Market Outlook – May 10, 2018

A Broader Rally on Mid-Week

 

The Dow Jones Industrial Average sustained its gains for five straight sessions on Wednesday. The broader stock market rallied too, booking sharp gains in energy, financials and technology stocks. The blue-chip index 182.33 points (+0.8%) and the S&P 500 Index gained 25.87 points (+1.0%). The Nasdaq Composite Index rose as well, adding 73 points (+1.0%)

By far, energy shares are the best performers in the S&P 500 as it jumped 2% on mid-week. The financials, material, industrials, and technology sectors all gained more than 1%. Of the 11 S&P sectors, 9 finished higher while 23 of the 30 Dow components ended in positive territory.

Twenty-First Century Fox Reports Record High Earnings

 

The Rupert Murdoch-controlled Twenty-First Century Fox Inc. (FOXA) presented on Wednesday their quarterly revenue that beat analysts’ expectations. Higher fees from cable and satellite distributors drove what drove the cable business earnings to a record high.

Last year, the media and entertainment company agreed to sell the bulk of its film and TV assets to Walt Disney Co. (DIS) for $52.4 billion. During their analyst call, executive chair Lachlan Murdoch said that by summer, he will seek shareholder approval of the transaction.

Murdoch made no mention of Comcast Corp.’s (CMCSA) desire to outbid Disney with a higher all-cash offer for Fox’s assets. Fox is confident that UK regulators will soon approve its bid to buy the remaining stake it does not already own of European pay-TV provider SKY.

Walmart Firms Up Acquisition of India’s Flipkart

 

Walmart Inc. (WMT) is dead serious to compete with Amazon.com Inc. (AMZN) in India’s growing market. The company announced on Wednesday it will pay Indian e-commerce firm Flipkart $16 billion to own nearly 77% stake of the company.

The acquisition will open a new front for Walmart as it prepares to battle Amazon head on and grab market share. According to Euromonitor, Amazon currently holds about 27% of India’s expanding e-commerce market. Walmart also warned investors that their fiscal earnings in 2019 would be reduced by 25-30 cents per share if the deal closes in the second quarter.

Nestle-Starbucks Deal to Challenge JAB’s Coffee Empire

 

The $7 billion licensing deal for Starbucks Inc.’s (SBUX) retail business which Nestle will pay for will give the Swiss company the much-needed boost in its competition with JAB Holding Company in the coffee world. The privately owned investment firm is creating a stir in the industry following a series of deals aimed at building a coffee empire.

The billionaire Reimann clan from Europe owns JAB which is also the second-largest coffee business in the world for the past five years. JAB is currently negotiating a giant deal to buy Dr. Pepper Snapple as part of its business expansion plans.

The Shutdown of Truck Plants to Bring Down Ford Earnings

 

On Wednesday, Ford Motor Co. (F) revealed their quarterly earnings will be affected by the shutdowns of their three U.S. truck plants. The U.S. automaker said the closures were necessary because of the fire that hit a key parts supplier.

Senior executives of Ford are working with Meridian Magnesium Products to shift production of the affected parts to other suppliers. The Eaton Rapids plant in Michigan of the Chinese-owned supplier needs to be repaired before production resumes.

Meanwhile, Ford’s president for global operations, Joe Hinrichs, affirmed the company’s full-year earnings estimate but also said, “We’re confident that any impacts will be short term.”

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