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The markets were mixed Monday afternoon as the Nasdaq Composite was lifted slightly higher by some M&A action but the broader markets were pressured by diving oil and commodity prices.
Today’s Markets
As of 12:34 p.m. EDT, the Dow Jones Industrial Average fell 34.46 points, or 0.35%, to 9785.43, the Standard & Poor's 500 lost 4.06 points, or 0.15%, to 1064.24 and the Nasdaq Composite picked up 3.31 points, or 0.16%, to 2136.20. The consumer-friendly FOX 50 slid 2.56 points, or 0.33%, to 772.85.
Aside from Dell’s (DELL) $3.9 billion takeover of Perot Systems (PER) and a $2 drop in oil, the markets were impacted by a new report on leading economic indicators, Lennar’s (LEN) big quarterly loss and bearish commentary from fertilizer giant Potash (POT).
Almost half of the Dow's 30 components climbed into the green by midday, led by General Electric (GE) and Wal-Mart (WMT). On the down side, financial giants American Express (AXP) and Bank of America (BAC) tumbled 2% a piece.
The choppy start for stocks comes after the Dow soared 215 points last week, its biggest weekly gain since July 24. Stocks have extended their summer surge amid increased optimism about an economic recovery.
The markets will “probably pull back for three or four days here and then the market probably rights itself a little bit” before “rallying into the month’s end,” said Michael James, senior equity trader at Wedbush Morgan Securities.
The Nasdaq Composite climbed into positive territory late morning as tech stocks like BlackBerry maker Research in Motion (RIMM) and Garmin (GRMN) rallied on the M&A news. Dell's $30-a-share deal to buy Perot Systems puts a 68% premium on Perot’s shares based on the closing price on Friday.
However, commodities led the markets lower Monday morning as crude oil tumbled nearly 4% after Platts said oil consumption in China tumbled 5.4% in August from the month before, the first decline in six months. The report spooked the markets as China, the world's second-largest economy, has been looked to to lead the world out of recession.
After climbing almost 4% last week, crude tumbled to $69.40 a barrel, down $2.64, or 3.66%. Commodities were also hurt by the dollar, which rallied 0.4% against the Euro. Gold fell $6 an ounce, or 0.61%, to $1004.30.
Underscoring the fall in the oil market, the energy sector sank more than 1% in recent trading. Individual energy-related stocks like Hess (HES) and Schlumberger (SLB) tumbled even further. Basic material stocks such as Freeport McMoRan (FCX) and U.S. Steel (X) also fell sharply amid the lower commodity prices.
Despite the early week struggles, some bullish traders have their sights kept on the pivotal 10000 level on the Dow and beyond.
“10000 is a foregone conclusion. People are chasing returns at this point," NYSE trader Jason Weisberg of Seaport Securities told FOX Business. “I hate to do this publicly, but the chart points to Dow 11000.”
The markets had little reaction to the Conference Board's leading economic indicators report, which climbed in August for the fifth straight month, suggesting a recovery may be underway. The index rose 0.6% last month, nearly matching the Street's expectation for a 0.7% increase.
Corporate Movers
Potash (POT) saw its shares tumble 5% after the world’s biggest fertilizer maker lowered its 2009 earnings outlook below the Street’s view late Friday amid lower-than-expected sales. The company said it now sees 2009 EPS of $3.25 to $3.75, well below its earlier guidance for EPS of $4 to $5. Analysts polled by Thomson Reuters had been forecasting full-year EPS of $4.12.
Bank of America’s (BAC) board is mulling its options if CEO Ken Lewis is charged with fraud and the directors are expected to add DuPont (DD) Chairman Charles Holliday to its board at a meeting on Monday, The Wall Street Journal reported. The board, which remains behind Lewis, recently confirmed a succession plan in case it needs to quickly name a new CEO, the paper reported.
Lennar (LEN) reported a third-quarter loss of 97 cents per share but said it should be profitable next year if the economy continues to improve. The home builder’s revenue tumbled by a worse-than-expected 35% to $721 million.
PepsiCo (PEP) executive Michael White will retire at the end of the year, the Journal reported. White, who led the company’s $7.8 billion purchase of its two biggest independent bottlers, will remain on the company's board after retirement to help with the bottler transition, the paper reported.
General Electric (GE) is set to enjoy strong cash flow generation of its industrial businesses, Morgan Stanley wrote in a note as the brokerage lifted its price target on the conglomerate to $19 from $17, Reuters reported.
Global Markets
European markets tumbled almost 1% across the board. The U.K.'s FTSE 100 fell 0.98% to 5122.10, France's CAC 40 lost 0.76% to 3798.72 and Germany's DAX dropped 1.21% to 5635.02.
In Asia, Hong Kong's Hang Seng sank 0.7% to 21472.85 but China's Shanghai Composite rose 0.15% to 2967.01. Japanese markets were closed for a holiday.
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