Last week saw a number of major corporate deals including Royal Dutch Shell’s plans to buy liquefied natural gas giant BG Group for a whopping $70 billion, FedEx vying for Europe’s TNT Express in a $4.8 billion bid and General Electric – finally – shedding about $500 billion in financial assets in an effort to return to its industrial roots. Also, Mylan Labs wants to increase its exposure in generics with the purchase of private label, over-the-counter drug company Perrigo for $29 billion. I believe that merger and acquisitions will pick up speed as the year progresses, especially in energy, healthcare and industrials.
Looking back, a late reaction to the last week’s jobless claims data took the major averages higher by about 1.7% to near-record levels. The NASDAQ was up by 2.5% and the transports were able to recover from a recent sell-off by nearly 2% on the week. Other than telecom stocks, all sectors were in the green led by energy, ahead by 3%, supported by a $2.50/bbl. uptick in oil prices, its fourth straight weekly gain. Healthcare and industrials were also favored by investors. While the Fed guessing game continues and the reactionary jolts to the market whenever a central bank member voices a view, all eyes will be on earnings this week. Blog candidates JPMorgan Chase, Intel, Johnson & Johnson and CSX Corp. will all report first quarter results on Tuesday. Later in the week, conservative choice Schlumberger will do well to provide a $0.92 per share figure for the first period vs. $1.21 a year-ago, as oil and gas exploration and production paused with lower prices. In general, expectations for the quarter are low, so unless there are major surprises in earnings or, more importantly, guidance for the remainder of 2015, the markets should stay the course. In all, monetary policy remains friendly and even if earnings season is a bust, long-term investors still have a largely supportive backdrop of slow, steady economic growth and accompanying reasonable equity returns.
Here is the answer to last week’s trivia question: On March 19, 2015 Apple replaced venerable AT&T as a member of the Dow Jones Industrial Average. The prior change occurred on September 20, 2013 when Goldman Sachs, Nike and Visa replaced Alcoa, Bank of America and what other company? Answer: Hewlett-Packard.
Today’s Trivia Question: What was the largest single day percentage gain for the Dow Jones Industrial Average? 18.50%, 15.34% or 12.91%.