Market Outlook – April 19, 2018

Market Breadth Tilts to the Upside

 

The Dow Jones Industrial Average failed to sustain its 2 consecutive days of gains, ended lower Wednesday by 38.56 points (-0.2%). The shares of International Business Machines Corp. (IBM) falling -7.53% and contributing 80 points drop on the price-weighted average of the blue-chip index.

Although the gains were slim, the S&P 500 index and the Nasdaq Composite Index advanced for the third day by 2.25 points (+0.1%) and 14.14 points (+0.2%) respectively. The 6 the 11 main sectors of S&P 500 registered a loss, led by consumer staples’ stocks while energy shares led the gainers that included industrials and materials.

Still, the earnings growth of the S&P 500 components is expected to be 17.3% for the period which is the fastest rate of expansion since 2011. Investors predict that the Federal Reserve will still  increase interest rates despite concerns about sluggish inflation and economic output.

China Expresses Confidence in Overcoming Impact of Tariffs

 

China’s commerce ministry said on Thursday that it is a miscalculation on the part of the United States. It will not stop China’s rise. Ministry spokesman Gao Feng said, “If the U.S. attempts to use protectionist trade policies to contain China’s development and force China to make concessions even at the costs of companies’ interests, it has taken a miscalculated step.”

During the regular media briefing in Beijing, the spokesman also affirmed China’s preparedness. The country can handle any negative effects from its trade dispute with the Americans. The ministry added that Beijing’s tariff hikes on U.S. imports will not have a big impact overall on its domestic industries.

Amazon Tops 100 Million Membership Mark

 

For the first time, Amazon.com Inc. (AMZN) disclosed the number of paying customers for its Amazon Prime subscription program. The confirmation brought to light the online retail giant besting the most prominent membership-based retail chain, Costco Wholesale Corp. (COST).

The data was contained in the annual letter of Chief Executive Jeff Bezos to shareholders released Wednesday afternoon. Amazon Prime has topped 100 million paid Prime members worldwide.

Bezos said in  his letter, “In 2017 Amazon shipped more than 5 billion items with Prime worldwide, and more new members joined Prime than in any previous year — both worldwide and in the U.S.”

Costco reported 90.3 million card-carrying members as of the end of its most recent fiscal year. Many of those were multiple members paying through the same account that paid subscriptions numbered only 49.4 million.

Time Warner Chief Appears Before U.S. District Court Judge

 

Time Warner Inc.’s (TWX) Chief Executive Jeff Bewkes appeared before Judge Richard Leon on Wednesday to defend his company’s planned merger with telecoms firm AT&T Inc. (T). Bewkes argued that the merger is necessary in order to compete effectively for advertising with internet giants like Facebook Inc. (FB) and Alphabet Inc.’s (GOOGL) Google.

Bewkes added that the U.S. Justice Department was wrong to say that because of the $84.5 billion deal, AT&T would be reluctant to license Time Warner’s TV and movie content to rivals, causing blackouts, in order to win over new customers to AT&T subsidiary DirecTV.

“I think it’s ridiculous,” said AT&T’s CEO for more than 10 years. “If our channels are not in distribution we lose lots of money (from lost subscriptions and advertising),”  Bewkes argued it was in Time Warner’s best interest financially to license its television channels, which range from movies to CNN to sports, broadly online.

P&G Announces Purchase of Merck’s Health Business

 

On Thursday, Procter & Gamble Co. (PG) announced that an agreement was reached with German firm Merck KGaA for them to acquire the latter’s consumer health business for about 3.4 billion euros ($4.2 billion). With the acquisition, P&G will now have vitamin brands such as Femibion, Nasivin, Neurobion, and Seven Seas.

 

The stable of brands of P&G includes Pampers diapers, Gillette razors and Vicks cough and cold products. The acquisition would enable the company to expand its portfolio of consumer healthcare products. The vitamin brands will have greater exposure to Asian and Latin American markets.

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