March 21, 2011
The stock market is expected to start the new week on a positve note as favorable news over the weekend out of Japan offsets the potentially unsettling sight of the air campaign in Libya.
Also reassuring the market is the announcement of the mega-merger in the telecom space, with AT&T acquiring T-Mobile for $39 billion in cash and stock. This transaction, should it pass regulatory muster, will make AT&T the largest wireless operator, sprinting past (pun intended) Verizon Wireless.
Why don’t I think that the start of the coalition’s bombing of Libya over the weekend will trump these positives and un-nerve the market? My thinking is that the negative news out of Libya is already reflected in the market, in the shape of elevated global oil prices. And the start of the air compaign improves the odds that we may finally see the back of Moammar Gaddhafi. The Libyan strongman increasingly looked stronger last week, as the rebels kept losing ground.
The lack of a well articulated exit plan may become a source of uncertainty in the coming days and weeks. What will the coalition do should the air campain fail to dislodge the Libyan regime? Let’s not forget that Iraq’s Saddam Hussein withstood a no-fly-zone for more than 10 years.
The start of the air campaign is a net positive, notwithstanding the concerns, than the alternative of letting Col. Gaddhafi consolidate his hold, as appeared likely last week.
While there are no lack of uncertainties, the stabilization of the Japanese nuclear picture is a net positive. And the telecom deal should be beneficial to market sentiment as well.
Sheraz Mian
Director of Research
Zacks Investment Research
