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Today in the Market (5/29/2024)

Good Morning! On Wednesday, U.S. equity markets declined as a result of a sudden increase in Treasury yields, which caused concern among investors who were already considering whether recent data would impact interest rates. With this, the NASDAQ fell by 0.58%, while the S&P 500 decreased by 0.74%, and the Dow Jones slid by 1.06%.

ANOTHER MERGER?

Continuing a recent trend of mergers and acquisitions in the energy sector, ConocoPhillips (COP) is planning to purchase Marathon Oil (MRO), an independent oil and gas producer, in an all-stock transaction for a total price of $22.5 billion, including debt.

But why? With Marathon’s production concentrated in North Dakota and Texas, the acquisition would enable ConocoPhillips to broaden its domestic asset base. It doesn’t stop there. Within the first year of the transaction, ConocoPhillips expects to save $500 million in expenses. The company also believes investors should anticipate a boost to their returns as a result of the deal’s anticipated immediate positive effect on profits and cash flows.

Is this a common theme in the Energy sector? Oil companies seeking to put their capital to use have been merging at a rapid pace over the last year, and this merger is no exception. For example, The purchase of Pioneer Natural Resources by ExxonMobil (XOM) for $59.5 billion has been concluded while Chevron’s (CVX) $53 billion takeover of Hess (HES) was approved by shareholders on Tuesday.

LETS TRY SOMETHING DIFFERENT

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Toyota (TM), the biggest automobile manufacturer in the world, is working toward the goal of incorporating a new component into the industry’s efforts to reduce carbon emissions. This new component will be small internal combustion engines that are able to operate on cleaner biofuels while still being compatible with integrated electric motors in hybrid vehicles.

Why this approach over the EV approach? The introduction of these new engines is in line with Toyota’s “multi-pathway” strategy, which prioritizes hybrid vehicles and sees electric vehicles as secondary. However, this policy was met with a great deal of early criticism, but it ultimately proved to be successful during the fiscal year that ended March 2024.

That is great and all, but… time is ticking. With no time frame provided for when these engines will be accessible, will Toyota meet the new EPA standards for emission? The new emission limits for vehicles will apply to automobiles and trucks manufactured between the years 2027 and 2032. On top of that, policymakers in the EU are working toward the goal of prohibiting the sale of automobiles that release carbon dioxide beginning in the year 2035.

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