Stocks stumbled to early losses Monday as markets factored in new trade war and tariff issues, a jump in oil prices and some big merger news.
Medical names thrashed out early leads, with Alexion Pharmaceuticals (ALXN) and Abbott Labs (ABT) both surging after announcing positive results in clinical trials. Energy names including Chevron (CVX), Exxon Mobil (XOM), Marathon Oil (MRO) and Halliburton (HAL) rallied on rising oil prices. Marijuana play Tilray (TLRY) posted one of the morning’s heaviest declines.
Trade War Worsens; Fed Rate Vote, Nike Earnings On Deck
Investors open the week with a close eye on U.S.-China trade relations. The U.S. launched its latest salvo of tariffs against $200 billion in China-made imports early Monday. Beijing reportedly responded with tariffs on $60 billion in U.S. made goods. President Trump previously warned that if China retaliated, the U.S. was prepared to launch duties on another $267 billion in Chinese imports.
China on Friday canceled a new round of trade talks planned this week in Washington, and then backed out of military discussions scheduled to begin in Beijing on Tuesday.
On Tuesday, the Federal Reserve swings into a two-day meeting that markets widely expect to produce the Fed’s third interest rate hike this year. Nike (NKE) reports earnings after Tuesday’s close. A third revision of second-quarter GDP growth is due out Thursday, during a heavy week of economic data releases.
Europe’s markets narrowed their early losses in afternoon trade, as they took a breather after a five-week advance. Markets in Shanghai and Tokyo were closed on holiday. Hong Kong’s Hang Seng index closed down 1.6% Monday. The Hong Kong Stock Exchange will be closed on Tuesday for a holiday.
Mergers: Barrick/Randgold; Comcast/Sky; Sirius/Pandora
Some large-cap merger action stirred markets early. Barrick Gold (ABX) climbed more than 6%, and Randgold Resources (GOLD) surged 8% after the mining leaders reported they would merge in an all-stock deal valued at $6 billion. Shares of both companies have been declining since July 2016.
Comcast lost more than 5% as it prevailed in the long-running bidding war for U.K. broadcast leader Sky. Comcast won out in a weekend auction arranged by U.K. regulators. Its $38.8 billion bid for Sky was about 10% above that of competitor Fox (whose entertainment assets are being acquired by Walt Disney). Sky shares rallied more than 8% on the London Stock Exchange Monday. Disney shares jumped 2% at the open. The stock is trading below 118 buy point in a seven-week flat base.
Satellite radio leader Sirius XM dived 3%, streaming music service Pandora Media (P) surged 8%, after Sirius said it would buy Pandora in an all-stock deal valued at $3.5 billion. The deal allows Pandora to shop offers from other bidders. Both stocks trade below 10.
Michael Kors (KORS) skidded 6% lower after reports said the Hong Kong-based fashion house planned to take over Italy’s Gianni Versace. Reuters and Bloomberg said the deal was valued at $2 billion or above. Monday’s loss sent Kors shares below their 10-week moving average in heavy trade, and back below a 70.10 buy point in a four-month flat base.
Oil Prices Climb On OPEC Decision
Oil prices jumped after the Organization of Petroleum Exporting Countries and production partners led by Russia wrapped their weekend meeting in Algiers, Algeria, without a decision to increase output quotas. West Texas Intermediate gained 1.5% to above $72 per barrel, up 12% from a mid-August low, but still well below the 43-month high marked July 3. Brent crude futures gained 2.3% to above $80.
Alexion, Edwards Near Buy Points: Tilray Unravels
Alexion Pharmaceuticals rumbled 5.3% higher in premarket trade, leading the S&P 500 and the Nasdaq 100. The company reported its Soliris neuromuscular disease treatment outperformed a placebo in a phase 3 trial. Alexion ended Friday’s session about 14% below a 138.87 buy point in a nine week cup base.
Abbott Labs leapt 3%, after its MitraClip heart valve device met expectations in clinical trials. Abbott shares are extended, taking out new highs, after clearing a six-month saucer base in July. The news also appeared to lift heart device peer Edwards Lifesciences (EW), which jumped 5.9% in early action. Edwards closed Friday 2% below a 156.97 buy point in an 11-week cup base.
Exxon ran up 2% higher, enough to exit the buy range after clearing an 84.50 cup-base buy point on Tuesday.
Marijuana distributor Tilray dived 14%, while cohorts Cronos Group (CRON) slipped 1% and Canopy Growth (CGC) opened a fraction higher. Tilray has so far soared 90% in September, as a growing numbers of partner companies buy into the young marijuana industry, and ahead of Canada’s official legalization of recreational pot use scheduled for Oct. 17. But investors including TheStreet’s Jim Cramer have warned the stocks have rapidly outpaced the industry’s fundamental promise.
Tilray finished Friday 59% below Wednesday’s high after a share reversal, but still 624% above its July IPO price.
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