Before the Bell: Tesla Shanghai Battery Plant; TSMC Revenue Falls; Exxon Pursues Permian Basin Driller

Premarket action on Monday had the three major U.S. indexes trading mixed. The Dow Jones industrials were up 0.07%, the S&P 500 was flat and the Nasdaq was 0.2% lower.

U.S. equity markets were closed on Friday. Eight of 11 market sectors closed higher Thursday. Communications services (1.71%) and utilities (0.74%) posted the day’s best gains. Energy (−1.47%) and materials (−0.74%) posted the largest losses. The Dow closed up 0.01%, the S&P 500 up 0.36% and the Nasdaq up 0.76% on Thursday.

Bond markets closed early Friday. Two-year Treasuries rose 15 basis points to end the day at 3.97%, and 10-year notes added nine basis points to close at 3.39%. In Monday’s premarket, two-year notes were trading at around 3.93% and 10-year notes at about 3.36%.

Thursday’s trading volume was well below the five-day average. New York Stock Exchange winners outpaced losers by 1,625 to 1,350, while Nasdaq decliners led advancers by more than 5 to 4.

Economic data due out this week includes the consumer price index (CPI) on Wednesday and the producer price index on Thursday. The weekly report on new claims for unemployment benefits will be released on Thursday as well, and the report on March retail sales is due on Friday.

Pharmaceuticals supplier Catalent Inc. (NYSE: CTLT) rose 5.4% on Thursday to post the largest gain among S&P 500 stocks. The company broke ground on a new clinical supply facility in Germany last week to add capacity for storing and handling clinical trial materials in a temperature-controlled environment.

Another big gainer Thursday was First Republic Bank (NYSE: FRC). After markets closed Thursday, the bank said that it will suspend dividend payments on its preferred stock. Shares rose 4.39% on Thursday but traded down about 1.3% Monday morning.

Fertilizer maker Mosaic Co. (NYSE: MOS) dropped 5.66% on Thursday, the sharpest drop of any S&P 500 stock. This followed a downgrade from Overweight to Neutral by analysts at J.P. Morgan, along with a price target reduction from $60 to $46 a share.

The long weekend has served up some interesting news. Tesla Inc. (NASDAQ: TSLA) reportedly has agreed to build a Megafactory in Shanghai with enough capacity to build 10,000 Megapack battery systems annually. Megapack is a large rechargeable lithium-ion battery designed to store energy at electric generating stations. According to the report, construction will begin in the third quarter, and production will begin in the second quarter of next year.

The Wall Street Journal reported Friday that energy supermajor Exxon Mobil Corp. (NYSE: XOM) has held preliminary acquisition talks with Permian Basin producer Pioneer Natural Resources Inc. (NYSE: PXD). Pioneer is the largest producer in the Permian Basin, and investors enjoyed $8.4 billion in dividends and buybacks last year. With a market cap of $48.9 billion, a deal for Pioneer should easily surpass the largest deal the company has made since the merger of Exxon and Mobil in 1999: the $41.0 billion in stock Exxon Mobil paid for natural gas producer XTO Energy in 2010.

Contract chip manufacturer Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) reported early Monday that net revenue for March declined by 10.9% month over month and by 15.4% year over year. Compared to the March quarter of last year, net revenue rose 3.6%.

China’s People’s Liberation Army (PLA) held military exercises over the weekend, buzzing the strait separating Taiwan from the mainland with planes and demonstrating missile launches from the ground and naval vessels at targets in Taiwan. The Financial Times reported Sunday that
“70 Chinese military aircraft were observed operating in the area around the island on Sunday, 35 of which crossed the unofficial Taiwan Strait median line or entered the country’s air defence identification zone.”

The South China Morning Post opened its Monday coverage of the PLA’s exercises with this paragraph:

The United States cannot be relied on to defend Taiwan, the mainland Chinese military’s official newspaper said on Monday, as an aircraft carrier group continued with Beijing’s third and last day of planned military drills around the island.

Alibaba founder Jack Ma owns the Singapore-based newspaper.

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