Harding and Company – US Markets Cautious – NASDAQ Gains, M&A Activity and Sector Shake-Up

MANHATTAN, N.Y. - Sept. 24, 2018 - PRLog -- The S&P 500 fell 0.35%, or 10.3 points, at market close Monday, while the Dow fell 0.68%, or 181.5 points. The Nasdaq was little changed, gaining 0.08%, or 6.29 points.

The U.S. market had opened lower Monday after China canceled plans to hold further trade talks with the Trump administration following the launch of the latest round of tariffs on Chinese imports.

Both the Dow and S&P 500 posted record highs last week despite the Trump administration's announcement early last week of a 10% tax on $200 billion in Chinese imports, which took effect Monday. China retaliated with taxes on $60 billion worth of U.S. goods. Some analysts said that the U.S. equity market's initial rally may validate the Trump administration's escalation tactics, encouraging it to intensify other geopolitical strategies beyond China.

STOCKS: M&A leads the day
Comcast won out over Fox with an about $40 billion bid for the European television company Sky over the weekend. Shares of Sky jumped 9% following the news. Comcast, whose shares fell 6% to $35.63 per share at market close Monday, must still earn approval from more than 50% of Sky's shareholders to complete the deal. Fox, in tandem with Disney, already has a 39% stake in Sky, although some analysts believe this will likely be sold to Comcast.

SiriusXM will acquire music streaming service Pandora in a $3.5 billion all-stock deal, both companies said in statements Monday. The deal offers SiriusXM an opportunity to expand its online music offerings as other streaming services such as Spotify continue to grow in popularity.

Accessories and Apparel Company Michael Kors is said to be closing in on an agreement to purchase Versace, according to a Bloomberg report. The deal, which could be announced as early as this week, would value the luxury fashion company Versace at around $2 billion.

Canada's Barrick Gold agreed to purchase Randgold Resources in a deal creating the world's largest gold company, based on value and output. The new gold-mining company will have a market value of about $18.3 billion and will hold five of the world's 10 largest bullion deposits. Shares of both companies jumped on the news.

Snapchat said in a blog post Monday that it is working with Amazon to test out a new visual search tool to allow users to shop using Snapchat's camera. Users will be able to point their cameras at an item or barcode, bringing up a link to that product or a similar one on Amazon. Shares of Snapchat initially rose on the news, but pared gains at the close, falling 2% to $8.95.

NEWS: Tech index gets a reboot
The largest reorganization of the S&P Global Industry Classification Standard (GICS) since 1999 took effect, leading some major tech companies including Facebook and Google-parent Alphabet to transition to a new communications sector. The reshuffling may benefit companies including Cisco, Akamai Technologies and Xerox, who used to compete with the major FANG names for the attention of fund managers seeking technology exposure.

Congress has less than a week to pass a spending bill in order to prevent a partial government shutdown that would start Oct. 1. The Senate approved the $854 billion spending bill last week with only seven senators voting no, although the House vote may be more contentious given that the bill provides funding for Planned Parenthood but not Trump's U.S.-Mexico border wall.

ECONOMY: Brent crude creeps higher, Fed rate hikes loom
Brent crude breached $80 a barrel, closing at its highest level since 2014, after OPEC leadership indicated that they will not immediately boost output. Some oil traders are predicting prices could rise to $100 a barrel in early 2019 as the U.S. tightens sanctions on Iran's exports.

The Federal Reserve will begin its latest policy meeting Tuesday, with a monetary policy statement to be released at 2 p.m. ET Wednesday followed by a press conference by Fed Chairman Jerome Powell. A rate hike is almost certain, many analysts believe, with the central bank anticipated to raise its benchmark interest rate by 25 basis points to between 2% and 2.25% in a move that would mark the third interest rate increase this year.

Whist yesterday was less positive than expected, the markets are still holding on to the gains seen earlier in the year with the US indexes still close to record highs. This in itself shows the confidence investors have at a time where volatility and concerns about global trade could have had a more significant impact on the markets than we are currently seeing.

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