foxex: Defense

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Monday's Headlines

1. Markets Rise on a Merger Monday
2. Raytheon and United Technologies Tie Up
3. Data Analytics Firms are in Style
4. Mira, el Peso

Markets Closed

Dow
26,062.68 +0.30%

S&P
2,886.73 +0.47%

Nasdaq
7,823.17 +1.05%

VIX
15.94 -2.21%

Bitcoin
$7,945.38 +2.82%

US 10-Yr Yield
2.143 +2.83%

Markets Rise on Mexico Deal and Mergers

"Tenemos un trato." "We have a deal."

The U.S. and Mexico reached an agreement on tariffs earlier today, as expected, which helped boost investors' confidence, sending U.S. markets up for the fifth day in a row.

President Trump had threatened to impose a 5% across-the-board tariff on Mexico unless the Mexican government did more to restrict the flow of Central American migrants into the U.S.

Apparently, the Trump administration heard what it wanted to hear from Mexican President Lopez-Obrador, and the threat was dropped.

U.S. automakers and electronics companies rallied on the news, as did the broader market until the final hour of trading. While all U.S. markets closed in positive territory, they were well off session highs at the final bell. (James has more on how the Mexican peso reacted in our daily chart, below.)

Massive Merger in Aerospace/Defense

Raytheon and United Technologies agreed to a $166 billion merger that would make the combined company, which will be called Raytheon Technologies, the second biggest defense contractor on the planet, behind Boeing. In what the companies are calling a 'merger of equals', United Technologies would own 57% of the combined entities to Raytheon's 43%. Surprisingly, the two companies do not compete with each other for contracts, and a merger would bring together Raytheon's Tomahawk missile systems with United Technologies capabilities in jet engine manufacturing.

United Technologies split its company into three units last November which include Otis Elevators, Carrier HVAC Systems and its Aerospace division, which is the one merging with Raytheon.

Raytheon gets about 75% of its business from the U.S. Dept. of Defense, while United Tech. gets about 25% from the agency.

If the the merger goes through, it will leave four major U.S. defense contractors out on their own. They are Lockheed Martin, General Dynamics, Northrup Grumman and Boeing.

All 6 of those defense contractors traded lower today, including Raytheon and United Tech.

Data and Analytics Firms are Hitting Pay Dirt

The hottest sector of the market right now is not cannabis or crypto, for a change. It's data and analytics, and the companies that are great at it are getting paid.

Last week, we saw Google acquire Looker for $2.6 billion. Google bought Looker to combine it into its Google Cloud business, so that it can provide better analytics to its cloud customers and the ability to crunch and visualize complicated data sets for its customers.

Today Salesforce said it would acquire Tableau Software for $15.7 billion. Tableau, like Looker, helps companies analyze and visualize large data sets. Salesforce became the biggest CRM (Customer Relationship Management) company in the world over the past decade, and helps companies generate and manage enormous amounts of data on their customers.

Why it Matters

There is a pattern here. Business is all about data, and all data is being stored in the cloud. But data, without the ability to analyze and visualize it in meaningful ways, is just a bunch of bits and bytes. The ability to take that data and use it to make meaningful business decisions with the assistance of machine learning or Artificial Intelligence, is where the rubber meets the road in 21st century business. Expect to see more action in this space.

Plus... if you can make beautiful data visualizations like this, who wouldn't hire you?

Beyond Meat Is Beyond...

Beyond Meat, the plant-based food company famous for its 'Beyond Burger', closed today up 570% from its IPO price of $25. That's not a typo.

At one point today, the company's shares were up 600% from its IPO price, as ravenous investors piled into the stock like it was the only company worth buying.

The company reported its first quarter as a public company last Thursday, and it told investors that it expects revenues to more than double next year.

Still, the company lost $6 million on sales of only $40.2 million in the past quarter.

At $168 per share, Beyond Meat has a market value of $9.65 billion.

That, according to market researcher, Charlie Bilello, makes it bigger than Shake Shack, Wendy's. Jack in the Box, and Red Robin Burgers. Combined.

chart courtesy Charlie Billelo and YCharts

More News:

American Eagle Stock Is Below 'Reversion to the Mean'

Why Contrarians Say China's Rare Earth Trump Card May Backfire

4 Ways to Play Equities if the Fed Cuts Rates

chart courtesy www.koyfin.com

Macy's popped more than 6% today, as President Trump announced that he would not be imposing tariffs on Mexico, as threatened last week. Meanwhile, Analog Devices stock rose nearly 6% today, as a Goldman Sachs analyst double upgraded shares from sell to buy.

Salesforce dropped more than 5% today, on news that the company would be buying the big data firm Tableau for $15.7 billion, as we discussed above.

Word of the Day

Mexican Peso

In the late 18th century, the Mexican Peso was used as a benchmark for all North American countries. On July 6, 1785, the US Dollar was valued at a rate comparable to the Peso, and was widely used as currency in the United States well after USD bills were introduced.

The Mexican Peso is one of the oldest currencies in North America. Its original design follows from the Spanish silver dollar and original eight pieces. It was an official tender in both the U.S.A and Canada until the mid-1850s. To be precise the U.S.A until 1857 and Canada until 1854 accepted Mexican Pesos along with other coins. The Mexican peso is the descendant of the Original eight piece that the Spanish government issued in Mexico. Mexico continued the same pattern for their currency after gaining their independence.

"MXN is the currency abbreviation for the Mexican peso which is the official currency of Mexico. The Mexican peso is made up of 100 centavos and is often presented with the symbol $ or Mex$. The name peso comes from the Mexican word 'pesos' which means 'weights' and refers to gold or silver weights."

source: Oanda and currencyinformation.org

Today in History

June 10th, 1752 - Benjamin Franklin flies a kite during a thunderstorm and is able to demonstrate the connection between lightning and electricity. He coined a number of terms used today, including battery, conductor and electrician. Franklin also invented the lightning rod, used to protect buildings and ships.

Ben Franklin was of course, among other things, an author, a printer, a political theorist, an inventor and a Founding Father of the United States. We're filing this episode under inventor.

Chart of the Day: Relief Rally for Mexican Peso on Averted Mexico Tariffs

The Mexican peso rallied sharply against the U.S. dollar on Monday in a strong reaction to the apparent resolution of the tariff conflict between the U.S. and Mexico. A little more than a week ago, President Trump threatened to impose a 5% tariff on all goods imported into the U.S. from Mexico. This threat was contingent upon the U.S. and Mexico coming together on a deal to address illegal immigration. On Sunday, Trump announced that the tariffs would be suspended indefinitely, prompting extended rallies in equity markets on Monday.

Aside from stocks, the Mexican peso was a major mover that surged sharply in a relief rally after tumbling against the dollar more than a week ago in the immediate aftermath of Trump's initial tariff threat. As shown on the chart, the large bearish candlestick on the far right represents Monday's substantial rise in the peso. Since the currency pair is denoted by convention as USD/MXN (U.S. dollar vs Mexican peso), a drop in the pair's value represents a weaker dollar against the peso and a stronger peso against the dollar.

From a longer-term perspective, though, USD/MXN continues to trade within a general uptrend (or downtrend for the peso) for the past two years. This suggests that despite the current relief rally for the peso, the path of least resistance for Mexico's currency likely remains to the downside against the U.S. dollar.