Daily Stock Market Update — Wednesday, June 13th
U.S. stocks are mixed Wednesday after the Federal Reserve raised interest rates and said it expects to increase rates two more times by the end of the year. Banks are rising, as they stand to make more money on lending. Bond yields are higher and big-dividend stocks like real estate investment trusts are falling.
A federal court ruled that AT&T’s $85 billion purchase of Time Warner can proceed, and that’s sending ripples through the market as investors bet that hundreds of billions’ worth of deals in the media, telecommunications and health care industries stand a better chance of getting approved.
KEEPING SCORE: The S&P 500 index remained at 2,785 as of 3:20 p.m. Eastern time. On Tuesday the benchmark index closed at its highest level since late January, when investors began worrying about a sharp pickup in inflation. The Dow Jones industrial average lost 19 points, or 0.1 percent, to 25,301.
The Nasdaq composite also wobbled but turned higher again, rising 23 points, or 0.3 percent, to 7,726. The Russell 2000 index of smaller-company stocks lost 2 points, or 0.2 percent, to 1,679. Both of those indexes finished at record highs Tuesday.
Most of the stocks on the New York Stock Exchange traded lower.
FED GOING FOR FOUR: Policymakers at the Federal Reserve plan to raise interest rates four times this year, as they expect inflation to increase at a faster pace and slightly exceed their target of 2 percent. Their projections show unemployment falling to a 50-year low later this year. The increase in rates Wednesday was the second this year.
The decision sent stocks lower, as many investors hoped the Fed would only raise rates three times this year. But the Fed’s view didn’t come as a shock after months of signs that economic growth and inflation are picking up.
Bond prices slumped. The yield on the 10-year Treasury note rose to 2.98 percent after it traded at 2.95 percent just before the Fed’s decision was announced.
The dollar rose to 110.55 yen from 110.33 yen. The euro rose to $1.1773 from $1.1750.
CABLE CONNECTION: Late Tuesday a judge approved AT&T’s $85 billion purchase of Time Warner and rejected the government’s argument that the deal would stifle competition and lead to higher cable bills. The purchase will give the wireless and cable giant control of CNN, HBO and the Warner Bros. movie studio. Time Warner climbed 2.2 percent to $98.36 while AT&T lost 5.7 percent to $32.40.
Media companies rallied. Netflix gained 5 percent to $382.28 and CBS gained 3.7 percent to $54.30.
WHAT’S NEXT?: Investors are waiting for Comcast to officially announce an all-cash offer for Twenty-First Century Fox’s entertainment businesses, and Fox surged 6.9 percent to $43.36 while Comcast rose 0.6 percent to $32.58. Comcast has said it’s preparing an offer but was waiting for the outcome of the AT&T case. Fox has agreed to sell those businesses to Disney for $52.4 billion in stock, setting up the possibility that Disney will have to raise its offer. However Disney added 2 percent to $106.40.
Investors felt that CVS’s effort to buy health insurer Aetna is more likely to go through, and they felt similarly about Cigna’s offer for pharmacy benefits manager Express Scripts. T-Mobile USA and Sprint made smaller gains. Investors have been skeptical the government would allow the third- and fourth-largest wireless carriers to combine.
THE QUOTE: Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said the ruling is probably a good sign for the two health care deals because, like AT&T and Time Warner, those acquisitions won’t reduce the number of companies competing in an industry, unlike a Sprint-T-Mobile merger. But investors might be drawing overly broad conclusions from Judge Richard Leon’s ruling, Gordon said.
“The judge’s decision is based on some very particular facts of the AT&T-Time Warner case,” he said, including the growing popularity of streaming services and greater competition for advertising revenue. “This isn’t a case that’s about a big sweeping legal philosophy.”
ENERGY: Benchmark U.S. crude rose 0.4 percent to $66.64 a barrel in New York. Brent crude, used to price international oils, gained 1.1 percent to $76.74 per barrel in London.
Wholesale gasoline added 1.7 percent to $2.13 a gallon. Heating oil picked up 1.1 percent to $2.19 a gallon. Natural gas advanced 0.8 percent to $2.97 per 1,000 cubic feet.
METALS: Gold added 0.1 percent to $1,301.30 an ounce. Silver gained 0.6 percent to $16.99 an ounce. Copper inched up 0.1 percent to $3.25 a pound.
OVERSEAS: Germany’s DAX rose 0.4 percent. France’s CAC 40 and the FTSE 100 in Britain took tiny losses.
The Nikkei 225 in Japan rose 0.4 percent and South Korea’s Kospi fell less than 0.1 percent. Hong Kong’s Hang Seng dropped 1.2 percent.
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