Weekly Market Recap

Published Jan. 22, 2022
Activision

WEEKLY MARKET SUMMARY

Dow Jones S&P 500 Nasdaq
34,265 (-4.81%)
4,397 (-5.18%)
13,768 (-6.38%)

Microsoft to Buy Activision Blizzard in All-Cash Deal Valued at $75 Billion

Microsoft agreed to buy Activision Blizzard Inc. in an all-cash transaction worth approximately $75 billion, making it the company’s largest acquisition to date, grabbing a videogame behemoth beset by allegations of workplace misbehavior. If completed, the merger would significantly increase Microsoft’s already massive videogame company, adding a stable of popular gaming titles such as Call of Duty, World of Warcraft, and Candy Crush to the Xbox console business and Microsoft’s own games such as Minecraft and Doom. After China’s Tencent Holdings Ltd. and Japan’s Sony Group Corp., Microsoft said the deal would make it the world’s third-largest gaming company by revenue. After accounting for Activision’s net cash, Microsoft estimates the deal to be worth $68.7 billion. Activision’s stock soared in premarket trade Tuesday after The Wall Street Journal reported that the business was close to a deal with Microsoft. The stock ended the day at $82.31, up 26%. In the midst of a broader market selloff, Microsoft shares slid 2.4 percent to $302.65 on Tuesday.

Oil prices hit more than seven-year highs after attack on UAE

After the United Arab Emirates pledged to respond against Yemen’s Iran-aligned Houthi militia for Monday’s fatal attack on its capital Abu Dhabi, US and worldwide oil prices hit more than seven-year highs Tuesday. The UAE is OPEC’s third-largest oil producer and the world’s seventh-largest oil producer, with a daily output of little over 4 million barrels. West Texas Intermediate crude surged more than 2% overnight to $85.56 a barrel before reversing course.

BofA, Morgan Stanley, P&G, UnitedHealth rise on earnings beats

Before the bell on Wednesday, Bank of America surpassed profit projections thanks to record quarterly asset management and investment banking fees, as well as the release of $851 million in reserves. Revenue for the fourth quarter fell just short of expectations. In the premarket, shares of BofA rose more than 4%. Morgan Stanley reported a quarterly profit that was higher than expected on Wednesday. Morgan Stanley, like BofA, missed sales projections in the fourth quarter. Morgan Stanley’s stock jumped more than 5.5 percent in premarket trading. Procter & Gamble (NYSE:PG) posted earnings and sales for the fiscal second quarter that beat expectations, thanks to pricing increases that helped offset higher commodity and freight costs. The consumer products giant has raised its full-year sales projections. In the premarket, P&G shares were up about 1%. UnitedHealth, which is part of the Dow Jones Industrial Average, reported better-than-expected fourth-quarter profit and revenue, aided in part by growth in its Optum arm, which includes its medication benefits management business. UnitedHealth’s stock jumped more than 1% in premarket trading.

SoFi soars after clearing regulatory hurdle to become a bank

SoFi crossed the final regulatory obstacle to become a bank, and its stock jumped more than 18% in premarket trading on Wednesday. The mobile-first finance firm provides banking services. However, it is not a bank in the traditional sense. It, like many other fintech firms, relies on FDIC-insured banks to hold customer deposits and provide loans. SoFi intends to buy a California community lender in order to become a bank. Last year, the fintech company went public through a SPAC transaction.

American, United see rough first quarter ahead due to Covid

After reporting a fourth-quarter adjusted loss of $1.42 per share on Thursday morning, American Airlines stock climbed 2% in premarket trading. Analysts had predicted a loss of $1.48 per share. The $9.43 billion in revenue was also higher than expected. American expects revenue to be down up to 22% in the first quarter compared to the same period last year, when it generated $10.6 billion in revenues. United Airlines reported a narrower-than-expected adjusted loss of $1.60 per share for the fourth quarter after the market closed on Wednesday. Due to excellent holiday bookings, revenue of $8.19 billion was also higher than predicted. While an increase in Covid cases due to the omicron version has harmed bookings in the short term, the carrier anticipates a better spring and summer. United’s stock dropped 1% in premarket trading.

Intel plans to build a $20 billion chip manufacturing site in Ohio

Intel announced Friday that it will invest $20 billion in two new advanced chip units in Ohio, the first phase in a $100 billion “mega-site” that will include eight semiconductor manufacturers. On the 1,000-acre site just outside of Columbus, the anticipated investment includes 3,000 permanent jobs and 7,000 construction jobs. Intel CEO Pat Gelsinger is spearheading the company’s expansion plans, particularly in Europe and the United States, as it strives to compete with global rivals and respond to a global microprocessor scarcity. Intel broke ground on two plants in Arizona in September as part of its turnaround plan to become a major chip maker for external clients.

Unilever Sets Out Ambition to Expand in Health Products

After announcing a $68 billion approach for GlaxoSmithKline PLC’s consumer-health division, Unilever PLC said it intends to focus more on health, beauty, and hygiene goods at the price of slower-growing food brands, spelling out its greatest strategic shift in years. The manufacturer of Dove soap and Ben & Jerry’s ice cream said Monday that it will buy GSK Consumer Healthcare, which offers everything from Aquafresh toothpaste to Advil medicines, as part of a rejiggering of its portfolio toward higher-growth sectors. Unilever announced on Saturday that it has made a takeover offer for the company, which is controlled 68 percent by Glaxo and 32 percent by Pfizer Inc. Unilever’s largest-ever acquisition, if completed, would dramatically increase the company’s reach in oral care and vitamins, as well as offer it a new footing in over-the-counter medicines. Unilever made three approaches late last year, which Glaxo rejected because they undervalued the firm and its future potential, according to Glaxo. The last offer, received on Dec. 20, valued the company at £50 billion (about $68.4 billion), with £41.7 billion in cash and £8.3 billion in stock, according to the company.

U.S. Existing-Home Sales Reached a 15-Year High of 6.1 Million Last Year

Low borrowing rates and strong buyer demand propelled U.S. house sales to a 15-year high in 2021, and the market is likely to remain hot in the first months of 2022. However, given the recent quick rise in interest rates, some home economists believe the market frenzy will abate in the second half of the year. The National Association of Realtors said Thursday that existing-home sales increased by 8.5 percent year over year to 6.12 million. Last year, home prices climbed at an all-time high across the country. Homes were also selling faster than ever before. Many sold within a week of appearing on the market, forcing purchasers to make hasty judgments on one of their most important life investments. In 2021, low mortgage rates boosted housing demand from all categories of customers, including first-time homebuyers, luxury vacation-home buyers, and investors. During the epidemic, many households saved more money and profited from a booming stock market. Employees who were able to work from home were willing to live further away from their workplaces. A high number of millennials are approaching their early and mid-thirties, which are typical home-buying years.

Nasdaq, S&P Finish Worst Week Since Pandemic Onset

Investors are concerned about the likelihood of increasing interest rates and their impact on valuations, as all three main U.S. indices declined for the third week in a row, continuing their fall into 2022. The S&P 500 and Nasdaq Composite Index both had their worst weeks since March 2020, with the Nasdaq falling for the fourth time in a row. Since October 2020, the Dow Jones Industrial Average has had its poorest weekly performance. To begin the year, investors have shifted their portfolios away from riskier assets. Higher interest rates have taken a toll on high-flying tech stocks and unprofitable company shares, sending the Nasdaq into correction zone. Meanwhile, oil prices and government bond yields have risen in 2022. The Federal Reserve is widely expected to hike interest rates many times this year to combat inflation, which has knocked on stocks. Rapid inflation, according to Fed Chairman Jerome Powell, is a “severe threat” to a full economic recovery. Consumer prices surged to a four-decade high in December, according to data. Despite the hikes, interest rates will remain around historic lows, giving investors hope that markets will recover.
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