U.S. stocks are joining a global rally that saw Europe post widespread gains, courtesy of optimism regarding tax reform which is expected to make its way through Congress this week. An unexpected jump to a more than 18-year high in homebuilder sentiment and a flurry of global M&A deals are also providing support. Treasury yields are mixed and the U.S. dollar is losing ground as a busy week shoves off. Crude oil prices are lower and gold is higher.
At 12:54 p.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are rising 0.7%, while the Nasdaq Composite is gaining 0.9%. WTI crude oil is decreasing $0.36 at $56.97 per barrel and Brent crude oil is declining $0.13 at $63.10 per barrel, while wholesale gasoline is up $0.01 at $1.67 per gallon. The Bloomberg gold spot price is trading $6.65 higher to $1,263.09 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is dropping 0.4% to 93.58.
Hershey Co. (HSY $115) announced an agreement to acquire Amplify Snack Brands Inc. (BETR $12), for $12.00 per share in cash, or about $1.6 billion including debt. HSY is higher, while BETR is surging over 70%.
Penn National Gaming Inc. (PENN $28) announced an agreement to acquire Pinnacle Entertainment Inc. (PNK $31) for $32.47 per share in cash and stock, valued at about $2.8 billion. Under the terms of the deal, PNK stockholders will receive $20.00 in cash and 0.42 shares of PENN for each share owned. In connection with the deal, Boyd Gaming Corp. (
BYD $34) agreed to acquire four assets of PNK for $575 million in cash. PENN is seeing some pressure, while PNK and BYD are higher.
CSX Corp. (CSX $53) announced that Chief Executive Officer (CEO) Hunter Harrison passed away over the weekend after taking a medical leave due to unexpected severe complications from a recent illness. The board has named Chief Operating Officer James Foote as acting CEO.
Homebuilder sentiment unexpectedly jumps to 18-year high, kicking off busy week
The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month unexpectedly jumped to over an 18-year high of 74, versus the Bloomberg forecast calling for a 70 reading and November's downwardly revised 69 level. The index sits decisively above the 50 mark, the point of separation for good versus poor conditions. The NAHB said housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community.
The NAHB added that with low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year. Tomorrow, we will get a look at November housing construction activity in the form of housing starts and building permits (economic calendar). Starts are projected to decline 3.2% month-over-month (m/m) to an annual rate of 1,249,000 units and permits are forecasted to decrease 3.1% to an annual rate of 1,275,000 units.
New home construction rebounded in October to the fastest pace in a year, suggesting a potential boost for Q4 GDP growth as construction spending subtracted from GDP in the second and third quarters, per Bloomberg. Schwab's Chief Investment Strategist Liz Ann Sonders notes in our 2018 Market Outlook: U.S. Stocks and Economy, animal spirits are keeping business optimism alive and broad U.S. growth should remain healthy in 2018, however late cycle tendencies should be on investors’ radar screen.
Treasuries are mixed, with the yield on the 2-year note dipping 1 basis point (bp) to 1.83%, while the yield on the 10-year note is rising 3 bps to 2.38% and the 30-year bond rate is gaining 4 bps to 2.73%. Schwab's Chief Fixed Income Strategist Kathy Jones provides a look at the bond markets heading into the New Year, in her video, What Could Fixed Income Investors Expect in 2018?.
Treasury yields are diverging and the U.S. dollar is dropping, though the stock markets are rallying, as the House and Senate are expected to vote on a final tax bill this week. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers a look at the tax bill and the votes in his latest commentary, Sweeping Tax Bill Poised to Become Law. Also, Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, delivers his article, Tax Reform: Frequently Asked Questions and as you conduct your year-end tax planning, check out our, Tax Reform: 11 Questions to Ask Your Advisor.
Europe broadly higher, bolstered by U.S. tax reform optimism
European equity markets finished broadly higher, with the global markets rallying on hopes that U.S. tax reform will face final votes this week, while a flood of M&A deals buoyed global sentiment. Thales SA (THLEF $101) agreed to acquire chipmaker Thales SA (THLEF $101) agreed to acquire chipmaker Gemalto NV (GTOMY $29) for about $5.6 billion. Stocks gained ground despite gains in the euro and British pound versus the U.S. dollar, while bond yields in the region traded mixed. In economic news, eurozone consumer price inflation rose in line with expectations for November. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his, 2018 Global Market Outlook: Three Actions to Take for the Year Ahead, in which he says 2018 global stock market gains could potentially be in the double-digits and international stocks may outperform U.S. stocks. Jeff urges investors to rebalance as 2018 gains in stocks may result in a higher risk asset allocation ahead of a potential recession and bear market.
The U.K. FTSE 100 Index and Switzerland's Swiss Market Index were up 0.6%, Germany's DAX Index rose 1.6%, France's CAC-40 Index and Italy's FTSE MIB Index gained 1.3%, and Spain's IBEX 35 Index advanced 0.9%.
Schwab Center for Financial Research - Market Analysis Group
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