Stocks went nowhere amid a light economic calendar and in the wake of more than $US100 billion of proposed mergers were pulled last night.
First, the scoreboard:
- Dow: 16,447.90 +18.4, (+0.1%)
- S&P 500: 1,920.10, -0.2, (-0.02%)
- Nasdaq: 4,356.91, +4.1, (0.1%)
And now, the top stories on Wednesday:
1. The U.S. trade deficit narrowed to $US41.5 billion in June from a revised $US44.7 billion May. Following this report, a number of Wall Street firms raised their outlooks for the second estimate of second quarter GDP. Wells Fargo raised their outlook to 4.25% from 4%, Barclays raised its outlook to 4.3% from 4%. Capital Economics also raised their outlook, to 4.2% from 4%, writing that, “Overall, we expect the trade deficit to widen modestly over the second half of this year. Exports should continue to grow, but the evident strength in domestic demand suggests that the gain in imports will be even more rapid. Nevertheless, any increase in the deficit should be relatively modest, particularly if the U.S. continues to reduce its reliance on imported oil as domestic production increases.”
2. The biggest stock story of the day was 21st Century Fox withdrawing its offer for Time Warner, and Sprint no longer looking to buy T-Mobile. Fox pulled its previously announced $US85 per share offer for Time Warner, saying that Time Warner management, “refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders.” Following the announcement, Fox shares gained 3% and Time Warner shares fell more than 12%. Sprint shares fell nearly 19%, as the company also replaced its CEO, Dan Hesse, while T-Mobile shares lost 8% after the news.
3. Walgreen announced it would acquire the remaining stake in European pharmacy chain Alliance Boots it didn’t already own for about $US5.3 billion. The company also said it wouldn’t move its tax base from Illinois, spurning the recently popular plan by companies to execute a so-called “tax inversion” in which they adopt the tax base of an acquired foreign company. Walgreen’s announcement comes just a day after the Obama administration signaled it was reviewing options in attempts to prevent tax inversions, which have been on the rise this year. Following the news, shares of Walgreen were down more than 14%.
4. Bank of America received approval from the Federal Reserve for its 2014 capital plan, and as a result announced it would raise its dividend 400% to $US0.05 per share from $US0.01 per share. Bank of America shares gained more than 1% following the news.
5. Jeff Gundlach of DoubleLine Capital was profiled in The Financial Times, and said he sees the Federal Reserve resurrecting its quantitative easing program in 2020. Gundlach told the FT’s Stephen Foley that 2020 is an “interesting timeframe” for the bond market, telling Foley that, “It seems like one of the consequences of this zero interest rate policy is you’ve pushed out the problem of refinancing, of rolling over, but you’ve really compounded the magnitude of it and it seems to be focused around the 2020s.”
6. Reports from Interfax said Russian president Vladimir Putin has banned food imports, as well as some farm produce and raw materials, from countries that have issued sanctions against Russia.
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