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The Roomba maker’s CEO is leaving as it announces big layoffs. (0:15) Budweiser is back with Super Bowl ads. (1:27) Morgan Stanley survey shows inflation still top of mind. (4:45)
This is an abridged transcript of the podcast.
Our top story so far
iRobot (IRBT) plunged after Amazon (AMZN) and the Roomba maker mutually agreed to terminate the planned $1.4 billion merger. iRobot’s CEO is also leaving, and the company will cut 31% of its workforce.
iRobot said it will cut about 350 jobs. Under the terms of the merger agreement, Amazon will pay iRobot a $94 million termination fee.
Colin Angle, the board chairman and CEO of iRobot, has stepped down. Glen Weinstein, iRobot’s executive vice president and chief legal officer, has been appointed interim CEO.
The deal termination comes as Amazon and iRobot struggled to gain approval from regulators, specifically in the U.S. and Europe. Media reports earlier this month indicated that the European Union was expected to block the deal, and Bloomberg reported that the Federal Trade Commission was drafting a lawsuit that would seek to stop the deal.
“Undue and disproportionate regulatory hurdles discourage entrepreneurs, who should be able to see acquisition as one path to success, and that hurts both consumers and competition—the very things that regulators say they’re trying to protect,” David Zapolsky, Amazon SVP and General Counsel, said in a separate statement on Monday.
In other news of note
Bud is coming back to the Super Bowl.
Anheuser-Busch InBev (BUD) is expected to return to advertising during Super Bowl 58 with 150 seconds of airtime during what will likely be the most-watched event of the year.
The beer giant will air a commercial for Budweiser with the iconic Clydesdales and feature Michelob Ultra in a spot with soccer star Lionel Messi. The company will also spotlight Bud Light with a new celebrity cameo. NFL Hall-of-Famers Peyton Manning and Emmitt Smith have been in recent Bud Light commercials.
Looking ahead, the beer giant still faces the threat of a labor strike. The Teamsters union said it was more united than ever at Anheuser-Busch InBev and fully prepared for a large strike and nationwide boycott. On December 16, 5,000 Teamsters at 12 Anheuser-Busch breweries in the U.S. voted by a 99% majority to authorize a strike.
Shares of BUD are down 4% for the early part of 2024 after rallying for the last two months of 2023. BUD trades about 4% more than where it stood a year ago, despite the market loss in the U.S. Strong results in other geographic regions have offset the Bud Light losses.
In today’s trading
It’s the calm before the storm for stocks. The major averages are little changed, and investors may be exercising caution ahead of a week that includes megacap earnings along with the Fed and the jobs report.
Rates are moving lower. The 10-year Treasury yield (US10Y) is back around 4.1%.
Goldman Sachs says the 2s10s Treasury yield curve will continue its recent steepening and should leave inversion territory around the third quarter.
Their economists expect “the FOMC will deliver 5 cuts of 25 bp each this year, the 2-year yield will fall to 3.7% by year-end, and the 10-year will end 2024 at 4.0%, near current levels.”
Looking at numbers since 1990, Goldman says the S&P 500 had a median return of 1.3% per month when the yield curve steepened. Returns have been similar during bull steepening (when short-term rates fall faster than long-term) or bear steepening.
“In contrast, returns have been substantially stronger in environments of improving economic growth expectations, as signaled by the outperformance of cyclical industries relative to defensive industries, than in environments where growth expectations are weakening,” strategist David Kostin said. “In other words, the reason the yield curve shifts is far more important for stocks than the shape of the curve itself.”
Among active stocks
J.P. Morgan hiked its rating on Dollar Tree (DLTR) to Overweight from Neutral. Analyst Matthew Boss noted that Dollar Tree’s exposure to the Red Sea shipping channel is limited and thinks the company is on a path to achieve its target of $10 EPS by 2026. He also explained that Dollar Tree is a potential dual deflation beneficiary.
SoFi Technologies (SOFI) jumped as loan originations growth across its three major business lines pushed Q4 earnings and revenue past consensus estimates. In addition, the company issued strong guidance for the year, as it anticipates robust growth in its tech platform and financial services segments.
Warner Bros. Discovery (WBD) saw a downgrade from Wells Fargo. The bank dropped the stock to Equal Weight from Overweight with a price target of $12, down from $16.
Analyst Steve Cahall says: “Lower earnings have been the story since the merger [of WarnerMedia and Discovery], and the trend limits future multiple expansion.”
And in the Wall Street Research Corner
Morgan Stanley said its latest survey on consumer attitudes showed that inflation remained a core concern for most people.
In its U.S. Consumer Pulse Survey of 2,000 people, Morgan Stanley said: “Coping with inflation continues to be the top concern for 2024, with 59% of consumers worried about rising prices, although this is marginally down from 63% and is the lowest reading since Jan’22.”
The No. 2 concern was the overall state of the political landscape, with 41% of survey respondents listing that as their top issue. But consumer confidence in the economy improved compared to the end of last year. 45% of consumers expect the economy to worsen in the next six months, down from 50%.
