Market Outlook – October 4, 2018

Dow Jones Post Longest Winning Streak

 

For a fifth straight session, the Dow Jones Industrial Average hit another record high on Wednesday to post its longest winning streak since mid-July. The blue-chip index advanced 54.45 points (+0.20%). It also hit an all-time high of 26,951.81 before settling at 26,828.39. The tech-heavy Nasdaq Composite Index climbed 25.54 points (+0.32%) while the broader S&P 500 Index inched higher by 2.08 points (+0.07%).

Meanwhile, the first of three readings on the labor market showed good results. According to Automatic Data Processing Inc., private-sector employment soared last month where 230,000 jobs were added. The Labor Department is set to release the September jobs report on Friday.

FedEx to Grant Bonuses to Pilots

 

FedEx Corp. (FDX) is preparing early for the coming peak shipping season to avoid disruption of supply chains. The global package delivery giant would be paying retirement-age pilots bonuses of $40,000 but could potentially go as high as $110,000. FedEx wants the pilots to keep flying into next year. The information was relayed by sources to Reuters.

FedEx along with rival United Parcel Service Inc. (UPS) have been trying to recruit hundreds of pilots this year. However, both companies are not paying bonuses. Pilots play a crucial role in global supply chains from aerospace to retail. They are mostly needed during the holidays when the average daily delivery volumes are expected to double.

Honda to Own 5.7% Stake in GM’s Self-Driving Vehicle Unit

 

A partnership between General Motors Co. (GM) and Honda Motor Co Ltd. is almost sealed. The Japan-based company will be investing $2.75 billion to acquire a 5.7% stake in GM’s Cruise self-driving vehicle unit. The two carmakers will jointly develop autonomous vehicles for deployment in ride services fleets around the world.

Only a few months ago, Japan’s SoftBank Group made its own multi-billion dollar commitment to General Motors’ said unit. Cruise has now matched Alphabet Inc.’s (GOOGL) Waymo unit in terms of resources and aggressive plans to launch commercial services.

The announcement of the deal came on Wednesday. Honda would pay $750 million upfront for the equity stake in GM’s Cruise plus a $2 billion contribution over 12 years to cover development work and fees. Honda will provide the engineering expertise. More importantly, Honda will be extending cooperation in a technology that has huge costs and risk but no market-ready products.

Barnes & Noble to Explore Buy Offers

 

On Wednesday, Barnes & Noble Inc. (BKS) said it would explore strategic options after founder-chairman Leonard Riggio and several parties expressed interest to buy the bookseller. BKS jumped as much as 24% in extended trading following the announcement.

The No.1 U.S. book store chain has a plan in place to thwart any hostile bid. They discovered a rapid accumulation of stocks by unidentified parties. The said plan will prevent any party from accumulating 20% or more of its common shares.

In order to counter the situation, the company is automatically offering preferred shares at a 50% discount to other shareholders. Based on data from Refinitiv, Riggio holds the largest stake of 19.24%.

The board of BKS has appointed a special committee to review and evaluate the offers. For his part, Riggio has committed to vote in favor of any transaction recommended by the said committee.

Dell Technologies Eyes Tracking Stock

 

Dell Technologies Inc. (DVMT) confirmed they have met with some investment banks to explore an initial public offering if its plan to buy the tracking stock of VMware Inc. (VMW) pushes through. Dell owns 80% of VMware. Back in July, the company wanted to purchase the tracking stock in a $21.7 billion cash-and-stock deal and return to the public market.

However, hedge funds such as Canyon Capital Advisors LLC and Elliott Management Corp. together with activist investor Carl Icahn have been resisting Dell’s effort to buy back the “tracking stock” from them.

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