Live Markets: SPAC M&A: Just another manic Monday
01/02/2021 18:02
* Wall Street indexes green; Nasdaq out front
* Tech, cons disc, comms srvcs lead S&P sectors, up more
than 2%
* Energy, consumer staples lag
* Dollar up; gold, oil rise; silver last up 7.4%
* U.S. 10-Year Treasury yield ~1.07%
Feb 1 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
SPAC M&A: JUST ANOTHER MANIC MONDAY (1245 EST/1745 GMT)
Dealmaking continues at a brisk pace as six SPAC (special
purpose acquisition company) tie-ups were announced early
Monday.
The biggest one comes from Fertitta Entertainment, parent of
restaurant and gaming company Golden Nugget GNOG.O and
restaurant-chain operator Landry's, which agreed to IPO through
a merger with FAST Acquisition Corp FST.N in a deal valued at
$6.6 billion. urn:newsml:reuters.com:*:nL4N2K73N9
Tuscan Holdings Corp's THCB.O shares are surging more than
30% on news it will take electric-vehicle battery maker
Microvast Inc public in a roughly $3 billion deal. urn:newsml:reuters.com:*:nL4N2K73K1
Deals involving private jet charter Wheels Up, urn:newsml:reuters.com:*:nL4N2K73E8
Nexters Global, owner of mobile game Hero Wars, urn:newsml:reuters.com:*:nL4N2K73N1,
data automotive firm Otonomo urn:newsml:reuters.com:*:nL4N2K73AI and biotech Ensysce
Biosciences urn:newsml:reuters.com:*:nPn1QXtdla round out today's SPAC-related M&A
news.
In a note last week, Goldman Sachs chief U.S. equity
strategist David Kostin pointed to 265 SPACs that still need to
acquire a target this year or in 2022. The aggregate value of
these takeovers could exceed $410 billion, equivalent to 12% of
the overall U.S. M&A volume during the last two years, Kostin
added.
New issuance this year has already totaled 91 offerings for
about $25 billion, per data provider SPAC Research. That
compares to 248 offerings which raised $83 billion in all of
2020.
This as public interest in SPACs is at an all-time high,
according to Google search trends chart below (100 = peak
popularity):
(Lance Tupper)
*****
WHEN JANUARY BRINGS A FALL THEN WHAT? (1200 EST/1700 GMT)
On the first day of a new month, the rear view mirror can
offer pictures of what's out front, even for the year ahead.
Citing an old Wall Street adage that January's stock
performance tells a lot about the year, DataTrek Research
co-founder Jessica Rabe described the S&P's 1.1% decline for the
first month of 2021 as a "modestly worrisome sign."
But this doesn't necessarily mean the sky will fall.
Since 1980, when the S&P showed January gains, its had a
positive annual return 83% of the time with a 15.5% average
gain, according to Rabe.
When its fallen in January, the S&P has gained in only 63%
of those years with just a 2.2% average advance.
Rabe went on divide history into very bad, bad and slightly
bad January performances with 'very bad' equating to a 5% plus
decline for the month and 'bad' representing a 2-5% decline and
'slightly bad' referring to declines between 92 basis points and
2%, which applies to January 2021.
Even when the S&P falls in January, Rabe says it’s been
positive the rest of the year 73% of the time and up an average
of 5.3 pct from February to December.
While equities may not have the tailwind of falling interest
rates this year they should have earnings leverage coming off
the bottom of a cycle, potentially enabling an average
rest-of-year return of 5% plus, she writes.
"While January 2021 did not start off on the best foot,
there’s more historical precedence for it to register a positive
performance over the balance of this year than negative," Rabe
writes.
(Sinéad Carew)
*****
ONE YEAR INTO RECESSION, FACTORY ACTIVITY AND CONSTRUCTION
EXPAND (1110 EST/1610 GMT)
A snowy start to February brought with it news of expanding
factory activity on Monday, along with portents of growing
inflation, and increased construction expenditures as the U.S.
economy marked a year in pandemic-induced recession.
U.S. factory activity lost some steam in January, according
to Institute for Supply Management (ISM) purchasing managers'
index (PMI) USPMI=ECI . urn:newsml:reuters.com:*:nN9N2H7017
ISM posted a PMI reading of 58.7, representing a modest loss
of momentum from December's 60.5 level and coming in below the
60 analysts expected.
A PMI number above 50 signifies increased activity from the
previous month.
"Manufacturing sector prospects for 2021 are upbeat, with
solid consumer goods demand, inventory restocking, gradual
business reopenings, and additional federal pandemic relief all
set to keep activity on a firm footing," writes Oren Klachkin,
lead U.S. economist at Oxford Economics (OE).
A slowdown in the expansion of the "new orders" component
was mitigated, however, by a jump in the "prices paid" subindex
to the highest level in nearly a decade in a sign that
long-languid inflation will begin to rise in the coming year.
Among the survey's respondents, the sentiment showed
confidence mixed with caution:
"Very strong demand with limitations in supply to meet
increased demand," (transportation equipment).
"We have had an increase in employees testing positive for
COVID-19, negatively impacting manufacturing," (misc.
manufacturing).
"Supply base is struggling to keep up with demand,
disrupting our production here and there. COVID-19 continues to
cause challenges throughout the supply chain," (machinery).
Global financial information firm IHS Markit also released
its final take on manufacturing PMI USMPMF=ECI , which edged up
one-tenth of a point from the level previously reported, coming
in at 59.2, representing a modest acceleration from December.
"Manufacturers are encountering major supply problems," says
Chris Williamson, chief business economist at Markit.
"Lead times are lengthening to an extent not previously seen
in the survey's history, meaning costs are rising as firms
struggle to source sufficient quantities of inputs to meet
production needs," Williamson added. "These higher costs are
being passed on to customers in the form of higher prices, which
rose in January at the fastest rate since 2008."
ISM and Markit PMI differ in the weight they give various
subcomponents.
The graphic below shows how widely the indexes have differed
over the last five years.
Finally, the Commerce Department released data on
construction spending USTCNS=ECI .
Expenditures on construction projects rose by 1% in
December, extending the prior month's upwardly revised 1.1%
gain.
The advance was driven by a 3.1% jump in spending on
residential construction as builders struggle to replenish
record low supplies amid a demand spike, as homebuyers flee for
the suburbs in search of lower population density and home
office space.
Year-on-year, residential construction expenditures are up a
whopping 20.7%.
"We look for a gradual recovery in private, nonresidential
investment as the recovery takes hold, while we expect the pace
of housing starts to moderate slightly," says Nancy Vanden
Houten, lead U.S. economist at OE. "Public outlays will likely
continue to be constrained by tight state and local budgets
despite a better than expected performance for revenues during
the pandemic."
Investors were in a buying mood in morning trading
All three major indexes were green, with tech shares putting
the Nasdaq out front.
(Stephen Culp)
*****
WALL STREET TRIES FOR A REBOUND (0941 EST/1441 GMT)
Wall Street's major indexes staged an opening rebound after
Friday's sell off. While earnings reports were thin on the
ground on Monday, retail investors shifted their focus to silver
XAG= with mining stocks soaring and the metal breaking above
$30 an ounce for the first time since 2013. urn:newsml:reuters.com:*:nL1N2K60M1
Wall Street's main indexes last week logged their steepest
weekly fall since October as investors gauged the ramifications
of the latest COVID-19 vaccine trial results on Friday and a
standoff between Wall Street hedge funds and retail investors
added to volatility. .N
Among the S&P's 11 major sectors, most are higher with
technology .SPLRCT leading the gains. Real estate .SPLRCR ,
consumer staples .SPLRCS , utilities .SPLRCU are lagging the
most.
Here is your morning trading snapshot:
(Sinéad Carew)
*****
S&P 500: TIRED LEGS? (0900 EST/1400 GMT)
The S&P 500 index .SPX lost more than 1% for the month of
January. This, as the benchmark index turned down after nearing
a significant resistance hurdle, amid a protracted monthly
momentum divergence:
Indeed, the SPX hit a high of 3,870.90 in January, which put
it less than 1% from a log-scale monthly channel resistance line
that was residing around 3,905. That line will ascend to around
3,975 in February.
Meanwhile, monthly momentum is lagging. Since registering an
all-time high in early 2018, the RSI has been making lower
highs. The most recent peak in December of last year came in shy
of 2018-2019 tops. Of note, just since 2007, SPX declines of
varying degree were preceded by monthly momentum divergence.
(Terence Gabriel)
*****
FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT
- CLICK HERE: urn:newsml:reuters.com:*:nL1N2K716K
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SPX02012021 https://tmsnrt.rs/2Yybe3v
Wall St indexes point higher https://tmsnrt.rs/3cvIG2P
ISM PMI https://tmsnrt.rs/39H48QN
Markit versus ISM https://tmsnrt.rs/39AIoFW
Construction spending https://tmsnrt.rs/3cznWXV
Google Trends for SPACs https://tmsnrt.rs/3rbpAD7
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Terence Gabriel and Lance Tupper are Reuters market analysts.
The views expressed are their own)