Tuesday’s mid-day trade, partially with the undercurrent of the broader market.