Breadth Thrusts in the Stock Market: What Comes Next?

 The previous post noted a late week bounce in stocks that had a defensive quality, with consumer staples and utility shares outpacing stocks in such sectors as energy and consumer discretionary.  On Monday there was another bounce, but the percentage of energy shares above their five-day moving averages went from about 22% to almost 96%.  The beaten down real estate stocks went from 43% to 63%; financials went from 17% to 58%.  Consumer discretionary shares went from 25% to 46%.  Tuesday the overall market (SPY) dipped, but again we saw a rising percentage of XLY, XLE, XLF, and XLRE stocks above their five-day averages.  By Wednesday, fully 94% of all SPX stocks were trading above their five-day moving averages.  In other words, we went from a defensive market theme to an aggressive one, creating a breadth thrust:  the great majority of shares participated to the upside.  This strength continued through the week.  The change of market theme was signaled by a shift in the patterning of market breadth.

So what does this market breadth thrust suggest going forward?  We can look from two perspectives:

1)  The presence of strength - I went back to 2006 and identified all market occasions in which more than 90% of SPX stocks were above their 3, 5, and 10-day moving averages at the same time.  Interestingly, out of well over 4000 market days, this only occurred on 42 occasions.  Over the next five trading sessions, the market was down by an average of -.26%, compared with a gain of +.18% for the remainder of the sample.  No particular edge here, even going out 20 days.  Returns over a next 20-day period were volatile, with 17 of the 42 occasions rising or falling by over 5%.

2)  The absence of weakness - If we get a true breadth thrust, we should see very few stocks demonstrating weakness.  I track the number of NYSE stocks giving sell signals on two technical indicator measures:  the Bollinger Bands and the Parabolic SAR.  These track price action over differing time periods.   On Friday, we had 10 or fewer stocks giving sell signals on both measures.  Out of almost 900 market days in my database, this only occurred on 7 occasions.  Again, very unusual.  The number of occasions is too small for reliable statistical inference, but it is noteworthy that the market overall underperformed over the next ten trading sessions and outperformed 30 days out.  Most interesting, four of those seven instances occurred as a cluster in April of 2020.  The question this invites is whether the current period (possible Fed pivot in rate policy due to bank concerns) is similar to the 2020 period (Fed pivot in the face of COVID impact).

Analyses such as these are meant to help in the formulation of credible market hypotheses, not the generation of infallible ideas.  Breadth thrust may be most important in the context in which it occurs.  If it occurs as a "blowoff" following a period of strength, we would expect volatile and negative returns going forward.  If it occurs following a protracted selloff, we would expect volatile and positive returns going forward as a function of short-covering and new buying.  At present, I'm open to the notion that we are, indeed, seeing a regime shift in the stock market, reflecting a change in central bank policy.  If that is the case, near-term weakness could become an opportunity to participate in longer-term cyclical strength.

 Brett Steenbarger, Ph.D

http://traderfeed.blogspot.com/2023/04/breadth-thrusts-in-stock-market-what.html

DHS accepting reported gender identity for immigration benefits apps, clarifying policy

 The Biden administration will now allow immigrants seeking benefits to mark their gender identity without needing their documentation to match, according to the Department of Homeland Security (DHS).

The news release, posted by U.S. Citizenship and Immigration Services (USCIS) on Friday, said the update to the immigration benefits policy is meant to clarify that immigrants do not need to submit proof of their gender identity when requesting to change their gender marker, except for those submitting a Form N-565, which is submitted by those applying for a replacement naturalization certificate or citizenship document. 

The release also states that the only gender markers available on their forms and documents are “Male” and “Female,” but DHS is working to add an additional gender marker of “X” for another or unspecified gender identity. 

DHS first requested public input on barriers to receiving USCIS benefits and services in April 2021.

The feedback indicated that the evidence requirements for gender marker changes created barriers, and listening sessions with stakeholders revealed how changing the policy will reduce these barriers, according to the release. 

The clarification came as Transgender Day of Visibility happened Friday. President Biden criticized “MAGA extremists” in a statement commemorating the day for pushing for bills in many states that limit transgender individuals’ rights.

About a dozen states have enacted laws that ban gender-affirming care for minors, and the American Civil Liberties Union reports that 430 bills have been introduced in state legislatures during this legislative session that target LGBTQ individuals. 

https://thehill.com/homenews/administration/3929553-dhs-accepting-reported-gender-identity-for-immigration-benefits-apps-clarifying-policy/

Malpass: ‘Advanced economies’ devouring world’s capital to ‘pay for their national debt’

 World Bank President David Malpass believes “advanced economies” are devouring the world’s capital to pay for their national debt, an issue that he said the international community needs to address. 

Malpass told radio host John Catsimatidis on his show “The Cats Roundtable” on WABC 770 AM that he is frustrated that developing countries are experiencing “grave difficulty.” 

“It’s a crisis-facing development, because the resources of the world are concentrating towards the advanced economies,” Malpass said. “Think of all the money in the world that has to go to paying the national debt.”

“The U.S. national debt, but also Japan’s and Europe’s national debt,” Malpass added.

He continued, saying a “giant amount of energy” of the world is needed just to pay the interest on advanced countries’ national debt, and interest rates are rising. 

“So if you think of it from the standpoint of a person living in a poor country, there’s not enough capital. Not enough fertilizer,” he said, adding that “for many of them, they don’t have electricity or water or food.”

“That’s a big challenge that I think the world should pay more attention to,” Malpass added.

He explained that China has been increasing its lending to developing countries in the past 10 to 15 years, but it has not been transparent on many occasions with contracts that are not disclosed.

Malpass, who also served in the Treasury Department under former President Trump, said this lack of transparency has made restructuring the contracts difficult if a developing country gets into economic trouble.

But, the World Bank has been “pushing hard” to create an improved debt-restructuring process for developing countries so they have a way to get out of debt and “get back on their feet” if the world experiences a crisis like the COVID-19 pandemic or rising interest rates like what is currently happening, he claimed.

The former Trump official added that the world went through a “unique” period of 0 percent interest rates during the height of the pandemic, requiring the international community need to be prepared for a “long workout” of higher rates. 

The Federal Reserve has aggressively raised interest rates over the past year to a range of 4.75 to 5 percent as of last month as part of its plan to battle against high inflation. 

The Fed is trying to get inflation to fall back under 2 percent from its 6 percent annual rate that it was in February. Inflation has been consistently dropping for months but remains well above the Fed’s target. 

Malpass said assets need to be repriced for higher interest rates that are more common, which will take time. He said this will require “good quality work” from the U.S. government and the private sector. 

He said advanced economies also need to perform better at using their capital so the rest of the world can have more. 

“The population is going up, and the world needs more growth,” he said. “And there have to be better techniques to do that: fiscal policy, monetary policy, tax policy, regulatory policy, I think have to urgently improve.”

https://thehill.com/business/economy/3929580-malpass-advanced-economies-are-devouring-the-worlds-capital-to-pay-for-their-national-debt/

Lawmakers to reintroduce federal nurse staffing ratio bill

 

• A federal nurse staffing law to set minimum nurse to patient ratios for all hospital units will be considered by lawmakers after the COVID-19 pandemic highlighted concerns around healthcare staff workloads and labor shortages.
• On Thursday, Sen. Sherrod Brown, D-Ohio, and Rep. Jan Schakowsky, D-Ill., said they are reintroducing the Nurse Staffing Standards for Hospital Patient Safety and Quality Care Act, which would also protect nurses who speak out against unsafe staffing standards.
• The bill mirrors California’s nurse staffing law, which outlines exactly how many patients a nurse in specific hospital units can care for at once. It was previously introduced in the Senate in 2021.

The COVID-19 pandemic highlighted the struggles of front-line healthcare workers including long-standing issues like staffing shortages and burnout.

Some workers have taken action through union organizing, picketing and strikes to secure new contracts with terms to quell challenges — especially regarding staffing levels.

National Nurses United is among the unions lobbying for federal staffing standards, arguing that safer conditions are needed to keep nurses from “leaving the healthcare field in droves” and making the crisis worse for workers who remain, NNU President Deborah Burger said at a Thursday press conference.

An NNU survey of 2,800 union members conducted in September and November, showed about 57% said staffing has gotten slightly or much worse at their hospitals.

Nearly half said their facility is using excessive overtime to keep units adequately staffed, and more than half said they are considering leaving nursing, according to that survey.

About one million registered nurses with active licenses are not practicing today, Burger said.

“It’s not because they don’t love nursing — they don’t love the stress, they don’t love putting their patients at risk, and they don’t love going home every day fearing that they had harmed someone,” Burger said.

Some states have passed their own nurse staffing laws during the pandemic.

New York passed a staffing law that stipulates hospitals from clinical staffing committees that include front-line nurses and other direct care staff when setting annual staffing standards for units.

Colorado also passed a staffing law that similarly required hospitals to form their own nurse staffing committees tasked with setting staffing plans.

Hospitals and their lobbies have previously opposed legislation mandating nurse staffing ratios, saying a one-size-fits all approach would harm flexibility and facilities’ operations.

https://www.healthcaredive.com/news/federal-nurse-staffing-ratios-bill-reintroduced/646426/

Biden’s latest drug price-control plans threaten war on cancer, Alzheimer’s and more

 Kenneth E. Thorpe is a professor of health policy at Emory University and chairman of the Partnership to Fight Chronic Disease. He served as deputy assistant secretary for health policy in the HHS from 1993 to 1995. 

President Joe Biden has released his budget. In it, he put forward the outline of a plan he says will keep Medicare solvent for decades to come. Though details are sparse, we know the plan would double the scope of Medicare’s new drug price controls — which haven’t even come into force yet — to fund other priorities. 

 

Medicare’s finances need shoring up, to be sure. But doubling down on the misguided price-control policies included in last year’s Inflation Reduction Act is not the way to do it. For starters, more price-setting could hamper a healthcare initiative close to Biden’s heart: the “Cancer Moonshot,” which aims to halve cancer death rates over the next 25 years.

Virtually everyone has experience dealing with cancer, whether personally or with a loved one, including Biden. But few recognize the monumental lift required to develop effective treatments, fully appreciate the tremendous progress we’ve already made, or understand the potential of cutting-edge innovations to change the game in the near future. 

Precision is a necessity for any health-related decision. Unfortunately, the policies in Biden’s budget are nothing if not imprecise, and promise to wreak havoc throughout the entire healthcare system.

Collateral damage from price controls will almost certainly extend to cutting-edge cell and gene therapies aimed at addressing the root causes of deadly diseases. Future public health successes — like those we’ve witnessed for COVID-19 and hepatitis C — would be all but impossible under the president’s proposals.  

Venture capitalists and other investors understand that drug development is an inherently risky process. Most efforts to bring a new drug to market end in failure. But many investors still choose to invest, for one important reason: the rewards for just a few successful drugs can outweigh thousands of expensive failures.

Potential funders routinely have to choose between multiple multimillion-dollar investment opportunities, each with a certain chance of making money and an often-larger risk of losing everything. When or how do funders determine whether to invest or walk away? There’s no easy answer. It’s a delicate balance that varies across industries. 

So, if we truly want to address chronic disease burdens, the last thing we should do is give investors more reasons to think that investments in biopharmaceutical R&D won’t pay off. There are enough market distortions in the drug industry as it is. Just take antibiotics; because of misaligned incentives in the antibiotic market, the pipeline for new antibiotics is nowhere close to what we need.

Price controls introduce an entirely new set of market distortions, by dramatically reducing the reward for successful drug development efforts. Price-setting does nothing to reduce the riskiness of biopharmaceutical R&D; it only adds to it. 

So it isn’t a shock pharmaceutical companies are already warning in SEC filings and investor calls that they are reassessing their investments in light of the price-control policies already put into law by the Inflation Reduction Act. Venture investors are making similar announcements. Private funds available for lifesaving “moonshot” R&D are evaporating by the day. 

The Cancer Moonshot throws a few bones to research, for example $1.8 billion in public funding. But that’s a tiny fraction of the estimated $18 billion of total cancer-related R&D potentially lost due to the Inflation Reduction Act’s price-control measures. Another example is doubling the R&D tax credits for small businesses — once again, a Band-Aid trying to stop arterial bleeding.

Reducing the burden of cancer and other diseases borne by taxpayers over the long run is the best way to ensure Medicare’s solvency. Better prevention and more advanced therapies can do just that. 

Even initially high prescription drug costs aren’t permanent. Prices drop quickly as patents and other exclusivity protections expire and generics competitors enter the market. About 90% of prescriptions dispensed in the United States today are generics — a higher generic penetration rate than any other nation.

There’s no way around it — achieving the Cancer Moonshot’s ambitious goals will require more innovation and investment. Safeguarding both the Cancer Moonshot and Medicare solvency will mean unleashing the ingenuity of America’s R&D infrastructure. It’s the same infrastructure to thank for a 27% reduction in cancer deaths between 2001 and 2020. Chipping away at the incentives for future drug development is a great disservice to the millions of Americans living with cancer and other chronic conditions.

The Biden Administration should be focused on bolstering the struggling health care workforce and removing barriers that stifle medical advances. Instead, it’s tying the hands of innovators and investors, putting millions of patients at risk in the process.

https://www.healthcaredive.com/news/bidens-latest-drug-price-control-plans-threaten-war-on-cancer-alzheimers/646400/

Hospital groups aim to blunt effort to reverse ACA ban on physician-owned hospitals

 Hospital lobbying groups are mobilizing to blunt any efforts on Capitol Hill to reverse a ban on physician-owned hospitals, including releasing a new analysis that claims such facilities cherry-pick patients. 

The analysis (PDF), released Tuesday by the American Hospital Association (AHA) and the Federation of American Hospitals (FAH), is part of a general effort by the groups to keep in place a ban on physician-owned hospitals passed alongside the Affordable Care Act (ACA) back in 2010. But critics say the hospital industry wants to stifle competition as the industry becomes more consolidated.

“The growth of physician-owned hospitals was restricted by Congress for good reasons and those remain valid today as this analysis shows,” said Rick Pollack, president and CEO of the AHA, in a statement.

The ACA prohibited any physician from building or owning a hospital and limited the growth of any facility that was already in operation. The goal of the ban was to combat facilities that supposedly admitted primarily healthier patients and only admitted patients on private insurance.

The analysis, conducted by consulting firm Dobson DaVanzo, on behalf of the groups compared 163 physician-owned hospitals to 3,020 non-physician hospitals. The group looked at data from Medicare cost reports from 2020 to 2021 and Medicare claims for information on inpatient and outpatient services offered by such facilities. 

Overall, the consulting firm found that physician-owned hospitals “generally treat a population that is younger, less complex or comorbid and less likely to be dually eligible or non-white” compared to traditional facilities. 

Physician-owned facilities also “have higher margins and lower unreimbursed and uncompensated care costs as a percent of net patient revenue compared to non-[physician-owned hospitals],” according to a fact sheet on the analysis. 

The firm found that 5.6% of physician facilities had a Medicare maximum readmission penalty of 3% compared with only 1% of non-physician-owned hospitals. It also found 6.7% of traditional facilities had uncompensated care costs as a percent of net patient revenue compared with 3.1%. 

The hospital groups charge that these findings reinforce concerns from more than a decade ago over whether physician facilities select only healthy patients and increase the use of unnecessary tests or treatments. 

“If there was every any doubt, the evidence against [physician-owned hospitals] is as crystal clear today as it was when Congress passed the self-referral ban in 2010,” said FAH President and CEO Chip Kahn in a statement.

Proponents of reversing the ACA ban slammed the analysis, which was not peer reviewed.

"An industry-funded consulting report that cherry-picks data is no comparison for a peer-reviewed study in the British Medical Journal from Harvard researchers that demonstrated that physician-owned hospitals had the same share of Medicaid patients as tax-exempt hospitals,” said Brian Miller, nonresident fellow with the think tank American Enterprise Institute, in a statement to Fierce Healthcare. 

He referred to a 2015 BMJ study that looked at 219 physician hospitals and 1,967 regular facilities. The study found that while physician-owned hospitals could treat slightly healthier patients, they don’t appear to “systematically select more profitable or less disadvantaged patients or to provide lower-value care.”

A 2021 study that Miller co-authored also found that physician-owned facilities offered higher quality services compared to competing facilities, and specialty facilities had lower in-hospital and/or 30-day mortality rates. 

Proponents also say that enabling physicians to own facilities again can help stem a growing trend of rural facilities that have closed up in recent years. 

"Allowing doctors to own and run hospitals would give rural communities another option to maintain local high-quality care and encourage local investment in existing hospitals," according to a Wall Street Journal op-ed authored by Miller and Sen. James Lankford, R-Oklahoma, who co-sponsored legislation to reverse the ban.

The debate comes amid scrutiny of increasing consolidation in the hospital industry and whether such mergers lead to lower quality and higher prices. The Federal Trade Commission, for instance, has filed lawsuits to halt mergers across several states over concerns they would boost prices. 

There is bipartisan interest in striking down the ban, with bills in the House and Senate to do so. It remains unclear, though, whether such a ban would make it through the divided Congress. 

“Doctors understand what it takes to make a hospital run,” said Rep. Michael Burgess, R-Texas, during a hearing Tuesday on hospital price transparency in the House Energy and Commerce Committee’s health subcommittee. “They want the best facility for their patients. They want a facility that meets their needs.”

https://www.fiercehealthcare.com/providers/hospital-groups-aim-blunt-effort-reverse-aca-ban-physician-owned-hospitals

House lawmakers blast Becerra for blaming docs for surprise billing arbitration backlog

 Xavier Becerra for laying blame for a backlog of surprise billing arbitration disputes at the feet of physicians.

Republicans on the House Energy and Commerce Committee’s health subcommittee told Becerra during a hearing Wednesday that the secretary should have anticipated massive interest in arbitration dispute, which went into effect recently to settle feuds between payers and providers for out-of-network charges. 

“I believe to the extent that this process is a failure and a failure because of poor planning on HHS,” said Rep. Michael Burgess, R-Texas, during the hearing. 

Under the No Surprises Act, a payer and provider can ask a third-party arbiter to choose between two amounts for an out-of-network charge. The arbitration process went into effect in February 2022, and, in the first eight months, the agency received 164,000 claims, Becerra said.

“Neither you nor I … believed we would have the volume of submission of claims,” Becerra told Burgess.

Burgess said that providers have been winning much more often than they lose, posting a win rate of 75%. However, because of an HHS backlog, only 3% of submissions have made it through the process, he added. 

The process has also been paused several times due to court rulings challenging the legality of the standards the arbiter must consider when selecting an amount. 

“Those physicians who are having success will start to see a slowdown in the adjudication of those claims,” Becerra said.

The HHS secretary has previously said in other congressional hearings that most of the claims submitted by providers have been frivolous. Other officials have said the tidal wave of claims is straining agency resources.

But Burgess claimed that HHS should have anticipated the deluge of claims. He pointed to a similar law in Texas that had 45,000 arbitration claims in the first year.

“Did you not look at the data that had already been accumulated in a single state for a similar law in the year and a half before it started?” Burgess said. “To turn around and blame providers for your department not being prepared for the volume of claims just doesn’t square with me.”

Other Republicans on the panel were miffed at the backlog and lack of progress in implementing the law. 

“We recently heard in [independent dispute resolution] situations that even though providers are winning those cases, we still don’t have insurance companies paying after they have lost,” said Rep. Larry Bucshon, M.D., R-Indiana. “We need to see what we can do to make sure that happens.”

Rep. Mariannette Miller-Meeks, R-Iowa, also called on Becerra to put together a rule that meets the intent of Congress after legal setbacks in regulations surrounding the arbitration process. 

“We feel the comments we have gotten back from HHS have been less than satisfactory,” she said. 

Miller-Meeks was referring to a long-standing legal feud between providers and HHS on how arbiters should pick an amount. The Biden administration’s initial rule back in 2021 called for the arbiter to put a heavy emphasis on picking the amount closest to a qualifying payment amount, which is the average price for an item or service in a geographic area. 

The Texas Medical Association (TMA) sued to halt the rule, arguing that it contradicts Congress’ intent in the law not to have a benchmark rate play a part in arbitration. A federal judge agreed, and HHS released a revised rule last year that allows the arbiter to consider other factors. 

However, the TMA sued again, arguing that the new rule still put too much emphasis on the qualifying payment amount. A lower judge again sided with the group, and HHS is trying to figure out whether to appeal. The court rulings have led HHS to pause the arbitration process at times, with the most recent break ending earlier this month.

https://www.fiercehealthcare.com/providers/house-lawmakers-blast-becerra-blaming-docs-surprise-billing-arbitration-backlog