Spirit Airlines Soars on $6.6 Billion Frontier Deal

Crude oil slips while bond yields inch higher

Frontier Group announced a $6.6 billion purchase of Spirit Airlines (SAVE). Shares of Spirit shot up 16% this morning in reaction to the news. If approved, Frontier's purchase would create the fifth-largest airline in the United States. Shares of major airlines Delta (DAL), United (UAL), and American Airlines (AAL) are also gaining.

The S&P 500 and Nasdaq's gains come after they posted one of the best weeks for the year. The yield on the 10-year Treasury note continued advancing today, after it surged past 1.9% Friday for the first time in more than two years.

Key Takeaways

  • Stocks are mixed, with the Dow wavering as other indexes gain.
  • Merger news is helping stocks: Frontier Group said it's buying Spirit Airlines for $6.6 billion and of Peloton is rumored to be a potential target by Amazon and Nike.
  • Bond yields advanced again after passing 1.9% last week for the first time in more than two years. Inflation data may drive markets this week.
  • Amgen Inc., Hasbro Inc., Tyson Foods Inc., and Take-Two Interactive Inc. report results today.

Frontier and Spirit Airlines Merger

Frontier's Spirit purchase combines the two largest low-cost carriers in the U.S. Frontier stated the combined airline is expected to add 10,000 jobs by 2026, expand its frequent flyer and membership programs, and add new routes.

The new combined airline will hope to better compete with the "Big Four" of U.S. airlines: Delta, American Airlines, United Airlines, and Southwest. Shares of all four companies are up this morning.

Regulatory Hurdles

The merger still has to be approved by federal antitrust regulators. The Biden administration has been more aggressive in its antitrust policies. Last year, the Department of Justice blocked an alliance between JetBlue (JBLU) and American Airlines that would have consolidated their operations in Boston and New York City.

Today's Market Movers

Peloton surged 27% following reports that Amazon (AMZN) and Nike (NKE) are exploring bids for the exercise equipment maker after investor Blackwells Capital urged the company’s board to put the company up for sale.

Last week, the Dow ended 1% higher, the S&P 500 rose 1.6%, and the Nasdaq gained 2.4% after a volatile week fueled by earnings beats by Amazon and Snap, and disappointing results from Facebook parent Meta Platforms

Inflation data and earnings will likely drive the markets this week. Today, Amgen Inc. (AMGN), Hasbro Inc. (HAS), Tyson Foods Inc. (TSN), and Take-Two Interactive Inc. (TTWO) report results. Later this week, investors will get results from Walt Disney Co. (DIS), Twitter Inc. (TWTR), Uber Technologies Inc. (UBER), Pfizer Inc. (PFE), CVS Health Corp. (CVS) Coca-Cola Co. (KO), and Kellogg Co (K).

Investors will also get the January Consumer Price Index (CPI) later in the week, which is expected to show inflation rising 7.3% for the year. Today, the Federal Reserve reports consumer credit data for December. It is expected to rise at an annual rate of 4.3%, after jumping 11% in November.

Consumer Credit

Oil prices slipped below $92 a barrel, after last week crossing that mark for the first time in seven years. The dollar strengthened against the euro.

Bitcoin rose, nearing $43,000 and other cryptos gained as well. 

Quick Hits: Today's Headlines

Ford Motor Co. (F) confirmed it's rolling back production at some plants next week. The automaker will suspend or cut production at eight factories in the U.S., Canada, and Mexico because of supply constraints of computer chips.

Toshiba Corp. has revised its restructuring plan and intends to split two ways instead of three. The Japanese conglomerate hopes to end a fight with foreign investors as it seeks to spin off its device business.

Paramount’s “Jackass Forever” beat out “Moonfall” and “Spiderman” to take the top spot at the weekend box office. “Jackass Forever” earned $23.5 million in ticket sales in its first weekend in theaters. ViacomCBS Inc. owns Paramount.

Retailer Kohl’s Corp. (KSS) has adopted a shareholder rights plan to protect itself from hostile takeovers. The move comes days after Kohl’s received a buyout offer from Starboard Value-backed Acacia Research and a possible offer from Sycamore Partners that Kohl’s said undervalued the retailer. 

The Big Story: Apple's New Phone Plans

Apple Inc. (AAPL) is targeting a date on or near March 8 to unveil a new line of more affordable 5G iPhones, an updated iPad, and possibly a Mac, Bloomberg News reported, citing sources familiar.

The new iPhone would be the first update to the iPhone SE model in two years, and feature 5G capabilities, an improved camera, and a faster processor. Apple’s current iPhone SE was launched in Spring of 2020 and sells for $399. 

The new iPad is expected to be an updated version of the iPad Air. That device was last updated in October 2020 and sells for $599. The launch would be Apple’s first since October, when it unveiled new MacBook Pro laptops. It is also reportedly planning to release its iOS 15.4 software for its devices in March.

While Apple’s plans could change over the next month in the face of production delays or other changes, the company is planning for a virtual livestream of the event rather than an in-person gathering. 

Article Sources

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  1. Bloomberg News. "Apple Aims to Debut a New Low-Cost 5G iPhone and iPad in Early March." Accessed Feb. 7, 2022.

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