Market Outlook – August 7, 2018

Nasdaq Post Gains for Fifth Straight Session

 

U.S. stocks closed higher Monday with the Nasdaq Composite Index rising for a fifth straight day. Investors continue to focus on healthy corporate earnings and digest them. Strong earnings reports have helped drive the market over recent sessions. Technology stocks along with consumer discretionary stocks led gainers.

The tech-heavy index climbed 47.66 points (+0.61%) to finish at 7.859.68. In the S&P 500 Index, nine of its 11 main sectors ended in positive territory. The broader index gained 10.05 points (+0.35%). The Dow Jones Industrial Average rose by 39.60 points (+0.16%).

Although investors are pleased with solid corporate earnings, the repercussions of retaliatory tariffs from trading partners worry them. Likewise, there are concerns about its impact on the financial markets. China said the Asian giant is prepared to engage the U.S. in a “protracted war” over trade.

U.S. Govt. Contests Ruling On AT&T and Time-Warner Deal

 

The U.S. government filed an appeal with the U.S. District Court on Monday in an attempt to stop AT&T Inc’s’ (T) acquisition of Time Warner. Government lawyers argued that Judge Richard Leon failed to take into account how companies negotiate with each other and seek to maximize profits. In addition, they said the deal would also decrease competition.

Back in June, Judge Leon ruled that the Justice Department was wrong to ask that the $85.4 billion merger be blocked. The government had said it would lead to higher prices for consumers and was illegal under antitrust law.

Meanwhile, no date was set as to when the courts will act on the appeal by the Justice Department. The said deal was sealed last June 14.

Tesla in Hiring Mode for New Shanghai Plant

 

The 21st Century Herald newspaper reported on Tuesday about the job openings advertised by Tesla Inc. (TSLA) last Sunday. There are about 14 senior level positions that need to be filled in. Among the positions are finance manager and architectural designer.

Tesla is hiring people for its new Shanghai factory.  The estimated cost of the first factory outside U.S. shores is $2 billion. Once the China plant is completed, it has the potential to double the American car maker’s global manufacturing.

Activist Investor Icahn Wants to Scrap Cigna–Express Scripts Deal

 

On Tuesday, billionaire investor Carl Icahn urged the shareholders of Cigna Corp (CI) to vote against the proposed $52 billion deal to purchase health insurer Express Scripts Holding Co. (ESRX). The activist investor was citing regulations and the growing threat of Amazon.Com Inc. (AMZN).

The said deal has somehow drawn investor skepticism because Amazon’s foray will upend the healthcare sector. Also, the profitability of pharmacy benefit managers such as Express Scripts will be hurt should U.S. President Donald Trump’s push to cut rebates.

Icahn’s letter read, “When Amazon starts to compete as we believe they will, with their 100 million Prime users and scale distribution system, they will have no trouble breaking into the so-called ecosystem.” He added, “With lower prices, the beneficiary will be American consumer, not the owners of Express Scripts.”

Disney Takes the Limelight

 

Walt Disney Co. (DIS) will be under the microscope when the market closes on Tuesday. Investors are curious about the media company’s  earnings report. There is interest regarding the future of the “Star Wars” franchise after “Solo” bombed at the box-office. Queries concerning the challenge to Comcast Corp. (CMCSA) might crop up too.

Disney CEO Bob Iger and 21st Century Fox Inc.’s (FOXA) Rupert Murdoch are both considering raising their bids for British broadcasting giant Sky. The two companies have until Thursday this week to top Comcast’s earlier offer of $34 billion.

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