March 13, 2018 Market Outlook

Wall Street Fails to Sustain Last Week’s Gain

After a broad rally last Friday to book a weekly gain, the stock market finished mostly lower to start the week. The Nasdaq closed at a record to finish at $7,588.32. The tech-heavy index posted an intraday high of 7,609.10. The S&P 500 dropped more than 1.2% while the Dow Jones slid by 0.6%.

Wall Street will pay close attention to the U.S. Labor Department’s report on the Consumer Price Index for February at 8:30 a.m. ET.  Investors are keenly awaiting the inflation data for fear that rising prices could prompt the Feds to hike interest rates sooner than later.

Trump Wants a Second Round of Tax Cuts

U.S. President Donald Trump took the opportunity on Monday at the White House to express his desire for phase 2 of tax reductions. The president hosted the World Series champion Houston Astros.

During the event, senators Rep. Kevin Brady were asked by Trump whether he planned to implement another round of tax cuts. His question drew laughter from the audience. GOP Sens. John Cornyn and Ted Cruz were present and heard the president.

Concerns about growing budget deficits would again be raised in case the Republicans add another tax measure. The tax bill passed last December still needs to be fine-tuned due to technical glitches and loopholes. The problem with a second tax cut is how to offset lost revenues.

Presidential Order Stops Broadcom-Qualcomm Deal

On Monday, U.S. President Donald Trump issued a presidential order to block Braodcom Ltd.’s (AVGO) proposed takeover of Qualcomm Inc. (QCOM). The order cited national security concern as the reason.

The U.S. Committee on Foreign Investment in the United States (CFIUS), a Treasury Department-led multi-agency panel, is currently investigating what is supposed to be the biggest deal in the tech sector. The agency is wary of the risk of Broadcom’s relationship with third-party foreign entities.

The government is bent on preventing China from getting the edge in mobile communications if the takeover by the Singapore-based Broadcom pushes through. Being one of the biggest competitors to Chinese telco Huawei Technologies Co. in the sector, Qualcomm is considered a prized asset. Broadcom’s $117 billion bid was rejected by the San-Diego based Qualcomm.

Dropbox IPO Set for Friday

The IPO of Dropbox Inc. (DBX) this week will be the largest tech IPO after a long while. The cloud computing company offered a price range for shares in its initial public offering that would value it at up to $7.1 billion. That is nearly one-third below the valuation it commanded in 2014. A few years back, the private tech market was valuable than today.

Many are curious if Dropbox will be received warmly by investors. The latest tech IPO might serve as a barometer for public sentiment. The San Francisco-based firm intends to raise $648 million and has set a price range of $16 to $18 per share. The final price will be set on the eve of the Friday’s IPO.

Two more IPOs in the tech space are scheduled this spring. The cyber security company Zscaler might also debut later this week while music company Spotify is expected to list in early March.

Apple to Acquire Digital Service Firm

Apple Inc. (AAPL) is set to acquire a firm that is considered the ‘Netflix for magazines.’ Texture is a digital magazine subscription service provider that allows users to access articles from magazines published by various companies for a monthly subscription fee. The iPhone maker did not disclose the financial details of the transaction.

The owner of Texture is Next Issue Media which is a joint venture formed by Condé Nast, Hearst Magazines, Meredith Corp (MDP), News Corp. (NWSA) and Rogers Media. It was reported that Apple was not the only tech company interested in Texture.

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