Verizon, Microsoft deals dominate Market News

 

Hold the phone: Verizon, Microsoft deals dominate
The chase by Frances Horodelski:

"The Misnamed Months - As you may recall from Latin class back in the third grade, we are entering a string of misnamed months. Based on their respectiveLatin bases September means 7th month; October means 8th; November, the 9th and December the 10th. That confusion came from inserting a month to honourJulius Caesar (July) and Augustus Caesar (August)." - Art Cashin

25% more traffic on the road; 25% more news stories to report. Welcome to September.

Hold the phone. It is a telecom day. Verizon is buying Verizon Wireless for $130 billion US from Vodafone for a combination of cash ($58.9 billion) and stock ($60.2 billion). VZ says the deal will be immediately accretive to earnings. VZ had its credit rating reduced to BBB+ from A- while also raising its dividend by 1.5 cents quarterly. Interesting twist - according to reports, Vodafone will pay only $5 billion in taxes on the transaction in the U.S. (none in the UK as the deal is structured through its Dutch subsidiary). What do you think the G20 will say about that? The UK's Independent calls it an "84 billion pound tax avoidance bonanza" which is an overstatement, but still a topic of conversation.

Following this announcement, VZ's CEO Lowell McAdam told Bloomberg that it had only limited interest in Canada and has no interest now. He also noted that the speculation about Canada was "way overblown". And that's the other major "phone" story as BCE (owner of Bell Media/BNN), Telus and Rogers are expected to post substantial rallies this morning. But "hold the phone", could someone else with deep pockets still be interested in supporting the new wireless entrants in Canada? Maybe this is one of many questions to ask today. RBC is the first off the mark with new buys on Telus and BCE. Canaccord has raised targets on Telus (now $39), BCE (now $45) and Rogers (now $49).

Sticking with phones, Microsoft has announced an agreement with Nokia to acquire the handset business and patents of the latter for $7.2 billion. The devices and services business represents about half of revenues leaving Nokia to be a network equipment supplier company. Microsoft is paying 0.35x revenues. Questions here include: can two weak entities in the wireless business make one strong one; what does this mean for BlackBerry as one buyer is potentially now gone; what are the valuation comparables for a BlackBerry buyout. BBRY is up 4.8% (!) Note that in the most recent data on short positions, the bears increased their short position on the company by almost 7 million.

But don't think this is it - there is an extraordinarily full calendar of things to consider as we move through September. Today we get monthly production numbers from the likes ofCanadian Oil Sands and Suncor; The Bank of Canada meets tomorrow (no rate change is expected); the G20 begins their conversations this week (September 5); September 6 is the U.S. (and Canadian) jobs numbers; September 9 sees the Italian government assessing the Berlusconi situation and also the Fall session of the U.S Congress where they will debateSyria; September 10 sees Intel and Apple before analysts and industry types (and a new iPhone for apple); September 12 - the SEC reviews the Nasdaq outage from two weeks ago; the Fed meets on September 17-18 (will they or won't they?); Microsoft is having an analyst day on September 19; the Germans go to the polls on September 22. And overarching it all will be the possibility of a debt ceiling debate that may go very well (or not). Whew - can we go back to the summer please.

And September often brings one of the busiest seasons for early previews for the quarter and for the rest of the year. With the Street still expecting 4th quarter earnings growth in the order of about 11% (on easy comparisons), there is room for disappointment. The equity markets aren't particularly overbought now as they were a few weeks ago, but September has a nasty habit of hitting you when you least expect it. Be careful - and keep your pencil sharp - there will be plenty of opportunities.

www.bnn.ca

It's the Dow's first six-day drop since July 2012

The Dow Jones industrial average fell 105.44, or 0.7%, to close at 14,897.55. The Dow is now riding a six-session losing streak and closed below 15,000 for the first time since July 3. It's the Dow's first six-day drop since July 2012

In a volatile trading session, stocks took a beating as investors continue to worry about the timing and scope of a paring back on the Federal Reserve's bond-buying stimulus program.

Stocks took a dive immediately after the 2 p.m. ET release of the minutes from the Federal Reserve's last meeting but then quickly recovered and then plunged all over again late in the session.

In the minutes, Fed policymakers indicated they are still on track to slow the central bank's massive stimulus this year and end it in mid-2014, but gave no signal whether the scale-back could begin next month.

The Dow Jones industrial average fell 105.44, or 0.7%, to close at 14,897.55. The Dow is now riding a six-session losing streak and closed below 15,000 for the first time since July 3. It's the Dow's first six-day drop since July 2012.

The Standard & Poor's 500 index fell 9.55, or 0.6%, to 1,642.80 and the Nasdaq composite index dropped 13.80, or 0.4%, to 3,599.55.

Source

Bill Carrigan, Tech Analysis and Picks

Bill Carrigan, technical analyst, Getting Technical Info Services

FOCUS: Technical Analysis Market Outlook: The current rebound bull is about 50-plus months or 1600 days old. A rebound bull is a powerful linear advance that follows a granddaddy bear such as the crash of 1987, the technology bust of 2000 and the financial bust of 2008.

The previous rebound bull of 2002-2007 ran for 60 months which is longer than the historical 48 month U.S. business cycle perhaps due to the forces of the global economy. The current rebound bull may be predicting a global recovery which would allow the U.S. Fed to slowly wind down their quantitative easing program.

As this bull ages look for normal sector rotation to return as the global recovery becomes a reality. The normal sector rotation order is: Leading Stock Sectors - Financial, utilities and telecom Coincident Stock Sectors - Consumer, health care, industrial and technology Lagging Stock Sectors - Energy and materials Strategy:

Plan for the “great rotation” as investors move away from the utilities, telecom and consumer sectors and toward the industrial, energy and materials sectors in response to gradual return of an inflationary environment. 

TOP PICKS:

iShares S&P/TSX Capped Materials Index Fund (XMA TSX) Most recent purchase $13.63
XMA is a basket of base and precious metals miners, lumber and potash producers. The XMA will benefit from a return to an inflationary environment.

Lundin Mining (LUN TSX) Most recent purchase $4.57 
LUN is a copper producer which is diversified geographically in Europe and North America. Lundin will benefit from a return to an inflationary environment.

ATS Automation (ATA TSX) Most recent purchase $12.08
ATA, like Martinrea (a past pick), is an Ontario manufacturer that will benefit from a return of manufacturing to Ontario. ATA will provide exposure to some dominant themes like autos and aerospace.

Will the loonie get a pop on jobs data? .

Will the loonie get a pop on jobs data? The chase by Frances Horodelski: This weekend, take a moment to lie on a hill, looking up at the skies somewhere outside of your city. It is time for the Perseids meteor shower where it is a black sky filled with shooting stars. The height of the shower will be August 12, but all weekend should have good viewing (as long as you're in the Northern Hemisphere anyway). And make a wish for health, happiness, and maybe a little good fortune. www.bnn.ca