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Open Interest Changes



Investors had some time off from the stock market on Presidents' Day, but that couldn't stop some mega deals from turning it into Merger Monday. Capital One (COF) agreed to acquire Discover Financial Services (DFS) in a stock-based transaction valued at $35.3B, creating a new financial giant that will better compete with the likes of Visa (V) and Mastercard (MA). Besides payment networks, the two companies will also form the largest U.S. credit card issuer by loan volume, as well as the sixth-largest U.S. bank by assets, which is sure to attract extra attention from regulators.

Reaction: In typical M&A fashion, shares of Discover (DFS) are up 13.6% to $125.53 in premarket trade, while Capital One (COF) is down 4.3% to $131.31 on the news. Many are hoping the deal will translate into lucrative interest charges as credit card debt and delinquency rates continue to climb in the aftermath of the pandemic. Upon completion of the transaction, Capital One stockholders will own around 60% of the combined firm, with Discover investors owning the rest.

Note that the agreement comes after Discover hit some turbulence in August 2023 when its then-CEO, Roger Hochschild, left the company. At the time, analysts suspected his exit was related to increased regulatory and risk oversight concerns. The company disclosed in its Q2 results a $365M charge related to a misclassification issue, which caused DFS to provide refunds to its merchants and merchant acquirers. In December, Discover said Michael Rhodes, formerly with TD Bank, would become its CEO as of March 6.

More details: Capital One anticipates the mega deal to generate $2.7B in pretax synergies and add more than 15% to its adjusted EPS in 2027. It's also expected to deliver a return on invested capital of 16% in 2027 with an internal rate of return of more than 20%. A conference call discussing the tie-up will take place this morning at 8:00 AM ET. (79 comments)

To the rescue

China is stepping up efforts to rescue its financial markets, with the PBOC announcing the biggest-ever cut in the benchmark mortgage rate. The five-year loan prime rate was reduced by 25 bps to 3.95%, which ING economists said was "likely aimed at supporting the recovery of the property market," but could further pressure Chinese bank margins. Beijing has been struggling to revive its economy and restore investor confidence amid a 30-year low in the country's foreign direct investment. The Lunar New Year turned out to be a bright spot, with consumer spending topping pre-pandemic levels, although some analysts are doubtful that this trend will continue. (3 comments)

Abandon ship

A cargo vessel's crew was forced to abandon ship over the weekend following Houthi missile attacks, marking the first such evacuation since the group's strikes began in the Red Sea. "Two anti-ship ballistic missiles were launched from Iranian-backed Houthi-controlled areas of Yemen toward MV Rubymar, a Belize-flagged, U.K.-owned bulk carrier," said the U.S. Central Command, adding that the evacuated crew was transported to a nearby port. A Houthi spokesperson said the group also targeted a U.S. drone and two American ships. As the waterway accounts for about 12% of global maritime trade, the West has been ramping up its defense in the Red Sea, with naval operations and retaliatory airstrikes. (21 comments)

Jet competition

Airbus (OTCPK:EADSF) isn't too worried about China's first homegrown airliner, which some say could eventually threaten the Western aerospace duopoly between the European firm and Boeing (BA). Comac's C919 is "not going to rock the boat," Christian Scherer, CEO of Airbus' commercial aircraft business, said on the sidelines of the Singapore Airshow, adding that it "looks a bit like an Airbus narrowbody." The C919 - similar to Boeing's 737 and the Airbus 320 - made its international air show debut in Singapore, where Tibet Airlines finalized an order for 40 jets. Scherer's comments come amid continued safety concerns at Boeing, while the aviation industry grapples with supply-chain constraints.

Today's Markets

In Asia, Japan -0.3%. Hong Kong +0.6%. China +0.4%. India +0.5%.
In Europe, at midday, London +0.2%. Paris +0.3%. Frankfurt -0.1%.
Futures at 7:00, Dow -0.3%. S&P -0.3%. Nasdaq -0.5%. Crude -1% to $77.66. Gold +0.6% to $2,037. Bitcoin flat at $52,329.
Ten-year Treasury Yield -4 bps to 4.28%.

Today's Economic Calendar

10:00 E-commerce Retail Sales
10:00 Leading Indicators

Companies reporting earnings today »

What else is happening...

Morgan Stanley: Weight loss drugs reduce grocery bills by up to 9%.

Top lithium producer cuts 2030 demand outlook on slower EV adoption.

JetBlue (JBLU) appoints Icahn Enterprises' (IEP) Lynn, Miller to board.

Nintendo (OTCPK:NTDOY) Switch might be delayed until next year.

GlobalFoundries (GFS) to get $1.5B for latest U.S. chip manufacturing.

Bayer (OTCPK:BAYZF) to slash dividend by 95% to reduce debt.

Trump SPAC (DWAC) schedules special stockholder meeting.

Early Super Bowl data suggests record numbers for sportsbooks.

JD.com (JD) mulls offer for Currys in potential bidding war with Elliott.

J.P. Morgan: U.S. companies' earnings saw 5% Y/Y growth during Q4.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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