The S&P 500’s biggest drop since January on Friday punctuated a week where stocks fell against a backdrop of trade concerns, a Fed that stood pat on rates and a yield curve that inverted in what many see as a reliable recession predictor. The VIX spiked 24% for good measure, indicating growing fear. “The Fed has set the tone for the markets, and if you trust their ability to ‘see around corners,’ then you will continue to maintain a risk-off position,” Raymond James’ Kevin Giddis told clients. For the week, the Dow fell 1.3% to 25,502, the S&P 500 dropped 0.8% to 2,801, and the Nasdaq slipped 0.6% to 7,643.
Reports emerged that a summit between President Trump and China’s Xi Jinping could be pushed back to June, and the news weighed on sentiment during the day. That meeting to sign a trade deal had been planned for March before being pushed back to April, and now faces further delay as it’s not likely that the two can reach a final deal by then.
Crude prices hit 2019 highs after OPEC agreed to deeper production cuts than previously committed. The members had agreed to cut 800K bbl/day through June 2019, with Russian and other allied producers cutting another 400K bbl/day. Even so, continuing gains in U.S. shale plays are likely to keep a lid on prices.
The Fed Open Market Committee stood pat on interest rates, and more notably produced some expectations widely seen as quite dovish. The “dot plot” that makes up the members’ projections showed 2019 year-end expectations for the fed funds rate at 2.375%, lower than a previous expectation for 2.875%. Similarly, year-end 2020 rates are now seen at 2.625% vs. 3.125% previously, and end-of-2021 is forecast at 2.62% vs. 3.125% before.
The European Union granted a reprieve to Britain on its exit from the bloc, but it’s not a particularly long one, and well short of the months that UK Prime Minister Theresa May asked for. EC President Donald Tusk said the EU agreed to an Article 50 extension until May 22 if Parliament can reach an exit deal next week. But failing that, Britain has only until April 12 to Brexit.
Bond yields tumbled amid a buying panic that followed news from Germany that its 10-year Bund yield went negative after German PMI fell to its weakest level in seven years. The 10-year Treasury yield headed to two-year lows early, a precursor to an inverted yield curve (three-month vs. 10-year, for the first time since before the Great Recession).
Looking to bulk up in a rapidly changing industry, Fidelity National Information Services (NYSE:FIS) agreed to pay about $35B in cash and stock to buy payment processor Worldpay (NYSE:WP). Including debt, the deal values Worldpay at about $43B. The deal price came out to about a 14% premium for Worldpay from Friday’s close.
In an ambitious effort to do without videogame consoles, Google (GOOG, GOOGL) unveiled a game-streaming platform called Stadia that it hopes will unify the experience of playing, watching and building games. The company demonstrated a system where games are streamed at very high resolution from Google’s data centers, and can be moved from platform to platform (desktops, laptops, TV, tablets and phones). There’s no word of pricing yet, but it’s set to launch this year.
Closing a long-in-the-making deal, Disney (NYSE:DIS) completed its $71.3B takeover of the media arm of Twenty-First Century Fox (FOX, FOXA), a move launching sweeping changes for both companies. Disney now controls Fox’s film and TV studio operations along with FX Networks and National Geographic, Star India, and 60% of Hulu. Meanwhile the new Fox Corp. is a leaner operation focused on news and live sports. As soon as the ink was dry, meetings started that could lead to a reported 3,000 job cuts or more as Disney cuts redundancies.
With the quarter’s end inching closer, Tesla (NASDAQ:TSLA) CEO Elon Musk sent a companywide memo setting vehicle deliveries as the “primary priority” for all employees. The memo, titled “Vehicle Delivery Help Needed!” followed closely on an email from VP Sanjay Shah last week looking for volunteers for delivery shifts. It’s the “biggest wave in Tesla’s history,” Musk wrote, and “As challenges go, this is a good one to have, as we’ve built the cars and people have bought the cars, so we just need to get the cars to their new owners!”
Swiss healthcare giant Novartis (NYSE:NVS) said it planned to spin off its eye care business, Alcon, to its shareholders on April 9. Those shareholders will receive one Alcon share for every five Novartis shares or ADRs they hold as fo the end of April 8. Alcon has secured $3.5B debt financing and will trade on the Swiss Exchange and the NYSE under the ticker ALC.
Dow -1.3% to 25,502. S&P 500 -0.8% to 2,801. Nasdaq -0.6% to 7,643. Russell 2000 -3.1% to 1,506. CBOE Volatility Index +28.% to 16.48.
London -0.3% to 7,208. France -2.5% to 5,270. Germany -2.8% to 11,364. Japan +0.8% to 21,627. China +2.7% to 3,104. Hong Kong +0.4% to 29,113. India +0.4% to 38,165.
Commodities and Bonds
Crude Oil WTI +0.8% to $58.97/bbl. Gold +0.8% to $1,313.4/oz. Natural Gas -1.5% to 2.754. Ten-Year Treasury Yield +1.2% to 124.12.
Forex and Cryptos
EUR/USD -0.09%. USD/JPY -1.39%. GBP/USD -0.56%. Bitcoin -0.4%. Litecoin -0.6%. Ethereum -3.2%. Ripple -2.1%. Bitcoin-Cash flat.
Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.