While you were sleeping: Wall St, Treasuries slide

Tuesday 30th January 2018

Wall Street moved lower, as did US Treasuries, as investors prepared for a week that includes a Federal Reserve meeting, US President Donald Trump’s first State of the Union address and a slew of corporate results including from Facebook, Amazon and Apple.

In 1.18pm trading in New York, the Dow Jones Industrial Average slid 0.2 percent, while the Nasdaq Composite Index inched 0.07 percent lower. In 1.03pm trading, the Standard & Poor’s 500 Index fell 0.3 percent.

“Today’s movement is just a bit of profit taking after last week and ahead of a very busy week,” Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas, told Reuters.

Investors also pointed to Nafta negotiations.

"In Nafta, for example, there’s uncertainty about what happens with trade," Kevin Caron, a senior portfolio manager at Washington Crossing Advisors, told Bloomberg. "And the reason trade is important is because global capital flows are inexorably linked with trade flows. So if something were to happen unexpectedly with trade, it would also have implications for the flow of capital around the world.”

US Treasuries dropped, sending the yield on the 10-year note four basis points higher to 2.70 percent, the highest in almost four years, according to Bloomberg.

The Dow moved lower as declines in shares of Caterpillar and those of Apple, recently down 2.6 percent and 1.6 percent respectively, outweighed gains in shares of Goldman Sachs and those of General Electric, recently up 1.6 percent and 1.2 percent respectively.

Bucking the general trend, shares of Dr Pepper Snapple Group soared, up 24 percent as of 1.02pm in New York, after JAB Holding's Keurig Green Mountain agreed to take control of the company in a deal that brings together soft-drink brands such as 7UP, A&W, Mott’s and Sunkist with Keurig’s single-serve coffee system.

Under the terms of the agreement, Dr Pepper Snapple shareholders will receive US$103.75 per share in a special cash dividend and retain 13 percent of the combined company, the companies said in a joint statement.

The newly-formed entity, named KDP, will have pro forma combined 2017 annual revenues of about US$11 billion, the companies said.

Including an US$18.7 billion cash payout to Dr Pepper Snapple shareholders, Thomson Reuters calculations put the value of the deal in excess of US$21 billion.

JAB and its partners will together make an equity investment of US$9 billion as part of the financing of the transaction, the companies said.

"The combination of Dr Pepper Snapple and Keurig will create a new scale beverage company which addresses today’s consumer needs, with a powerful platform of consumer brands and an unparalleled distribution capability to reach virtually every consumer, everywhere," Bob Gamgort, Chief Executive Officer of Keurig, said in the statement.

Also eyeing deals is Tyson Foods. The largest US meatpacker is looking to acquire companies that would boost its food brands and geographic reach, Chief Executive Officer Tom Hayes said in an interview at the World Economic Forum's annual meeting in Davos, Switzerland, last week, Bloomberg reported.

Tyson also has an eye on expanding its international footprint by adding operations and increasing US exports. Hayes said the recent US tax reform are "very positive" for Tyson and may save the company more than US$300 million, some of which it will use to boost capital expenditures, Bloomberg reported.

"If we can find those that are bolt-on to our current system that gives us more capacity in a growing category, that's great," Hayes told Bloomberg. However, valuations have been "very high," forcing Tyson to take a cautious approach, he said.

Shares of Tyson traded 0.4 weaker as of 1.11pm in New York on Monday.

In Europe, the Stoxx 600 Index declined 0.2 percent. France’s CAC40 Index fell 0.1 percent, while Germany’s DAX Index also retreated 0.1 percent.

The UK’s FTSE 100 index eked out a 0.1 percent gain, bolstered by advances in shares of Glencore and Rio Tinto.

(BusinessDesk)

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