It’s not quite the holidays yet. We’ve got a major Fed decision this week and earnings from an AI bellwether that’s been wobbling. Read all about it my weekly preview The Globe and Mail.
Here are five things to know today:
Back to the grind: Futures are grinding higher this morning ahead of the Federal Reserve rate decision on Wednesday. I know I am really hyping it up but between the possible dissent, the looming Chair change and the data vacuum this has all the makings of a very niche soap opera. The Fed is expected to cut rates at this meeting, marking the sixth rate cut since September 2024. The Bank of Canada will also make its rate decision Wednesday with decidedly less drama and is expected to hold rates. The folks that construct the S&P 500 announced index changes which include Carvana (+8%), CRH (+6%) and Comfort Systems (+2%). Particularly for Carvana this is a watershed moment considering less than 5 years ago the company was on the verge of bankruptcy. For the backstory on Carvana watch the interview I did with Jordan McNamee of the Optimist Fund back in March.
A confluent of factors: IBM announced it would buy Confluent in an $11 billion deal at $31/share which is a 35% premium. Confluent is a data streaming platform that connects data together to deliver real-time analysis for corporations that includes everything from real-time fraud detection to inventory management. This will be the second biggest deal IBM has ever done after it purchased Red Hat in 2018 for $32 billion. It is a nice exit for recent Confluent shareholders, but long term shareholders are likely disappointed with the stock trading above $31/share earlier this year. The stock has been hampered by slowing top line growth and persistent bottom line losses. It went public during the 2021 mania pricing its offering at $36/share and went has high as $93/share. Despite this, the AI race has sparked a deal frenzy and IBM says the data flow Confluent manages is essential to deploying AI solutions. “With the acquisition of Confluent, IBM will provide the smart data platform for enterprise IT, purpose-built for AI,” said IBM CEO Arvind Krishna. “We believe this acquisition represents a strong move by IBM…with Confluent representing a natural fit for IBM’s long-term growth strategy as the company addresses IBM’s focus on eliminating data silos for powering AI,” wrote Dan Ives at Wedbush, “We loudly applaud this deal as Arvind takes IBM further into the AI Revolution with more acquisitions likely ahead.”
Art of the Deal, Streaming Edition: Netflix is facing twin headwinds when it comes to their proposed acquisition of Warner Brothers: US President Trump has raised eyebrows over the deal and investors don’t seem to like it. Trump said market share concentration “could be a problem” and his current Director of the National Economic Council Kevin Hassett says the President wants a lot of analysis done. Remember, if Netflix doesn’t buy Warner Brothers because of regulatory issues they will have to pay $5.8 billion break-fee. Pivotal Research downgraded Netflix calling the deal “very expensive” and sees “lack of upside.” Jefferies’ analyst summed it up by saying the deal “adds noise to a once clean” stock story. There are also questions about how far Netflix will go to buy Warner Brothers. Reports suggest Paramount is considering a bid, maybe even a hostile one, at a higher price. Most analysts believe the stock will be rangebound until these issues are resolved. The once high flying stock is now trading at an 8-month low, down 25% from its all-time high this year and is underperforming peers.
Grounded: Watch Transat after the vacation-destination airliner announced it would begin cancelling flights after receiving a strike notice from the pilots. Pierre Karl Péladeau, the Quebec billionaire who is CEO of Quebecor also owns 10% of Transat and called this a “deplorable” situation. “This is yet another example of the Board of Directors’ failure to act quickly enough to address the pilot’s working conditions for the benefit of its customers,” he wrote in an a statement. Péladeau has a long history with Transat and most recently has agitated for changes and shrinking the board. “In order to avoid catastrophe, I offer to act as a mediator with the pilots and management, to propose a way forward and arrive at a settlement proposal to save the company and jobs, all for the benefit of customers and shareholders.”
Ride the rails: CP Rail is catching an upgrade from Morgan Stanley this morning. The upgrade is part of a generally more positive view of the freight transportation industry in 2026. The analyst isn’t terrible bullish about the prospects of better demand, but simply argues the worst is priced in and the risk vs reward is the best it has been since 2020 “even if the coast is not entirely clear.”
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