Market Outlook – August 9, 2018

Nasdaq Posts Longest Winning Streak Since March

 

The Nasdaq Composite Index registered its longest stretch of uninterrupted gains since March 12 as it gained 4.66 points (+0.1%) on mid-week. With the recent advances, the tech-heavy benchmark is within 50 points off its record close set on July 25.

The S&P 500 Index is coming from a four-day winning streak before ending the run to close -0.75% lower. The broader index is less than 0.5% from its all-time high hit on January 26. Meanwhile, the four straight days of gain by the Dow Jones Industrial Average was also halted as the blue-chip index shed -45.16 points (-0.18%) to finish Wednesday’s session at 25,583.75.

China Retaliates with $16 Billion Worth of Tariffs

 

China swiftly announced late Wednesday that it would slap additional tariffs of 25% on $16 billion worth of U.S. imports. The move is in retaliation to the plan of the United States to collect 25% extra in tariffs on $16 billion of Chinese goods beginning on August 23.

On Thursday, Chinese state media accused the United States of a “mobster mentality” when it decided to implement additional tariffs on Chinese goods. Beijing warned that they had all the necessary means to fight back. The U.S. moves left them no choice but to fight back.

WTO Sees Global Trade Losing Momentum in Q3

 

Based on the World Trade Organization’s (WTO) quarterly outlook indicator, there will be an easing of trade growth in the coming months in line with medium-term trends.

WTO said on Thursday that global trade in goods is likely to lose momentum in the third quarter. At present, growth is just above trend. However, with trade tensions escalating, export orders, automobile production, and sales are all slowing down.

Albertson and Rite Aid Terminates Merger Deal

 

U.S. grocer Albertsons Companies Inc. and Rite Aid Corp. jointly announced the termination of their merger agreement on Wednesday. The termination was prompted by a shareholder advisory firm that opposed the deal.

Albertsons along with its majority owner, private equity firm Cerberus Capital Management LP, were hoping that the merger would help them counter the pressure from e-commerce giant Amazon.com Inc. (AMZN) and Walmart Inc. (WMT).

It was the Institutional Shareholder Services Inc. (ISS) that issued the shareholder advisory. The ISS report from last month was advising Rite Aid investors to vote down its $24 billion merger with Albertsons. The report said the agreement was not going to give the drug store chain’s shareholders a “fair ownership interest” in the combined company.

Perrigo to Expand Leading Consumer Businesses

 

The board of directors of Perrigo Company PLC (PRG) approved on Thursday the plan to separate its Prescription Pharmaceuticals (Rx) business after completing a review of its strategic portfolio. Perrigo’s Rx business serves patients and health systems with topical medicines at more affordable prices.

According to Chief Executive Uwe Roehrhoff, the move is timely. It will enable the management of the generic drug maker to focus on expanding the company’s leading consumer businesses. Apart from the plan’s approval, the board will begin to explore all value-enhancing options. That could include a possible tax-efficient separation to shareholders, a sale or merger.

Chairman Rolf Classon said in a statement, “The board believes the differentiated and diversified Rx business has the potential to realize greater value outside of Perrigo.”

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