Market Outlook – June 12, 2018

U.S. Main Benchmarks Rise and Shrugs Off Trade Tensions


The main U.S. stock-market indexes closed mostly higher on Monday as investors expect the U.S.-North Korea summit to have a favorable outcome. Also, investors are shifting their focus to the central-bank meetings scheduled to begin on Tuesday. The Federal Reserve, led by Chairman Jerome Powell, is expected to announce an interest rate hike at the conclusion of its two-day meeting.

The Nasdaq Composite Index gained the biggest and advanced 14.41 points (+0.2%). The S&P 500 Index rose 2.97 points (+0.1%) as eight of the eleven major sectors finishing higher. Consumer-staples stocks led the gainers. The broader index has gained in six of the past seven sessions.

Meanwhile, the Dow Jones Industrial Average ended nearly flat, adding 5.78 points (less than +0.1%). Towards the end of the trading session, the blue-chip index shed nearly 60 points. Still, its advance meant a fourth straight positive session.

Trump and Kim Pledges Denuclearization


The historic summit between the United States and North Korea finally took place in Singapore. On Tuesday, American president Donald Trump and his counterpart Kim Jong Un pledged to work toward denuclearization. The two leaders issued a joint statement at the end of their meeting.

The statement read, “President Trump committed to providing security guarantees to the DPRK and Chairman Kim Jong Un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.”

Also, U.S. Secretary of State Mike Pompeo and North Korean officials would hold follow-up negotiations “at the earliest possible date.” There were few specifics about the denuclearization prompting political analysts to say the summit only yielded symbolic results but nothing tangible.

Legal Battle Ahead as Open Internet Rules Expires


When the Federal Communications Commission (FCC) repealed the 2015 Obama administration’s landmark net neutrality rules last December, a blaze of criticism on social media websites erupted. Internet firms like Google parent Alphabet Inc. (GOOGL), Facebook Inc. (FB), and Democrats in Congress protested.

The said U.S. open internet rules expired on Monday and have just handed over sweeping new powers to internet service providers (ISPs). The ISPs can slow, block or offer “paid prioritization” to some websites as long as they disclose the practices. Those opposed to the repeal are likely to take the matter to court.

Prior to the repeal of the 2015 order, internet providers were subjected to strict regulations by the FCC. The commission argued that consumers needed protection from internet provider practices and said internet providers could engage in “just and reasonable conduct.”

According to FCC Chairman Ajit Pai, the new regulations will ensure more investment by providers and will ensure “better, faster, and cheaper Internet access and more broadband competition to the American people.”

Ruling on AT&T–Time Warner Deal Known Today


The fate of AT&T Inc.’s (T) bid to acquire Time Warner Inc. (TWX) for $85 billion will be known today. The U.S. federal judge handling the case is expected to issue the ruling at 4:00 p.m. ET.

The Justice Department filed the case to block the deal. They fear the sale would give AT&T the power to charge its competitors more for Time Warner’s content. More so, AT&T can block the content entirely from rivals like of Comcast Holdings Corp. (CCZ) and Verizon Communications Inc. (VZ).

AT&T and Time Warner believe the merger is necessary in order to be competitive with Netflix Inc. (NFLX) and Inc. (AMZN). Time Warner is the owner of HBO, Warner Bros., and the Turner networks which include CNN.

Comcast Corp. (CMCSA) is closely following the developments. If the deal is approved, the company could have a crack and make a takeover offer for Twenty-First Century Fox Inc. (FOX).

Exxon to Push for Deeper Energy Trading


Exxon Mobil Corp. (XOM) is about to make a major change in its business approach. The company intends to push deeper into energy trading to increase profit. According to executive recruiters, Exxon is building a global team of experienced traders and beefing up its risk-management systems.

The company has been limiting its past activities to avoid being suspected of market manipulation. But now, Exxon wants to expand trading its growing energy assets. By getting the best prices for its products, hundreds of millions of dollars can be added to annual earnings through buying and selling of crude and fuels.

Over the next few years, new oilfields and refinery expansions would be on stream. With an expected extra output of 1 million barrels per day, there would be more assets to trade but the risks would be higher.

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