Month: October 2023

(C) Reuters.

By Davit Kirakosyan

Here is your Pro Recap of 5 head-turning deal dispatches you may have missed last week: deals at Chicos/Sycamore Partners, Blue Apron/Wonder, Carlyle in talks to acquire a majority stake in Medtronic units, Bain Capital considering a takeover of CCC Intelligent Solutions, and John Malone’s Liberty Media considering merging its stake in SiriusXM with the rest of the radio company.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Chicos FAS to be acquired by Sycamore Partners for $1 billion

Chico’s FAS (NYSE:CHS) shares soared by over 63% on Thursday following the company’s announcement of its agreement to be acquired by Sycamore Partners for a total of $1 billion ($7.60 per share in cash), as reported in real-time on InvestingPro.

This acquisition, led by the private equity firm, will result in Chicos transitioning into a private company.

The deal is expected to close by the end of the first calendar quarter of 2024. In addition, it includes a 30-day “go-shop” period that will expire at the end of the day on October 27. The “go-shop” period permits Chico’s FAS to solicit and consider alternative acquisition proposals actively.

Marc Lore’s Wonder acquires Blue Apron for $103 million

Blue Apron (NASDAQ:APRN) shares jumped more than 134% on Friday after the company announced its acquisition by Marc Lore’s Wonder Group for $13.00 per share of Class A common stock, totaling around $103 million.

The merger aims to create a leading mealtime platform with enhanced choice, flexibility, and convenience, focusing on chef-curated meals with high-quality ingredients.

Blue Apron’s operations will continue under the Blue Apron brand, with new synergies between consumer-facing apps and delivery logistics. The transaction is expected to close in Q4/23.

Carlyle in exclusive talks to acquire majority stake in Medtronic units for $7B

According to Reuters, citing sources familiar with the matter, Carlyle Group (NASDAQ:CG) is currently in exclusive discussions to acquire a majority stake in Medtronic’s (NYSE:MDT) Patient Monitoring and Respiratory Intervention units at a valuation exceeding $7B.

Should an agreement be reached in the coming weeks, it would signify the conclusion of Medtronic’s year-long evaluation of its patient monitoring and respiratory interventions businesses, which it had contemplated spinning off into a separate publicly traded entity.

These businesses that Medtronic intends to divest would be transferred to a new company majority-owned by Carlyle, with Medtronic retaining a stake of more than 35% in the new entity, as per the sources.

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(C) Reuters. FILE PHOTO: U.S. Federal Reserve Chair Jerome Powell holds a press conference in Washington, U.S, September 20, 2023. REUTERS/Evelyn Hockstein/File Photo

By Howard Schneider

YORK, Pa. (Reuters) – The U.S. economy is still dealing with the aftermath of the COVID-19 pandemic, Federal Reserve chair Jerome Powell said during a meeting with community and business leaders in York, Pennsylvania.

“We are still coming through the other side of the pandemic,” Powell said, noting labor shortages in healthcare, ongoing difficulties with access to child care, and other issues heightened by the health crisis. He did not comment on current monetary policy or the economic outlook in brief opening remarks.

(C) Reuters

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst picks and cuts you may have missed today: upgrades at Rivian Automotive, FedEx, United States Steel, Datadog, and downgrades at Toast and Chubb.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Rivian Automotive gains on Evercore upgrade

Rivian Automotive (NASDAQ:RIVN) shares surged more than 3% pre-market today after Evercore ISI upgraded the company to Outperform from In Line with a price target of $35.00, as reported in real-time on InvestingPro.

FedEx raised to Positive at Susquehanna

Susquehanna upgraded FedEx (NYSE:FDX) to Positive from Neutral and raised its price target to $315.00 from $225.00. Shares rose nearly 1% pre-market today.

“We view the long-term upside opportunity in FDX from cost rationalization and valuation re-rating as greater than near-term cyclical risk,” noted Susquehanna.

Last week, the stock was initiated at HSBC with a Buy rating and a price target of $330.00.

United States Steel earns an upgrade at Morgan Stanley

United States Steel (NYSE:X) shares rose more than 1% pre-market today after Morgan Stanley upgraded the company to Overweight from Equalweight and raised its price target to $40.00 from $25.00, and assigned it as its Top Pick on the expected value creation from the company’s transformational investments.

“Our call is supported by the ongoing strategic review process to potentially sell assets/the company, which highlights the value of X’s growth initiatives,” mentioned Morgan Stanley.

The company is set to report its Q3/23 earnings results on Oct 25.

Datadog raised to Overweight at Piper Sandler

Piper Sandler upgraded Datadog (NASDAQ:DDOG) to Overweight from Neutral and raised its price target to $115.00 from $88.00. As a result, shares gained more than 2% pre-market today.

The analyst’s rationale for the upgrade includes the belief that the cloud-related challenges affecting Datadog’s performance have largely been addressed in recent quarters, with adjustments made to expectations following last quarter’s guide down.

As we contemplate the current environment, broad signs of stabilization in infrastructure and DevOps software demand coupled with incremental opportunities around security and AI position DDOG to be a major beneficiary as things improve.

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(C) Reuters. A supporter of former U.S. President Donald Trump holds up a U.S. national flag at Trump Tower in New York City, U.S., October 1, 2023. REUTERS/David ‘Dee’ Delgado
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By Jack Queen and Luc Cohen

NEW YORK (Reuters) -A civil fraud trial that could deal a major blow to Donald Trump’s real estate empire began on Monday, with a New York state lawyer accusing the former president of generating more than $1 billion by lying, and Trump blasting the case as a “scam.”

The trial in a downtown Manhattan courtroom case concerns accusations by state Attorney General Letitia James that Trump inflated his assets and his own net worth from 2011 to 2021 to obtain favorable bank loans and lower insurance premiums.

James is seeking at least $250 million in fines, a permanent ban against Trump and his sons Donald Jr and Eric from running businesses in New York and a five-year commercial real estate ban against Trump and the Trump Organization.

Trump looked on with his arms crossed are Kevin Wallace, a lawyer in James’ office, called Trump “materially inaccurate” in describing his finances to banks and insurers.

“This isn’t business as usual, and this isn’t how sophisticated parties deal with each other,” Wallace said in his opening statement. “These are not victimless crimes.”

Christopher Kise, a lawyer for Trump, countered in his opening statement that the financials for Trump and the Trump organization were entirely legal.

“It is one of the most highly successful brands in the world, and he has made a fortune literally being right about real estate investments,” Kise said. “There was no intent to defraud, there was no illegality, there was no default, there was no breach, there was no reliance from the banks, there were no unjust profits, and there were no victims.”

Trump holds a commanding lead over rivals for the 2024 Republican presidential nomination.

He wore a dark blue suit, a brighter blue tie and an American flag pin on his lapel, and told reporters before entering the courtroom that the case was a “scam,” a “sham,” and “a continuation of the single greatest witch hunt of all time.

“We have a great company. I built a great company. It’s tremendous,” Trump said. “It’s got some of the greatest real estate assets in the world. And now I have to go in before a rogue judge.”

James said her office was ready to prove its case.

“The law is both powerful and fragile,” she said before entering the courtroom. “No matter how much money you think you may have, no one is above the law.”

MANY LEGAL WOES

Trump’s trial is overseen by Justice Arthur Engoron, who will hear evidence without a jury.

It largely concerns penalties that Trump, his adult sons and 10 of his companies must face after Engoron last week found them liable for fraud.

Before opening arguments, Engoron described himself as a generalist on the law. “One thing I know a lot about is the definition of fraud,” he said.

In his Sept. 26 decision, Engoron described in scathing terms how the defendants made up valuations.

That included Trump calculating the value of his apartment in Trump Tower as if it were three times its actual size, and listing his Mar-a-Lago estate as being worth up to $739 million though deed restrictions capped it at $28 million.

Engoron’s decision also covers several other properties including Trump’s family estate in Westchester County, New York, and various office buildings and golf clubs.

The judge canceled business certificates for companies controlling pillars of Trump’s empire, and said he would appoint receivers to oversee their dissolution.

Trump responded to the decision by calling Engoron “deranged.”

Wallace played an excerpt from a deposition where Michael Cohen, who had been Trump’s personal lawyer and fixer but has since turned against his former boss, said the goal was “to attain the number that Mr. Trump wanted.”

Kise countered that just because people disagree about valuations does not mean one valuation must be fraudulent.

He also said Trump’s banks and insurers knew his valuations were estimates.

“They are not designed to be absolutes,” he said.

The trial is scheduled to run through early December.

More than 150 people including Cohen could testify, though much of the trial may be a battle of experts opining on financial documents.

Trump also faces several other legal headaches, which have been a financial drain, and made him the first sitting or former U.S. president to be criminally charged.

He has been criminally charged in Washington over his efforts to undo his loss in the 2020 presidential election, in Georgia over moves to reverse election results there, in Florida over his handling of classified documents upon leaving office, and in New York over hush money payments to a porn star.

Trump has denied all wrongdoing and pleaded not guilty.

(C) Reuters Dow Jones, Nasdaq, S&P 500 weekly preview: More room for correction in October

The S&P 500 (SPX) recorded the fourth consecutive weekly drop candle after falling 0.7% last week. The index printed the lowest level since the end of May as stocks responded to another bond market selloff.

The Nasdaq Composite Index (IXIC) ended the week flat, despite also plunging below 13000 for the first time in 4 months. Finally, the Dow Jones Industrial Average (DJI) index fell as much as 1.3% after testing an important daily support in the context of the 100 daily moving average.

“We’re not surprised by the message that the policy rate may stay higher for longer. However, we’re also not convinced the Fed will have to do much more tightening at this stage. Instead, it’s time, not further rate hikes, that is needed to see inflation moderate back toward the target. In other words, it may be more bark than bite from here. In any event, that bark has sent rates higher and stocks lower, a reaction that we think may be creating an opportunity,” investment strategists at Edward Jones said.

Q4 is Here

Traders are entering the final quarter of 2023 with a focus on economic releases that could set the tone for the rest of the year. While they hope for positive data, the central bank narrative remains crucial, especially in the context of ongoing efforts to control inflation.

Treasury yields are playing a pivotal role in shaping market sentiment, and there is a wealth of U.S. economic data to analyze. Key reports such as the ISM index, ADP employment figures, U.S. Factory Orders, Non-Farm Payrolls, and hourly earnings will be closely scrutinized to validate the Federal Reserve’s hawkish stance.

Recent data has indicated a slowdown in U.S. consumption, and the surge in oil prices is expected to have an impact.

This week will also feature speeches by Federal Reserve officials across the spectrum, including Chairman Jerome Powell. With bond markets already factoring in tightening measures, these speeches will be closely watched. Any hints of a dovish tone could potentially reverse some of the recent bond market movements.

Ahead of the Q3 earnings season, FactSet earnings analysts noted that a record-high number (116) of S&P 500 companies have issued EPS guidance for the third quarter.

64% of companies in the S&P 500 have issued negative EPS guidance, which is higher than the 5-year average of 59% but in line with the 10-year average of 64%. When it comes to the number of companies providing negative EPS guidance, it exceeds the 5-year average of 58 and the 10-year average of 63.

In total, 116 S&P 500 companies have issued EPS guidance for the third quarter, which is above both the 5-year average of 97 and the 10-year average of 99.

What analysts are saying about U.S. stocks

Edward Jones: “We expect markets to endure bouts of anxiety ahead, prompted by temporary uncertainties, like a government shutdown, as well as more structural challenges, like high interest-rate headwinds to the economy and stock prices. That said, we think this emerging correction in the markets will present compelling opportunities, as we think the broader uptrend in equities remains intact.”

RBC: “Net bullishness on the AAII survey, which has fallen sharply since mid August, still isn’t back down to levels that would indicate investor pessimism had gotten too extreme.”

BofA: “Although 4Q returns are often solid for the SPX, October is known for big intra-month drawdowns. The breakdown below 4335-4325 is bearish entering October and suggests risk on the SPX to the 4200 area (rising 200-day MA, June breakout point and 50% retracement), which means that we favor an undercut of last week’s low at 4238. The next resistance is 4375-4402 (9/21 downside gap and rising 100-day MA). The next support is 4114 (61.8% retracement).”

Citi: “We advocate a barbell approach to buying the recent US equity drawdown. Consistent with our call to buy growth on pullbacks, Tech is lifted to OW. Our Q4 SIGN portfolio is incrementally more overweight Growth and less so for Cyclicals. Industrials stand out among Cyclicals.”

JPMorgan: “Despite some recent weakness, where SPX RSI turned technically oversold, we believe that the equity risk-reward remains challenging. Divergences between softer activity momentum and the elevated equity prices, as well as market internals, that opened up in the summer, are starting to close, but there is more to go.”

Morgan Stanley: “Equity investors should avoid rotating into early-cycle winners like consumer cyclicals, housing-related/interest-rate-sensitive sectors, and small caps. Instead, we believe a barbell of large-cap defensive growth/quality with late-cycle cyclical winners like Energy and Industrials should outperform.”