the M&A of US stock market is increasing

BY  | FROM xinhua | 2015-06-01 15:06

“Where have all the share deals gone, long time passing?”  Cash was king in the M&A world, and therefore the market this week (and cash is a taxable event, compared to shares which are typically tax deferred).  The good news is that at least we don’t have to hear about the share-synergy tale (or are they fairy tales?).  Charter Communications (CHTR) will pick up Time Warner Cable (TWX) for USD 55 billion (Charter closed the week up 0.6%, as Time Warner gained 5.7%), and Avago Technology (AVGO) will buy Broadcom (BRCM) for USD 37 billion (Avago added 4.0% and Broadcom gained 20.3%).  Then there is the rumored Intel (INTC) USD 15 billion deal for Altera (ALTR).  Part of the M&A takeaway is that companies may be attempting to buy sales, since increasing them has appeared to be difficult. And maybe if they spend their built-up piles of money, activists will leave them alone.  Concerns over Greece increased, as the country’s politicians said creditor demands were not acceptable.  Prolonging the soap opera was the possible postponing of a USD 1.7 billion IMF repayment until the end of June.  More shocking news was that there might be some game playing at FIFA, which was not on the field, but rather on the executive floor.  Former Lehman Brothers head Richard Fuld went public about the past, as he said the “perfect storm” caused the Lehman crisis. In economic data, the April Durable Goods report showed a sharp decline for the month, but the prior month’s gain was restated upward to 5.1%.  Housing data was mixed, as S&P/Case-Shiller U.S. National Home Price Index came in with a 4.1% gain, but the gains continue to decline (the prior month was 4.2%), as FHFA Home Prices came in lower than expected.  New Home sales, however, were strong with a 6.8% gain.  The updated Q1 GDP rate was restated to be negative 0.7% from negative 0.2%, but since Q1 has already been written off, it appeared to matter little; what mattered was that Q2 is expected to be positive at 2.5%. On an issue level, retail was split, as accessories issue Michael Kors Holdings (KORS) reported the slower-than-expected sales (with a slower forecast), declining 24.5% for the week, while high-end jewelry issue Tiffany & Company (TIF) reported improving sales in Europe and the U.S., closing the week up 7.8%. For the shortened week, the market posted a 0.88% decline after three weeks of small gains.  Trading was mostly uneventful, as it again appeared to be more volatile that it was statistically.  Tuesday’s 1.03% decline was followed by Wednesday’s 0.92% rebound, as a lack of leadership ruled the week. 

For the month of May, the market posted a 1.05%, leaving it up 2.36% year-to-date. The tone of the market did not appear to change materially, as most felt the market needed time to set a foundation at the higher level.  The instability of oil and the U.S. dollar, after both appeared to stabilize, added uncertainty into the market, with few expecting either to steady. Breadth turned negative, as 117 issues gained for the week, down from last week’s 259 (and the prior week’s 294), and 386 issues declined, up from last week’s 239 (and the prior week’s 205).  Three issue gained 10% or more (two did so last week), as five other issues were up at least 5% (10 last week).  Three issue fell at least 10% (three did last week), with 20 more falling at least 5% (five last week). All ten sectors declined for week, compared to four which did do last week.  Energy declined the most, off 2.06%, as oil turned down and is off 5.22% year-to-date—the worst sector in the index.  Healthcare did the best, off 0.02%, and is up 9.190% year-to-date, the best of any sector. Trading volume increased 6% this week, after declining 6% last week and declining 11% the week before.  Low trading is becoming the norm, as most of the action is done at the opening and closing of business.  Volatility again seemed high, but the actual high-over-the-low price variance was 1.29%, and while it was up from last week’s 0.69% (the prior week to that was 1.84%), it remains significantly lower than the one-year 2.24% average. The VIX closed up at 13.84, as volatility increased from last week’s 12.13 (it was as high as 14.63) but remained relatively low.  Interest rates continued to be volatile but stayed in a range, as the U.S. 10-year Treasury yield decreased to 2.13% from last week’s 2.21% (year-end 2014 was 2.17%).  Oil declined, as it broke away from its range of USD 58-USD 62, but moved back into it, as it closed the week at USD 60.23, up from the prior week’s USD 59.89.  The euro closed at 1.0993, down from last week’s 1.1067, which was up from the prior week’s 1.1449; the pound was at 1.5290, down from last week’s 1.5490 (and the prior week’s 1.5726); with the yen (quoted in yens-to-the U.S. dollar, so higher is weaker) at 124.14, compared to last week’s 121.56 (and the prior week’s 119.98). With the expectation for a stronger Q2 in earnings, analyst estimates and company forecasts will increase in number.  Next week will bring a heavy economic schedule, dominated by Friday’s employment report and the Fed’s implication (the next Fed meeting is June 16-17, 2015, with the second day of the meeting having a press conference).

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