The Bonds Are Back In Town
- New week, new markets: U.S. markets closed higher across the board to offset some of last week’s plunge. Believe it or not, a long-awaited rise in oil helped push up stocks—a real surprise following last week’s frightening 10% decline.
- It wasn’t all great, though: markets actually fluctuated throughout the day as Friday’s junk bond selloff continued. Moral of the story: high yields don’t always equal high rewards.
- While junk bonds tanked, the more stable government bond market didn’t fare much better, seeing its largest jump in yields since October. Simply put, government bonds are stuck between a rock and a hard place: panic in more risky assets like stocks and high-yield bonds should push investors towards the risk-free nature of government bonds (pushing yields lower), but yesterday that was outweighed by expectations that the Federal Reserve will raise rates on Wednesday.
Victims of the Dreaded Hike
We’ve all heard about the nearly-inevitable interest rate hike that’s set to be announced on Wednesday by the Fed. We’ve also heard about the global economy’s recent slowdown. Here’s what we’re trying to get at: an interest rate hike may be the right thing for a somewhat-strengthening U.S. economy, but it could have dire consequences for developing economies around the world, such as Brazil. Higher interest rates at home means a stronger dollar, which means more expensive loans—not so great for economies lacking in funds.
Newell Rubbermaid, the commercial and consumer products conglomerate, agreed to purchase rival Jarden for a hefty $15 billion in cash and stock. The deal throws together brand names like Sharpie and Yankee Candle under one new roof, dubbed Newell Brands. Both companies have seen astounding growth this past year, and the merger will only help through some sweet cost savings: we’re talking $500 million in reduced distribution costs, setting Newell Brands up nicely for a successful future.
Shell Dumps Thousands
Shell’s merger with BG Group may be good news for both companies, but it spells trouble for their employees. The merger, slated to take place in 2016, will lead to around 2,800 Shell layoffs. That may be rough, but it comes as no surprise from Shell, which has already let 7,500 people go this year. Many are blaming low oil prices for the layoffs, but 2016 is a new year. Hopefully this next round of layoffs will be the last.
TODAY IN TECH
Dell/EMC/VMware: It’s Complicated
Remember the massive $67 billion Dell-EMC deal announced in October? Well, it’s getting more complicated. Here’s the lowdown: EMC owns 80% of VMware. In the process of merging with Dell, EMC planned on stuffing its cloud computing business with VMware’s business in a joint venture dubbed Virtustream. This reorganization was another complication on top of the already confusing merger dynamics, leading VMware shareholders to believe that the company would suffer as a result of poor focus from management. It’s no surprise then that VMware has walked away from the Virtustream venture with EMC.
- Monday: VeriFone Earnings
- Tuesday: Consumer Price Index; Housing Market Index
- Wednesday: Federal Reserve Meeting; Housing Starts; Industrial Production; FedEx, Oracle Earnings
- Thursday: Weekly Jobless Claims; General Mills, Accenture Earnings
- Friday: BlackBerry, Carnival, Darden Restaurants, Carmax Earnings