On The Fly: Stocks end week higher amid signals of rate hike, tax reform
Stocks ended the week higher following Federal Reserve Chair Janet Yellen's flagging of a possible interest rate rise next month and as President Donald Trump talked up plans for upcoming tax reform. MACRO NEWS: In the U.S., the Producer Price Index rose 0.6% in January, with the core rate up 0.4%. The Consumer Price Index increased 0.6% in January. The core CPI reading, which removes food and energy, rose 0.3%. Retail sales were up 0.4% last month. When autos and gas are removed, the core reading was up 0.7%. Industrial production slipped 0.3% in January, with capacity at 75.3%. The February Empire State manufacturing index rose to 18.7. Initial jobless claims rose 5,000 to 239,000 in the week ended February 11. Housing starts fell 2.6% to a 1.246M rate in January, while building permits rose 4.6% to a 1.285M rate. The Philly Fed business outlook survey surged 19.7 points to a reading of 43.3. The leading economic indicators rose 0.6% to 125.5 in January... During her semiannual monetary policy report to the Congress, Fed Chair Janet Yellen said it is "unwise" to wait too long to raise rates as it could require the FOMC to "eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession." The economic outlook is uncertain, and "monetary policy is not on a preset course," she added... In Asia, Japan's fourth quarter GDP growth of 1% was about in-line with the consensus forecast for growth of 1.1%. China's Consumer Price Index rose 2.5% on the year in January, while its Producer Price Index rose 0.6%... In Europe, the European Commission raised its growth forecasts for 2017 to 1.6% from 1.5% and for 2018 to 1.8% from 1.7%. Fourth quarter Eurozone GDP flash came in at 0.4%, while Eurozone Industrial Production fell 1.6% in December. COMPANY NEWS: Kraft Heinz (KHC) confirmed that it has made a comprehensive proposal to Unilever (UN; UL) about combining the two groups. However, the latter has rejected the $143B offer saying that it "fundamentally undervalues" the company... Verizon (VZ) announced that will start selling unlimited data plans. Later in the week, AT&T (T) announced that it will launch its own new Unlimited plan, available to all consumer and business postpaid AT&T wireless customers. Against that backdrop of a new front in the pricing war among wireless service providers, Reuters said on Friday that SoftBank (SFTBF) is prepared to relinquish control of Sprint (S) to Deutsche Telekom's (DTEGY) T-Mobile US (TMUS) to clinch a tie-up of the two U.S. carriers. The Japanese company has not yet approached Deutsche Telekom to talk about any deal because the U.S. Federal Communications Commission has established strict anti-collusion rules that prohibit talks between rivals during the ongoing auction of airwaves, the report added... In other M&A news, in a week full of deal headlines, Allergan (AGN) announced that it is acquiring Zeltiq Aesthetics (ZLTQ) for $2.475B, or $56.50 per share. Hologic (HOLX) announced a definitive agreement to acquire all outstanding Cynosure (CYNO) shares for $66.00 per share in cash, which corresponds to an equity value of approximately $1.65B and an enterprise value of $1.44B net of cash. Fortress Investment Group (FIG) agreed to be acquired by Japan's SoftBank for roughly $3.3B in cash. Integrated Device Technology (IDTI) agreed to acquire GigPeak (GIG) for total cash consideration of $3.08 per share, or approximately $250M in cash. According to a report by Reuters, Restaurant Brands (QSR), the owner of Burger King and Tim Horton's, approached Popeyes Louisiana Kitchen (PLKI) to show interest in a potential takeover. Verizon and Yahoo (YHOO) are said to have tentatively reached a new merger pact under which Verizon will pay $250M less to acquire Yahoo. In addition, both companies will reportedly share in the legal responsibility from recent hacking incidents as part of the new pact. Kate Spade (KATE) pre-reported quarterly results and announced a strategic process, confirming media reports in recent months of a potential sale... Aetna (AET) and Humana (HUM) mutually ended their merger agreement following a ruling from the U.S. District Court for the District of Columbia granting a Department of Justice request to enjoin the deal. Under the terms of the merger agreement, Humana is entitled to a breakup fee of $1B, or approximately $630M, net of tax. Cigna (CI) also announced it is terminating the proposed merger agreement with Anthem (ANTM) following the order from the U.S. District Court for the District of Columbia enjoining the transaction. To effect this termination, Cigna has filed suit against Anthem, seeking payment by Anthem of the $1.85B reverse termination fee contemplated in the merger agreement, as well as additional damages in an amount exceeding $13B. However, Anthem announced that it has filed its own lawsuit in Delaware seeking a temporary restraining order to enjoin Cigna from terminating, and taking any action contrary to the terms of, their merger agreement, contending that Cigna does not have a right to terminate the pact... Dow member UnitedHealth (UNH) fell more than 4% on Friday following reports it was the subject of an investigation by the DOJ for Medicare fraud. Volkswagen (VLKAY) and Mobileye (MBLY) reached a pact over new navigation standard for autonomous driving, with future Volkswagen models using the camera-based map and localization technology Road Experience Management from Mobileye... Chemours (CC) announced an agreement with DuPont (DD) to address the costs of the global settlement of the multi-district PFOA litigation between DuPont and the plaintiffs... Hain Celestial (HAIN) disclosed that it received a subpoena from the SEC over its accounting... Among companies that announced quarterly results this week, Cisco Systems (CSCO), Deere (DE), Teva Pharmaceutical (TEVA), Chegg (CHGG), Groupon (GRPN), Wix.com (WIX), NetApp (NTAP), TrueCar (TRUE), and Arista Networks (ANET) advanced following their reports, while PepsiCo (PEP), Snyder's-Lance (LNCE), AIG (AIG), Fossil Group (FOSL), LendingClub (LC), Kraft Heinz, GNC (GNC), MGM Resorts (MGM), Molina Healthcare (MOH), J M Smucker (SJM), and Campbell Soup (CPB) declined. INDEXES: For the week, the Dow rose 1.73% to 20,624.05, the Nasdaq advanced 1.8% to 5,838.58, and the S&P 500 gained 1.49% to 2,351.16.