Plus, Jerome Powell and Donald Trump met this morning to discuss the economy, T-Mobile’s CEO is stepping down, and HP rejected Xerox’s takeover bid.
Stocks traded slightly lower to start Monday with the dow down 4 points, of 0.01%. The S&P 500 and Nasdaq both slipped by 0.1%.
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Stocks pulled back Monday morning on mixed signals on the U.S.-China trade negotiations. CNBC reported this morning that China is pessimistic about moving forward on a possible trade deal given President Donald Trump’s reluctance to agree to rolling back tariffs on Chinese goods, a sticking point that China believed the U.S. had already agreed to. Chinese Commerce Ministry spokesman Gao Feng said early this month that the two countries had agreed to lift existing duties on each others goods as they moved toward signing a limited phase one trade agreement, though Trump said just days later that he had never agreed to such a condition. The Chinese Ministry of Commerce then said yesterday that the two sides have had “constructive discussions” about “each other’s core concerns” and have agreed to remain in close contact, while White House economic advisor Larry Kudlow said that the two countries are “getting close” to reaching an agreement.
President Trump met with Federal Reserve Chairman Jerome Powell this morning to discuss economic issues. Trump and Powell have been at odds over the direction of monetary policy, and the two met alongside Treasury Secretary Steven Mnuchin to discuss the economy more broadly as well as inflation, and growth and employment trends. A statement from the central bank said Powell’s “comments were consistent with his remarks at his congressional hearings last week.”
Saudi Arabia cut Saudi Aramco’s valuation and scaled down the size of the sale after the country decided to make the deal almost exclusively for locals after a lackluster response from foreign investors. The IPO won’t be marketed in the U.S., Canada, or Japan, and bankers told investors that roadshow events planned for London and other European cities this week had been canceled. Aramco is now expected to sell just 1.5% of its shares on a local exchange and will seek a valuation of between $1.6 trillion and $1.71 trillion.
T-Mobile announced this morning that CEO John Legere will step down on April 30, 2020 and will be succeeded by President and COO Mike Sievert. Sievert has been considered to be the heir apparent once Legere stepped down as the company’s merger with Sprint was completed. Legere tweeted Monday morning that the decision “has been under development for a long time.” He added, “In the months ahead, my focus will be on ensuring a smooth leadership transition and continuing to work closely with the board and Mike to complete the Sprint transaction.” “As the architect of the Uncarrier strategy and the company’s complete transformation, John has put T-Mobile US in an incredibly strong position,” said Tim Hoettges, CEO of parent Deutsche Telekom AG and chairmen of T-Mobile US. “I have the highest respect for his performance as a manager and as a friend, I am very grateful to him for the time together.”
HP’s board of directors unanimously agreed to reject a proposal from Xerox to acquire the company as the offer was not in the best interest of shareholders as it undervalued HP. “In reaching this determination, the Board also considered the highly conditional and uncertain nature of the proposal, including the potential impact of outsized debt levels on the combined company’s stock,” the board wrote in a letter to Xerox’s CEO, John Visentin. “We note the decline of Xerox’s revenue from $10.2 billion to $9.2 billion (on a trailing 12-month basis) since June 2018, which raises significant questions for us regarding the trajectory of your business and future prospects. In addition, we believe it is critical to engage in a rigorous analysis of the achievable synergies from a potential combination. With substantive engagement from Xerox management and access to diligence information on Xerox, we believe that we can quickly evaluate the merits of a potential transaction.”
Stocks We’re Watching
Restoration Hardware (NYSE: RH): Shares of this high-end furniture retailer jumped late last week when Berkshire Hathaway’s Q3 13-F filling revealed the conglomerate had taken a new stake in the company. The stake was likely taken out be Todd Combs or Ted Weschler, two Berkshire portfolio managers who oversee part of its large equity portfolio, and has made the market more optimistic about the stock. RH shares are up more than 57% year-to-date.
Yandex (NASDAQ: YNDX): Shares of this Russian search engine are up nearly 12% this morning after the company announced a $300 million share buyback today. The Moscow Times also reported this morning that Yandex seems to have found a solution to new legislation in Russia that would have regulated foreign ownership of Russian tech stocks. According to the report, Yandex’s recent restructuring is approved of by State Duma representative Anton Gorelkin, who introduced the legislation, which is a win-win for the company and the government that promises to “withdraw the initiative to allow revisions.”
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