Stocks drop after home data; investors await Fed
Saks up after it agrees to be acquired in $2.4 billion buyout
NEW YORK (MarketWatch) — U.S. stocks lost ground Monday, with a drop in home sales adding to initial pressure as investors awaited bigger data later in the week and a meeting of Federal Reserve policy makers.
A round of deal making moved shares of retailer Saks Inc., drug maker Perrigo Co. and advertising firm Omnicom Group Inc.
The S&P 500 Index (SNC:SPX) fell 5.24 points to 1,686.44, while the Dow Jones Industrial Average (DJI:DJIA) dropped 42.80 points to 15,516.03. The Nasdaq Composite (NASDAQ:COMP) gave up an early rise to trade at 3,607.61, down 5.56 points.
Indexes saw added pressure after the National Association of Realtors said pending home sales fell 0.4% in June, with rising rates blamed for undercutting sales momentum.
Still, the Dow and S&P remain camped out just below record highs, while the Nasdaq is near a 13-year high. Overall, market action remains “very healthy and very constructive,” though the market’s reaction to upcoming data will be very telling, said Adam Sarhan, chief executive of Sarhan Capital, in a phone interview.
The Federal Reserve meeting, which concludes Wednesday, is the “wild card” for markets given widely-held expectations the policy-setting Federal Open Market Committee won’t make major changes to its policy statement, Sarhan said.
Polya Lesova takes a look at which stocks traders will be watching during market action, including Omnicom Group, Elan Corporation, and Saks Inc.
Investors are closely watching the Fed for any further clues to when it may begin tapering its purchases of government bonds. Concerns over a slower pace of stimulus was tied to a pullback by stocks last month, though equities soon recovered to see the S&P and Dow head back to record territory.
Meanwhile, nonfarm payrolls and other jobs data for July are set for release on Friday.
Shares of Dow component Boeing Co. (NYSE:BA) trimmed an early loss but remained down 0.6%. The U.S. Federal Aviation Administration has proposed a $2.75 million civil penalty against the aerospace company, saying it failed to correct a problem with fasteners on its 777 airplanes for more than two years after its discovery in 2008.
United Technologies Corp. (NYSE:UTX) and General Electric Co. (NYSE:GE) were also lower, dragging on the blue-chip index. Caterpillar Inc. (NYSE:CAT) shares gained 1.2% after the company said it would buy back $1 billion in shares from Societe Generale.
It wasn’t quite a “merger Monday,” but some deal news was jostling individual stocks. Shares of Saks Inc. (NYSE:SKS) rose more than 3% after the retailer agreed to be acquired by Hudson’s Bay Co. (TOR:CA:HBC) in a $2.4 billion, all-cash deal.
American depositary shares of Elan Corp. (NYSE:ELN) (IRX:IE:DRX) rose 4.5% after Perrigo(NYSE:PRGO) said it would use a combination of cash and stock to buy Elan for $16.50 a share, which is a 10.5% premium over Elan’s closing price Friday. Perrigo shares dropped 5.6%.
Shares of Hertz Global Holdings Inc. (NYSE:HTZ) dropped 3%. The car-rental firm reported a 31% rise in second-quarter profit, earning 45 cents a share when excluding one-time items. A survey of analysts found a consensus forecast for earnings of 45 cents. See: Anadarko, Express Scripts in focus Monday.
Shares of Omnicon Group Inc. (NYSE:OMC) jumped more than 3% after it and Publicis Groupe SA(EPA:FR:PUB) said Sunday that they will merge in the biggest advertising industry deal in history.
Simon Property Group Inc. (NYSE:SPG) said Monday that second-quarter earnings rose 58%. The nation’s largest shopping-mall operator logged higher funds from operations to beat analyst estimates and boosted its full-year outlook. Shares rose 0.2%.