Traders-Blog.com

Stocks closed lower on the day and week with the S&P 500 logging a third straight week of declines, after a wary session spent marking time ahead of next week’s Federal Reserve rates decision. However, the energy sector was a notable gainer after two major deals suggested a round of consolidation among oil and gas producers may be on the cards. Concerns about the economy, inflation and interest rates continue to unnerve investors.

Today, the Dow Jones Industrial average closed down 30.02 or 0.3% to 10,989.09, the broader Standard & Poor’s 500 index closed down 1.10 or 0.1% to 1,244.50, and the tech-heavy Nasdaq composite index closed down 1.51 to 2,121.47. For the week, the Dow ended down 0.2%, the S&P lost 0.5% and the Nasdaq fell 0.4%.

Market breadth was negative and volume was light. On the New York Stock Exchange, decliners edged out advancers by 16 to 15 on volume of 1.4 billion shares. On the Nasdaq, losers narrowly beat winners by 15 to 14 as 1.6 billion shares changed hands.

There are new worries about just how hawkish the Fed is and whether it will over-tighten and whether investors will have a hard landing or a soft landing scenario for the economy. The market could instead focus on expectations that the second-quarter earnings season will prove solid. Investors are scared to buy and scared to sell - everyone is trapped in day-to-day volatility.

On the data front, orders for new U.S.-made durable goods fell a more-than-expected 0.3% in May. It marked the second decline in a row, with orders now down 3.5% since a peak in December. The news heightened investors’ nervousness before the Federal Reserve’s policy meeting next week.

Additionally, the hedge-fund business came under scrutiny after the New York Times reported that Pequot, a $7 billion fund managed by Arthur Samberg, is being investigated by the SEC for possible insider trading. The probe has not resulted in any charges. Pequot, responding to the report, said all its trades have been proper and it has never received any insider information regarding impending mergers.

Blockbuster from the energy sector had a merger news. Shares of Shares in Anadarko Petroleum Corp. fell 7.2% down $3.49 to $44.90 after the company said it would spend $21.1 billion to acquire rivals Kerr-McGee Corp. that closed up $18.31 or 36% to $68.61: and Western Gas Resources Inc. that closed up $18.76 or 46% to $59.67. The merger would create one of the world’s largest independent oil and gas producers. In another deal for the oil sector, Energy Partners Ltd. closed up $1.15 to $19.17and Stone Energy Corp. closed up $0.48 to $46.71, on a merge announcement in a $2.2 billion deal. The combined entity will create one of the most active drillers of operated oil and gas wells on the Gulf of Mexico.

Stock of Oracle Corp. closed up $0.57 or 4% to $14.90, after the software maker posted a 27% jump in its quarterly profit and strong revenue growth, buoyed by strong sales of new software licenses, particularly in its applications segment. Safra Catz, the company’s president and chief financial officer, predicted profit excluding acquisition and other one-time items for the current quarter that met analysts’ average estimate. She forecast a stronger-than-expected rise in revenue for the current period.

Shares of Alcoa Inc. closed up $0.19 to $30.18, on information that it has sealed a four-year labor contract with its United Steelworkers union. The company also expects to book a second-quarter charge of 4 cents a share on costs related to the ratification of the contract. The aluminum producer is also in talks to establish operations in other African countries besides Guinea and Ghana.

Shares of Six Flags Inc. closed down $1.90 or almost 26% to $5.55 after the theme-park company said that it was looking to shed six properties as part of its initiative to sell off non-core assets. The company also announced that reaching its prior outlook for adjusted earnings before interest, taxes, depreciation and amortization would be “extremely difficult,” and Standard & Poor’s downgraded its outlook to “negative” from “stable.

Stock of Qualcomm Inc. fell 4.2% to $39.55 after J.P. Morgan cut the wireless-technology provider to neutral from overweight. The broker cited a likely stalemate in contract negotiations with Nokia Corp. over the Finnish handset maker’s WCDMA license agreement.

Crude-oil futures maintained flat while traders continued to weigh a smaller-than-expected build in U.S. gasoline supplies, developments in Iran, and next week’s Federal Reserve decision on interest rates. The August contract closed up 3 cents at $70.87 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter