Rite Aid, a well-known pharmacy chain, joined the increasing number of companies filing for bankruptcy in 2023. A report from S&P Global revealed that by the end of September, 516 U.S. companies had declared bankruptcy, which is double the number of insolvencies seen in the first nine months of 2022. This year's bankruptcy toll is just slightly below the record set in 2020 when Covid-19 lockdowns caused numerous businesses to close their doors. In fact, it has been the worst year for bankruptcies since 2010.
For years, Rite Aid has faced challenges such as a declining business, a reduction in the number of stores, and financial losses. Lawsuits related to its involvement in the opioid epidemic have further aggravated its situation. As a result of the bankruptcy filing, Rite Aid announced plans to close additional stores and sell off assets.
Consumer-discretionary companies like Rite Aid have been hit hard by e-commerce and changing consumer spending habits. By September, a total of 64 companies in this sector had filed for bankruptcy. Across all industries, 18 companies had liabilities exceeding $1 billion. Notable examples include SVB Financial in March, Bed Bath & Beyond in April, and SmileDirectClub in September. Unfortunately, more bankruptcies can be expected in the future.
Last Week's Market Overview
President Joe Biden made a visit to Israel right after an explosion occurred at a Gaza hospital. The U.S. believes that the explosion was caused by an errant Palestinian missile, leading to increased tensions in the region. Looking at the stock market, there was initially a strong opening, but chip stocks took a hit when the U.S. imposed restrictions on Nvidia's AI chips made for China. Strong retail sales data led to a rise in Treasury yields and a subsequent decline in stock prices. Additionally, the House still needs to appoint a speaker. By the end of the week, the Dow Jones Industrial Average had lost 1.6%, the S&P 500 was down 2.39%, and the Nasdaq Composite fell by 3.16%.
Rite Aid, facing significant lawsuits over its involvement in the opioid crisis, has filed for Chapter 11 and has begun selling off its assets. The first asset up for sale is its pharmacy benefit management business, which was acquired for $575 million. Unfortunately, Albemarle's $4.2 billion bid for Australian lithium producer Liontown Resources fell through due to Hancock Prospecting, an iron-ore miner, acquiring a substantial minority stake. However, Thermo Fisher is making a significant acquisition by buying Swedish protein specialist Olink for $3.1 billion. On the other hand, Wyndham Hotel & Resorts turned down a takeover bid of $7.8 billion from Choice Hotels.
Big Tech Earnings
This week, we can expect to see the release of earnings reports from major tech giants. Alphabet and Microsoft will be the first to report their results after the market closes on Tuesday, followed by Meta Platforms and Amazon.com on Wednesday. These four technology stocks collectively hold a weight of approximately 18% in the S&P 500 index, according to Dow Jones Market Data.
Detroit Auto Makers
General Motors and Ford Motor, two out of the three Detroit auto makers currently engaged in strikes led by the United Auto Workers (UAW), will be announcing their earnings this week. Investors will be particularly interested in any updates regarding the ongoing negotiations between management and the UAW. The strike also affects the Chrysler parent company, Stellantis.
This week's economic data is expected to be quite significant. On Thursday, we will receive an estimate of the third-quarter gross domestic product (GDP), and on Friday, we will have the personal-consumption expenditures price index for September. Economists predict that GDP will show a seasonally adjusted rate of 3.3%, while the core personal-consumption expenditures (excluding food and energy prices) will rise to 3.6%, according to FactSet.
Oil giants Chevron and Exxon Mobil are set to release their financial results this week. Despite geopolitical turmoil, the price of crude oil has remained below $100 a barrel. This indicates that the companies' management may face questions regarding their strategies in such a challenging environment.
Anheuser-Busch InBev ADR (BUD) saw a minor price increase on Thursday, underperforming compared to competitors.
Republican candidate proposes banning social media access for minors, citing mental health concerns and dangers of online platforms. Implementation and enforcea...
Lawyers representing Wall Street Journal reporter Evan Gershkovich have submitted a request to the United Nations, urging the organization to issue an opinion r...