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Morning Brief: Government shutdown enters workweek

Monday, January 22, 2018

What to watch today

The U.S. government shut down over the weekend, and so investors and traders will be following D.C. for developments. But is the mess on Capitol Hill bad news for the markets and the economy? Ryan Detrick at LPL Financial notes that the median return for the S&P 500 during past shutdowns has been exactly 0%, while the average return is 0.6%. During the most recent 16-day shutdown in 2013, the S&P 500 gained 3.1%. Economists at Goldman Sachs estimated that each week the government is shut down in the first quarter would take 0.2% off first quarter GDP. This impact, however, would likely be reversed in subsequent quarters.

In the week ahead, fourth quarter earnings season will really start to kick into gear as the bulk of S&P 500 earnings are expected out over the next three weeks. Notable reports this week should include Netflix (NFLX) on Monday after the close, Johnson & Johnson (JNJ), Travelers (TRV), Procter & Gamble (PG), and Verizon (VZ) before Tuesday’s open, United Technologies (UTX), GE (GE), and Comcast (CMCSA) before Wednesday’s open, Ford (F) and Whirlpool (WHR) after Wednesday’s close, American Airlines (AAL), 3M (MMM), and Caterpillar (CAT) before Thursday’s open, and Starbucks (SBUX) after the market close on Thursday.

This week’s big economic highlight is expected to be the first estimate of fourth quarter GDP, due out Friday morning. Economists estimate the U.S. economy expanded at an annualized pace of 3% in the final three months of 2017, but the government’s shutdown jeopardizes the Bureau of Labor Statistics’ ability to release this report as scheduled.

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Top news

Sanofi digs deep to buy Bioverativ for $11.6B:  French health care group Sanofi (SNY) has agreed to buy U.S. haemophilia specialist Bioverativ (BIVV) for $11.6 billion, its biggest deal for seven years, which it said would strengthen its presence in treatments for rare diseases.  The move comes at a time of renewed interest by large drugmakers in smaller biotech firms and predictions by some experts that 2018 will see a substantial pick-up in mergers and acquisitions. [Reuters]

Icahn, Deason push for Xerox to explore sale:  Xerox Corp.’s (XRX) first- and third-biggest investors, billionaires Carl Icahn and Darwin Deason, have formed an alliance and plan to encourage the printer and copier giant to explore a potential sale, according to people familiar with the matter. The two investors, who together control more than 15% of Xerox’s shares, had already been separately calling for changes at the Norwalk, Conn., company on slightly different topics, but this would be the first time either has come out publicly for a potential sale. [The Wall Street Journal]

Amazon to debut store without checkout: More than a year after it introduced the concept, Amazon (AMZN) is opening its artificial intelligence-powered Amazon Go store in downtown Seattle on Monday. The store on the bottom floor of the company’s Seattle headquarters allows shoppers to scan their smartphone with the Amazon Go app at a turnstile, pick out the items they want and leave. [AP]

UBS to buy back $2.1B of stock: UBS Group AG (UBS) Chief Executive Officer Sergio Ermotti is responding to investor demands for higher returns. The world’s largest wealth manager will buy back as much as $2.1 billion of stock over three years and merge its two wealth-management businesses. The buyback program will begin in March. [Bloomberg]

Wal-Mart shops Brazil unit stake to Advent, other funds:  Wal-Mart Stores Inc. (WMT) is in talks with buyout firm Advent International Corp and other funds to sell a major stake in its Brazilian operations, two people with direct knowledge of the matter said . Wal-Mart is being advised by Goldman Sachs & Co, according to one of the sources. [Reuters]

For more of the latest news, go to Yahoo Finance

Yahoo Finance is holding a live summit on cryptocurrencies, featuring a range of big-name guest speakers, on Feb. 7 in New York City. Get your ticket here.

 People cheer during a Women’s March rally Sunday, Jan. 21, 2018, in Las Vegas. (AP Photo/John Locher) 

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