The stock market today has gotten off to a relatively moderate start. Stocks closed the week strong last week. Comments made by Fed President Powell helped ease concerns about an aggressive year for rate hikes in 2019. There will be several key focus points to pay attention to and be mindful on January 7.
1. Eyes on Biotechnology Stocks In The Stock Market Today
Big biotech deals and major Phase results have helped give the biotechnology sector and stock in it a nice boost on Monday. Leading the pack has been the deal between Eli Lilly (LLY) and Loxo Oncology (LOXO). The juggernaut biotech firm plans to buy Loxo for roughly $8 billion in cash. As a result of the deal, Eli Lilly will be picking up a large portfolio of medicines that target cancers caused by rare gene mutations.
This is the biggest deal in the cancer therapy market conducted by Lilly and kick starts the year for the company. Thursday, Bristol-Myers (BMY) bought out Celgene (CELG) for a cool $74 billion creating yet another monster in the cancer drug business.
This deal may not be the only big deal to look at from Lilly. In May, Lilly said it would buy Armo Biosciences Inc for $1.6 billion to expand its portfolio of drugs that help the body’s immune system fight cancer. Furthermore, Lilly Chief Financial Officer Joshua Smiley told Reuters late last year that the company was looking to make similar acquisitions using $4 billion the company amassed as part of its divestiture of animal health unit Elanco.
2. Trade Talks Start Between China & The US
Two days of talks are underway between the US and China. The site city is Beijing and of course, investors are looking for good news to come out of it. The two world powers have until March 1st to make a deal. If this doesn’t happen by the deadline, President Donald Trump has said he would bump up tariffs to 25%. This will be up from 10% and on $200 billion worth of Chinese imports.
The tariffs have had their own negative impact on global markets for months now. Fears of a further economic slow down have weighed heavily on a number of sectors including tech and industrials.
3. Pay Attention To Energy Stocks
With oil prices jumping even higher during the pre-market hours of the stock market today, energy will be in focus. Hopes of a favorable outcome from the US-China trade discussions have been a boon to sector prices. Benchmarket Brent crude futures jumped about 3% from its previous close to nearly $59 per barrel. US West Texas Intermediate (WTI) crude oil futures are looking to close in on $50 per barrel and up by almost 3% as well. A note from Goldman Sachs (GS) said that cuts could end up boosting spot crude prices this year in reference to inventories going back to the 5-year average. Even with the probable outcome of an economic slowdown, crude prices have been supported by cuts in supply that began late last year by OPEC and non-OPEC Russia.
4. Non-Manufacturing PMI In Focus at 10AM ET
Part of the reason futures pulled back this morning for US equities had to do with the outcome of the ISM figures to be delivered at 10AM ET. The numbers are expected to show a decline that is more modest with non-manufacturing PMI coming in at 59.6; a decline from 60.7 in November. But the fear is coming from a potential downside surprise. We saw a similar reaction to last week’s manufacturing index.