Closing Market Summary: Energy Reversal Nearly Upends Positive DayStocks were range-bound for much of Monday's session, cruising towards what looked like an easy victory, but news that President Trump will announce his decision regarding the Iran nuclear deal on Tuesday prompted a wave of selling in the late afternoon. The market bounced back a bit following the initial reaction, but still finished off its highs of the day. The S&P 500 and the Dow settled with gains of 0.4% apiece, while the tech-heavy Nasdaq and the small-cap Russell 2000 ended with respective gains 0.8% and 0.9%.
The energy sector led the broader market higher out of the gate, moving in tandem with crude oil prices, which hit their highest level in three-and-a-half years; the energy sector was up 2.4% at its highest mark of the day, while WTI crude futures were up 1.6% at $70.81/bbl. However, those gains were completely unraveled after President Trump tweeted that he'll be announcing his decision to either stay or pull out of the Iran nuclear deal at 2:00 PM ET on Tuesday. The president is expected to pull out of the deal -- thereby restoring sanctions on Iran, a top oil exporter -- but that's not for certain.
Energy eventually finished with a gain of 0.2%, closing near the center of the sector standings. The top-weighted technology sector (+0.8%) trailed energy in second place through much of the session and took over the top spot on the leaderboard after energy fell. Within the tech space, Apple (AAPL 185.16, +1.33, +0.7%) climbed for the sixth session in a row, settling at a new all-time high, and NVIDIA (NVDA 248.68, +9.62, +4.0%) soared after Bank of America/Merrill Lynch maintained its 'Buy' rating ahead of Thursday's earnings report.
The financials (+0.7%) and industrials (+0.7%) groups closed right behind technology at the top of the sector standings, while the other advancing sectors finished with gains between less than 0.1% and 0.4%. On the downside, the health care (-0.1%), consumer staples (-0.6%), utilities (-0.5%), and telecom services (-0.6%) sectors -- all of which are countercyclical groups -- settled in negative territory.
Elsewhere, U.S. Treasuries began the week on a modestly lower, but mostly quiet, note amid a lack of notable economic data; the yield on the benchmark 10-yr Treasury note advanced one basis point to 2.95%.
Monday's lone economic report -- the Consumer Credit report for March -- showed an increase of $11.7 billion (consensus $16.1 billion). The key takeaway from the report is that there was a decline in outstanding revolving credit for the second straight month, which reflects a propensity by consumers to pay down debt in a rising interest rate environment. That inclination helps explain why consumer spending growth was lackluster in the first quarter.
- Nasdaq Composite: +5.2% YTD
- Russell 2000: +2.8% YTD
- S&P 500: UNCH YTD
- Dow Jones Industrial Average: -1.5% YTD
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Hertz Global misses by $0.32, beats on revs (22.16 +0.79)
- Reports Q1 (Mar) loss of $1.58 per share, excluding non-recurring items, $0.32 worse than the Capital IQ Consensus of ($1.26); revenues rose 7.7% year/year to $2.06 bln vs the $1.97 bln Capital IQ Consensus.
- Total revenue per transaction day for U.S. rental car business decreased 1% to $40.93
- Total revenue per transaction day for International rental car business increased 5% to $45.72
CBS and Charter (CHTR) announce a new multi-year content carriage agreement
The agreement also includes TV Everywhere and video-on-demand availability of programming from CBS and SHOWTIME to Spectrum subscribers in Charter markets across the country. Charter now has rights to live authenticated streaming on CBS.com, the CBS app and Charter's authenticated platform.
- In addition, the authentication service SHOWTIME ANYTIME will continue to provide Charter's SHOWTIME subscribers with unlimited access to acclaimed original series, hit movies, sports, documentaries, specials and much more online and on mobile devices.
- Financial terms were not disclosed.
Allianz open to ‘merger of equals’, says chief executive
European insurer warns that high valuations are obstacles to transformative deals
The chief executive of Allianz has suggested that he is open to the idea of a “merger of equals” with a large rival but said high stock market valuations and rising acquisition premiums were big obstacles to transformative M&A.
“It is very difficult to justify paying 30 per cent more on a €30bn asset than to pay 30 per cent on a €5bn asset,” Oliver Bäte told the Financial Times, pointing to higher cost and revenue synergies needed to recoup such a mark-up, which could be marred by significant integration risks.
This does not mean that transformative deals are off the agenda, the head of Europe’s largest insurer argued, but he said good targets were hard to find: “We’ve decided that we have not found yet the attractive asset to make us comfortable to plough out a lot of money.”
Mr Bäte has made no secret of his desire to do deals, and in the past has pointed to property and casualty insurance as an area where he would like to expand.
Market rumours have linked Allianz with an offer for its Swiss rival Zurich, which has a market capitalisation of €40bn, compared with Allianz’s €87bn.
Mr Bäte neither confirmed nor denied the bid speculation, pointing to the insurer’s longstanding policy on not commenting on market rumours.
Last year Allianz spent £500m on a 49 per cent stake in UK insurer LV’s general insurance business. Earlier this year it paid €1.9bn to buy out minority investors in Euler Hermes, the Paris-based trade credit insurer.
It has since been linked with other targets in the rapidly consolidating property and casualty insurance sector, where a combination of claims from natural disasters and years of falling prices have left some companies looking for buyers.
Allianz is widely believed to have been one of the seven companies that earlier this year expressed an interest in XL Group, the Bermuda-based insurer. XL was eventually bought by Axa, which offered €12.4bn and will pay a 54 per cent premium on the target’s pre-deal share price.
That deal was poorly received by investors, with Axa shares falling 10 per cent in the aftermath of the announcement.
Mr Bäte said premia seen in recent deals of about 50 per cent on the market price were “rather crazy”, and he stressed the importance of capital discipline.
“When I was on the way into the job, many investors told me that [Allianz was] very well-respected for many things but not for protecting our capital and managing it very carefully,” he said.
Earning more trust among investors in this regard has been a key priority for the chief executive, who has been in charge since 2015. “I don’t want to lose that reputation because of a deal.”
Mr Bäte categorically ruled out hostile takeovers, arguing that within the financial services sector, large transactions could only be successful if they are supported by both sides. “We would never go after anybody against their will; never.”
Mr Bäte suggested that the high stock market valuations and rising takeover premia implied that a merger of equals would be an attractive path to a large, transformative deal.
“However, large companies need to be ready for mergers, and we haven’t found many,” he said, adding that executives were not always driven by what is best for shareholders and companies, but their own jobs. “We are always open for these discussions, and more so than, I think, other institutions.”
be seen as bullish fot the chart.
But I will prefer to play short a this level.