>>> US Close Dow -0,54% S&P -0,49% Nasdaq -0,86% Russell +0,32%


Closing Market Summary: Disappointing Finish

The market ended an abbreviated Tuesday session on a disappointing note, falling victim to a late tech-led sell off. The S&P 500 ended lower by 0.5%, closing near its worst mark of the day and dropping about six points below its 50-day moving average. The Dow (-0.5%) and the Nasdaq (-0.9%) also slid, but the small-cap Russell 2000 added 0.3%.

Stocks opened Tuesday's session mostly higher, but the underperformance of the top-weighted technology (-1.4%) and financials (-1.1%) sectors -- which represent around 40% of the broader market combined -- kept the major averages in check. 

Eventually those two sectors -- in addition to other cyclical groups like consumer discretionary (-0.6%), industrials (-0.4%), and materials (-0.3%) -- broke into a full-fledged retreat, overpowering gains from most countercyclical groups. Telecom services was the top-performing sector with a gain of 1.2%.

A Chinese court ruling that temporarily banned Micron (MU 51.48, -3.00) chip sales helped fuel a final leg of selling late in the session, further stoking fears of a trade war between the world's two largest economies. Micron shares lost 5.5%, and the Philadelphia Semiconductor Index finished lower by 1.8%.

Late losses were also likely fueled by a desire to limit risk exposure ahead of the Fourth of July holiday break; U.S. markets will reopen on Thursday.

In other corporate news, shares of Tesla (TSLA 310.86, -24.21) tumbled 7.2% on Tuesday following a Business Insider report that CEO Elon Musk ordered engineers to stop putting nearly finished Model 3s through a critical "brake and roll" test in an effort to achieve the company's long-elusive production target of 5,000 Model 3s per week. Separately, Facebook (FB 192.79, -4.57) shares lost 2.3% after The Washington Post reported that a federal investigation into the company's data breach with Cambridge Analytica has expanded.

Away from stocks, WTI crude futures had a volatile session, trading between -1.6% and +1.8%, before closing flat at $73.94 per barrel. News of supply disruptions in Libya and Canada helped fuel early gains, which were then rolled back following a subsequent report that Saudi Arabia is ready to use its spare capacity to maintain stability in the oil market.

Elsewhere, U.S. Treasuries rallied on Tuesday, pushing yields lower across the curve; the yield on the benchmark 10-yr Treasury note dropped to 2.83% from 2.87%. Meanwhile, the U.S. Dollar Index declined 0.2% to 94.41, and the CBOE Volatility Index jumped 4.9% to 16.37.

Tuesday's economic data was limited to Factory Orders for May:

  • The Factory Orders report for May showed an increase of 0.4% (consensus -0.2%). The April reading was revised to -0.4% from -0.8%.
    • The key takeaway from the report is that shipments of nondefense capital goods excluding aircraft were higher than what was seen in the Advance Durable Goods Orders Report for May. That improvement, though, was offset to large extent by a downward revision to April, so it shouldn't move the needle that much in terms of Q2 GDP growth prospects.

U.S. markets will be closed on Wednesday in celebration of the Fourth of July.

  • Nasdaq Composite +8.7% YTD
  • Russell 2000 +8.1% YTD
  • S&P 500 +1.5% YTD
  • Dow Jones Industrial Average -2.2% YTD

WSJ : Nestlé in Talks to Buy Pet-Food Maker for $2 Billion

Nestlé in Talks to Buy Pet-Food Maker for $2 Billion
Deal is latest effort by Swiss giant to focus on higher growth businesses amid activist pressure

Nestlé SA NSRGY 0.62% is angling to take control of Canada’s Champion Petfoods for more than $2 billion, according to people familiar with the matter, as the consumer-goods giant seeks out higher-growth businesses to help offset its struggling packaged-foods operations.

Nestlé is in talks to acquire a majority stake in the closely held maker of specialty cat and dog food, whose owners include Toronto buyout firm Bedford Capital. The talks, however, could still break down before a deal is completed.

The interest in Champion comes about a year after Nestlé first disclosed a far-reaching plan to revive its stock price by investing in areas such as pet care, bottled water and coffee amid pressure from U.S. activist investor Daniel Loeb. Since then, the company has made several deals, including its $7 billion acquisition of the rights to sell Starbucks Corp.’s coffee and tea in grocery and retail stores.


Still, Mr. Loeb remains dissatisfied with these efforts. On Sunday he made public a letter to Nestlé Chief Executive Mark Schneider and the board, criticizing the company for not selling underperforming and nonstrategic businesses fast enough and described the company’s strategic approach as “muddled.”

Switzerland-based Nestlé is already established in the pet-food market through its well-known Purina brand, and in April it acquired a majority stake in Tails.com, a direct-to-consumer dog nutrition business in the U.K. for an undisclosed amount.

Nestlé’s pet-care operation generated organic sales growth of 3% last year, second only the coffee division’s growth on an organic sales basis, which excludes such factors as foreign-exchange fluctuations. By comparison, the company’s confectionery and prepared dishes and cooking aids businesses grew by 0.3% and 2.2% respectively.

The acquisition of Champion could help Nestlé sustain the momentum of its pet-food operation, while providing the Edmonton, Alberta-based company with a broader customer base.

Champion, as a closely held company, doesn’t disclose financial information. But it and other natural pet-food makers are growing faster than their more traditional rivals as health-conscious consumers increasingly do for their pets what they have done for themselves by favoring natural food and high-end treats—a trend that has had many packaged-foods companies playing catch up.

Champion sells its dog and cat food under the Orijen, and Acana brands, listing fresh meat, free-run poultry and wild-caught fish among the ingredients it uses. The company sells its products in more than 80 countries through a network of pet food distributors and veterinarian practices, as well as in-store and online, according to its website.

Nestlé isn’t the only packaged-foods company betting on the acquisition of higher-end pet-care businesses to reinvigorate growth. In February, General Mills Inc. agreed to buy natural pet-food maker Blue Buffalo Pet Products Inc. for about $8 billion to help offset slumping sales of its yogurt and cereal brands.

And last month, Mars Inc., best known for its candy bar and gum brands, acquired European veterinary operator AniCura Holding AB from European buyout firm Nordic Capital for about €2 billion ($2.32 billion), the latest in a series of deals in the pet-care sector for the privately held company. Mars is also a major pet-food provider with brands such as Iams, Pedigree and Royal Canin.

FT : China’s Didi faces new challenge after Uber routed

China’s Didi faces new challenge after Uber routed
Didi dominates ride-hailing in China but FTCR data highlight vulnerability

Having outspent Uber in the ride hailing wars of 2015 and 2016, Didi could have been forgiven for thinking that the lane ahead was clear. However, FTCR’s latest consumer survey highlights the threat posed by local rival Meituan-Dianping. Although tighter regulations may slow the expansion of the online-to-offline services giant into ride-hailing, Didi should not be complacent.

Nationwide, Didi enjoys a commanding market share — about 90 per cent, according to data service company Jiguang. Our survey of 1,000 urban consumers also shows Didi’s many competitors far behind in the popularity stakes. However, a city-by-city analysis presents a more nuanced take, suggesting Didi’s position is not unassailable.


Just months after going live in Nanjing and Shanghai, Meituan-Dianping has rapidly built a sizeable following in those cities with its Meituan Dache service, helped by its ubiquity in food delivery. The Tencent-backed company, which started in group ticket buying and online food reviews, is reportedly seeking to raise more than $4bn in an initial public offering in Hong Kong. 

It may be tempting to predict a repeat of the ride-hailing wars, in which Didi and Uber burnt billions of dollars to win over drivers and consumers with subsidies and heavy discounting. But in doing so one must factor in the regulatory roadblocks that have since been erected by government agencies in response to protectionist complaints from local taxi companies and safety concerns among consumers. 

The murder of a 21-year-old flight attendant in Zhengzhou in May, allegedly by her Didi driver, has been a catalyst for consumers demanding that the company tighten up on safety. Consumers said safety was their most important consideration in choosing which ride-hailing app to use, with the availability of promotional offers in fourth place. 



Stepping on the brakes
Ride hailing companies are now subject to licensing requirements at national and local levels, while local governments police discounting and promotional offers to curtail the well-worn China tech strategy of burning cash to win market share. 

This regulatory tightening is hindering Meituan’s expansion plans. It has yet to receive a permit to operate in its hometown of Beijing, and was rebuked by Shanghai authorities shortly after launching there in March for offering promotions. 

Meituan’s IPO prospectus acknowledges the risks of piling into new business areas against entrenched competition, as well as those posed by tighter regulations. But the company sees ride-hailing as a complementary service to its current offerings, hoping customers will read the review, book the restaurant and then arrange the transport, all from one app.

Meituan lost nearly Rmb19bn ($2.85bn) last year, while driver costs rose to Rmb293m from nothing. These costs are likely to rise further. However, provided it can navigate the shifting regulatory environment, Meituan’s enlarged cash pile and brand recognition mean it is likely to challenge Didi in other cities.

Since 2016, Didi has taken its struggle against Uber global — it started services in Australia last week — but the battle for market share at home is not over. 

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • NA.

Other news:

  • SAFE -2.3% (files for $1 bln mixed securities shelf offering)
  • FB -1.2% (lower on Washington Post report suggesting expanded federal investigation into data sharing)
  • TAL -0.9% (following Muddy Waters report; issues further response)

Analyst comments:

  • DAL -2.2% (downgraded to Hold from Buy at Deutsche Bank)
  • UAL -1.1% (downgraded to Hold from Buy at Deutsche Bank)
  • EPZM -1.1% (downgraded to Mkt Perform from Outperform at Leerink Partners)
  • AAL -0.5% (downgraded to Hold from Buy at Deutsche Bank)

>>> US Gapping up

Gapping up 
In reaction to earnings/guidance:

  • MLHR +11.5%, AZZ +7.8%

M&A news:

  • JNP +31.6% (signs definitive agreement to be acquired by Catalent (CTLT) for $11.50/share)
  • ACXM +5.2% (entered into a definitive agreement to sell its Acxiom Marketing Solutions business to Interpublic Group)

Select metals/mining stocks trading lower:

  • BBL +2.6%, BHP +2.2%, RIO +1.7%, GLD +0.6%, X +0.5%

Other news:

  • VEON +20.1% (agrees on the sale of 50% stake in Wind Tre to CK Hutchison)
  • GLDD +4.9% (announces receipt of $164 million in awarded work)
  • DF +1.6% (Dean Foods has increased its ownership percentage and taken a majority stake in Good Karma Foods)
  • SCS +0.7% (following MLHR earnings/guidance)
  • HNI +0.7% (ticking higher following MLHR earnings/guidance)

Analyst comments:

  • ROKU +3.6% (upgraded to Outperform from Perform at Oppenheimer)
  • MGTX +2.8% (initiated with a Buy at BofA/Merrill)
  • ALB +1.7% (upgraded to Buy from Neutral at Goldman)