Weekly Financial Recap June 17

Some highlights of this past week’s news in business

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*Amazon acquires grocery chain Whole Foods (Image from Varfix) 

U.S. Markets 

  • The Dow Jones Industrial Average faced some volatility this past week but closed the week at another record high with a gain of +123.3 points or +0.58% to close at 21,384. The index was led by gains in energy stocks Chevron (NYSE: CVX+1.83% $108.35 and Exxon Mobil Corp (NYSE: XOM) +1.50% $83.49 while large cap tech stocks experienced turmoil and set the tech-heavy NASDAQ back for a loss of 0.90% to 6,152. 
  • The Federal Reserve raised the Federal Funds rate for the second time in 2017 to 1.00% – 1.25%. The Fed reported that it would begin cutting its supply of bonds through open market operations. This decision signals the Fed’s continued confidence in the U.S. economy. The Fed cited the improving labor market and low unemployment as signs of a healthy growing economy. Many experts expect one more hike by the end of the year, most likely to occur after the Federal Reserve mid-September meeting on September 19-20 where Fed governors will discuss their 2.0% target rate for inflation. As equities continue to soar to record highs and yields on government bonds hit their lowest point in years, post-rate hike, some are questioning the effectiveness of the Fed’s ability to influence the economy

Oil & Gas 

  • Oil prices dropped to their lowest point in seven months as rival crude inventories in the United States and Brazil were announced higher than expected. While OPEC and non-OPEC member countries continue to counteract the ongoing 3-year oil glut, they face the challenge of U.S. shale oil production increasing global supplies and dropping the price of brent crude oil, which fell to $47 this past Wednesday. U.S. shale oil production is expected to hit a record high next month of 5.475M barrels per day (bpd). OPEC has agreed to keep production to under 1.8B bpd and to not increase production until Q1 2018.  

M&A 

  • Amazon (NASDAQ: AMZN) announced their acquisition of Austin, Texas-based grocery chain Whole Foods Market Inc. (NASDAQ: WFM) at $42 per share, a 27% premium, for a total acquisition price of $13.7B. According to the terms of the deal, Whole Foods will still operate under the moniker Whole Foods Market Inc. and CEO John Mackey will remain as the leader of the company. Before this deal, Amazon’s largest acquisition was the shoe delivery company Zappos, for $1.2B in 2009. The grocery chain operates approximately 430 stores across the country and prides itself on providing organic and healthy foods to its clientele. The transaction gives Amazon a strong footing in the grocery business and potentially a gateway toward expanding its Amazon Go grocery stores. Other grocery chains felt the ripple effect or Bezos/Amazon Effect, of the transaction. Kroger (NYSE: KR) closed at a loss of 27.58% to $22.29 while Costco (NASDAQ: COST) fell 6.90% for the week to $167.11.

    verizon-yahoo-832x333*Image by ecommerceIQ

  • What many analysts never expected to happen has finally happened. Verizon has closed its $4.48B acquisition of Yahoo Inc.’s core business. Verizon will combine Yahoo and AOL, which it bought two years ago, to form a new subsidiary: Oath. Oath will manage Verizon’s vast portfolio of HuffPost, TechCrunch, and Tumblr among other brands. Yahoo’s noncore business will be renamed Altaba Inc. whose primary assets include a 15.5% stake in the Alibaba Group Holding (NYSE: BABA) and a 35.5% stake in Yahoo Japan Corp. Former Yahoo CEO, Marissa Mayer, will walk away from the transaction with nearly $260M. Mayer owned 4.5M shares of Yahoo including options and restricted stock units.

Ali Punjani
Independent Business Blogger

Share Prices are listed with their respective Friday close values. Economic data is provided on a weekly change basis unless otherwise stated. 

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