Tax reform inspires Wall Street

European stocks rallied strongly on Monday after the U.S. Senate passed a tax package delivering significant fiscal stimulus, which investors have been anticipating would give extra legs to the bull run in equity markets. The U.S. Senate voted in the early morning hours on Saturday to pass the tax reform bill. Wall Street is most excited about the provision to lower the corporate tax rate from 35% to 20%, which it expects would be a boon to Corporate America and a positive for an already historically high stock market. The tax overhaul delivered some relief in early European trading after benchmarks hit multi-week lows on Friday. Strong gains in the U.S. dollar helped Germany’s dollar-exposed DAX shoot up from a two-month low, last up 1.1 percent. The euro’s strengthening has weighed on earnings expectations for stocks across the euro zone this quarter. The Dax decided to ram the doors open on the first trading day of the week, hammering the 13’040 mark at opening and ramping up to the 13106 point mark booking a 1,95% increase. One hour before opening the German DAX is only quoting positive returns with the biggest Loser being ProSiebenSat1 increasing its market cap by 0,15%. The biggest Winner on the German Index is Fresenius Medical Care KGaA. After opening at 84 Euro, the stock rose to a half-year high at 87,18 Euro and is now quoting at 86,84.

The most recent five-day stretch of trading on Wall Street was an exciting one for those long equities. For starters, the Dow Jones Industrial Average used a couple of notable advances to blow past the 24,000 mark. On Friday, it was a rollercoaster ride for the investment community, with some sharp reversals in the direction of trading during the seesaw session. In addition to the tax reform hopes, trading was driven by the decision of General Michael Flynn to plead guilty to a lesser charge in Federal Court, which many pundits think will have him talk about the Trump Administration’s alleged dealings with Russia. The Flynn news spooked the market after a strong start to the session, but the losses were pared significantly into the closing bell when it was looking more likely that Senate Republicans would have enough votes to pass its tax reform plan. For the day, the Dow Jones Industrial Average, the NASDAQ, and the broader S&P 500 Index were down 41, 26, and five points, respectively. The small and mid-cap sectors also finished lower, but it was not a clean sweep for the bears, as there were more winning than losing stocks on the Big Board. Most of the damage was done by the NASDAQ, where decliners outnumbered advancers by a comfortable margin. The industrial and technology sectors were the notable laggards, while the energy group was very much in favor. The remaining groups among the 10 major equity groups did not finish the session too far removed from the neutral line. Notwithstanding Friday’s setback, the equity market entered the final month of 2017 with a chance to make history. If the major equity averages were to finish the 31-day stretch in positive territory, it would be the first time since the inception of the stock market that it finished higher during each month of the year. The bulls will certainly be emboldened if Congress can get a tax reform bill on President Trump’s desk for him to sign into law before year’s end. Too, there could be another Santa Claus rally on the horizon, especially with a strengthening U.S. economy making a case for investors to put more money into stocks. The investment community also seems to have already factored into its valuations the likelihood the Federal Reserve will tighten the monetary reins by 25 basis points at it two-day monetary policy meeting next

Investors will begin the first full trading week of December with some M&A news. The lead headline is the agreement in place for pharmacy giant CVS Health to acquire insurance provider Aetna. Under the terms of the $69 billion deal, which may reshape American health care, Aetna shareholders would receive approximately $207 per share, consisting of $145 per share in cash and 0.8378 of share of CVS stock for each share held. Meantime, reports surfaced that Broadcom plans a hostile takeover of Qualcomm after the latter rebuked past attempts to work out a deal between the two technology giants. Specifically, Broadcom now plans to nominate a slate of 11 independent members to the board of Qualcomm after the semiconductor company rejected its $103 billion cash-and-stock bid last month.

On Monday Morning the Dow Jones is rallying up at 24522 point after breaking the 24000 point mark on Friday. Some of the biggest gainers included bank and industrial stocks. Bank of America and JPMorgan rose more than 3 percent, while Caterpillar and Boeing  gained about 2 percent. One hour after opening the Index has gained 280 points.

 

Bulls drive Dow Jones to the 24000 mark

Today’s Overview:

• Dax crashes
• Dow Jones breaks the 24000 mark
• CFIUS clears Bayer’s planned takeover of Monsanto
• Tesla opens biggest Lithium battery factory
• Juniper goes crashing after Nokia denies take-over

After a long week with no real changes the German DAX seems to be heading down in the first day of December. After opening at 13044, the German Index is down at the12854 point mark, losing 130 bp. The DAX is not the only Index suffering in the first day of December. The euro zone is sliding down Overall on the last day of the week as euro zone factories posted their busiest month in over 17 years in November. At mid-day only 3 stocks are above the 0% line, the biggest loser being Infineon carrying a loss of 228bp. Europe’s financial stocks wilted after a delayed vote on tax reform in the U.S. deflated a rally in the sector, driving regional benchmarks to start December with a dip. Euro zone stocks fell 0.6 percent while Britain’s FTSE, which has suffered from a strong sterling this week, slid 0.1 percent.  Financials were the biggest weight after the U.S. Senate delayed a vote on a tax reform bill that investors anticipate will be beneficial for banks.  Lloyds, Barclays, and BNP Paribas led the index down.  Oil and gas stocks stayed buoyant, with Shell, Total and BP leading sector gains as OPEC’s extension of supply cuts continued to boost crude prices. Healthcare stocks outperformed thanks to a Morgan Stanley upgrade boosting UCB by 3.3 percent while Novo Nordisk, flagged as one of the strategists’ favourites in the pharma space, gained 2.8 percent.  British pharma company Indivior also shot up 11.7 percent after its opioid addiction drug got approved by the U.S. Food and Drug Administration.

In the U.S. the stock market delivered a strong performance yesterday, with traders seeming to be more confident that the Trump Administration’s tax plan will be approved. At the close of trading, the Dow Jones Industrial Average was ahead 332 points; the broader S&P 500 Index was up 21 points; and the NASDAQ was higher by 50 points. Market breadth was supportive, with winners nicely ahead of losers on the NYSE. Most equity sectors participated in today’s advance. The energy and industrial issues showed leadership, while the telecom names and utility stocks underperformed. Technically, the stock market continues to move strongly higher, with the Dow Jones Industrial Average now past the 24,000 mark. While equity valuations are elevated, traders seem content with the nation’s economic progress.

On other big news Germany’s Bayer said that the Committee on Foreign Investment in the United States (CFIUS) had no national security concerns about the drugmaker’s planned takeover of U.S. seeds group Monsanto, giving its go-ahead. Bayer and Monsanto will continue to cooperate with other authorities to complete the transaction in early 2018, Bayer said in a statement on Friday.

Tesla Inc switched on the world’s biggest lithium ion battery on Friday in time to feed Australia’s shaky power grid for the first day of summer, meeting a promise by Elon Musk to build it in 100 days or give it free. “South Australia is now leading the world in dispatchable renewable energy,” state Premier Jay Weatherill said at the official launch at the Hornsdale wind farm, owned by private French firm Neoen.  Tesla won a bid in July to build the 129-megawatt hour battery for South Australia, which expanded in wind power far quicker than the rest of the country, but has suffered a string of blackouts over the past 18 months. In a politically charged debate, opponents of the state’s renewables push have argued that the battery is a “Hollywood solution” in a country that still relies on fossil fuels, mainly coal, for two-thirds of its electricity.  Supporters, however, say it will help stabilize the grid in a state that now gets more than 40 percent of its electricity from wind energy, but needs help when the wind dies down.

Shares of Juniper Networks Inc fell 8 percent in pre-market trade on Thursday after Finland’s Nokia denied reports that it was in talks to buy the U.S. network gear maker.  CNBC on Wednesday reported, citing sources, that Nokia was in talks to buy Juniper at an offer that would value the company at around $16 billion, higher than Juniper’s $11.26 billion market capitalization as of Wednesday’s close. That valuation would imply a price of about $42 per share, a level last seen by Juniper shareholders six years ago, Morningstar analyst Ilya Kundozerov wrote in a client note.  Within hours of the CNBC report, however, Nokia, which does not typically comment on market rumors, said it was not preparing an offer for Juniper. Bernstein analyst Pierre Ferragu said Nokia acquiring Juniper seemed a stretch citing an operational alliance limited to $300 million to $400 million in costs, near impossible product integration in routing and a risk of negative revenue combination.