Market Outlook – May 24, 2018

Mid-Week Rebound by U.S. Stocks

 

U.S. stocks made a rally on Wednesday towards closing time after the minutes of the Federal Reserve meeting last May 2 was released. The minutes indicated the central bank will not be too aggressive in raising interest rates.

However, a June rate increase is likely. Investors got their assurance and somehow, the pressure from geopolitical and trade concerns lessened.

The Dow Jones Industrial Average advanced 52.40 points to close +0.2% higher at 24,886.81. The broader S&P 500 Index gained 8.85 points (+0.3%) while the Nasdaq Composite Index added 47.50 points (+0.6%).

Trump Eyes Probe and Tariff on Imported Cars

 

United States President Donald Trump is eyeing tariffs for car imports. But he wants a probe first on his next tariff target. The move is drawing resistance from the U.S. auto industry. The American International commented, “To treat auto imports like a national security threat would be a self-inflicted economic disaster for American consumers, dealers, and dealership employees.”  The group is against a new international trade battle.

Commerce Secretary Wilbur Ross was tasked by Trump on Wednesday to launch an investigation into whether automobile imports are hurting US national security. Ross said in s statement, “There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry.”

Trump also issued a statement saying, “Core industries such as automobiles and automotive parts are critical to our strength as a Nation.” The investigation by the Commerce Department will cover cars, SUVs, vans, light trucks and automotive parts.

Comcast Makes Public its Bid for 21st Century Fox

 

The $52.4 billion all-stock offer of Walt Disney’s (DIS) for the assets of 21st Century Fox Inc. (FOXA) is under threat. Its nemesis is Comcast Corp. (CMCSA). The U.S. cable giant finally came out in the open on Wednesday to alert the public and Fox shareholders that a more lucrative offer is forthcoming.

Comcast’s all-cash offer for Fox might reach $60 billion or even top it in case the merger of AT&T Inc. (T) and Time-Warner Inc. (TWX) gets the nod of the federal judge on June 12. They made known its interest even if Fox agreed last December to sell to Disney. The shareholders are set to vote on the deal by mid-July.

GE Suffers Biggest Selloff in 9 Years

 

Wednesday saw the shares of General Electric Co. (GE) plunge and placed the stock on track for the biggest selloff nine years. From $15.29 on Tuesday, the stock price of the industrial conglomerate fell 7.26% to $14.18. Some analysts said GE was doing okay before its Chief Executive John Flannery spoke at an industry conference.

Trading volume was 229% more on mid-week and ballooned to 147 million shares. GE led the losers in the Dow Jones Industrial Average.  Flannery said the reason why the stock sold off was because investors were disappointed over how “deliberate” the company was moving to right the ship.

GE’s dive can also be attributed to Flannery’s warning that their power division wouldn’t see profit growth until 2020. He also said he couldn’t guarantee that GE would be able to keep paying dividends.

Proctor & Gamble to Continue Investing in Russia

 

Despite the their country’s soured relations with Russia,  U.S. consumer goods group Procter & Gamble (P&G) will continue to invest in Russian plants this year and beyond. According to Sotirios Marinidis, P&G’s head for Eastern Europe and Central Asia, around $50 million has been earmarked for its two plants.

In an interview with Reuters, Maranidis said, “We are committed to the market, we are committed to the Russian consumers. Until today we have invested roughly $800 million and counting.” “I think that’s in the interest of both the U.S. and Russia to continue to have good business relationships going forward. His pronouncement is a reaffirmation of P&G’s commitment to the market despite political risks.

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