Stocks crept higher at Wednesday’s open as telecom and entertainment stocks continued to respond to Tuesday’s U.S. district court ruling allowing AT&T (T) and Time Warner (TWX) to merge. Beyond the sectors affected by the ruling, markets set up in a holding pattern ahead of this afternoon’s policy announcement from the Federal Reserve.
21st Century Fox (FOX) led early advancers, with Time Warner, Discovery Communications (DISCA) and CBS (CBS) also making strong, related moves. AT&T, Comcast (CMCSA) and H&R Block (HRB) posted some of the heaviest early declines.
The Dow Jones industrials and the S&P 500 fought to hold fractional gains. The Nasdaq Composite gained almost 0.2%.
AT&T/Time Warner Ruling Triggers Media Scramble
A federal judge in Washington late Tuesday threw out the U.S. Justice Department’s effort to block AT&T’s $85.4 billion acquisition of Time Warner. The judge said the DOJ case, which echoed promises made by Donald Trump during his 2016 presidential campaign, was too weak to consider an appeal.
The ruling throws open the door to a broad range of restructuring among telecom and entertainment names struggling to adapt to competition brought by Netflix (NFLX), Facebook (FB), Alphabet’s (GOOGL) Google and other huge new-media venues. (For updates on this story and other market coverage, visit stock news today)
Meanwhile, Disney inched up 0.5%. Disney inked a $52.4 billion deal in December to acquire the bulk of 21st Century Fox. But Comcast also wants those assets, and investors anticipate a bidding war now that the AT&T-Time Warner deal has gone through. In response, Comcast dropped 3.3%. Fox vaulted 7% higher.
As a result, 21st Century Fox and Discovery Communications posted the two largest premarket gains among Nasdaq 100 issues. Fox, Time Warner and CBS led the S&P 500.
While H&R Block dived to the bottom of the S&P 500 on disappointing quarterly results, Comcast and AT&T held the next-largest declines. Comcast was the worst performer among Nasdaq 100 stocks in premarket trade.
Merck Rises On FDA Review; Netflix, Twitter Jump
On the Dow, Intel (INTC) and Goldman Sachs (GS) set up early leads, up 0.6% apiece. Merck (MRK) ticked 0.2% higher. The Food and Drug Administration agreed to a priority review to possibly expand the permissible age range for Merck’s human papillomavirus vaccine, Gardasil 9. Merck shares are in a buy range above a 61.10 buy point in a bottoming base.
On the IBD 50 list, Twitter (TWTR) again swung to an early lead, up 1.2% at the open. The stock is working on its fourth straight weekly gain since clearing a 33.88 buy point in a cup-with-handle base in May. Shares are up more than 20%, placing the stock in a profit-taking zone.
Earnings: Pivotal, Korn Ferry, Bitauto Spike
Pivotal Software (PVTL) blasted 19% higher, sending the April IPO to take a new high. Pivotal reported after Tuesday’s close fiscal first-quarter revenue that blasted past analyst expectations, while losses were less than forecast. The San Francisco-based company also hoisted second-quarter earnings and revenue guidance above estimates. The stock is extended after clearing an IPO base on June 6, ending Tuesday up 41% from its April IPO at 15 a share.
Korn Ferry International (KFY) jetted ahead 20% following its fiscal fourth-quarter report. The staffing services firm’s results topped analyst expectations, particularly on the revenue line. Management issued strong first quarter earnings and revenue guidance, and announced a rebranding plan that would collect the company’s sub-brands under a single name. Shares are extended, up 25% since clearing a flat base in March.
China-based Bitauto Holdings (BITA) jumped 9%. The online auto shopping and marketing service turned in first-quarter earnings slightly below consensus targets. But revenue topped views by a wide margin. The stock ended Tuesday 45% above an April low, attempting to climb the right side of a deep, eight-month consolidation.
H&R Block careened 20% lower. The accounting firm reported fiscal fourth-quarter sales and earnings comfortably above analysts targets. Full-year revenue guidance was just below consensus expectations, however, as the company said discount pricing would affect its top-line performance. The stock had been climbing the right side of an 11-month base.
Fed News Could Cause Late Shift
Banks, financial stocks and other interest-rate sensitive portions of the market could kick into action late in Wednesday’s session. That would depend on the outcome of the Federal Reserve’s policy announcement, which comes out at 2 p.m. ET, and press conference, which begins at 2:30 p.m. The market has for the most part baked in expectations for a quarter-point rate hike, putting the Fed’s target at between 1.75% and 2%. But hints as to whether Fed strategy might include one or two more rate increases during the remainder of the year could cause adjustments, and a shift in tone, late in the session.
Oil Price Eases Ahead Of Data
Oil prices could also factor into Wednesday’s action, pending the results of weekly data due out from the Energy Information Administration at 10:30 a.m. ET. Weekly data from the American Petroleum Institute on Tuesday showed a lighter-than-anticipated 730,000-barrel decrease in oil inventories (vs. forecasts for a 2.7 million-barrel decline). Gasoline supplies unexpectedly rose by 4.3 million barrels. West Texas Intermediate futures traded 0.6% lower ahead of the open, dipping just below $66 per barrel.