S&P 500 Enters Correction Territory, Major Mergers Shake Markets
October 28, 2023
S&P 500 Enters Correction Land
The S&P 500 (SP500) encountered a drawback, dropping by 2.53% within the week to finish at 4,117.37 points. Four out of five sessions ended in losses last week. This downturn drove the benchmark index into a correction phase – its closing price on Friday showed more than a 10% decrease from its highest point this year which it hit on July 31st. This comes shortly after the Nasdaq Composite (COMP.IND) who also entered correction territory just two days earlier.
The weekly pullback can mainly be pinned on a slump in mega-technology stocks. Of the S&P’s 11 sectors, ten were down – Utilities (XLU) being the only sector to record any gains. Energy (XLE) and Communication Services (XLC) had lost over 6% and 5%, respectively while Technology (XLK) saw almost a 2% dip.
Multibillion-Dollar Deals Kick Off Merger Monday
Merger Monday signaled two major multibillion-dollar mergers & acquisitions deals this week . Chevron (CVX) plans to procure Hess Corp. (HES) in a $53B all-stock deal meant to expand its operations into the DJ and Permian Basin regions, announced less than two weeks after Exxon Mobil’s $60B acquisition of Pioneer Natural Resources (PXD). Following this news, Chevron shares dipped by around three percent, while Hess’ share price climbed slightly more than two percent upon announcement of the deal.
With another substantial purchase announcement, Swiss based pharmaceutical company Roche (OTCQX:RHHBY), is set to acquire Telavant Holdingsfrom Roivant Sciences (ROIV) and Pfizer (PFE) expects to pay $7.1B upfront. This transaction will include rights to commercialise a potential new treatment for inflammatory bowel disease in the U.S. and Japan. News of the impending deal initiated an upward surge of approximately 15% in Roivant’s share value.
Bonds and Bitcoin See Major Movements
At present, the bond market is rather volatile as big names like Bill Ackman and Bill Gross predict its future moves almost simultaneously. The 10-year Treasury (US10Y) yield shot up to 5% on Monday and within two months, the 30-year Treasury (US30Y), found itself at an elevated 5.15%. According to SA analyst Adam Vincze, “The Treasury yield curve has remained inverted since last year, pointing towards a probable downturn in the economy – a phenomenon which many infer is cleverly hidden by current swelling budget deficits.” Meanwhile, Bitcoin (BTC-USD) enthusiasts celebrate this week as cryptocurrency briefly touched $35K on Tuesday, boosted by anticipation surrounding possible approval of United States’ first Direct-Investment ETF for bitcoin.
Tech Earnings Report Show Diverse Outcomes
Tech sector earnings season disclosed mixed results, which caused respective company share prices to sway in different directions. Meta Platforms (META) initially saw a rise of nearly 4% during after-market trading on Wednesday when it reported revenues, profits, and user growth exceeded forecasts. However, these gains were short-lived; dwindling nearly 4% by the end of Meta’s earnings call due to warnings about “increased uncertainty” and “turbulence ahead“.
It’s worth noting that Nasdaq Composite Index (COMP.IND), heavily influenced by technology stocks, also found itself in correction territory on Thursday. Meta has been hit by a wave of lawsuits filed by California and numerous other U.S. states, accusing Instagram and Facebook of exploiting youngsters for profit. Similar claims have been made against Snap (SNAP), TikTok, and Google (GOOG, GOOGL) with hundreds of lawsuits filed.
Issues Arise for General Motors’ Cruise
Dire straits surround General Motors‘ (GM) Cruise, its autonomous vehicle branch, after it halted operations citywide in San Francisco. The situation worsened when the company’s permits were revoked by the California DMV following a hit-and-run incident involving one of its self-driving cars on Oct. 2nd.
Management at Cruise admitted that “rebuilding public trust is our biggest focus right now” and announced plans to “proactively pause driverless operations while we review our processes, systems, and tools.” Their operations include but are not limited to cities like Austin, Dallas, Houston, Phoenix, and Miami.