“One learns the most from mistakes, not successes.” — Paul Tudor Jones

1. Raytheon and United Technologies Agree to Merge — United Technologies and Raytheon have agreed to an all-stock merger, creating the second-largest defense-and-aerospace company in the U.S. after Boeing (NYSE:BA) with combined annual sales of around $74B. The deal won’t include United Tech’s (NYSE:UTX) elevator (Otis) and air conditioning units (Carrier), which it plans to spin off in 2020. Raytheon’s (NYSE:RTN) Tom Kennedy will become executive chairman of the combined company, to be called Raytheon Technologies, while UTX’s Greg Hayes will be named CEO. Two years after the deal closes, Hayes will assume the role of chairman and CEO.
2. Beijing Offers Support to Local Government — Beijing encouraged local governments to use special bonds for infrastructure projects in a bid to shore up economic growth. That helped offset President Trump’s threat to raise tariffs again if President Xi Jinping doesn’t meet with him at the G-20 summit at the end of June. The onshore yuan also bounced off its closing low of the year as the PBOC set its reference rate higher than forecast and announced plans to sell bills this month after the currency was hit in May.
3. Hong Kong Protests Intensify — Protests against Hong Kong’s controversial extradition law shut down key parts of the city, with police firing tear gas and rubber bullets to drive away thousands of demonstrators. Financial institutions also scrambled for liquid assets, triggering interbank interest rates in the territory to shoot up across the curve, with the one-month and two-month HIBOR reaching their highest level since late 2008. Hong Kong Chief Executive Carrie Lam argues the legislation is necessary to close a legal loophole that makes the city a refuge to criminals, but opponents say its approval would tear down the legal wall intended to keep Hong Kong’s justice system separate from China’s.
4. FTC Opposes Qualcomm Antitrust Request — the FTC has asked District Judge Lucy Koh to deny Qualcomm’s (NASDAQ:QCOM) request to delay enforcement of an antitrust ruling handed down in May, announcing that it was in the public interest because an appeal could take years. LG Electronics (OTC:LGEAF) reiterated the view of the FTC, saying it could be forced into signing another unfair deal unless Koh’s protections remain in place. On May 28, Qualcomm asked to put the sweeping antitrust decision on hold as it would “radically restructure its business relationships” in ways that would be impossible to reverse if it wins an appeal.
5. AAII Weekly Sentiment Survey — last week’s rally has reversed this build-up of bearish sentiment to a small degree, as the percentage of investors reporting as bulls in this week’s AAII survey grew to 26.84% from 22.53% last week. While this is an improvement, investors have been hesitant to rush back, as bullish sentiment remains low relative to history. This week’s reading is still over one standard deviation below the historical average of 38.19%.

Bearish sentiment, on the other hand, saw a sharper move, falling to 34.2% versus 42.58% last week. That is the largest decline in bearish sentiment since February 7th of this year, when it had fallen just under 9%, from 31.76% to 22.78%. Similar to bulls, while this is an improvement, bearish sentiment remains elevated above its historical average.

The week ahead — Economic data from Econoday.com:

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