M&A Deals Lift Sentiment - Ahead of Wall Street
August 15 2011 - 3:24AM
Zacks
Monday, August 15, 2011
There is a tug of war between two competing visions of the economy:
one is looking for a recession, while the other is expecting the
economy to continue chugging along in positive territory. Last
week's see-saw movement in the stock market was essentially a
reflection of this tension.
I don't think we are heading towards a recession, though it may be
awhile before this issue gets settled. There is enough momentum in
the economy's underlying fundamentals to keep it from going into
negative territory. Last week's positive retails sales and jobless
claims numbers, coupled with the recent pullback in oil prices, are
indicative that consumer spending has likely improved from the
second-quarter's anemic pace.
We have a busy economic calendar this week, though few of the
reports can give us definitive answers on the recession question.
The two regional manufacturing surveys this week, the Empire State
this morning and Philly Fed on Thursday, come close to providing a
preview of the national ISM manufacturing report for August.
The New York Fed's Empire State survey came in weaker than expected
this morning, for the third monthly negative reading in as many
months. All the major sub-components of the index were in the
negative territory, though the employment component remained
modestly positive. While this report pertains to New York State
only, it does provide some evidence that conditions in the
manufacturing sector are difficult.
In corporate news, we have a number of M&A deal announcements
this morning. The most important of these is
Google's
(GOOG) acquisition of
Motorola Mobility
(MMI) for $12.5 billion in cash, a 63% premium to MMI's
Friday closing price. This deal gives Google a complete platform,
from software to hardware, to more effectively compete in the
mobile handset space.
In other deal announcements,
Transocean (RIG) is
aquiring Norway's Aker Drilling for $1.43 billion in cash. Aker
owns two ultra-deepwater drilling rigs and has two other units
under construction.
Time Warner Cable (TWC) is
acquiring Carlyle-owned cable operator Insight Communications for
about $3 billion.
The second quarter reporting season is almost over, though we still
have a number of the retailers to report. We got a mixed report
this morning from
Lowe's (LOW), beating on EPS but
coming short on revenue.
Home Depot (HD) reports
on Tuesday.
Sheraz Mian
Director of Research
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
HOME DEPOT (HD): Free Stock Analysis Report
LOWES COS (LOW): Free Stock Analysis Report
MOTOROLA MOBLTY (MMI): Free Stock Analysis Report
TRANSOCEAN LTD (RIG): Free Stock Analysis Report
TIME WARNER CAB (TWC): Free Stock Analysis Report
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