Closing Market Summary: Averages Finish Mixed as Crude Oil WeighsThe stock market ended a volatile start to the week on a mixed note as a prolonged downturn in crude oil pressured equities. However, the broader market continued to show marked resilience to selling pressure as the S&P 500 (-0.1%) finished eight points off a freshly minted all-time intraday high (2178.29). Focal points impacting today's trade included strengthening in the dollar, an assortment of global manufacturing reports, bearish commentary from Goldman Sachs, and the outperformance of heavily-weighted technology (+0.4%) and health care (+0.6%). The Nasdaq Composite (+0.4%) finished ahead of the S&P 500 (-0.1%) and the Dow Jones Industrial Average (-0.2%).
U.S. equities began the day on a choppy note, responding to a negative bias in European averages. Regional bourses slipped as participants eyed mixed manufacturing readings out of China and a downward revision to the U.K.'s Manufacturing PMI for July (48.2; expected 49.1). Separately, Friday's stress test results from the European Banking Authority failed to elicit buying interest. The results came in largely as expected with Monte dei Paschi di Siena (BMDPF 0.386, +0.006) showing the weakest capital position.
The major averages marched off their opening levels shortly after the release of the ISM Index for July (52.6; consensus 53.1) and construction spending for May (-0.6%; consensus +0.7%). Both reports missed consensus estimates, but the ISM Index marked the fifth straight month of expansion for the manufacturing sector. The S&P 500 (-0.1%) pulled back shortly after notching a fresh all-time intraday high, succumbing to pressure from the oil patch. The energy component finished lower by 3.5% ($40.09/bbl; -$1.47), extending its decline from the June 8th closing high to 21.8%.
The benchmark index settled off its worst level of the day, buoyed by strength from the technology (+0.4%) and health care (+0.6%) sectors. Conversely, six sectors ended in the red with materials (-0.7%), telecom services (-1.0%), and energy (-3.3%) leading the downside.
The economically-sensitive financial sector (-0.2%) settled behind the broader market as money center banks and life insurance names underperformed. Citigroup (C 43.42, -0.39) and Bank of America (BAC 14.33, -0.16) lagged as they traded lower alongside European financial names like Deutsche Bank (DB 13.07, -0.37), which declined by 2.8%. The broader sector finished behind the benchmark index as investors look ahead to tomorrow's latest inflation reading. Separately, the Employment Situation Report for July is scheduled to cross the wires at 8:30 ET on Friday.
In the technology sector (+0.4%), heavily-weighted components Alphabet (GOOG 772.88, +4.09) and Apple (AAPL 106.05, +1.84) outperformed, gaining 0.5% and 1.8%, respectively. Both names reported positive bottom-line results last week. Apple also benefited from news that Uber and Didi Chuxing entered into a strategic agreement. The high-beta chipmakers settled slightly behind the broader sector, evidenced by the 0.2% gain in the PHLX Semiconductor Index.
Biotechnology demonstrated relative strength in the health care sector (+0.6%), as the iShares Nasdaq Biotechnology ETF (IBB 294.07, +4.63) jumped 1.6%. In the ETF, Regeneron Pharmaceuticals (REGN 434.00, +8.88) gained 2.1% after the European Medicines Agency agreed to review the company's sarilumab medication. Biogen (BIIB 301.83, +11.90) outperformed after Phase-3 trial results of nusinersen met their primary endpoints.
The U.S. Dollar Index (95.77, +0.24) ended off its best level of the day as the greenback gained against the euro, pound, and yen. The single currency slipped 0.1% against the dollar (1.1166) while sterling lost 0.4% against the buck (1.3180). Separately, the safe-haven yen lost 0.3% against the dollar (102.37).
Treasuries settled lower as volatility in equities failed to elicit much buying interest in the bond market. The yield on the 10-yr note rose five basis points to 1.51%.
Participation was above the recent average as more than 829 million shares changed hands on the NYSE floor.
Today's economic data was limited to the July ISM Index and Construction Spending for June:
- The ISM Manufacturing Index slipped to 52.6 in July (consensus 53.1) from 53.2 in June.
- That signals a slowdown in growth, but importantly, a number above 50.0 still reflects an expansion in manufacturing activity.
- July marked the fifth straight month of expansion for the manufacturing sector on a national level and it is the second-highest reading over the last 12 months.
- If the PMI reading for July is annualized, it corresponds to a 3 percent increase in real GDP annually, according to the ISM.
- The only components below 50.0, though, were the Employment Index (to 49.4 from 50.4) and the Backlog of Orders Index (to 48.0 from 52.5).
- The Prices Index (to 55.0 from 60.5) saw the biggest monthly drop, reflecting prices that are increasing but at a slower pace.
- The New Orders Index dipped to 56.9 from 57.0; the Production Index rose to 55.4 from 54.7; and the New Export Orders Index fell to 52.5 from 53.5. The Import Index was flat at 52.0.
- Construction spending declined at a seasonally adjusted annual rate of 0.6% in June. That was well below the consensus estimate, which called for a 0.7% increase.
- An upward revision to May from -0.8% to -0.1% helped temper some of the headline disappointment.
- The downturn in June featured a decline in both private construction (-0.6%) and public construction (-0.6%).
- On the private side, non residential spending (-1.0%) accounted for nearly all of the decline.
- The biggest drags included spending in highway and street (-1.4%), manufacturing (-4.5%), educational (-1.0%), commercial (-2.2%), and health care (-1.4%) sectors.
- Private residential spending was down only 0.1%. Public residential spending fell 6.0%, but at roughly 2.2% of total public construction spending, that had little bearing on the monthly drop.
- Non residential public spending declined 0.5% due largely to drops in highway and street spending (-1.4%), educational spending (-0.5%), and sewage and waste disposal spending (-2.7%).
- On a year-over-year basis, total construction spending was up 0.3%, bolstered by a 2.5% increase in total private construction spending that offset a 6.0% decline in total public construction spending.
Tomorrow's economic data will include Personal Income (consensus +0.3%) and Personal Spending (consensus +0.3%) reports for June and Core PCE Prices for June (consensus +0.2%), which will each cross the wires at 8:30 ET. Separately, Auto & Truck Sales for July will be released throughout tomorrow's session.
- Russell 2000 +7.2% YTD
- S&P 500 +6.2% YTD
- Dow Jones +5.6% YTD
- Nasdaq Composite +3.5% YTD
The Uber-Didi deal is straight out of Peter Thiel's playbook
Here’s what the Gawker destroyer said in 2014.
The big story in tech this morning is that Uber and its Chinese rival Didi Chuxing are officially calling a truce, and Uber is selling its Chinese subsidiary to Didi.
Both companies lost billions of dollars on subsidizing rides on ultimately futile efforts to outflank one another, and what was previously a market dominated by two companies (a duopoly) is now a monopoly.
Though chatter about this kind of deal began surfacing in recent weeks, one guy had the right idea about it long before anyone else: Billionaire investor, vampire-like life-extension enthusiast, Trump delegate and Gawker destroyer Peter Thiel.
In a September 2014 op-ed for the Wall Street Journal, Thiel basically argued that any smart entrepreneur really wants to create a monopoly; the article was titled “Competition Is for Losers,” and it was drawn from his book of startup wisdom, “Zero to One.”
Here’s his case, in his own words:
Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away. The lesson for entrepreneurs is clear: If you want to create and capture lasting value, don't build an undifferentiated commodity business.
To put it in terms of Uber and Didi, Thiel is saying that all their “profits” were being eroded by their expensive war of ride subsidies and new driver incentives. And because both Uber and Didi Chuxing have raised seemingly endless amounts of money, this fight in China could have gone on for a long time, and it would have been a while before either of them saw an actual “profit” in the Chinese market.
The rest of Thiel’s argument relates to what would come next for Uber and Didi, now that they each have their own area to dominate (Uber, the U.S. and Europe; Didi, mainly China). He thinks that “creative monopolists give customers more choices by adding entirely new categories of abundance to the world.”
We already have an idea of what Uber and Didi think their “entirely new categories of abundance” might be. In fact, Uber’s driverless categories of abundance are currently cruising around the streets of Pittsburgh.
Of course, the biggest and best (or baddest, in Thiel’s libertarian eyes) monopolist of all is the government.
And Uber’s long-term goal, according to CEO Travis Kalanick?
Taking on mass transit.
Didi’s acquisition of Uber China throws the global anti-Uber alliance in doubt
Didi is now literally more invested in Uber than it is in Grab, Lyft and Ola combined.
Didi Chuxing, China’s homegrown ride-hailing startup, was the glue that held together the global anti-Uber alliance that included Lyft, Grab and Ola. But now that Didi has acquired Uber’s China operations, that partnership has been thrown into doubt.
In addition to a $1 billion investment Didi is making into Uber, the deal also brings Uber CEO Travis Kalanick onto Didi Chuxing’s board and Didi Chairman Cheng Wei onto Uber’s board. Both Kalanick and Wei are non-voting members of the board.
That means, as of last night, Didi Chuxing is more invested in Uber’s success than it is in the alliance. Didi, so far, had invested about $100 million in Lyft, $350 million in Grab and $30 million in Ola, altogether about $480 million, less than half of what it just invested in Uber.
Some of the partners in the alliance were blindsided by last night’s news, a source said. Lyft, Uber’s chief competitor in the U.S., and Ola, India’s dominant ride-hail player, have been left to determine what that means for their relationship with Didi, according to sources.
That’s because, though there were reports of investor pressure on both Uber and Didi to strike a deal as of July, sources say Didi assured its partners several weeks ago that such a deal would not happen.
In other words: While Uber’s investors may have pushed for it, Didi’s decision to acquire Uber came together abruptly.
It’s not hard to believe partners were shocked, especially when considering Didi’s president Jean Liu was knocking Uber’s service in China as recently as June during Recode’s Code Conference.
But the tables turned, and they turned fast. As part of Didi’s acquisition of Uber China, Uber will receive close to a 20 percent stake in Didi.
For Lyft, which has a long history of competing against Uber in an important market, Didi’s acquisition of Uber China complicates things a tad more than it does for Grab and Ola. Lyft and Didi shipped the first consumer-facing aspect of their international alliance in April. As part of the global anti-Uber alliance, each company agreed to launch a cross-booking platform where, for example, a Didi user could hail a Lyft in the U.S. without switching apps.
Now the company is in the middle of trying to figure out what this means for its partnership with Didi and what Uber’s stake in Didi means for Uber’s relationship with Lyft.
“We always believed Didi had a big advantage in China because of the regulatory environment,” Lyft spokesperson Alexandra LaManna told Recode. “The recent policy changes are exactly why we did not invest in the region. Over the next few weeks, we will evaluate our partnership with Didi.”
As for Ola, a source close to the company insists it’s business as usual since Didi is a minority investor in Ola and the company hasn’t launched any products as part of its partnership with Didi as of yet. For now, it’s too early to tell whether the companies will continue to partner, the source said.
When asked about the sudden nature of the news, the source close to Ola pointed to Ola’s acquisition of TaxiForSure, which came together in a little more than a week, and said it wasn’t uncommon for these types of deals to come together quickly.
Uber may have thrown in the towel in China, but now it can focus on the next biggest markets in the region, India and Southeast Asia, as well as in other parts of the world, including Latin America, the Middle East and North Africa.
In an email to employees, Grab CEO Anthony Tan said Didi’s victory over Uber was a good sign for the company’s business in Southeast Asia. The letter reads like a rallying cry, with Tan readying his troops to fend against the resources Uber is now freed up to pour into Southeast Asia.
“With the deal in China, we expect Uber to turn more attention and divert resources to our region,” Tan wrote in his note to employees. “But we have seen that when the local champion stays true to their beliefs and strengths, they can prevail.”
Even so, Grab will continue to partner with Didi, which includes rolling out a cross-booking platform with the company. In a statement, Tan echoed what he wrote to his employees: The acquisition of Uber China was a victory for Didi Chuxing and it means local players can, and will, win.
“Our internationalization strategy remains the same as before, to bring roaming availability to our users wherever they travel to,” Tan said in a statement.
Ola, on the other hand, thinks it’s unlikely Uber will double down on its investment in India, according to a source close to the company. India, the source insisted, is as diverse if not a more diverse market than China and requires a local approach. Uber’s loss in China, the source said, is a testament to the fact that local markets can’t be infiltrated by a foreign company with an international blueprint.
*SOLOCAL GROUP TO CUT DEBT TO EUR 400M FROM EUR 1.16B
You gotta know when to fold ‘em: Uber and Didi call a truce in China with a $35 billion deal
The U.S. ride-hailing phenom was engaged in a pricey battle with its Chinese rival.
The news was first reported by Bloomberg tonight and Recode has also confirmed the transaction.
An Uber spokesperson declined to comment and a Didi one has not yet gotten back to me as yet.
Under terms of the deal, Uber China, the ride-hailing company’s Chinese subsidiary, will be part of a larger Didi company valued at $35 billion. Uber gets a 20 percent stake in that — Didi’s previous valuation was $28 billion.
That’s a $7 billion value for upward of $2 billion that Uber has frittered away, um, spent there. (Really, nice trade!)
In turn, Didi will invest in Uber at a valuation of almost $70 billion. That was about the value of Uber’s last round.
Now, everyone owns everyone everywhere.
Consider: Didi has investments from China bigwigs Alibaba and Tencent and also has a partnership with Uber’s U.S. rival Lyft, as well as with Grab in Southeast Asia, another Uber competitor. Apple recently made an investment in Didi and General Motors made one in Lyft. Uber’s investors are everyone, including China’s third powerhouse Baidu.
Confused? Let me break it down more simply: Uber knows when to fold them in China, after being engaged in an incredibly expensive ride war with Didi there. The pair have been taking shots at each other all along, claiming fraud and whatnot naughtiness, most of which I tried to ignore.
But Uber CEO Travis Kalanick admitted it was futile in a blog post obtained by Bloomberg and which is all over China’s WeChat service (you can see one such copy below).
Wrote Kalanick: “As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart. Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”
“It’s a win-win for both companies,” said one source.
Well, to be more precise, not a lose-lose anymore.
And let’s just point out, cutting the massive losses in China and turning it into a more solid investment certainly clears the way for an IPO that many expect Uber to have in 2017 or so.
More to come, I am sure, but for tonight, peace out.
This was all over China’s WeChat, whose parent company Tencent is an investor in Didi, which just got Uber China. Got it?
2 news that can explain interst in Tom Tom today...
- Uber to pour $500m into global mapping project - FT - http://www.ft.com/cms/s/0/e0dfa45e-5522-11e6-befd-2fc0c26b3c60.html#axzz4G3uPLjGG I believe it could be too late to invest in mapping business to build its own data, even if they many drivers than can potentially helped them...Uber is not waze...so don't think it will be the good strategy.
- Verizon Agrees to Buy Fleetmatics in $2.4 Billion Deal
TechCrunch on Fleetmatics Business : https://techcrunch.com/2016/08/01/verizon-buys-fleetmatics-for-2-4b-in-cash-to-step-up-in-telematics/
I have been talking for months (even years) fo this story and still think that it will make of lot of sens of this one to be taking over...45% of teh capital is still own by 4 shareholders founders of the company, and still believe that there many buyers out there...
stock was trading around the 6 a month a go, rallied almosxt 30% from there, but still down 33% YTD...
have a look.
Laurent
Gapping down
In reaction to disappointing earnings/guidance: SOHU -4.7%, NSP -3.2%.
M&A news: SCTY -6.4% (confirms definitive merger agreement with Tesla (TSLA), agrees to be acquired for $25.37/share in stock), RIG -4.7% (RIG to acquire Transocean Partners (RIGP) for 1.1427 shares of RIG stock).
Select European financial related names showing weakness following stress test results: SAN -3.3%, RBS -3.1%, BCS-2.7%, DB -2.2%, HSBC -1.4%.
Other news: ADMA -42.7% ( receives Complete Response Letter from FDA for pending Biologics License Application), KERX-30% (withdrawal of guidance on supply interruption of Auryxia tablets; also reported earnings ), TKAI -12.7% (to reduce workforce by ~60%), GRPN -2.5% (no news today, pulling back following 30% gain last week) MCRB -2.1% (continued volatility), CNI -0.3% (Canadian Natl Rail discloses that it will repurchase common shares under three specific share repurchase programs ; will form part of the previously announced Normal Course Issuer Bid for up to 33 mln shares ).
Analyst comments: BUD -1.7% (downgraded to Neutral from Positive at Susquehanna).
M&A news: SCTY -6.4% (confirms definitive merger agreement with Tesla (TSLA), agrees to be acquired for $25.37/share in stock), RIG -4.7% (RIG to acquire Transocean Partners (RIGP) for 1.1427 shares of RIG stock).
Select European financial related names showing weakness following stress test results: SAN -3.3%, RBS -3.1%, BCS-2.7%, DB -2.2%, HSBC -1.4%.
Other news: ADMA -42.7% ( receives Complete Response Letter from FDA for pending Biologics License Application), KERX-30% (withdrawal of guidance on supply interruption of Auryxia tablets; also reported earnings ), TKAI -12.7% (to reduce workforce by ~60%), GRPN -2.5% (no news today, pulling back following 30% gain last week) MCRB -2.1% (continued volatility), CNI -0.3% (Canadian Natl Rail discloses that it will repurchase common shares under three specific share repurchase programs ; will form part of the previously announced Normal Course Issuer Bid for up to 33 mln shares ).
Analyst comments: BUD -1.7% (downgraded to Neutral from Positive at Susquehanna).
Gapping up
In reaction to strong earnings/guidance: TOPS +55%, WG +22%, CACC +2.7%, DO +1.7%.
M&A news: FLTX +39.7% (to be acquired by Verizon (VZ) for $60/share in cash, or ~$2.4 bln), PN +33.1% (Patriot National Board to consider an offer for a potential transaction with Ebix (EBIX), CZR +14.5% (Chinese consortium to buy Caesars Interactive Entertainment's social and mobile games business Playtika for $4.4 bln in cash).
Other news: IONS +23.3% (Phase 3 trial evaluating nusinersen in infantile-onset SMA met the primary endpoint; as a result, Biogen paid Ionis a $75 million license fee ), HRTX +20.3% (announces preliminary, 'positive', top-line efficacy results from two Phase 2 clinical studies of HTX-011 for the management of post-operative pain in patients undergoing bunionectomy and inguinal hernia repair), KGJI +17.3% (sells all of its interest in the Shanghai Creative Industry Park to Wuhan Lianfuda Investment Management for ~$ 171 mln), DRYS +17.1% (following TOPS earnings/move), SCYX +16.3% (announces its Phase 2 study evaluating SCY-078 as a treatment in patients initially treated with IV echinocandin therapy for invasive Candida infections met all primary objectives), ESEA +14.9% (following TOPS earnings/move), SPHS +5.1% (recent momentum name, not seeing anything new today), SPU +5.2% (recent momentum name, not seeing anything new today), MGT +5% (recent momentum name, not seeing anything new today), IPI +4.7% (light volume; obtains further waivers of certain covenants under its senior notes and its credit facility until September 30, 2016; also reaches agreement in principle with holders of its senior notes regarding revised terms), ESI +3.5% (light volume; Yude Zhang increases active stake ), SVU +0.2% (Several PE firms are preparing offers for Suvervalu's Save-A-Lot unit, according to Reuters).
Analyst comments: ETSY +3% (initiated with a Buy at Citigroup; tgt $14).
In reaction to strong earnings/guidance: TOPS +55%, WG +22%, CACC +2.7%, DO +1.7%.
M&A news: FLTX +39.7% (to be acquired by Verizon (VZ) for $60/share in cash, or ~$2.4 bln), PN +33.1% (Patriot National Board to consider an offer for a potential transaction with Ebix (EBIX), CZR +14.5% (Chinese consortium to buy Caesars Interactive Entertainment's social and mobile games business Playtika for $4.4 bln in cash).
Other news: IONS +23.3% (Phase 3 trial evaluating nusinersen in infantile-onset SMA met the primary endpoint; as a result, Biogen paid Ionis a $75 million license fee ), HRTX +20.3% (announces preliminary, 'positive', top-line efficacy results from two Phase 2 clinical studies of HTX-011 for the management of post-operative pain in patients undergoing bunionectomy and inguinal hernia repair), KGJI +17.3% (sells all of its interest in the Shanghai Creative Industry Park to Wuhan Lianfuda Investment Management for ~$ 171 mln), DRYS +17.1% (following TOPS earnings/move), SCYX +16.3% (announces its Phase 2 study evaluating SCY-078 as a treatment in patients initially treated with IV echinocandin therapy for invasive Candida infections met all primary objectives), ESEA +14.9% (following TOPS earnings/move), SPHS +5.1% (recent momentum name, not seeing anything new today), SPU +5.2% (recent momentum name, not seeing anything new today), MGT +5% (recent momentum name, not seeing anything new today), IPI +4.7% (light volume; obtains further waivers of certain covenants under its senior notes and its credit facility until September 30, 2016; also reaches agreement in principle with holders of its senior notes regarding revised terms), ESI +3.5% (light volume; Yude Zhang increases active stake ), SVU +0.2% (Several PE firms are preparing offers for Suvervalu's Save-A-Lot unit, according to Reuters).
Analyst comments: ETSY +3% (initiated with a Buy at Citigroup; tgt $14).