Monday, December 4, 17
Stock futures surge to start the week with Dow futures up over 200 points and the S&P futures higher by over 0.6% as markets cheer news that Senate Republicans passed a sweeping overhaul of the U.S. tax code over the weekend. Outside of the positive tax news, eyes remain focused on the drama out of Washington as well after U.S. President Donald Trump said on Twitter he never asked former FBI Director James Comey to stop investigating former national security adviser Michael Flynn. Rattling markets on Friday was news that Flynn, a former member of Trump’s election team, pleaded guilty to lying to federal investigators who are probing Russia’s alleged interference in the U.S. election. In corporate news today, there are a few big M&A deals, with CVS agreeing to buy Aetna (AET) for about $69B in cash and stock in one of the biggest deals of the year, and BGC agreeing to be acquired by an Italian cable maker. Also in focus this week, the U.S. faces a partial government shutdown after money runs out on Dec. 8 if Congress can’t agree on a spending bill or stopgap measure by then.
Regarding the tax bill: On Saturday, the Senate passed a sweeping tax-code overhaul almost entirely along party lines, advancing a top policy goal of congressional Republicans and President Donald Trump. The bill passed the chamber 51 to 49, with the only Republican “no” vote coming from Tennessee’s Bob Corker, who cited concerns about the deficit. No Democrats voted for the bill, which would cut corporate and individual taxes; expand the estate-tax exemption; and repeal Obamacare’s individual-insurance mandate, among many other provisions.
Senate passage brings Republicans closer to its goal, but the version passed differs in some respects from the House’s. The two chambers must agree on a single bill before sending it to Trump for signature. The House bill doesn’t include the Obamacare mandate repeal, and would cut the corporate rate to 20% next year. The Senate’s bill would delay that cut until 2019. Maine’s Susan Collins agreed after it include her amendment allowing up to $10,000 in state and local property tax deductions. Sens. Ron Johnson and Steve Daines said they won bigger benefits for pass-through businesses.
In Asian markets, The Nikkei Index fell -111 points to settle at 22,707, the Shanghai Index slipped -8 points to end at 3,309 and the Hang Seng Index rose 64 points to end at 29,138. In Europe, the German DAX is higher by over 150 points back above 13,050 and the FTSE 100 is up around 60 points at 7,360. The British Pound jumps to overnight highs above 1.3523 on reports of Brexit deal progress
As for last week, The Dow saw a 2.9% weekly rise, its largest since December 2016. The S&P 500 saw a 1.5% weekly gain, the biggest since September. Both the Dow and the S&P have risen in 10 of the past 12 weeks. The Nasdaq fell 0.6% over the week, the biggest weekly decline for the index since Sept. 8.
Market Closing Prices Yesterday
· The S&P 500 Index slipped -5.36 points, or 0.20%, to 2,642.22
· The Dow Jones Industrial Average fell -40.76 points, or 0.17%, to 24,231.59
· The Nasdaq Composite dropped -26.39 points, or 0.38%, to 6,847.59
· The Russell 2000 Index declined -7.12 points, or 0.46% to 1,537.02
Events Calendar for Today
· 10:00 AM EST Factory Orders for October…est. (-0.4%)
· 10:00 AM EST Durable Goods Orders, Oct-F…est. (-1.0%)
· 10:00 AM EST Durable Goods Orders Ex: Transportation…est.
· ABC News suspended investigative reporter Brian Ross for four weeks without pay after an erroneous report that former national security adviser Michael Flynn was prepared to testify that Donald Trump directed him to establish contact with Russian officials during his presidential campaign.
· China’s economic growth target for 2018 will reflect new changes in the economy as the government put more emphasis on higher quality development, the State Council Information Office said on Monday.
· Japanese consumer confidence improved in November to its highest level in four years as the sentiment index for general households, which includes views on incomes and jobs, rose 0.4 point from the previous month to 44.9, up for a third straight month and marking the highest since September 2013
· The IHS Markit/CIPS UK Construction PMI touched a five-month high of 53.1 in November from 50.8 in October and better than all forecasts in a Reuters poll of economists that had pointed to a reading of 51.0.
Sector News Breakdown
· Adidas (ADDYY) is expecting a big increase in sales of soccer jerseys from the upcoming World Cup helped by the company’s sponsorship of three of the top teams, according to Reuters, citing the sportswear maker’s CEO
· Fiat Chrysler (FCAU) is in talks with Hyundai Motor about a technical partnership, according to Bloomberg
· Gucci said Monday that police raided its offices in Milan and Florence over suspected tax evasion, confirming Italian press reports, according to AFP.https://goo.gl/ACnZri
· Energy Transfer Partners (ETP) has been a poor performer among large MLPs, with shares down 30% since April according to Barron’s, but has potential to offer rewards to investors; says the company “has attractive pipeline assets and good growth prospects”
· A 5% rally in natural gas prices last week isn’t likely to last said Barron’s; while a colder winter could be in store this year, “record production” and improvements in transportation will probably keep prices down, according to Barron’s
· Repsol SA (REPYY) is considering options including a potential sale of its $4.4 billion stake in Spanish gas distributor Gas Natural SDG SA, people familiar with the matter said, according to a Bloomberg report
· Visa (V) fired Jim McCarthy, the executive vice president for innovation and strategic partnerships (and handled PayPal and Apple partnerships), for behavior that “violated” company policy, according to Recode citing an internal memo it had seen
· Regional banks such as CIT Group (CIT) and Zions Bancorp (ZION) stand to benefit from a regulatory roll-back under Dodd-Frank, as well as tax cuts and rising interest rates according to Barron’s; noted the sector has under-performed this year, with the SPDR S&P Regional Banking ETF (KRE) returning about 8% compared with about 20% for the S&P 500.
· Bitcoin’s “wild ride” and rapid surge in value is starting to attract the interest of established financial players looking to make it easier to trade by offering futures contracts in Barron’s cover story. Article noted CME Group (CME), the Chicago Board Options Exchange (CBOE), Nasdaq and Cantor Fitzgerald all have plans to offer bitcoin futures now that the products have been green-lighted by regulators, while big banks such as Goldman Sachs (GS) are likely to “dip their toes in” to the market as client’s demand help executing bitcoin trades, according to Barron’s.
· The Hartford (HIG) has entered into a definitive agreement to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital LLC for $2.05B
· CVS Health Corp. (CVS) will buy Aetna Inc. (AET) for about $67.5 billion, paying $207 per share in cash and stock ($145 a share in cash) according to a person familiar with the matter, creating a health-care and retail giant https://goo.gl/qYL7zS
· Amgen Inc. (AMGN) Repatha is the first PCSK9 drug inhibitor approved by the FDA for prevention of heart attacks, strokes and coronary revascularizations in adults with established cardiovascular disease. Repatha cardiovascular outcomes study showed drug reduced risk of heart attack by 27%, risk of stroke by 21% and risk of coronary revascularization by 22%
· Johnson & Johnson (JNJ) shares mentioned positively in Barron’s noting shares had a blockbuster year, as concerns about its big rheumatoid-arthritis drug Remicade proved too pessimistic, but shares could rise almost 20% as investors view the company’s drug pipeline in a new light
Industrials & Materials
· Global demand for air travel climbed 7.2% in October, rebounding after September was disrupted by hurricanes, the International Air Transport Association (IATA) said on Monday.
· Airlines Delta Air Lines (DAL) and United Continental (UAL) are locked in an “odd, inescapable tango,” according to Barron’s, but it looks like is United’s game to lose, he adds
· UPS was upgraded to buy from hold at Deutsche Bank
Technology, Media & Telecom
· Walt Disney Co. (DIS) has re-engaged in discussions with 21st Century Fox (FOXA) to purchase some of the media giant’s assets, and Comcast Corp. (CMCSA)remains in the mix, with deal talks gaining momentum, according to people familiar with the situation. https://goo.gl/BM7aAo
· Italy’s cable maker Prysmian SpA said that it will acquire General Cable Corporation (BGC) for $30 a share, in a deal that values the latter at approximately $3 billion. https://goo.gl/BtTb53
· Dialog Semiconductor shares fell overseas after the company acknowledged it eventually could lose some of Apple Inc.’s (AAPL) business. Dialog, which makes power management integrated circuits, said it “recognizes Apple has the resources and capability to internally design a PMIC and could potentially do so in the next few years.”
· Salesforce.com (CRM) mentioned positively in Barron’s saying shares have 25% upside to $130, as it launches new products, its “addressable market” expands, which means more opportunities for sales and potentially wider margins
· Tax-overhaul proposal passed by the Senate would offer a big boost to large multinationals and domestically focused firms by slashing the corporate tax rate, Barron’s writes. Tech giants such as Apple (AAPL), Microsoft (MSFT) and Google parent Alphabet (GOOGL) likely to reap windfalls
Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.