[BRIEFING.COM] On the heels of last week's strong performance, Monday's market took a breather. The major averages traded in mixed, tightly range-bound fashion for most of the session, and they kept within close proximity of the unchanged mark. The Dow and S&P booked modest losses, while the Nasdaq registered a moderate gain.
The absence of a fresh catalyst helped halt the market's advance. For a Merger Monday, the M&A front was a light one. Reports were limited to a possible sale of Michaels Stores (MIK 38.35 +4.39) and Prudential PLC's (PUK 26.22 +2.27) rejection of Aviva PLC's takeover offer. Some M&A related news that did spur action was Verizon's (VZ 34.22 -0.19) indication that it does not intend to purchase Qwest (Q 6.79 -0.15) or Alltel (AT 65.45 -1.11). The company asserted that buying Vodafone's (VOD 22.35 -0.16) 45% stake in Verizon Wireless is its priority. Qwest and Alltel did not fare well, and their declines were behind the Telecom sector's 0.7% fall.
Overall, the corporate front was relatively uneventful. Amongst the most attention-grabbing were reports of Wal-Mart's (WMT 47.76 +1.07) plans for its ramped-up Chinese expansion, and General Motors' (GM 20.85 -0.28) nearing deal with the UAW. Wal-Mart helped the Consumer Staples sector (+0.3%) maintain positive footing. Healthcare (+0.2%), another defensive area of the market, demonstrated relative strength today. Both sectors had lagged during last week's broad-based rally, but enjoyed some renewed (albeit modest) buying interest today. A pair of pharmaceuticals received some added attention: Eli Lily (LLY 57.42 +0.33) rose following Barron's positive feature of the stock, and Schering-Plough (SGP 19.33 +0.85) enjoyed an analyst upgrade and announced an exclusive collaboration and licensing agreement with P.T.C Therapeutics.
Following their sharp pullbacks on Friday, prices across the energy fell significantly. Crude led the decline and dropped close to 4%. The declines have come alongside reports that inventory is at seven-year highs and following OPEC's reduced demand forecast. However, geopolitical concerns should continue to support prices. We remain bullish on the sector for that reason, as well as on account of tight market conditions and underlying fundamentals. BJ Services' (BJS 31.55 -1.25) reiterated guidance spoke to those points today. The company, which is a suggested holding in our portfolio for active investors, reaffirmed expectations for 20-25% top line growth and 45-52% EPS growth for FY06. Due to today's energy price action, selling across the sector was pervasive and took even that stock lower. The Energy sector levied a market-dragging 1.7% loss.
Despite some continued improvement within the Treasury market, rate-sensitive areas did not take a bullish cue. Instead, they experienced some consolidation of last week's solid gains. The Financial sector recovered just before the bell, but it closed at the flat line and did little to boost the market. Utilities fell 1.2%, and homebuilders were weak across the board. Some caution ahead of this week's housing data added to the latter area's decline. In a broader sense, anticipation of a few key items contributed to the market's performance today. This evening, Fed Chairman Bernanke will speak to the Economic Club of New York. Investors are anxious to gain insight into monetary policy, but, in our view, it is highly unlikely that the Chairman will provide any clues. The FOMC's policy decision will be announced next Tuesday. We continue to expect two more rate hikes, and we believe that the possibility of a third should not be dismissed. Anticipation ahead of tomorrow's Producer Price Index also contributed to the market's cautious stance. It's apt to be somewhat anticlimactic, though, because the Consumer Price Index has already been released. With respect to today's economic calendar, Leading Indicators was the only item. The data checked in relatively in-line with expectations, and had little effect on trade within neither the stock nor bond market.
Aside from the Consumer Staples and Healthcare sectors, Technology (+0.4%) was another area that managed to sustain a gain. Particular pockets of strength included Yahoo, Oracle, and Google. Yahoo (YHOO 30.44 +0.37) was named Piper Jaffray's internet stock pick of the week, Oracle (ORCL 13.72 +0.12) attracted buyers ahead of its earnings report, and a federal judge ruled that Google (GOOG 348.19 +8.40) does not have to turn over consumer search data to the DoJ. Additionally, a rebound in semiconductors lent muscle to the sector's, and the Nasdaq's, outperformance. NYSE Adv/Dec 1441/1840...Nasdaq Adv/Dec 1525/1508
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)