Dow Jones futures rose solidly Monday morning, along with stock futures for the S&P 500 index and Nasdaq 100. A trio of big merger deals are making headlines, including a long-mooted combination of Sprint (S) and T-Mobile (TMUS). Meanwhile, Apple (AAPL), which reports earnings Tuesday, is still the world’s most valuable company but has been decidedly mediocre for a full 12 months.
The Dow Jones industrial average, S&P 500 and Nasdaq composite fell last week, though they pared losses after finding support near their 200-day moving averages. But they hit resistance around their 50-day lines Friday, as Amazon, Microsoft (MSFT), Intel (INTC) pulled back from post-earnings highs and Apple retreated.
Dow Jones Futures Today
Dow Jones futures advanced 0.5% vs. fair value. S&P 500 futures rose 0.45% and Nasdaq futures climbed 0.75%. The 10-year Treasury yield inched higher to 2.966% after hitting a four-year high of 3.02% last week. The 2-year yield nudged up to 2.492%, the Treasury yield curve continues to tighten.
Remember that Dow Jones futures and other off-hours trading often doesn’t translate into how the market or individual stock will open or close in the following session. Nasdaq futures skyrocketed early Friday, but tech gains quickly withered after the open.
Sprint, T-Mobile Merger
After years of on-and-off talks, Sprint and T-Mobile agreed on a $26.5 billion combination. The obvious winners are tech writers and editors, who will no longer have to write headlines like “Sprint, T-Mobile Said To Resume Talks” followed by “Sprint, T-Mobile Merger Talks On Hold.”
As for investors, the T-Mobile merger with Sprint values each Sprint share at 0.10256 of a T-Mobile share. That values Sprint at 6.62 a share based on T-Mobile’s Friday close of 64.52. Sprint closed Friday at 6.50.
Sprint tumbled 7.5% to 6.01 before the open on the stock market today. That’s about where it was late Friday, as buzz that a deal was imminent. T-Mobile stock fell a fraction.
Deutsche Telekom, T-Mobile’s parent, will get a 42% stake while Sprint majority owner Softbank will get 27%. The new company will use the T-Mobile name. T-Mobile Chief Executive John Legere will be CEO while the board will include SoftBank CEO Masayoshi Son.
Antitrust regulators are sure to take a close look at the deal, which would reduce the number of major U.S. wireless operators to three.
Walmart Sells U.K. Grocery Chain Asda
Walmart will sell its U.K. grocery chain to Sainsbury’s for 7.3 billion pounds ($10.1 billion), retrenching from a fiercely competitive market as it picks battles with Amazon (AMZN) at home and in many other countries worldwide. Walmart will own a 42% stake in the combined firm. U.K. regulators are likely to take a very close look at this deal.
Walmart, a Dow Jones component, edged higher in the premarket.
Marathon Petroleum To Buy Andeavor
Marathon Petroleum (MPC) will buy Andeavor (ANDV) for over $20 billion, the Wall Street Journal reported Sunday. The deal, expected to be announced Monday, would value Andeavor at about $150 a share, roughly a 23% premium. It would create the largest U.S. refinery by capacity, passing Valero Energy (VLO).
Apple Is No Leader
Even as the Dow Jones, S&P 500 and Nasdaq eked out slim gains Friday, Apple fell 1.2%, undercutting the low of its recent consolidation. The stock is beginning to lose sight of its 200-day line.
Apple’s relative strength line, which tracks the stock’s performance vs. the S&P 500 index, also sank to its worst levels since early February. The RS line offers a quick way of showing which stocks are the real leaders and laggards. Apple’s RS line is about where it was exactly 12 months ago, Since early November, it has been trending lower.
The Dow Jones tech giant’s earnings are expected to rise 28% to $2.69 a share as revenue grows 15.5% to $61.1 billion. That would be faster EPS growth and the 6th straight quarter of accelerating sales gains. But that’s largely a reflection of the new iPhone product cycle. The growing fear, which has weighed on the stock, is that iPhone X demand is rapidly cooling. What will drive Apple’s growth going forward.
Apple’s guidance will be key. The iPhone giant also is expected to hike its dividend and increase share buybacks.
Apple shares rose slightly in premarket trading.
Amazon Eyes Apple Market Cap Crown
Apple has a market cap of nearly $824 billion, still the most valuable public company. But Amazon.com (AMZN) has sprinted over the past year and is now worth $761 billion.
Amazon recently surpassed fellow FANG stock Google-parent Alphabet (GOOGL), which briefly grabbed that crown two years ago. Alphabet has a $717 billion market cap.
Amazon has shot up 71% over the past 12 months vs. 13% for Apple and 12% for the S&P 500 index. Alphabet has risen 16%. Since the end of last year, Amazon has climbed 34% while Alphabet and Apple are modestly lower.
Amazon broke out Friday following its blowout, accelerating earnings and revenue growth. But the stock fell back below the 1,617.64 cup-base entry, closing up 3.6% at 1,572.62. Investors may want to wait for the online sales giant to move above Friday’s intraday high of 1,638.10.
Amazon rose 0.8% in premarket trading.
Remember that Amazon is in a very late-stage base, after several big moves in recent years. Late-stage breakouts are less likely to be big winners and more likely to fail outright.
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