Weekly Market Update: Hopes for China trade deal fade; Yield curve inverts It was a jarring week for investors which saw the Dow trade lower by nearly 800 points in two separate sessions before sliding another 559 points on Friday. Traders were forced to navigate the anomaly of a Wednesday US market closure due to the observance of Former President George H. W. Bush’s funeral which may have hampered liquidity and goosed volatility.
Stock trading opened on a decidedly positive note after President Trump and President Xi appeared to reach some sort of a détente at their G20 dinner last Saturday. The euphoria spurred by positive tones coming from the US President was short lived though. Tuesday saw the US Treasury yield curve invert for the first time when the 5-year yield dropped below 3-year and eventually 2-year rates. This alarming growth signal spooked investors and, along with a rethink of just how lasting the trade truce will be, sent stocks careening lower in a global flight from risk assets. Thursday when markets reopened the panic resumed after news broke late on Wednesday that the CFO of Chinese tech giant Huawei was arrested in Canada and was to be extradited to the US on trade sanction violations. The US 10-year yield dropped below 2.85% for the first time since this summer while the VIX popped back above 25. The Russel 2000 took out the fall lows while the other major US indices appeared poised to retest those Oct/Nov lows.
Oil prices also remained heavy heading into the OPEC producers meetings. Oil prices bounced on Friday after an agreement was reached to take an additional 1.2M bpd of supply off the market beginning in January.
Friday’s softer than expected November employment data didn’t raise any serious doubts about the prospects for a rate hike on December 19th, but was consistent with growing market expectations for a less hawkish Fed in 2019.
For the week the S&P500 fell 4.6%, the DJIA lost 4.5%, and the Nasdaq tumbled 4.9%.
In corporate news this week, Nexstar confirmed it would acquire Tribune Media Company for $46.50/shr cash in a $6.4B deal that would make it the largest local TV firm in the United States. Tesaro shares jumped after Glaxo announced it would acquire the cancer-focused drugmaker in a $5.1B all-cash deal. Marlboro maker Altria Group announced a C$2.4B strategic investment in Canada pot firm Cronos, sending the cannabis company’s shares 20% higher on Friday. Toll Brothers dropped after reporting an earnings miss and lackluster guidance, the latest evidence of slowing housing demand. Restoration Hardware jumped on a strong outlook and beats on both the top and bottom line. Lyft filed confidential plans for an IPO with the SEC, beating rival Uber to the punch.
Macro :
- Semiconductor Stocks Post Worst Three-Day Plunge Since 2014
- EU May Give Italy Extra Time on Budget as Wrangling Drags On
- Fake and Bad News Is Depressing Market, JPM’s Kolanovic Says (1)
Keep an eye on :
- AAPL US : iPhone XS & XR adoption significantly lower than last year’s models, data shows - 9to5
- AST IM : Salini Impregilo expected to make non-binding offer to Astaldi on 15 December
- BG US : Bunge Is Said Open to Talks With Glencore, ADM as CEO to Leave
- DBK GY : Barron's : Why It’s Time to Bail Out of Deutsche Bank - http://bit.ly/2B57N87
- DBK GY : German Govt Stake in Deutsche Bank Unjustified: CDU’s Meister
- DTY LN : Short Sellers Lombard Odier And Merian Ramp Up Bets Against Undertaker Dignity
- ENGI FP : Amber Capital Builds Suez Stake, Seeks Higher Holder Returns: FT
- ERA FP : Eramet Sees ‘Material’ Impact After Alloys Unit Quality Review
- ECP FP : Europacorp Hires Messier Maris to Search for Partner: Les Echos
- FRE GY : Akorn Seeks New CEO After Losing Fresenius Deal
- GLEN LN : Bunge Is Said Open to Talks With Glencore, ADM as CEO to Leave
- MRK GY : EMD Serono unit granted FDA orphan drug designation for treatment of biliary tract cancer
- NBL US : Noble Energy Partners Buys Bakken Shale, Eagle Ford Shale Assets
- NOVN SW : Data demonstrates consistent efficacy and tolerability of Kisqali® combination therapy in HR+/HER2- advanced breast cancer in patients with difficult-to-treat visceral disease
- PAH3 GY : Porsche CEO Confirms Plan for $6.8 Billion Profit Boost by 2025
- PZZA US : Papa John’s Founder Schnatter Engaged Adviser to Review Options
- RNO FP : Nissan Seeks to Block Ghosn Family Access to Brazil Apartment:FT
- SEV FP : Amber Capital Builds Suez Stake, Seeks Higher Holder Returns: FT