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T3's Take 3: Crude Oil Bounces Around on Saudi Intervention Chatter


Today's financial recap and tomorrow's financial outlook.

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Market Roundup

It was another relatively quiet day in the markets.

The S&P 500 closed down down 0.1% at 2086.59 after some relatively tame back-and-forth action.

The Nasdaq 100 was a bit weaker and closed off 0.3% as index leader Apple (AAPL) weakened. move up from last week.

Biotechnology stocks led to the upside, with the NASDAQ Biotechnology Index ETF (IBB) rallying an impressive 0.7%.

Pharmaceutical stocks also performed well on account of...

A Big Drug Marriage

Today, Pfizer (PFE) announced that it would merge with Allergan (AGN) in a $160 billion transaction. This is the largest tax inversion deal in history, and the largest pharmaceutical merger ever.

The deal is structured with Allergan serving as acquirer, allowing the entity to be headquartered in Ireland to save on taxes. Allergan shareholders will receive 11.3 shares in the new company for each Allergan share they own now.

According to the terms of the deal, Allergan shares are being valued at $336.63 each. However, Allergan shares are trading at just over $300 because political pressures related to the tax inversion could endanger consummation of the merger.

Bloomberg data shows that this deal has pushed announced M&A volume to $3.42 trillion year-to-date, surpassing the $3.4 trillion announced for all of 2007. 

Ups and Downs of Crude

Crude oil went on a bit of a rollercoaster this weekend.

Oil prices fell due to ongoing fears of oversupply conditions, as well as growing anticipation of a Fed rate hike in December, which would presumably push up the dollar and hurt crude oil prices.

Prices then rebounded sharply this morning after Saudi Arabia said it would cooperate with both OPEC and non-OPEC oil producers in stabilizing crude oil markets.

Media outlets interpreted the Saudi news as similar to ECB President Mario Draghi's 2012 pledge to do "whatever it takes" to save the euro, even though no actual OPEC policy changes were announced.

Incidentally, Venezuela said oil would fall into the mid-$20's unless OPEC adopts an "equilibrium price" that would cover the cost of new production.

However, the rally was short-lived and crude oil fell 0.3% to $41.75.

OPEC meets on December 4 in Vienna, which may produce some actual news regarding its attitude towards crude oil prices. 

Tuesday Preview

Tomorrow morning, Trade Balance, GDP, PCE, S&P CaseShiller Home Price, Consumer Confidence, and Richmond Fed numbers will be released.

Overseas, Japan will release its Monetary Policy Meeting Minutes, and Germany will see its Ifo Business Climate report.

Campbell Soup (CPB)Tiffany & Co.  (TIF), and HP (HP) report earnings.
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