Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
The recent spike in bond rates is having unpredictable effects across the market. In some cases, like housing, rising rates are hurting demand for new loans and slowing the pace of buying activity. But investors may not have expected the jump in borrowing costs to kick-start talks on a massive corporate buyout deal, as it has between Verizon (NYSE:VZ) and Vodafone (NASDAQ:VOD).
News of a potential 12-figure deal between the two giants helped push stock index futures higher this morning. As of 7:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) looks set to rise by a moderate 51 points at the start of trading.
The Wall Street Journal reported that the two companies are in discussions to transfer Vodafone's 45% stake in Verizon's wireless business. The purchase could be worth "well over $100 billion," the Journal reports.
The two companies have tried in the past to find common ground on the acquisition, but price has always been the stumbling block. Verizon has been looking to pay around $100 billion, while Vodafone has been looking for something closer to $130 billion. However, the recent spike in interest rates has both parties more eager to close the deal. It could be financed with as much as $50 billion in debt, adding a sense of urgency to talks as long-term rates climb higher.
Verizon wants complete ownership of its wireless business, which is the largest in the U.S., boasting 98 million customers who pay an average of $144 per month for services. That average monthly figure has been jumping higher as smartphone penetration climbs; it was $126 per month just two years ago. Total revenue for the wireless business was $76 billion in 2012.
Both companies' stocks are up in premarket trading. Vodafone is trading higher by 8.5%, and Verizon is up 7.4%.
Elsewhere on the Dow, Wal-Mart (NYSE:WMT) is set to give a briefing today updating investors on its safety practices in Bangladesh. Shareholders have been voicing concerns after recent disasters in the country have been linked to major clothing retailers' brands. In response, Wal-Mart has gotten tougher with its sourcing standards, but it hasn't answered many important questions on worker safety. Today's briefing will include a statement by Wal-Mart, but it will also give investors an opportunity to ask tough questions of the megaretailer.