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Morgan Buys E*TRADE, Victoria's Secret Sold

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Thursday, February 20, 2020

A couple major headlines (aside from the usual Thursday Initial Jobless Claims data, results below) are hitting this morning’s pre-markets on a corporate-structure level: Morgan Stanley MS is reportedly purchasing online stock-trading service E*TRADE ETFC for $13 billion, or $58.74 per share, a 31% premium to yesterday’s closing price. This has sent E*TRADE shares up nearly 25% in today’s pre-market at this hour. Morgan Stanley shares are down around 5% so far this morning.

E*TRADE CEO Michael Pizzi is reportedly staying on to helm the transition phase of the merger, indicating this was a welcome occurrence for the trade platform. What analysts are now pivoting toward is what Morgan Stanley competitor Goldman Sachs GS might do to counter coverage in this space; there is no single acquirable entity the size of E*TRADE still available for purchase, which may put Goldman at a disadvantage over the medium term. Goldman shares are down very moderately at this stage of today’s pre-market.

Also, private entity Sycamore Partners is reportedly taking over 55% of L Brands’ Victoria’s Secret business. Sycamore, which owns stakes in companies like Staples , Hot Topic and Coldwater Creek, will pay $525 million for the struggling lingerie line. Further, founder, President and CEO of L Brands, Les Wexner, is reportedly stepping down from his post after 57(!) years. His company, which has come way down from its all-time highs in late 2015, is down another 10% in today’s pre-market.

Initial Jobless Claims came in exactly as expected with 210K new claims reported last week. This continues our long-term narrative of robust strength in the U.S. labor market, and remains on the low end of the 200-225K range we’ve grown accustomed to. This is up slightly from the upwardly revised 206K the previous week, but showing no signs of exhaustion for its long-term domestic employment scenario.

Continuing Claims ticked up slightly to 1.726 million — off its 50-year lows but still representative of the excellent condition our labor market is in. In fact, we haven’t seen Continuing Claims above the 2 million level (which would still not indicate any sort of major employment weakness in our data) since the early part of 2017, three years ago.

Philly Fed numbers for the month of February were well ahead of expectations — 36.7 was 3 1/2 times higher than the expected print of 10, more than double the previous month’s 17.0 and also the highest read we’ve seen in three years. While we’ve seen Manufacturing struggle in recent years, somewhat due to trade friction with China, these figures from the 6th largest city in the U.S. are very welcome news, even if they are necessarily somewhat narrow data points.

Mark Vickery
Senior Editor

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