Displaying items by tag: stocks

(New York)

Talk about a mega merger. In a deal with huge regulatory implications, T-Mobile announced an acquisition of Sprint for $26.5 bn. The deal would be all stock, and is a bet that the 3rd and 4th largest mobile providers in the US can team up to create a rival to the leading players, AT&T and Verizon. The two companies, which are owned by Deutsche Telekom and SoftGroup, respectively, tried to merge 5 months ago, but the deal collapsed.

FINSUM: This is a big play to capture the next generation of data, or 5G, which is being heralded as a sort of holy grail for mobile providers.

(New York)

Ten-year Treasuries are currently hovering around the 3% yield mark. This has alarmed some investors, but the market seems to be more bullish following yesterday’s moves. Now, with the move higher in yields stalling, Citigroup is calling for a huge rally in the notes, saying they will return to 2.65% yields. According to the bank’s strategists, “Equity markets are reacting negatively to increases in Treasury yields … A further sell off in rates will be held in check by the feedback loop from equity markets”.

FINSUM: A rally is possible, but Citi is saying this will occur because of a sell-off in stocks sparked by fears over inflation and rates. Not as bullish as it sounds.

(Seattle)

Anyone in Amazon should be a little bit nervous today. While the stock’s performance should speak for itself, we think an announcement by the company could be a risk factor. Amazon has announced that it is increasing the price of its Prime service from $99 to $119, or a 20% rise. The company has not raised the price since 2014, but the changes will come into effect next month. Amazon notes that it has greatly expanded the services included in Prime, including bringing the total items covered by Prime to over 100m.

FINSUM: How much might this keep new subscribers from joining? Going over the $100 mark seems like an important mental threshold. The price hike appears to indicate Amazon needs more revenue to invest in another big venture.

(New York)

Yields on the ten-year Treasury note crossed the 3% threshold this week and seem set to stay there for some time, sparking a big change in bond markets. Bloomberg argues that yields at this level change everything for all asset classes. The reason why is that a jump in yields to above 3% starts to cause a shake out amongst highly indebted companies, boosts the Dollar, and in turn, makes emerging markets less attractive.

FINSUM: To be honest, our biggest concern was not even discussed by Bloomberg, which is how higher yields affect the arithmetic for whether to put money in richly valued stocks, or into bonds that are starting to offer acceptable returns. 3%+ yields really could put an end to this bull market.

(New York)

Something very odd is happening in the stock market. Despite the fact that rates look likely to rise and yields are rising sharply, financial stocks are losing ground. This is the opposite of what one would expect, as higher rates boost profit margins for banks and the like. No one is quite sure why, but it seems that instead of boosting hopes for earnings, higher rates have investors worried about a weaker economy to come, which would be negative for banks, which are quite tied to economic performance.

FINSUM: To us this is a quite a bearish view, as it indicates that investors see stagflation coming on (higher rates with zero or negative growth.