Summary:
- Trump once again targets Federal Reserve via Twitter
- US500 launches session higher but Friday’s candlestick hints at indecisiveness
- Bristol-Myers Squibb (BMY.US) sinks after announcing divestiture of Otezla drug
In spite of broad declines being present on the Old Continent on Monday, the US stock market opened higher at the start of the new week. S&P 500 (US500) extended YTD gains to 17.7% on Friday and is on the way for the best first half since 1997, when the index added 19.4% in the first six months of the year. Meanwhile, Donald Trump once again criticized actions of the Federal Reserve via Twitter.
S&P 500 (US500) reached new intraday all-time high on Friday but failed to stay there until the session close. In turn, a spinning top candlestick pattern has been painted. Such a pattern hints at indecisiveness of the market participants but given that it was painted at the ATH it may hint at potential reversal. In this scenario the support zone ranging above 2865 pts should be the first target for sellers. Source: xStation5
Donald Trump, the President of the United States, started the week with a new series of tweets. However, while the tweets are new, topics covered are all the same - Iran and the Federal Reserve. When it comes to Iran, Trump said that the US army does not need to be present in the Strait of Hormuz as it barely needs oil from the Middle East due to booming domestic production. When it comes to tweets on the Federal Reserve, the US President continued with its outspoken criticism. Trump called the US central bank a “stubborn child” and reiterated that if it was not for its rate cuts, the Dow Jones would be “thousands of points higher” and GDP would grow by 4 or 5%. The market reaction was minor with EURUSD moving off the daily highs. However, it shows that Trump is nowhere near stopping his attacks on the Federal Reserve even when the US central bank hinted that easing may be coming. Continued “aggression” towards Fed risks undermining confidence in the US central bank and with that, in the economy as a whole.
S&P 500 movers after the first 10 minutes of Monday’s session. Source: Bloomberg
Company News
As it is usually the case for Mondays, investors were offered some M&A news. Announcement of Eldorado Resorts buying Caesars Entertainment Corp (CZR.US) for $8.58 billion ($12.75 per share) is the most widely discussed one. The merger would create the biggest gaming operator in the United States with abundant portfolio of casinos. The price offered represents 28% premium to Friday’s closing price.
Bristol-Myers Squibb (BMY.US) is one of the worst performing S&P 500 stocks at the beginning of Monday’s trading. The company announced that it has reached an agreement with the US antitrust regulator and is now closer to finalizing the deal with Celgene (CELG.US). Under the terms of the agreement, Bristol will divest one of Celgene's best selling drugs, Otezla. The drug generated a revenue of $1.86 billion last year.
While 28% premium to Friday’s closing price looks attractive, Caesars Entertainment Corp (CZR.US) opened significantly below it on Monday. This shows that the market is not too sure that the merger will go through. The stock began to move lower following session open and in case the move is extended, support zone ranging around $10.50 handle may be the first target for the bears. Source: xStation5
