Once again reversing course, the market countered the pullback that got started last week with a solid gain today. All told, the S&P 500‘s close of 2066.66 was 0.98% better than Friday’s closing level. The news came on the heels of a disappointing Empire Manufacturing report, perhaps giving Janet Yellen a bit more breathing room before imposing the next interest rate hike.
Here’s the deal.
Office Depot Inc (ODP)
Just three trading days after a federal judge agreed with the Federal Trade Commission that the proposed pairing of Office Depot and Staples, Inc. (NASDAQ:SPLS) should not be allowed to happen, which sent ODP shares 40% lower as a result, the stock was under fire again on Monday.
However, today’s dip was a more muted 5% stumble — the drop to a new multi-year low close has ODP investors wondering of they’ll find any relief at any point in the foreseeable future.
The weakness precedes a post-close conference call that will discuss the retailer’s plans from here, without Staples as a partner. The renewed selling suggests investors don’t anticipate anything impressive to be offered during the call.
Time Warner Cable Inc (TWC)
Superficially speaking, Time Warner Cable shares should be up today. Late last week the ballyhooed merger of it and Charter Communications, Inc. (NASDAQ:CHTR) was given the final approval needed, opening the door to greater scale and a more monopoly-like hold on consumers. Yet, the 2.6% tumble TWC shares took today (not to mention the 5% slide CHTR shareholders suffered) says the market is less than thrilled with the plan now.
Some would argue that the last leg of the deal — California’s approval — imposed some significant requirements on the now-combined cable providers. A closer look at the requirement, however, makes it clear it isn’t exactly a burden.
No, the bulk of the reason CHTR and TWC shares both moved into the red on Monday is mostly a “buy the rumor, sell the news” effect.
Time Warner Cable shares rallied 20% between February and last week in anticipation of the news. Charter gained more than 30% during the same timeframe. From here, speculators are taking profits simply because the upside of the trade has been more than fully realized.
Aduro BioTech Inc (ADRO)
Finally, small-cap Aduro BioTech was hit especially hard on Monday following reports that its pancreatic cancer drug CRS-207 failed to meet its phase 2b efficacy goals.
The failed trial is clearly a setback for ADRO, as it would be for any other biotech company. The market and media’s response to the bad news from Aduro BioTech was especially brutal though, with 24/7 Wall St’s headline “Is This the Beginning of the End of Aduro BioTech?” effectively summing up the market’s assessment of the report.
ADRO closed more than 16% lower on Monday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.