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T3's Take 3: Stocks Trade Lower Despite Deal Mania


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


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After weeks of speculation that SanDisk (SNDK) would be acquird, today it was finally announced that Western Digital (WDC) will acquire the company for a cool $19 billion, about $86.50 a share. Western Digital CEO Steve Milligan stated that the combined company will be ideally positioned to capture growth opportunities in the rapidly evolving storage industry. SanDisk was suffering from oversupply and declining sales in flash drives as consumer habits have changed. SanDisk shares closed up 2.1% at $76.58, while Western Digital shares fell 4.6%. 

We had another major chip deal today, with Lam Research (LRCX) acquiring KLA-Tencor (KLAC) for $10.6 billion. The merger will increase process control, and strengthen customer relationships by reducing variability and accelerating yield.  

Lam Research shares finished up 1.1%, while KLA-Tencor shares soared 18.8%. 

And finally, Silver Lake Partners and Thoma Bravo announced an acquisition of SolarWinds (SWI) for $4.5 billion in cash, or $60.10 per share. Management stated that operating as a private company will give SolarWinds more flexibility to execute its long-term strategy SolarWinds shares surged 16.2% to $58.31.  

Biotech Roundhouse

Biotech giant Biogen (BIIB) reported earnings this morning. EPS beat by $0.69, coming in at $4.48. Revenue was $2.8 billion vs. the $2.6 billion consensus. After the report, the company announced it would slash 11% of its workforce, and cut development programs. The restructuring is expected to save the company $250 million a year. The restructuring comes amid struggles in some of its multiple sclerosis drugs. One drug saw a slowdown in growth, while another failed late-stage clinical trials. Biogen shares closed up 4.0%.

Valeant Pharmaceuticals (VRX) made headlines today after controversial research firm Citron Research published a note starting that Valeant was using specialty pharmacies to record fake sales. Citron compared Valenat to Enron. Valeant shares immediately plummeted nearly 30%, but crawled higher throughout the day after high-profile hedge fund manager Bill Ackman raised his stake in Valeant.

World Equity Markets

Asian stocks were mixed. The Shanghai Composite closed down 3.5%, its worst one-day performance in a month  amid a sell-off in small-caps. The Hong Kong Hang Seng fell about 0.4%.

Japan's Nikkei jumped 2% after weaker than expected trade data brought back investors' hope for more stimulus. Financials and automakers rallied about 2%. Electronics makers such as Sony (SNE) and Canon (CAJ) jumped over 3%. The Korean Kopsi rallied 0.2%.

Europe finished mostly up. The German DAX gained 0.9%, and the French CAC rallied 0.5%. The focus now turns to tomorrow's ECB meeting. Investors will be eyeing the bank's discussion of whether or not to increase its $1.1 trillion bond-buying program.

US stocks were mixed as well today. The S&P 500 finished down 0.5%. Several big names reported earnings, with General Motors (GM) rising sharply on an impressive earnings beat. Coca-Cola (KO) went sideways after a revenue miss.

Thursday's Financial Outlook

US economic data for tomorrow will include the Chicago Fed Nat Activity Index, jobless claims, FHFA house price index, existing home sales, leading index, and Kansas City Fed manufacturing activity. 

Overseas economic data will feature British retail sales, the ECB rate decision, Canadian retail sales, euro-zone consumer confidence, China property prices, Japan's PMI, and China's conference board leading index.

3M (MMM), Caterpillar (CAT), McDonald's (MCD), Raytheon (RTN), and United Continental (UAL) will report earnings before the open tomorrow.

After the close, Alphabet (GOOG), Amazon (AMZN), AT&T (T), Capital One (COF), Microsoft (MSFT) will release their earnings after the close. 

No positions in stocks mentioned.
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