February 28, 2018 Market Outlook

U.S. Stocks Fall as Fed Chair Heightens Investors’ Jitters

After a great start on Monday, the main U.S. stock-market benchmarks closed lower on Tuesday after new Fed Chairman Jerome Powell highlighted the strengthening economy during his congressional testimony. Investors grew jittery because that could prompt the central bank to be more aggressive in tightening monetary policy.

The S&P 500 index fell 35.32 points to 2,744.28, with all of the 11 main sectors closing in the red. The Nasdaq Composite Index declined 91.11 points to 7,330.35. The Dow Jones surged by 399.28 points on Monday but tumbled by 299.24 points on Tuesday.

On the last trading day of February, the S&P 500 and Dow Jones indexes are set to book their first monthly declines in nearly a year.

Oppenheimer Global Fund Goes for Biotech Stocks

The awardee of the 2018 U.S. Thomson Reuters Lipper Fund Award in the global large-cap growth fund category said on Tuesday their next focus would be on biotech stocks. According to Rajeev Bhaman, portfolio manager of the $11.8 billion fund, the recent volatility in the global market opens a buying opportunity in the biotechnology sector.

They see little impact of rising interest rates on biotech stocks because investors in the sector are more focused on the long-term potential of their drugs. Value-oriented investors look for companies that have strength that has not yet been recognized by the market. Biotech firms such as Bluebird Bio Inc. (BLUE), Ionis Pharmaceuticals Inc. (ION), and Sage Therapeutics Inc. (SAGE) have excellent potentials.

Their drugs can have multiple uses rather than pinpointing a specific ailment.  “We look for things that have multiple ways to win once a proof of concept is worked out, so you have multiple shots at the apple,” Bhaman said.

Biggest Chinese IPO in America in the Works

According to Reuters sources, eight banks including Morgan Stanley (MS) and and Goldman Sachs (GS) were hired by Chinese electric vehicle startup NIO to work on a planned U.S. stock market listing this year worth up to $2 billion.

The six other banks are Bank of America Merrill Lynch (BAC), Citigroup (C), Credit Suisse (CSGN), Deutsche Bank, JPMorgan (JPM), and UBS.

NIO was founded by Chinese internet entrepreneur William Li in 2014 and the proposed $1to $2 billion IPO seeks fresh capital to finance its expansion program along with its investments in areas including autonomous driving and battery technologies.

If everything goes as planned, the IPO’s top-line would become the biggest Chinese listing in the U.S. since e-commerce giant Alibaba Group Holding Ltd.’s (BABA) $25 billion public float in 2014.

China’s Netflix Files for U.S. IPO

Baidu Inc.’s (BIDU) video unit iQiyi on Tuesday filed for an initial public offering of up to $1.5 billion with the U.S. SEC. The Chinese video streaming service provider plans to list its American Depository Shares on the Nasdaq under the symbol “IQ.”

The company’s services are similar to Netflix Inc. (NFLX) and have over 50 million subscribed members. They have and more than 420 million mobile monthly average users.

Based on the IPO filing, Baidu will continue to be its controlling shareholder upon the completion of the offering. IQiyi will use half of the net proceeds from the offering to expand and enhance their content offerings. Credit Suisse, BofA Merrill Lynch, and Goldman Sachs Asia are among the lead underwriters to the IPO.

Diageo to Launch Jane Walker in Place of Johnnie Walker

Liquor giant Diageo (DEO), makers of Johnnie Walker whiskey, is set to launch a special edition of its Black Label blend next month featuring the female logo. This is the first time the top-hatted man logo will be replaced by a woman.

In a statement, the company said, “As a brand that has stood for progress for nearly 200 years, Johnnie Walker is proud to take this next step forward by introducing Jane Walker as another symbol of the brand’s commitment to progress.”

The special edition bottles will hit U.S. stores in March and sell for around $34 per bottle. The launching will coincide with Women’s History Month and International Women’s Day.

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