Stocks are down at midday as Microsoft (MSFT), Apple (AAPL) and other big tech names are leading markets lower with their losses. Japan has reported two deaths and South Korea confirmed its first fatality from the coronavirus and a report said the illness was spreading in Beijing, all of which are keeping investors on edge with the U.S. market near record highs.
ECONOMIC EVENTS: In the U.S., initial jobless claims rose 4,000 to 210,000 in the week ended February 15, matching expectations. The Philly Fed manufacturing index surged 19.7 points to 36.7 in February, which was much stronger than forecast. The leading economic index popped 0.8% to 112.1 in January, hitting a new all time high.
TOP NEWS: There was plenty of M&A news this morning, headlined by Morgan Stanley's (MS) $13B all-stock deal to acquire E-Trade (ETFC). E-Trade stockholders will receive 1.0432 Morgan Stanley shares for each E-Trade share, which represents per share consideration of $58.74 based on the closing price of Morgan Stanley common stock on February 19. Following the announcement, Wells Fargo analyst Mike Mayo downgraded Morgan Stanley shares to Equal Weight from Overweight with a price target of $58, down from $65, as he estimates $1.5B or more of "value destruction" related to the transaction.
In other deal news, L Brands (LB) and private equity firm Sycamore Partners announced a strategic transaction that will position Bath & Body Works as a standalone public company and separate Victoria's Secret Lingerie, Victoria's Secret Beauty and PINK into a privately-held entity. Victoria's Secret, with a total enterprise value of $1.1B, will be separated from L Brands into a privately-held company majority-owned by Sycamore, which will purchase a 55% interest in Victoria's Secret for approximately $525M. Upon closing, Les Wexner will step down as CEO and Chairman of the Board of L Brands, though he will remain a member of the board as Chairman Emeritus.
Additionally, Dialog Semiconductor (DLGNF) announced an agreement to acquire all outstanding shares of Adesto Technologies (IOTS) for $12.55 per share in cash, or for approximately $500M enterprise value.
On the earnings front, shares of ViacomCBS (VIAC) are down 17% following the company's first quarterly report since its merger closed in early December. The combined company's earnings performance and outlook trailed analysts' consensus estimates, though there may be some issues of comparability as the company noted a "significant" set of merger-related items that were a headwind in the fourth quarter.
Also lower following earnings was Six Flags (SIX), which has plunged 18% after the company's report included a dividend cut, significantly lowered financial outlook, a promise of a new strategic direction for the company, and a new CFO.
MAJOR MOVERS: Among the noteworthy gainers was Domino's Pizza (DPZ), which rose 23% after it reported better than expected quarterly results and raised its quarterly dividend 20%. Also higher after reporting quarterly results were Stamps.com (STMP) and Community Health (CYH), which gained a respective 58% and 40%.
Among the notable losers was Teva (TEVA), which fell 2% after Phase 2/3 trials in deutetrabenazine failed to meet the primary endpoints. Also lower were Tivity Health (TVTY) and Aaron's (AAN), which dropped 45% and 20%, respectively, after reporting quarterly results.
INDEXES: Near midday, the Dow was down 271.82, or 0.93%, to 29,076.21, the Nasdaq was down 131.67, or 1.34%, to 9,685.51, and the S&P 500 was down 31.97, or 0.94%, to 3,354.18.
