FT : Altice in talks to enter US cable market

Altice in talks to enter US cable market

Altice, the European cable and mobile group, is in advanced discussions to acquire Suddenlink Communications, the seventh-largest US cable operator with almost 1.5m subscribers, according to people familiar with the matter.
The value of the deal, which could be announced as soon as Wednesday morning, is likely to be in excess of the $6.6bn BC Partners and CPP Investment Board paid in 2012 to buy Suddenlink from another investor group, these people said.

Altice and Suddenlink both declined to comment.
In an industry where economies of scale between neighbouring networks offer big savings, cross-border cable deals are uncommon, sparking speculation that this may not be Altice’s last deal in the US.
Patrick Drahi, Altice’s billionaire founder, once worked for John Malone, and has ambitions that are increasingly putting him in competition with those of the US “cable king”.
People familiar with the matter said Altice recently lost out to Mr Malone’s Liberty Global European cable group in the bidding for Base, a Belgian mobile operator, and the two men could find themselves in competition again in US cable.
Through his investment in Charter Communications, Mr Malone has helped spur recent dealmaking in a US cable market where growth is increasingly driven by broadband internet access rather than video. The failure of Comcast’s $45bn bid for Time Warner Cable has intensified speculation about follow-on deals.
Rich Greenfield, an analyst at BTIG, said Suddenlink’s new owner could look at combining it with MediaCom, but he did not expect Altice to do a deal with a bigger cable company.
1.5m
Number of subscribers at Suddenlink Communications, the seventh-largest US cable operator
Altice, which has a market value of almost €29bn, has made aggressive efforts to consolidate the French communications market, where it controls Numericable-SFR. Expectations of an eventual deal with Bouygues have ebbed, but Dexter Goei, chief executive, told the Financial Times in February that the group is on the hunt for bigger acquisitions.
Suddenlink, led by chief executive Jerry Kent, has operations spanning Texas, West Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Arizona and elsewhere.
“Altice is effectively buying a broadband monopoly because there’s no fibre in (Suddenlink’s) area,” Mr Greenfield said, describing the company as “a well-run operation that is focused on the cash flow out of the broadband business.”
“Rural cable has always had the benefit of not having the same level of competition. That’s why Suddenlink has been successful — they’ve really focused on being all about broadband,” he said.

Suddenlink made headlines recently when it dropped Viacom’s channels in a high-profile dispute with the owner of MTV, Comedy Central and Nickelodeon.
Mr Kent has spoken about “an evolutionary shift in how the [US] pay-TV model works” as media owners, telecoms companies, cable groups and tech companies all experiment with online video and allowing consumers to watch content without cable or satellite subscriptions.
He told the FT earlier this year: “With these shifts, it really has transformed from the old argument that content is king to the consumer is king.”
News of the talks, first reported by the Wall Street Journal, came as Mr Malone told an interviewer there “would be very substantial synergies” in a combination between Liberty Global and Vodafone, the London-listed mobile operator.
He cautioned, however, that such a deal could be hard to pull off. Vodafone was like “a big banana in a jar”, he told Bloomberg: “The question is: how do you get your hand out of the jar with the banana.”

WSJ : Japan’s First-Quarter GDP Growth Is Fastest in a Year

Japan’s First-Quarter GDP Growth Is Fastest in a Year

GDP grows annualized 2.4% in first quarter on household, business spending


TOKYO—Japan’s economy grew at its fastest pace in a year in the first quarter, fueled by household and business spending, an indication that the engines could be starting to fire once again in the world’s third-largest economy.

Japan’s real gross domestic product grew 2.4% in annualized terms in the first three months of 2015, the government said Wednesday, stronger than a revised 1.1% expansion in the previous quarter. That was larger than a 1.5% expansion forecast by economists surveyed by The Wall Street Journal.

The figures offer support for the government and the Bank of Japan’s view that the economy is on its way to recovery, as corporate profits recover and companies have promised to pay workers more. But an increase in unsold goods suggests consumption is still failing to keep pace with production, a factor that casts a shadow on otherwise upbeat figures.

economy on a path to sustained growth with a brew of monetary and fiscal stimulus since taking power in late 2012. Mr. Abe’s efforts have been frustrated by a sales tax increase last year that chilled consumer and business sentiment and pushed the economy into its fourth recession in a decade.

The latest data show an acceleration in the economy’s recovery from that slump as consumption finally starts to pick up. Household spending rose 0.4% on quarter, higher than the 0.2% increase forecast by economists.

But the expansion was also driven by a larger-than-forecast increase in inventories by private companies. The fact that more goods are sitting in warehouses rather than being bought by consumers may signal some weakness in the economy looking ahead.

Inventories contributed 0.5 percentage point to growth, compared with 0.2 percentage point forecast by economists.

Meanwhile, capital spending rose 0.4% on quarter, slightly weaker than a 0.6% increase forecast by economists. That was the first increase on quarter in four quarters.

Some companies, such as Canon Inc. and Panasonic Corp. have shifted some production back to Japan as the yen has weakened against other major currencies, a factor supporting business investment. Furthermore, economists note that a shortage of workers in Japan has likely forced more companies to invest in automation measures or IT to make up for workers they can’t find to hire.

Wednesday’s data also showed Japan’s recovery is still largely driven by demand at home. Exports grew 2.4% on quarter, down from a 3.2% increase in the October-December quarter, though many economists forecast a pickup in coming months.

>>> After Hours Summary: DY +14.9%, CSC +4.8%, QIHU +1.7%, ETSY -17


After Hours Summary: DY +14.9%, CSC +4.8%, QIHU +1.7%, ETSY -17.1%, CISG -8.5%, DL -4.4% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: DY +14.9%, CSC +4.8%, QIHU +1.7%, NQ +1.4%, ADI +0.9%, GPRK +0.5%

Companies trading higher in after hours in reaction to news: SRPT +40.1% (announced a rolling NDA for Eteplirsen, to treat Duchenne muscular dystrophy, following a meeting with the FDA), CSC +4.8% (announced plan to split its Global Commercial and US Public sector businesses and a $10.50/share cash dividend; co also reported earnings), BG +0.8% (authorized new program for the repurchase of up to $500 mln of its common shares; increased regular quarterly cash dividend, from $0.34 to $0.38/share), PCRX +0.3% (announced data from three studies evaluating the clinical and pharmacoeconomic utility of EXPAREL for postsurgical pain control)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: ETSY -17.1%, CISG -8.5%, DL -4.4%, KEYS -3.1%, ADSK -2.1%, NDSN -1.3%, TEDU -0.9%, VSAT -0.5%

Companies trading lower in after hours in reaction to news: XEC -4.0% (intends to commence a registered public offering of 6 mln shares of its common stock), ACHN -3.7% (entered into a worldwide license and collaboration arrangement with Janssen Pharmaceuticals, a Johnson & Johnson (JNJ) unit, for Hepatitis C in up to $1.1 bln deal), NCLH -2.5% (announced a secondary public offering of 20 mln shares by selling shareholders), MGM -1.6% (Land & Buildings issued additional statement: notes it no longer intends to nominate any candidates for election as directors at the Company's 2015 Annual Meeting), EPE -1.3% (priced its offering of $800 mln aggregate principal amount of 6.375% Senior Notes due 2023 at an issue price of 100%) 

Reuters : Altice Said to Look at Acquiring Time Warner Cable: Reuters Link


NEW YORK (Reuters) - French telecom group Altice SA (ATCE.AS) is looking at acquiring Time Warner Cable Inc (TWC.N) and has held talks with the U.S.-based company about a potential deal, according to a source familiar with the matter.

Since its merger with Comcast fell apart last month, Time Warner Cable has also being circled by small rival Charter Communications.

Altice is also looking at privately held Suddenlink, Reuters reported earlier on Tuesday.

Time Warner Cable declined to comment while Altice could not immediately be reached for comment.

http://www.reuters.com/article/2015/05/19/us-timewarnercable-altice-exclusive-idUSKBN0O42PR20150519
Altice Said to Look at Acquiring Time Warner Cable: Reuters Link
2015-05-19 23:22:01.840 GMT


By Grant Clark
(Bloomberg) -- http://tinyurl.com/oqmvuva


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
Grant Clark in Singapore at +65-6212-1101 or
gclark@bloomberg.net

WSJ: Altice looking to Merge with Time Warner

Altice in Advanced Talks to Buy Cable Company Suddenlink

European telecom firm is also eyeing Time Warner Cable


Cable tycoon John Malone’s plans to consolidate the fragmented U.S. industry could run into competition from an unlikely player: telecommunications group Altice SA.

The company controlled by French cable investor Patrick Drahi is in advanced talks to acquire U.S. cable operator Suddenlink Communications in a deal that would be valued at $8 billion to $10 billion including debt and could be announced as soon as this week, according to a person familiar with the matter.

Separately, Altice is eyeing Time Warner Cable Inc., the No. 2 U.S. cable operator by subscribers, people familiar with the situation said. Altice has made initial contact with TWC.


Combined, the moves show the deal-hungry European company’s appetite for a major cross-border expansion. And they add another dimension to the complex drama playing out in the U.S. cable industry, bringing a new player into the race to consolidate the sector.

Mr. Malone has been a vocal proponent of consolidation and has pursued those ambitions through his investment in Charter Communications Inc., the fourth-largest operator. Charter is seeking a deal with Time Warner Cable, whose $45.2 billion merger with Comcast Corp. fell apart last month, and also is in talks with closely-held Bright House Networks.

Altice is a Luxembourg-based cable-and-telecom company with a market value of €28.7 billion ($32 billion).

By buying St. Louis-based Suddenlink, Altice would get access to about 1.5 million customers in more than a dozen states from Texas to West Virginia. Suddenlink is the seventh-largest U.S. cable operator by video customers and had revenue of $2.3 billion last year. Suddenlink Chief Executive Jerry Kent, a cable-industry veteran, founded the company early in the last decade and built it up by purchasing cable systems from rivals including Cox Communications Inc. and Charter.

Suddenlink is majority-owned by private-equity firm BC Partners and a Canadian pension fund, who bought it in 2012 in a deal valued at $6.6 billion, including debt.

There is no guarantee the Suddenlink talks won’t fall apart before a deal is reached. No deal with TWC is imminent and any transaction would only happen after a deal with Suddenlink, one of the people familiar with the situation said.

Time Warner Cable, with a $44.5 billion market capitalization, would be a much bigger deal for Altice to digest. The company operates in big city markets including New York and Los Angeles and has nearly 11 million residential cable TV customers. It attracted interest from Charter soon after Comcast terminated its deal with TWC in the face of stiff regulatory resistance.

A deal of such size could be challenging for Altice to pull off financially. Altice has made a name for itself with its record leveraged buyouts last year. The company had net debt of €18.78 billion at the end of the first quarter. Still, Altice believes it could raise enough cash to afford a bid for Time Warner Cable, a person familiar with the matter said.

Mr. Drahi, 51 years old, has made a fortune by investing in underperforming cable companies. Buying into the U.S. would catapult Altice, which now owns communications companies from France to the Caribbean, into one of the world’s largest cable and broadband markets. Mr. Drahi has been betting that the future of the telecom industry lies in combining cable and broadband operators with mobile companies to offer clients higher-priced bundles combining television, broadband, fixed telephony and mobile services.

Entering the U.S. would make Mr. Drahi a direct competitor to Mr. Malone, whose career has served as a model in Mr. Drahi’s expansion over the past decades.

Altice has other ties to Mr. Malone: Dexter Goei, the chief executive of Altice, was a member of the slate of directors Charter nominated to replace Time Warner Cable’s board early last year, during its hostile attempt to take over TWC. That effort was headed off when Comcast struck its ill-fated TWC deal.

A foreign player acquiring U.S. cable companies would require approval from the Committee on Foreign Investment in the U.S. Such a deal would also require approval from the Federal Communications Commission and could be subject to antitrust review from the Justice Department.

Mr. Drahi is the second French telecom billionaire to attempt to venture into the U.S. in less than a year. Last summer, rival Xavier Niel with his low-cost operator Iliad SA made a bid to buy U.S. carrier T-Mobile U.S., but his offer was rebuffed.

Altice has been searching for assets to buy in the U.S. for some time and has looked at several potential targets, other people familiar with the matter said.

Mr. Drahi over the past year has emerged as one of the most aggressive deal-makers in a fragmented European telecom market.

In April last year, Altice won a hard-fought takeover battle to buy French cellphone carrier SFR in a $23 billion deal. Only a few months later, the company agreed to buy former Portuguese telecom monopoly PT Portugal for around $9 billion.

>>> FEMSA aggressively pursuing M&A opportunities in drugstore sector, seeking t

DEAL REPORTER

FEMSA aggressively pursuing M&A opportunities in drugstore sector, seeking to grow scale
FEMSA (FEMSAUBD:MX), Coca Cola´s largest bottler outside the US, is aggressively looking to acquire drug store chains through its arm FEMSA Comercio, an IR officer told Mergermarket. The company is seeking to enter Mexico City, Monterrey and Guadalajara, markets where it does not currently operate, said the officer.

Reaching a scale of more than 1,000 units would give the owner of the ubiquitous OXXO convenience store chain enough leverage to negotiate directly with drug makers, the officer said.

FEMSA currently operates roughly 600 units in the South of the country through its majority-owned brands Farmacias YZA and Farmacias Moderna, as well as 200 more units under its recently acquired brand Farmacias Farmacon, located in the Northeast of the country. The Farmacon deal is expected to close in 2Q15, the officer said.

There are currently three drugstore formats in Mexico right now, according to the IR officer. That of Farmacias Guadalajara is like a mini supermarket, with sales of drugs accounting for 50% of sales, and around 400-500 sq m in layout. Benavides, acquired by Walgreens Boots Alliance (WBA), maintains a mid-sized format of 250 sq m, where home and beauty products account for a big part of sales; and Farmacias del Ahorro is around 100 sq m in size, with 80% of sales coming from drugs, the officer said.

"FEMSA would like to have a smaller format, the size of an OXXO (90 sq m), where drugs account for 50%-60% of sales, 25% comes from beauty products, and the rest from convenience products," he said.

Farmacias San Pablo and Farmacias Farmatodo are seen as likely targets and have long been subject to speculation in the local press. San Pablo has 61 units in the Mexico City area, according to a source close to the company. Farmatodo has around 150 units in Mexico City, Puebla and Queretaro, according to its website.

“It is not easy to create a national network because there are few national chains in Mexico you can buy, so you have to go little by little,” said a sector banker, speaking about consolidation opportunities in the country. “FEMSA´s interest has also had the effect of pushing valuations up to 10x or 11x EBITDA, and there are at least two players from South America who want in, plus a few Europeans.”

According to the National Association of Drugstores of Mexico (ANAFARMEX), there are close to 40,000 drugstores in the country. Most of the businesses are “mom and pop shops,” and that is not going to change in the next five to ten years, according to a consultant and the banker.

Farmacias Guadalajara (FRAGUAB:MX) is seen as the biggest in the country, according to the banker. It ended 2014 with 1,322 drugstores in 23 states of the country, plus Mexico City, according to official filings with the Mexican Bolsa (MexBol). Sales for the full year were MXN 32.03bn (USD 2.09bn), according to the filings.

Farmacias del Ahorro, seen as the second largest, does not disclose its figures, but its CEO told the press last year it was expecting to end the year with close to 1,300 units.

Walgreens Boots Alliance is third in the country after last year it acquired 1,000 drugstores in Mexico operated under the names Benavides and ABC from Casa Saba. The MXN 8.5bn (USD 557.11m) deal included 400 additional units in Chile under the brand Ahumada.

Mirtha Luque, IR officer at Farmacias Guadalajara, did not respond to requests for comment. Farmacias SanPablo did not immediately respond to e-mails seeking comment. Farmatodo did not immediately respond to e-mails seeking comment.

(BUS) CSC Announces Plan to Separate into Two Independent, Publicly Traded Compa

BN 05/19 20:18 *CSC TO SPLIT INTO GLOBAL COMMERCIAL CO, U.S. PUBLIC SECTOR CO.
BN 05/19 20:18 *CSC: COMPLETION OF SPLIT WON'T REQUIRE HOLDER VOTE
BN 05/19 20:17 *CSC:BOTH COS. TO HAVE ADEQUATE CAPITAL, INVEST-GRADE PROFILES
BN 05/19 20:17 *CSC SEPARATION WON'T REQUIRE HOLDER VOTE
BN 05/19 20:17 *CSC TO SPLIT TO CSC–GLOBAL COMMERCIAL, CSC–U.S. PUBLIC SECTOR
BN 05/19 20:16 *CSC HOLDERS TO OWN SHRS OF BOTH COMPANIES
BN 05/19 20:16 *CSC TO PAY SPECIAL CASH DIV TO HOLDERS OF $10.50/SHR AFER SPLIT
BN 05/19 20:16 *CSC SEES SEPARATION COMPLETED BY END OF OCT.
BFW 05/19 20:16 *CSC TO SEPARATE INTO TWO INDEPENDENT, PUBLICLY TRADED COS.
BN 05/19 20:16 *CSC TO SEPARATE INTO TWO INDEPENDENT, PUBLICLY TRADED COS.
BN 05/19 20:16 *CSC $10.50 SPECIAL CASH DIV/SHR INTENDED
BN 05/19 20:16 *CSC REPORTS PLAN TO SEPARATE INTO TWO INDEPENDENT, PUBLICLY TRA
BN 05/19 20:16 *CSC REPORTS PLAN TO SEPARATE INTO TWO INDEPENDENT, PUBLICLY
CSC Announces Plan to Separate into Two Independent, Publicly Traded Companies
2015-05-19 20:16:00.115 GMT

CSC Announces Plan to Separate into Two Independent, Publicly Traded
Companies

$10.50 Special Cash Dividend Per Share Intended as Part of Transaction

Move Sharpens Strategic Focus for Global Commercial and U.S. Public Sector
Businesses; Drives Additional Value for Customers and Shareholders

Business Wire

FALLS CHURCH, Va. -- May 19, 2015

Computer Sciences Corporation (NYSE: CSC) today announced that its Board of
Directors has unanimously approved a plan to separate the company into two
publicly traded, pure-play leaders: one to serve commercial and government
clients globally and one to serve public sector clients in the U.S.

Concurrent with the separation, CSC intends to pay a special cash dividend to
shareholders of $10.50 per share at closing, which is expected by October
2015.

“CSC began its turnaround three years go,” said CEO Mike Lawrie. “That
turnaround has progressed strongly, and our focus now turns to positioning the
business for long-term growth and leadership. The best way to accelerate that
transformation is by separating the company into two businesses, each uniquely
positioned to lead its market by focusing strongly on the needs of its
clients.”

About the Companies

Both businesses will be industry leaders from day one.

* CSC – Global Commercial will move forward as the trusted information
technology (IT) services and solutions partner for Fortune 1,000 companies
and non-U.S. government clients, leveraging its industry, infrastructure
and consulting expertise to lead customers on their digital transformation
journey. With $8.1 billion in FY 15 revenue, CSC Global Commercial will
have more than 1,000 customers (including 175 of the Fortune 500), 51,000
employees and 34 delivery centers globally. The business will retain its
leadership status across multiple markets, along with innovative offerings
and industry-leading strategic partnerships.
* CSC – U.S. Public Sector will be a top three provider of mission-specific
IT, infrastructure and business services to U.S. federal, state and
defense agencies. Building on more than a half-century of government
service, the business also will be a leading IT services provider to
national security. The public sector business had FY 15 revenues of $4.1
billion and employs 14,000 people, including 3,500 U.S. military veterans.

Rationale for the Separation

CSC’s Board of Directors made the decision to separate the commercial and
public sector businesses as a result of several factors.

* The “Get Fit” phase of the company’s turnaround has been successfully
completed. Over the last three years, CSC has implemented a common
operating model, streamlined its cost structure, improved its go-to-market
performance and brought in proven leadership.
* At the same time, markets have evolved rapidly, with diverging
opportunities and challenges. On the commercial side, clients seek
partners with a deep understanding of their business who can help lead
their digital transformations. In the U.S. public sector, technology
demands are increasing, and clients want providers with specific
experience in government-focused innovation. By separating, each business
will have the scale – among the largest in their respective categories –
as well as the focus to meet unique customer needs and market
requirements.
* The two segments have different growth profiles and cash flow dynamics.
The separation will allow both companies to better optimize their capital
strategies and cost structures, and will provide investors with distinct
long-term investment opportunities.
* The market for talent has become highly competitive. As two independent,
focused and market-leading organizations, each business will be better
positioned to recruit and retain the best IT talent.

Based on these factors, CSC’s Board of Directors believes that the next phase
of the turnaround, focused on growth, will be enhanced by the ability of the
two businesses to function as pure plays focused exclusively on their
respective customer segments.

“Our analysis shows significant benefits of going with a pure-play strategy,”
Lawrie noted. “We expect this change to enable both businesses to enhance
innovation and improve delivery, in ways that are consistent with the rate and
pace of the markets they serve.”

Moving Forward

CSC will operate on a “business as usual” basis while details of the
separation – including leadership, locations and other details – are being
finalized. When the separation is concluded, it is expected that both
businesses will have:

* Operational and financial scale;
* Adequate capital, consistent with investment-grade credit profiles; and
* Industry-leading partnerships – built on CSC’s existing partner ecosystem
– that have proven instrumental in the company’s recent success.

“During the first three years of CSC’s turnaround, we benefitted from taking a
unified approach,” Lawrie concluded. “The progress we’ve made, coupled with
the changing demands of the market, make this a good time to give these two
businesses room to thrive as independent companies, able to move decisively to
capture the opportunities in front of them.”

About the Transaction

The separation is intended to qualify as a tax-free transaction to CSC
shareholders. Immediately following the separation, which is expected to be
completed by the end of October 2015, CSC shareholders will own shares of both
CSC – Global Commercial and CSC – U.S. Public Sector.

Completion of the separation will not require a shareholder vote but will be
subject to customary conditions, including final approval of the CSC Board of
Directors, the receipt of a favorable opinion from counsel with respect to the
tax-free nature of the transaction, and the effectiveness of a Form 10 filing
with the U.S. Securities and Exchange Commission.

RBC Capital Markets is serving as financial advisor to CSC. Additional
financial advice is provided to CSC by Guggenheim Partners. Allen & Overy LLP
is serving as legal advisor.

Investor Call/Webcast

CSC senior management will discuss this announcement and other related matters
at 5 p.m. EDT today during the company’s previously scheduled fourth quarter
earnings call and webcast. The dial-in number for domestic callers is
888-542-1101. Callers who reside outside of the United States or Canada should
dial 719-325-2482. The passcode for all participants is 9825381. The webcast
audio and any presentation slides will be available on CSC’s Investor
Relations website.

A replay of the conference call will be available from approximately two hours
after the conclusion of the call until May 26, 2015. The replay dial-in number
is 888-203-1112 for domestic callers and 719-457-0820 for callers who reside
outside of the United States and Canada. The replay passcode is also 9825381.
A replay of this webcast also will be available on CSC’s website.

About CSC

Computer Sciences Corporation (CSC) is a global leader of next generation
information technology (IT) services and solutions. The Company's mission is
to enable superior returns on our clients’ technology investments through
best-in-class industry solutions, domain expertise and global scale. CSC has
approximately 70,000 employees and reported revenue of $12.2 billion for the
12 months ended April 3, 2015. For more information, visit the company's
website at www.csc.com.

All statements in this press release and in all future press releases that do
not directly and exclusively relate to historical facts constitute
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements represent the Company’s
intentions, plans, expectations and beliefs, and are subject to risks,
uncertainties and other factors, many of which are outside the Company’s
control. These factors could cause actual results to differ materially from
such forward-looking statements. For a written description of these factors,
see the section titled “Risk Factors” in CSC’s Form 10-K for the fiscal year
ended March 28, 2014 and any updating information in subsequent SEC filings.
The Company disclaims any intention or obligation to update these
forward-looking statements whether as a result of subsequent event or
otherwise, except as required by law.

Click here to subscribe to Mobile Alerts for CSC.

View source version on businesswire.com:
http://www.businesswire.com/news/home/20150519007092/en/

Contact:

CSC
Rich Adamonis
Global Media Relations
862.228.3481
radamonis@csc.com
or
CSC NPS
Heather Williams
Communications
703.641.2217
hwilliams22@csc.com
or
CSC
George Price
Investor Relations
703.641.3842
investorrelations@csc.com

-0- May/19/2015 20:16 GMT

>>> US Close Dow+0,07% S&P-0,07% Nasdaq-0,17% Russell-0,14%


Closing Market Summary: S&P 500 Snaps Three Day Streak

The major averages ended the Tuesday session on an unchanged note after spending the entire day near their flat lines. The S&P 500 settled lower by 0.1% while the Dow Jones Industrial Average (+0.1%) outperformed slightly, edging up to another record closing high.

Overall, the Tuesday session was a snoozer that saw the benchmark index bounce inside a five-point range that was expanded to nine points by the close. The index was able to set a fresh intraday record high at 2,133.02 during the afternoon, but returned near its session low by the close.

For the second day in a row, heavily-weighted health care (+0.5%) and financials (+0.7%) outperformed throughout the day and kept the benchmark index from dipping too far below its flat line. The health care sector outperformed even as biotechnology struggled to keep pace with the iShares Nasdaq Biotechnology ETF (IBB 360.60, +0.30) adding 0.1%.

Elsewhere, the financial sector continued its recent outperformance amid increasing Treasury yields that are expected to boost net interest margins for banks. Thanks to today's gain, the sector is now up 3.4% in May versus a 2.0% gain for the S&P 500.

Treasury yields rose once again today, but not before an overnight rally in global bonds that followed remarks from European Central Bank executive member Benoit Coeure who said the ECB plans to frontload its asset purchases in hopes of avoiding thin liquidity conditions in July and August. The remarks boosted global bonds and weighed on the euro, sending the single currency lower by 1.5% against the dollar to 1.1150. Furthermore, the timing of the comments from Mr. Coeure was viewed as controversial because the original speech was delivered on Monday evening, London time, when the ECB member appeared before a private group of hedge fund investors; however, the speech was not released to the public until this morning. In response, the European Central Bank blamed the delay on an "internal procedural error."

Despite rallying overnight, U.S. Treasuries surrendered their gains in the morning after the April Housing Starts report beat expectations (1.135 mln; consensus 1.019 mln). True to recent form, the better than expected data point was seen as a potential headwind to the market considering a strong showing from the housing sector is likely to be used as an argument in favor of the Fed hiking rates sooner rather than later. That being said, homebuilder stocks outperformed with iShares Dow Jones US Home Construction ETF (ITB 27.30, +0.19) climbing 0.7%. Meanwhile, the broader consumer discretionary sector settled just below its flat line.

Also of note, another cyclical sector—energy—lost 1.2%, and settled behind the remaining nine groups as crude oil weighed. WTI crude ended lower by 3.6% at $58.08 and surrendered its May gain with the 1.1% increase in the Dollar Index (95.29, +1.07) adding to the pressure.

Today's participation represented an improvement from yesterday as more than 720 million shares changed hands at the NYSE floor.

Economic data was limited to Housing Starts and Building Permits:
  • Housing starts increased 20.2% in April to 1.135 mln from an upwardly revised 944,000 (from 926,000) in March while the consensus expected an increase to 1.019 mln 
    • After the subpar first quarter, when housing starts plummeted to some of their worst levels since the middle of last year, construction levels rebounded significantly in April. 
    • This was the first time starts reached 1.135 mln since November 2007 and it was the first time starts increased by at least 20.2% in a month since a 20.9% increase in February 1991. 
    • Single-family starts increased 16.7% in April to 733,000 from 628,000 in March. That was the most single-family homes started since January 2008 when 773,000 were started. 
    • Building permits rose to a seasonally adjusted annualized rate of 1.143 mln in April from a revised 1.038 mln for March (from 1.039 mln) while the consensus expected a reading of 1.065 mln 
Tomorrow, the Weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC minutes from the April 29 meeting will be released at 14:00 ET.
  • Nasdaq Composite +7.1% YTD 
  • Russell 2000 +4.4% YTD 
  • S&P 500 +3.4% YTD 
  • Dow Jones Industrial Average +2.8% YTD

>>> ACHN-JNJ Enters Worldwide Collaboration with Achillion Pharmaceuticals, Inc.

JNJ Enters Worldwide Collaboration with Achillion Pharmaceuticals, Inc. to Combat Hepatitis C Virus 

- Janssen Pharmaceutical Companies of Johnson & Johnson, announced today that it has entered into an exclusive worldwide license and collaboration arrangement with Achillion Pharmaceuticals, Inc. (Achillion) to develop and commercialize one or more of Achillion's lead hepatitis C virus (HCV) assets which include ACH-3102, ACH-3422 and sovaprevir. 

A key objective of the collaboration will be to develop a short-duration, highly effective, pan-genotypic, oral regimen for the treatment of HCV. An initial regimen that is planned to be explored will feature Achillion's ACH-3102, an NS5A inhibitor currently in Phase 2 clinical studies that has been granted Fast Track designation by the U.S. Food and Drug Administration, in combination with an NS3/4A HCV protease inhibitor plus an NS5B HCV polymerase inhibitor from the collaboration. 

Under the terms of the agreement, Achillion will grant Janssen an exclusive, worldwide license to develop and, upon regulatory approval, commercialize HCV products and regimens containing one or more of the licensed HCV assets. Achillion will be eligible to receive milestone payments based upon the achievement of specified development, regulatory and sales milestones and tiered royalties on future worldwide sales. 

In addition, and separate to the exclusive license and collaboration arrangement, Johnson & Johnson Innovation JJDC, Inc. will make an equity investment in Achillion.

The transactions are subject to customary closing conditions, including termination or expiration of any applicable waiting periods under the Hart-Scott-Rodino Act.