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from Counterparties:

MORNING BID: Running on Empty

The most interesting developing trend in the U.S. equity market has been the recent stumble in the biotech and momentum-oriented names, be it Gilead Sciences, Biogen, Netflix or a few others. The biotechs were a group often cited as having entered a "parabolic" stage, which in market parlance refers basically to "going up and up and up in a straight line." The move wasn't anything on the order of the homebuilders during the housing bubble of 2006 to 2007, or the tech giants during the latter stages of the tech run - a 300 percent gain versus 700 to 800 percent gains back in the other cases. That doesn't mean we won't see an ongoing breakdown, though some of the selling abated late in the Monday session.

But the Nasdaq Biotech Index has now dropped sharply through its 50-day moving average. More worryingly, the Nasdaq Composite sits just five points above its 50-day moving average of about 4221, and the Nasdaq 100 barely managed to close above that level as well on Monday. "Three consecutive down days have been a rare occurrences in this tape," said Michael O'Rourke, chief market strategist at JonesTrading. "That makes the intraday lows registered today in both single stocks and the indices important support levels to watch. Violations of those levels should be problematic."

The thing is, there aren't a lot of catalysts to push those stocks - or those of 3-D printer stocks, like 3D Systems, which is down 38 percent year-to-date, or Xone Systems, down 42 percent for the year, and Voxeljet, down 35 percent on the year. Some of this reflects concerns about slowed economic growth, or perhaps that investors have had their fill of these types of stocks when the market is facing quite a bit of uncertainty. A number of strategists have pointed out how the Federal Reserve's reversal of its bond-buying campaign hasn't unduly affected the equity market. That's true in the broadest sense, that major indexes like the S&P still track pretty close to record levels despite valuations that are a bit dear to many.

But one area where you see the reaction to less money flopping around is that it runs away from names that have had their way for a while.

from Breakingviews:

Food deal shows how investors eat up synergies

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By Robert Cyran
The author is a Reuters Breakignviews columnist. The opinions expressed are his own.

Sysco’s acquisition of US Foods shows how investors are eating up synergies. The $3.5 billion purchase, revealed on Monday, received a rapturous reception, with the buyer’s market valuation surging by as much as a quarter – or $5 billion – before giving up some gains. Hefty cost cuts help the merger math.

from Breakingviews:

Disney magic hasn’t exactly worked on Pixar

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By Jeffrey Goldfarb and Grace Dai
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

 

 

Walt Disney boss Bob Iger has another Pixar hit on his hands. “Monsters University” should provide an eighth consecutive animated lift to Disney’s bottom line when it reports quarterly results on Tuesday. The upcoming “Planes,” derived from Pixar’s “Cars,” is bound to be a success, too. But a Breakingviews analysis suggests the studio’s value to the Magic Kingdom falls short of the $7.4 billion purchase price. High-priced deals for Marvel and Lucasfilm may also disappoint investors in the long term.

from Breakingviews:

Elon Musk has to sell 540,000 Teslas a year

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By Antony Currie
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Chief Executive Elon Musk has to sell 540,000 Tesla vehicles a year. At least that’s what may be needed for the electric automaker to be worth $43 billion, according to a Breakingviews calculator. Reaching that stock market valuation by 2022 is one target in Tesla’s rocket-scientist founder’s long-term incentive plan. Hitting that and 10 operational targets could, on simplified assumptions, bag him up to $1.8 billion.

from Breakingviews:

Deal prospects make Vodafone look cheap

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By Quentin Webb and Robert Cyran
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Deal prospects make Vodafone look cheap. An optimistic reading of the underlying valuations suggests M&A could deliver shareholders in the London-listed mobile giant perhaps 35 percent more value than they have now. That’s an extra 31.5 billion pounds ($47.6 billion). But unlocking this would entail huge deals and huge headaches to match.

from Global Investing:

Abenomics rally: bubble or trend?

"Abenomics" is the buzzword in Japan these days -- it refers to Prime Minister Shinzo Abe's aggressive reflationary fiscal and monetary policies that triggered the yen's 10 percent decline against the dollar and 17 percent rally in Tokyo stocks this year.

So it's no wonder that the Japanese mutual fund market, the second largest in Asia-Pacific, enjoyed the largest monthly inflows in almost six years last month, raking in as much as $11 billion.

from Breakingviews:

SolarCity IPO valuation approaches earth

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By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

SolarCity’s underwriters have come down closer to earth. The U.S. solar panel installer slashed its expected initial public offering price by more than 40 percent at the last moment to $8 a share. The old price of $14 at the middle of the range, equating to some six times expected 2012 revenue, always looked starry-eyed. The new price merely requires optimism.

from Breakingviews:

If Apple becomes Microsoft, investors should cheer

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By Robert Cyran and Richard Beales
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

If Apple becomes Microsoft, investors should cheer. At least, that is, for their wallets. Middle age for technology stocks can hurt as shareholders looking for rapid growth lose interest and value-oriented owners await stability. But Apple has already made the transition - before its growth has slowed much. Even if its next decade echoes Microsoft’s last, the company is worth over $1 trillion.

from Breakingviews:

FT sale would defy today’s financial times

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By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A sale of the FT would surely defy the financial times the newspaper documents. The impending departure of Marjorie Scardino as chief executive of Pearson, parent company of the Financial Times, makes a change of ownership more likely. Her replacement said on Wednesday the publication is a “highly valued” asset. But the paper’s status could make it more valuable to someone else.

from Breakingviews:

Pandora’s income stream on congressional playlist

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By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Pandora’s income potential could soon be set loose. New U.S. legislation proposes to recalibrate how music royalty payments are made for online radio companies. Such costs lock up about half of Pandora’s revenue. A new Breakingviews calculator shows just how much value could be released by reducing them.

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