DOW + 59 = 18,636
SPX + 6 = 2190
NAS + 29 = 5262
10 Y + .04 = 1.56%
OIL + 1.19 = 45.68
GOLD + 2.90 = 1339.60
The Dow Industrial Average, the S&P 500 index, and the Nasdaq Composite index all set new record highs. If you’ve been trading markets for any time, you know that when there is price movement out of the normal range and out of the established valuations – it can get scary.
We had just a couple of economic reports to start the day. Investors appeared to shrug off weaker-than-expected reading on manufacturing conditions in the New York region. The National Association of Home Builders confidence index rose 2 points to 60.
Energy producing stocks were higher as crude oil rallied after Russian Energy Minister Novak said that Russia is open to cooperation with OPEC to help stabilize the oil market. Oil prices recently fell 20% from the June highs, largely because there is a glut of oil.
Russia and Saudi Arabia are probably the two most important oil producers on the planet, with Saudi Arabia the de facto leader of the OPEC cartel of oil-producing nations. Russia, alongside the US, is one of the two biggest non-OPEC producers. What the two nations do regarding oil policy has profound effects on the markets. For example, at April’s massively anticipated OPEC meeting about a freeze in production, Saudi Arabia refused to cooperate unless Iran joined in any production freeze; the meeting promptly ended and the proposal fell flat on its face.
Rosneft, Russia’s state-owned oil company, reported a massive fall in profits for the second quarter of 2016, with net income down from 134 billion rubles over the same period in 2015 to 89 billion rubles. If Russia can strike an agreement with Saudi Arabia that can help boost oil prices, or at least keep them stable, that will likely allow Rosneft return to stronger profitability. Rosneft’s results come just three days after a report from the highly respected International Energy Agency argued that the supply-and-demand imbalance plaguing oil was only going to get worse in 2017, something that would further depress prices.
M&A activity is kicking off the headlines this week with an array of deals. The technology sector is still leading the global M&A market this year, but the real estate segment is not far behind. The Wall Street Journal reports Honeywell is nearing a deal to acquire privately-held, JDA Software Group for about $3 billion, including debt.
Scottsdale, Arizona -based JDA, with more than 4,300 employees, provides integrated retail and supply chain planning and execution solutions. It sells software that helps retailers, including Walgreens and Advance Auto Parts, optimize their supply chains and merchandising. The company also provides warehouse management software to manufacturers and consumer products companies.
Real-estate investment trust Mid-America Apartment will buy Post Properties for about $4 billion in an all stock deal, bringing together two major apartment owners who have benefited from a boom in rental demand. Memphis-headquartered Mid-America currently owns or has ownership interest in more than 80,000 apartment units in 15 states in the Southeast and Southwest. Atlanta-based Post Properties has more than 24,000 apartment units in 61 communities in Georgia, Texas, Florida, North Carolina, Maryland, Virginia and Washington.
Looking to become a major player in the smart meter market, Xylem agreed to acquire Sensus USA for around $1.7 billion, including debt, according to Reuters. The acquisition comes at a time when regulatory requirements and a drive for savings are pushing both companies and consumers to tightly control their water and energy consumption.
KKR is expected to bid for television distributor Entertainment One after the owner of the preschool cartoon character “Peppa Pig” rejected an offer from ITV Plc, Bloomberg reports. Last week, eOne rebuffed a $1.3 billion takeover offer from the British broadcaster, saying it undervalued the production and distribution company.
American International Group is nearing a deal to sell its mortgage-guaranty unit to Arch Capital Group for about $3.4 billion. The Wall Street Journal reported the companies could strike a deal as soon as early this week, although it added that the talks could still fall apart.
San Francisco Federal Reserve President John Williams says central bankers and governments must come up with new policies to buffer their economies against persistently low interest rates that threaten to make future recessions deeper and more difficult to avoid.
Williams said setting higher inflation targets, tying monetary policy directly to economic output, instituting government spending programs that automatically kick in during economic downturns, and boosting investment in education and research are all policies that should be considered.
Williams also called for changes to fiscal policy, perhaps tying tax rates or government spending to unemployment rates. Doing so, he said, would allow “predictable, systematic adjustments of fiscal policy that support the economy during recessions and recoveries.”
Google’s high-speed-internet business is slowing down. Alphabet’s Google Fiber unit is rethinking how to deliver internet connections in about a dozen metro areas, including Los Angeles, Chicago and Dallas, after its initial rollouts proved more time-consuming and expensive than anticipated. In San Jose, Calif., and Portland, Ore., Alphabet has suspended projects while investigating alternate technologies.
Google Fiber is now considering wireless technology to connect homes rather than underground fiber-optic cables. Elsewhere, Google is leasing existing fiber or asking cities or power companies to build the networks. The strategy shift comes after Google Fiber reached just six metro areas in four years, illustrating the difficulty and expense of digging up streets and laying thousands of miles of cables.
About 40 companies have signed on to the so-called Privacy Shield agreement, the new data-protection pact that allows American firms to transfer information on European citizens to servers in the U.S. Among them: Microsoft, Workday and Salesforce.com. According to the Commerce Department, “there are nearly 200 applications currently involved in our rigorous review process” and the list will be updated on a rolling basis.
Volkswagen has won German regulatory approval for technical fixes on another 460,000 diesel cars fitted with software that cheats emissions tests, raising the number of vehicles cleared for repair to over 5 million. Approval by Germany’s motor vehicle authority KBA is valid for countries throughout Europe where 8.5 million diesel cars are affected by VW’s scandal. About 11 million autos are implicated globally.
Meanwhile, German carmaker Audi is rolling out technology that will allow its vehicles in the United States to communicate with traffic signals. It’s called vehicle-to-infrastructure technology, or V-to-I. The technology allows traffic signals and other infrastructure to exchange safety and other operational data wirelessly to vehicles over the cloud.
For example, the system allows the vehicle to display a countdown before a red light turns to green. The countdown will also appear on the dashboard if the vehicle determines it will not be able to make an approaching light before it turns red, to allow the driver to begin to brake. Audi plans to roll out the capability in five to seven U.S. cities this year.
Nissan Motor has come up with a new type of gasoline engine it says may make some of today’s advanced diesel engines obsolete. The new engine uses variable compression technology, which Nissan engineers say allows it at any given moment to choose an optimal compression ratio for combustion – a key factor in the trade-off between power and efficiency in all gasoline-fueled engines. The technology comes at a time when diesel engine technology has been tarnished by Volkswagen’s emissions cheating scandal.
The new Variable Compression-Turbo (VC-T) powertrain, expected to be officially unveiled at next month’s Paris motor show, will initially be showcased in an Infiniti car to be unveiled next year. The turbo-charged, 2-liter, four-cylinder VC-T engine averages 27 percent better fuel economy than the 3.5-liter V6 engine it replaces, with comparable power and torque. Nissan says the new engine matches the diesel engine in torque – the amount of thrust that helps determine the car’s acceleration. The engine is also cheaper than today’s advanced turbo-charged diesel engines.