The U.S. equity markets are trending slightly lower on Monday, continuing last Friday's sharp selloff that was based on global growth fears and yield curve concerns. The market is also pricing in the effects of an uncertain Brexit outcome which is limiting economic growth in Europe, the stalling of trade talks with China, as well as the flurry of IPOs that are coming to market.
In positive news, AT&T (T) and Viacom (VIAB) avoided a programming blackout over the weekend and announced on Monday a renewed contract that includes continued carriage of Viacom services across multiple AT&T-DirectTV platforms and products. This news comes about one week after Viacom launched a campaign last Tuesday at the website www.keepviacom.com, warning 24 million DirecTV customers that its channels could be dropped from the service. Although the financial implications of the deal are unknown, this agreement represents the best-case outcome of the three we outlined last week in our Alert here.
This negotiation had acted as an overhang on VIAB for quite some time, compressing its already low price-to-earnings multiple due to its uncertainty. But this outcome is demonstrative of how CEO Bob Bakish's turnaround plan is working. We are getting that relief rally we were expecting if a deal was made, and VIAB is recouping much of last week's steep losses in today's session. More details around the partnership are expected to come at a later date.
In other news, Apple (AAPL) will be hosting its special event today at 1:00 p.m. ET. The company is expected to unveil two new subscription services: One for news and another for TV streaming. We have also seen a rumor floating around of the possibility that a new gaming subscription service will be announced too.
As we have written before (most recently in our Alert here), Apple's focus on services will decrease its reliance on cyclical hardware sales, increase its exposure to higher margin, recurring revenue streams, and should further improve the brand loyalty of an already 1.4 billion active device installed base. Checking off these three boxes should help the stock command a higher price-to-earnings multiple in the market.
Shares are down ahead of the event, but we view this as a good thing because it should make expectations far more reasonable. We'll be out later this afternoon with additional coverage of the event.