In late trading on Tuesday, the shares of Yahoo Inc. (YHOO,
-7.62%) declined by almost 8 percent. This came as a result of concerns
regarding the company’s intentions for a tax free spinoff of their Alibaba
Group Holding Ltd. (BABA, +1.26%) shares as well as the regulatory challenges
which the company might now need to face. According to a report by Bloomberg
News on Tuesday, an official of the Internal Revenue Service recently said that
they are currently considering amendments to their rules regarding spinoffs.
This information was revealed at a D.C. Bar Association event by Isaac
Zimbalist who is a senior technician reviewer at the IRS’s Office of Associate
Chief Counsel. Zimbalist said that while a rule change was under consideration,
no further decisions have been made regarding the types of changes that will be
made. Meanwhile, Yahoo has not commented regarding these recent comments by the
IRS. For now, this matter seems unclear and should Yahoo spinoff their Alibaba
shares, there is currently no clarity regarding what regulations will be
applied. Yahoo is currently trading at $40.98 a share.
INDICES
On Tuesday, U.S. stocks ended the trading session lower
while the Dow industrials managed to close at a new record high. As a result of
declining oil prices, pressure was put on energy stocks with the sector selling
off sharply. Adding to this, economic data released yesterday showed a sharp
increase in housing starts in April. As a result, investors were prompted to
question what impact this will have on the Federal Reserve and the timing of
interest rate hikes. At the close of trading, the Dow Jones Industrial Average
(DJIA) rose 0.1%, or 13.51 points, to 18,312.39. This marked the blue chip
index’s second consecutive record close. The best performer of the session on
the DJIA was McDonald`s Corporation (NYSE:MCD), which rose 2.71% or 2.66 points
to trade at 100.68 at the close. Also, the poorest performer of the session was
Wal-Mart Stores Inc. (NYSE:WMT), which fell 4.37% or 3.49 points to trade at
76.43. Meanwhile, the Nasdaq Composite index (COMP) declined 0.2%, or 8.41
points, to 5,070.03 while the S&P 500 index (SPX) also declined 0.1%, or
1.38 points, at 2,127.82. This decline marked a break in the index’s 3-day
record-scoring streak.
CURRENCIES
In currency trading on Tuesday, the U.S. dollar (USD)
gained. This came in response to data which showed that housing starts and
building permits in the U.S. in April beat expectations. According to the
Commerce Department in the U.S., there was a 10.1 percent increase in the
number of building permits issued in April, from 1.038 million in March, to
1.143 million units in April. Their report also showed that in April, housing
starts increased by 20.2 percent to reach 1.135 million units. This was up from
March's total of 944,000 units while also beating expectations. In trading, the
EUR/USD traded at 1.1141, down 1.53% while the GBP/USD was also down 0.95% and
trading at 1.5505. Against the New Zealand dollar and the Japanese yen, the USD
traded higher with NZD/USD down 0.52% to 0.7353 and with USD/JPY up 0.52% and
trading at 120.61. Also, the U.S. dollar index was at 95.46, up 1.31% which
also marked the highest level since the 5th of May.
COMMODITIES
In Asia, in early morning trading on Wednesday, crude oil
prices gained. This came in response to a solid decline in U.S. stockpiles
which was reported yesterday by the American Petroleum Institute. According to
their data, crude oil supplies declined last week by 5.2 million barrels.
Meanwhile, the stocks of gasoline also declined by 1.2 million barrels while
data on distillates was not available. Today, investors will turn their
attention to the more closely watched numbers reported by the EIA (Energy
Information Administration). WTI crude oil for delivery in July traded at
$58.37 a barrel, up 0.65 percent, on the NYMEX. Meanwhile on Tuesday, Brent
crude oil for delivery in July traded at $64.13 a barrel, down 3.23% or $2.14,
on the Intercontinental Exchange (ICE).
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