October 24, 2016

Stocks opened higher this morning (Dow +79 pts; SPX +.3%). Tech is by far the best performing sector, up .9% but gains are pretty broad-based across retailers, transports, banks, media, chemicals, and even some biotechs. The VIX Index is down to 13 and VIX November futures are trading down to 15. So volatility expectations are coming down a bit. WTI crude oil is down modestly, to $49.75/barrel. That’s dragging on the energy sector this morning. Baker Hughes says US oil exploration companies added 11 oil rigs in the last week; the rig count has been climbing for the last several months. Bonds are selling off a bit as yields continue to march higher. The 5-year Treasury is currently at 1.27% and the 10-year is at 1.76%. 

The SPX has been in a tight trading range of 2120 to 2190 for the last three months. And right now we are treading water in the middle of that range. So Wall Street is wondering whether the market is building momentum for another run at the all-time high, or whether momentum is fading. Zachs Investment Research says it is “waiting for something to happen. Perhaps a fresh catalyst...or just the removal of a current obstacle…” such as the election. 

Honeywell (HON) beat lowered earnings expectations for the third quarter. Management says the business jet market continues to be weak and predicts the global economy will continue in “slow-growth” mode. The company’s earnings will be up double-digits next year, in line with previous guidance.

Tilman Fertitta, CEO of Landry’s Steakhouse, addressed falling restaurant sales in a CNBC interview on Friday. “People are staying home and binge-watching” rather than going to restaurants. He also said grocery prices are falling so at-home meals are more cost effective. 

As expected, AT&T (T) announced a deal to acquire Time Warner Inc. (TWX) for about $107/share split evenly between stock and cash. The carrier will end up increasing its debt load by about $40bil to a total of $183bil, which sounds huge and is significantly larger than debt loads for any of its competitors. So Moody’s put AT&T on credit watch for a possible downgrade. The stock is down since rumors of the deal hit the market last week. This is clearly not something investors want. 

TD Ameritrade (AMTD) and Toronto Dominion Bank (TD) together announced a deal to acquire Scottrade for about $4bil. TD owns over 40% of discount broker TD Ameritrade, and likely participated in the deal primarily to help Ameritrade make the acquisition. Bloomberg suggests TD Ameritrade went after Scottrade in order to expand its branch network. “[TD Ameritrade] Officials believe adding Scottrade’s clients will boost revenue with more trades and more opportunities to offer investment advice.” 

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