Here are five things you need to know this morning:
Zeitgeist: A big rally in semiconductor stocks sent the Nadsaq 100 to record highs. That looks set to continue this morning as investors got a big boost from Taiwan Semiconductor yesterday. The S&P 500 is barely an inch from fresh all-time highs, while the TSX has a few centimetres to go. Interestingly, tech actually finished lower on the TSX because Shopify sold off. Scotia’s Hugo Ste-Marie notes that two-thirds of the rally since October has been driven by valuation. Meaning the “P” in price-to-earnings is growing faster than the “E.” But Bank of America’s Michael Hartnett doesn’t advise getting in the way of the rally. The zeitgeist “is firmly buy-the-dip as Powell pivot means (first half) upside is bigger than downside,” Hartnett wrote in a note to clients.
Shop ‘til you drop: Canadians were busy little elves in December. StatCan’s advance estimate for retail sales in December shows a 0.8 per cent jump in sales from November. This as retail sales for November slumped more than expected (fell 0.5 per cent excluding autos, versus the -0.1 per cent decline expected). CIBC isn’t taking too much comfort in the December show of strength. “Although the advance estimate for December suggested a 0.8 per cent increase in sales, we expect that strength to be fleeting given the weakening labour market and the impact of higher interest rates on spending,” Katherine Judge wrote in a note to clients. It’s the final data point the Bank of Canada gets before its trend-setting interest rate decision next week. The Bank of Canada is expected to keep rates on hold at five per cent but of course we will watch the press conference for clues about the rest of the year. And oh, by the way, they’ve changed their decision time. The decision now comes out at 9:45 a.m. ET, with a press conference after every decision beginning at 10:30 a.m. ET.
Dealbreakers: Shares of iRobot are plunging in pre-market as Bloomberg reports the European Union is set to block Amazon from buying it. Amazon proposed to buy the robotic vacuum maker back in August 2022 for US$51.75 per share. Amazon was told the deal was likely to be rejected, according to sources speaking to Bloomberg. Shares of iRobot are poised to open at an 11-year low as the future remains uncertain. It has struggled with dwindling sales, while Amazon was hoping the deal would help buoy its smart home offerings. Regulators are proving to be a fly in the ointment. What now? There is a chance Amazon walks away after missing a deadline last week to submit “remedies” that would alleviate regulators' concerns. In other M&A news, we are tracking the latest developments with Spirit Airlines after a judge ruled competition would be hurt if JetBlue bought it. Shares of Spirit are surging this morning as the company reiterates that the deal remains in “full force and effect,” but didn’t provide details about whether it will appeal the decision.
Deal flow: Sticking with deals, Blackstone announced this morning plans to buy Tricon Residential for $15.17 per share (US$11.25 per share). That’s a 30 per cent premium to yesterday’s closing price, but well off the high reached in 2022, north of $20 per share. Tricon is a residential property developer in Toronto and parts of the U.S. The stock has been down about 40 per cent over the last two years as the bloom came off the rose for REITs. While the deal is at a big premium to its recent trading average, it appears to be below the value of assets it owns. CIBC’s latest net asset value for Tricon puts it at around US$12/share. I’ll be curious to see if anyone objects.
Fair-weather: Shares of Wayfair are getting a boost in pre-market trading. The online home furniture store is laying off about 1,600 employees, with a focus on management and leadership positions. Wayfair says it's looking to trim down structure and reduce costs, adding that persistent category weakness is making revenue growth challenging. It’s the third round of layoffs at Wayfair since the summer of 2022, the latest expected to save the company about US$280 million.