After the Close - The U.S. stock market put in a choppy, and somewhat directionless, performance today. At the end of the session, the Dow Jones Industrial Average finished down nine points (-0.1%); the S&P 500 Index was up three points (0.3%); and the tech-heavy NASDAQ closed up 16 points (0.6%). The mixed tone could be seen in the market’s’ breadth, as advancing stocks were moderately ahead of decliners on the NYSE. The various market sectors were also largely divided. There were considerable losses in the conglomerates and in the capital good names, while the more defensive groups, such as the utilities and the healthcare issues made some progress.
Technically, it was not surprising that the market took a breather today, after Friday’s large up move. That large one-day gain was accompanied by heavy trading volumes, which was a good sign. The Standard & Poor’s 500 Index may be running into some resistance at the 1,360 area, as this level was hit, but did not hold, several sessions back. The VIX was also up for much of the session, possibly hinting at some skepticism on the part of traders today. Nonetheless, it should be noted that the VIX is near 17, which, on the whole, suggests bullish sentiment. Meanwhile, with the July 4th observance landing in the middle of the week, trading for the next few days may be light.
A good showing overseas may have lent some underlying support to the U.S. market. On the Continent, the bourses were all up over 1%, which was good to see. This may be a continued reaction to the recent summit meeting, where steps were announced to ease problems in the Italian and Spanish debt markets. Elsewhere, the euro slipped to about $1.26 today.
The economic news on our shores was disappointing. Specifically, the ISM Manufacturing Index for the month of June came in at 49.7, falling short of analyst expectations. The reading was also significantly below the 53.5 figure posted in May. Elsewhere, a construction spending report was a slight positive, as this figure rose 0.9% in May, which was a bit better than the consensus forecast. Tomorrow, we get a look at factory orders for the month of May, as well as auto and truck sales for June.
In corporate news, there were a few acquisitions announced. Amylin (AMLN) shares were higher on news that the drug company will likely be acquired by Bristol-Myers Squibb (BMY). Elsewhere, Dell (DELL) is purchasing Quest Software (QSFT), but the stock did not move much. Moreover, Brightpoint (CELL) saw its shares move higher on news that the mobile phone distributor will be acquired by Ingram Micro (IM). Increased M&A is always a good sign, possibly suggesting that many businesses are doing well, and that some stocks are attractively priced. - Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned
12:30 PM ET - The major U.S. equity indexes, on the heels of Friday’s outsized gains, started the new trading week—one that will likely be marked by light volume with many investors on vacation around the July 4th holiday—in positive territory, but quickly retreated after a dour report on the U.S. economy was issued at 10:00 A.M. (EDT). So, as we reach the midday hour on the East Coast, all of the major equity indexes are in the red, with the Dow Jones Industrial Average suffering the biggest percentage setback.
The latest report on the U.S. economy was not very encouraging. Specifically, the Institute for Supply Management, a Tempe, Arizona-based trade group, said that manufacturing activity contracted in June for the first time since July, 2009. The PMI registered 49.7, a decrease of 3.8% from May's reading of 53.5, indicating contraction in the manufacturing sector for the first time in more than three years. Not surprisingly, those sectors most closely tied to the economy were among the weaker groups in the first-half of the trading day.
The disappointing U.S. economic data, along with reports showing that Chinese manufacturing activity deteriorated at a faster clip in June than a month earlier and the euro zone’s Manufacturing Purchasing Managers' Index (PMI) holding at its lowest reading since June 2009, is also weighing on the economically sensitive industries and the price of crude oil today. In fact, after a noteworthy surge on Friday, the price of crude oil has reversed course and is currently off around 2% on the New York Mercantile Exchange. However, the weakness in the energy sector is not spilling over into the other commodity groups, as most of the major agricultural and soft commodities are showing nice gains so far today.
Meanwhile, the first trading day of the calendar second half has brought a flurry of merger and acquisition news. Dell (DELL) and Quest Software (QSFT) have entered into a definitive agreement for Dell to acquire Quest for $28.00 per share in cash, for an aggregate purchase price of approximately $2.4 billion, net of Quest’s cash and debt. Also in the technology space, Ingram Micro (IM) agreed to acquire wireless networking company Brightpoint (CELL) for $840 million. Over the weekend two other deals were announced: Bristol-Myers Squibb (BMY) reached an agreement to purchase industry peer Amylin Pharmaceuticals (AMLN), which is best known for its diabetes drug, for $5.3 billion; and Lincare Holdings (LNCR) agreed to be acquired Germany’s Linde AG for $4.6 billion in cash.
Looking ahead to the second half of the day, there does not seem to be much to build a case for the bulls. However, judging by what has taken place in recent weeks on Wall Street, a spate of bargain hunting can’t be rule out—advancing issues are actually ahead of decliners right now on the Big Board. Still, our sense is that the bears will be tough to take down today, especially with the aforementioned report indicating that manufacturing activity, which has been a mainstay of the U.S. expansion, may be faltering. Too, investors clearly have not abandoned their “flight-to-quality” stance either, as noted by the current nine-basis-point decline in the yield on the 10-year Treasury note. - William G. Ferguson
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
Stocks to Watch from The Survey – A flurry of M&A deals were hammered out over the weekend, including drug company Bristol-Myers Squibb’s (BMY) agreement to purchase industry peer Amylin Pharmaceuticals (AMLN), which is best known for its diabetes drug, for $5.3 billion. BMY stock is down marginally in pre-market trading. Additionally, rumors that Lincare Holdings (LNCR) was in talks with potential suitors turned out to be true, as the leading provider of oxygen and respiratory services has agreed to be acquired by Germany’s Linde AG for about $4.6 billion in cash. Lincare stock is soaring in pre-market trading on the news. The same is true for Brightpoint (CELL) shares, which are rallying on news that the wireless networking company has agreed to be acquired by Ingram Micro (IM), a wholesale distributor of computer products and related services, for about $840 million, including the assumption of debt. Moving on, the lengthy courtship for Quest Software (QSFT) finally appears to be over, with computer maker Dell (DELL) the winning bidder for the provider of enterprise systems management products. Both stocks are little changed in the premarket. Finally, shares of Micron Technology (MU) are higher in pre-market trading, after the semiconductor manufacturer announced plans to buy Japan-based rival Elpida Memory. – Matthew E. Spencer
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell - It continues to be all about Europe. Specifically, after weeks of generally dour tidings from the Continent, with just a few positive wrinkles in between, the U.S. equity markets, gripped by escalating concerns about the future of that floundering region, had been mostly on the defensive. However, late Thursday, the euro-zone leaders, facing pressures from mounting debt yields in Spain and Italy, the two most recent major European Union nations under stress, saw Germany, the largest and strongest member of the EU, agree to the concessions it had formerly rejected. Armed with that news and with a consequent surge in the battered euro, the single currency used by the EU, stock markets around the world soared.
Over here, the news caught on quickly, and stocks opened up Friday's session on a strong note, after having finished up Thursday's trading in better fashion. All told, after paring what had been a steep early Thursday loss, the markets rose from the outset on Friday and never looked back, with the 30-stock Dow Jones Industrial Average gaining an outsized 278 points on the day, thereby closing the month of June, which had heretofore been an up-and-down-affair, with the largest gain for any June since 1997. Joining the Dow on the road to recovery were the other key averages. All in all, it was one of the market's best days in months.
Not only did the equity markets and the euro surge, but so did oil, gaining almost 10% on the day, for its biggest one day increase since 2009, on hopes that the EU accord would help inject new life into a weak global economy. However, it is not that simple. For example, there was only slight movement in the euro-zone position, and the changes will take months to implement. Moreover, the struggling nations in that region, headlined by Greece, Ireland, Portugal, Cyprus, Spain and Italy, to name just a half dozen of the weaker countries on the Continent, will not be put on the road to recovery overnight. There is also the full accord, itself, to still be worked out. In fact, according to press critics, some of Friday's measures were short on details. So why was there this dramatic response by the markets on Friday? Our sense is that there was so little expected that this modest step toward a long-term solution was clearly unexpected. Time will tell if this latest effort to take a positive view of Europe will prove fortuitous to global traders and investors.
Meanwhile, following the Friday fireworks, the markets around the world seem to be settling down this morning, with our own equity futures earlier having had a mixed look to them.
As to other news, we begin a new month today, and at 10:00 (EDT) this morning, we will get a major look at June data when the Institute for Supply Management issues its monthly report on manufacturing activity across the nation. This survey, which came in at a moderately positive reading of 53.5 last month, is expected to show a slower rate of growth of 52.0. However, unless this survey comes in closer to the 50.0 mark, which is the dividing line between an expanding or a contracting industrial sector, the markets should not have a major reaction. We also will get data on May construction spending at that time. Then, tomorrow, we are due to see a report on June car sales, where a decent performance is forecast. That will be followed on Thursday with data on non-manufacturing activity for June and the latest weekly report on new jobless claims. Finally, Friday is due to see the most critical issuance of the month when the government releases its report on non-farm payroll growth for June. In May, there had been 69,000 jobs added; the estimate for June is 100,000 new payrolls. The unemployment rate, meantime, is forecast to stay at 8.2%. So, all in all, it should be a pivotal week for the economy, as perhaps, the focus will shift here again, after weeks of looking overseas. That may or may not be a good thing for the bulls. Stay tuned. – Harvey S. Katz
At the time of this article's writing, the author did not have positions in any of the companies mentioned.