US stocks set to start near record highs; Pfizer slides lower on Mylan merger

Summary:

  • S&P500 remains near Friday’s all-time high

  • Trump weighs in again ahead of Fed decision

  • Pfizer shares drop as Mylan merger announced

 

Stock markets across the Atlantic are set to begin the new week close to where they ended the last with all major indices little changed ahead of the cash session. Friday saw the S&P500 make a new record high and while the Nasdaq  and Dow Jones both failed to chalk up a fresh milestone, they remain within striking distance of all-time peaks. 

The S&P500 hit a new all-time high of 3029 on Friday. There is some negative divergence apparent on the MACD but as of yet there are no reversal signals from the candlesticks. Source: xStation 

 

It’s a busy week on the economic calendar with several big earnings releases (Apple after Tuesday’s close could be of particular interest) due out and the latest jobs report on Friday, but in broader market terms the stand out event is no doubt Wednesday’s Fed decision. Markets have pretty much discounted a 25 bps cut, which should it occur would be the first time in a decade the US central bank has lowered rates, but the key aspect to watch will likely be whether this is a one-off or if there are more cuts to come. 

Donald Trump has been a near constant public critic of Fed chair Powell and the FOMC in the past year calling for rate cuts and the US president has once more taken the opportunity to weigh in with his monetary policy opinions today. Source: Twitter 

 

News that Pfizer is set to combine part of its business with Mylan has caused some sizable moves in both stocks in pre-market trade, with the former called to start in the red and the latter jumping strongly higher. The all-stock deal would see each Mylan share converted into one share of the new company with Pfizer shareholders owning 57% of the combined entity and Mylan the rest. The divestiture relates to Pfizer’s off-patent drug business and will see it join forces with generic drug maker Mylan. Estimates at the combined company’s annual sales are in excess of $20B. In other related news, Pfizer reported adjusted earnings per share of $0.80 for the second quarter, beating estimates by $0.05. Mylan beat the street by $0.08 on the same measure and posted EPS of $1.03. Pfizer shares are called to begin lower by around 2% while Mylan is expected to start firmly higher, somewhere in the region of 15%. 

Mylan shares have plunged by more than 75% from their 2015 peak but the stock is expected to jump this afternoon on the Pfizer merger news. Source: xStation 

 

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