Closing Market Summary: Indices End Mixed Despite Oil's Tumble[BRIEFING.COM] The stock market managed to end its day on a flat note despite early and sustained weakness from the oil pit. Additionally, relative weakness from the heavyweight financial sector (-0.4%) was outweighed by strength in the influential technology (+0.1%) and the consumer discretionary (+0.4%) spaces. The Dow Jones Industrial Average (+0.1%) finished ahead of the tech-heavy Nasdaq (UNCH) and the S&P 500 (-0.1%).
Equities stumbled at the start of today's session as a downturn in oil weighed on the broader market. Today's oil trade centered on news from Iranian officials that the country will not be joining production cap efforts until its exports grow to four million barrels per day. As a result, the potential March meeting was called further into jeopardy as investors turn to April for action from OPEC and non-OPEC members. For its part, WTI crude ended its day lower by 3.8% at $37.19/bbl.
Four of ten sectors were able to finish their session above their flat lines with consumer discretionary (+0.4%), utilities (+0.1%), and technology (+0.1%) leading the pack. Meanwhile, materials (-0.7%), energy (-0.6%), financials (-0.4%) and health care (-0.4%) rounded out the board.
Oilfield service names like Schlumberger (SLB 73.44, -1.56) and Baker Hughes (BHI 43.88, -1.91) sported some of the largest losses in the energy sector. The two companies lost a respective 2.1% and 4.2% today, but remain up in March with gains of 1.4% apiece. However, the broader sector has gained 8.4% over that same period.
The financial sector slumped today, pulling back from its recent run. On that note, the sector has climbed 6.2% in March, but is still down 6.4% on the year. Today's weakness was broad based as insurance companies, money center banks, and asset management names all slipped from their recent levels.
In the consumer discretionary space (+0.4%), an unsolicited offer on Starwood Hotels (HOT 75.93, +5.51) resulted in a bid under for the lodging sub-group. A consortium of investors put forward a competing offer to the proposed Starwood and Marriott (MAR 70.93, +2.04) merger. The consortium's proposal is an all cash deal for $76 a share compared to Marriot's, which is primarily a stock offer. Elsewhere, Dow components Nike (NKE 60.81, +0.73) and McDonald's (MCD 122.90, +1.35) topped the price-weighted index.
Heavyweight names outperformed in the tech space (+0.1%) with Alphabet (GOOGL 750.24, +5.37) and Facebook (FB 109.89, +0.48) gaining a respective 0.7% and 0.4%. Conversely, data storage names like Western Digital (WDC 48.19, -1.69) and Seagate Tech (STX 35.36, -0.81) surrendered 3.4% and 2.2%, respectively. Additionally, the PHLX Semiconductor Index lost 0.4%.
The iShares Nasdaq Biotechnology ETF (IBB 261.44, -0.50) abandoned its best level (263.66) of the day and ended its day beneath its flat line. Meanwhile, Pfizer (PFE 30.10, -0.40) trimmed its loss to 1.3% after being down as much as 1.8%. The stock recovered from Pfizer's Corex cough syrup brand being banned for sale in India.
The U.S. Dollar Index (96.59, +0.41) ended its day higher as the greenback gained against the euro. The euro/dollar pair slipped from the 1.1121 level to trade lower by 0.4% (1.1099). Separately, the dollar/yen pair climbed from its low of 113.58 to trade at 113.81 (UNCH).
The Treasury complex notched session highs shortly after the open, but floated sideways from there. The yield on the 10-yr note slipped as low as 1.94%.(-5 bps) before ending its day at 1.96% (-3 bps).
Today's participation fell beneath the recent average with fewer than 835 million shares changing hands at the NYSE floor.
There was no economic data of note released today.
Tomorrow's economic data includes February Retail Sales (consensus -0.1%), February PPI (consensus -0.2%), and March Empire Manufacturing (consensus -9.5) all crossing the wires at 8:30 ET. Meanwhile, Business Inventories for January (consensus +0.0%) and the NAHB Housing Market Index for March (consensus 59.0) will be released at 10:00 ET. The day's data will be capped off with the Net Long-Term TIC Flows for January at 16:00 ET.
Also tomorrow, the Fed will begin its two-day March policy meeting.
- Nasdaq Composite -5.1% YTD
- Russell 2000 -4.6% YTD
- S&P 500 -1.2% YTD
- Dow Jones -1.1% YTD
*WOODFORD SEES CHANCE TO BUY MORE HEALTHCARE STOCKS
*NEIL WOODFORD SAYS SELLOFF AN OPPORTUNITY TO TOP UP HOLDINGS
Kellogg: Investigation under way after graphic video
The company says it learned of the video Friday and immediately altered law enforcement authorities and regulators. A criminal investigation is being conducted by the U.S. Food and Drug Administration’s Office of Criminal Investigation, the company said.
A representative for the FDA did not immediately respond when asked for comment.
The graphic video shows a man urinating on an assembly line, then panning to a sign with the Kellogg logo. Kellogg said its own investigation determined the video was recorded at its Memphis, Tennessee factory in 2014.
“It is important to note that any products that could be potentially impacted would be very limited and past their expiration dates,” the company said. It says the products that were potentially impacted include Rice Krispies Treats, granola clusters used in some products and puffed rice treats that it no longer makes.
“We are outraged by this completely unacceptable situation, and we will work closely with authorities to prosecute to the full extent of the law,” the company said.
Kellogg said it is still working to identify the individual in the video.
DJ J&J May Make a Big Move Sooner Than Later -- Market Talk
10:20 ET - After 2 years of underperforming healthcare stocks, Goldman Sachs says Johnson & Johnson (JNJ) has myriad ways to boost shares and thinks something is bound to happen sooner than later. So it ticks up its P/E multiple to 17 from 16, in the process boosting its price target $10 to $112 and upgrading the company from sell. The investment bank notes it's been advocating a JNJ breakup since 2012 as the company "is sitting on a significant amount of trapped value." JNJ launched a $10B stock-buyback effort in October, but Goldman says the company "needs to be more active with its strategy in order to catch up with peers' bolder strategic moves." That includes possibly hiving off some operations--consumer, biopharma or medical devices--or borrowing to repurchase stock. JNJ is flat at $107.71.
Lions Gate Entertainment Corp., the independent film and TV studio that is best known for such blockbuster hits as “Hunger Games,” the “Twilight” franchise and “Mad Men,” may soon become the focus of an activist fund manager looking to push it into a deal. But the scheme could come up against one of the industry’s most powerful operators.
Activist fund Jana Partners LLC’s Barry Rosenstein hiked his stake in Lions Gate to about 5.7%, according to a Feb. 16 securities filing, making the insurgent fund the third largest outside shareholder. Another fund known to shake things up, Eminence Capital LP, has a sizable stake, nearly 1%, according to a February securities filing.
And while both funds haven’t made any M&A-type agitations yet, many analysts and some investors contend that Lions Gate could be a major target for acquisition. It is one of only a handful of small, independent TV and movie studio companies with a raft of high-end properties. It’s very possible it will get swept up in the current wave of consolidation in the media, telecom and technology industries.
“It’s a good time to be in the TV and movie content making business,” said one activist fund manager, noting that the number of original U.S. TV shows has doubled to over 400.
He added that one of the most attractive aspects of a merger with Lions Gate is that it is incorporated in Vancouver, British Columbia-making it a candidate for a so-called tax inversion deal set up to avoid U.S. corporate taxes. Canadian companies also can make easier targets for activists, who only need a 5% stake to requisition a special shareholder meeting to expedite a director-election campaign.
Tony Wible, analyst at Drexel Hamilton, thinks that a major Chinese player such as Alibaba Group Holding Ltd. could be interested. A combination with a Chinese company would help Lions Gate with promotion and distribution in the fast-growing Chinese film market.
“A Chinese player such as Alibaba would seek to mix the strategic and economic benefit of acquiring Lions Gate,” Wible said. “They [China] have a broader soft-power initiative. They want to have their own version of Hollywood and would pay more to get there.”
Other Chinese companies could be interested as well. Dalian Wanda Group Co. Ltd. in January acquired Burbank, Calif.-based film studio Legendary Entertainment, a deal that comes after it spent $2.6 billion to acquire AMC Entertainment Holdings Inc. in 2013.
Robert Routh, analyst at FBN Securities, thinks that Netflix Inc., which has a $39 billion market capitalization, could be interested in Lions Gate and adding exclusive content to its growing original programming trove. “Lions Gate is a cherry asset,” Routh said.
Further, a Netflix-Lions Gate combination could be structured as a tax inversion deal, making it all the more attractive to the U.S.-based streaming service.
There is one major stumbling block potentially in the way of these plans, however, and that is John Malone.
Any activist targeting Lions Gate would end up against Malone, the media and telecom billionaire who is on its board and is well regarded for creating value and making smart media plays. In November, Lions Gate firmed up its ties to Malone after Liberty Global plc and Discovery Communications set up a new “long-term strategic partnership” with the TV and movie studio company.
Malone owns 28.7% of Discovery and 25% of Liberty Global. Both acquired a 3.4% stake in Lions Gate in November in a move that came after Malone himself acquired a 3.4% Lions Gate stake in February. More recently, on Feb. 25, Lions Gate issued an activist securities filing in Starz noting that it “intends to explore” whether there is a potential for a “mutually beneficial combination of the two companies.”
One near-term possibility is that Lions Gate combines with Starz and Discovery Communications as a tax inversion deal.
In addition to owning a near 6% of Lions Gate, the activist, Jana Partners LLC, also owns significant stakes in Liberty Global and Starz. “Inversion is the key to a lot of this,” said one analyst. “Malone likes to structure deals as tax efficient.”
However, talk of a Starz-Lions Gate combination has cooled after Lions Gate shares dropped following the release of a third-quarter earnings report that didn’t meet Wall Street expectations in part due to disappointing results from “Hunger Games: Mockingjay Part 2.”
Other potential buyers could include Verizon Communications Inc. or AT&T Inc., which owns DirecTV. Routh noted that either company could be interested in buying Lions Gate to have control over their exclusive content that it can distribute on smartphones and tablets. “A tremendous amount of TV is consumed on smartphones,” Routh said. “If you are Verizon and have exclusive content that AT&T doesn’t have, you might get a consumer to switch from Verizon to AT&T.”
Further, companies like Verizon or AT&T that might want to enter the film and TV studio realm don’t have a lot to pick from. “You can’t buy Fox or Disney with all its theme parks to get access to its film studios,” Routh said. “They have a ton of content that could be very interesting for a distributor, such as if you own FIOS as Verizon does or DirecTV as AT&T does.”
Under pressure from insurgent fund managers, Viacom Inc. is seeking a large minority investor in its Paramount Pictures unit, possibly Amazon.com Inc. or Alibaba. However, one activist fund following Viacom can envision a possible spinoff of Paramount, followed by an inversion combination with Lions Gate. Another option, he added, is that Lions Gate could take out privately held MGM Studios, which owns Metro-Goldwyn-Mayer Studios Inc., and go private.Whether it’s with Starz, Netflix or Alibaba, watch for Lions Gate to be the central attraction in a movie-related deal down the road.
China's CNOOC Ltd (0883.HK) is interested in purchasing a minority stake in Brazilian petrochemical company Braskem SA (BRKM5.SA) from state-run Petroleo Brasileiro SA (PETR4.SA), newspaper Valor said on Monday.
A Petrobras source told Reuters in January the company had been receiving interest from major international chemical companies for its 36 percent stake in Braskem's total capital. Talks are still preliminary, Valor said.
Representatives for Petrobras and CNOOC were not immediately available to comment on the Valor report.
Petrobras have tried to speed up a long-stalled program to sell assets as it struggles to finance expansion and pay down its $130 billion debt, the largest of any oil company.
Braskem's controlling shareholder Grupo Odebrecht SA [ODBES.UL], Latin America's largest engineering conglomerate, is also seeking to exit Braskem and could sell its stake in a joint transaction with Petrobras, three sources told Reuters last week.
CLECO Corp and the investor group that agreed to buy CNL offer additional commitments aimed at addressing issues raised by the Louisiana Public Service Commission
In response to the LPSC's feedback, the investor group and Cleco have enhanced and added to the package of 77 commitments for the transaction. The commitments include:
- ~$100 million of immediate rate relief, which provides rate credits of $370 on average to every Cleco residential and small business customer. These credits replace the previous $125 million of rate credits over 15 years.
- A $15 million contribution to Louisiana's economic development efforts to be administered by state economic development agencies in Cleco's service territory. * Extended commitment from five to 10 years for Cleco employee headcount, salaries and benefits and retiree benefits.
- The investor group will provide for investment by Louisiana governmental pension plans in up to 10 percent of Cleco's equity.
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