Stocks pared earlier gains to close lower as a sell-off in natural gas reversed the early positive momentum from a flurry of merger news. The drop in oil brought down the entire energy sector, weighing on the broader market and leaving the averages mostly unchanged on the day.
Today, the Dow Jones Industrial average closed down 7.45 or 0.06% to 12,463.87, after scaling a new record trading high of 12,498.47. The broader S&P 500 index closed down 2.02 or 0.14% to 1,423.53, and the tech-heavy Nasdaq composite index closed down 1.94 or 0.08% to 2,427.61.
Market breadth was mixed. On the New York Stock Exchange, advancers beat decliners by a margin of nearly 2 to 1 on volume of 1.4 billion shares. On the Nasdaq, losers topped winners by a margin of 16 to 13 as 1.8 billion shares changed hands.
Major overseas indexes rebounded after the Thai government lifted the controls on foreign stock investments that roiled global markets yesterday. It is evident that investors don’t want to get spontaneous at this time of the year and at this point, there’s not really a lot that can derail the market until the start of the new year. Tomorrow, investors will be on the lookout for the final reading of GDP growth in the third quarter. Additionally, the Philadelphia Fed’s survey that measures regional manufacturing activity, weekly jobless claims and leading economic indicators will also be available.
Shares of FedEx closed down $2.15 or 2% to $111.85, after it warned about results for the current period. While it reported an 8% gain in second quarter income, investors were more focused on the fact that the shipper cut its third-quarter outlook. Second-quarter net income rose 8% to $511 million, from $471 million in the year earlier. Its total revenue rose 10% reaching $8.93 billion from $8.09 billion.
Shares of Swedish telecommunications equipment provider Ericsson fell 0.1% after news it agreed to buy Redback Networks for $2.1 billion. Shares of Redback closed up $4.49 or 21% to $25.66. Redback makes “edge” routers that connect computers to the Internet and allow operators to simultaneously deliver broadband, television and telephone services over networks using standard Internet infrastructure. This technology is essential to carriers that want to offer increasingly popular “triple-play” communications services.
Stock of Harrah Entertainment closed up $0.37 to $82.69, after it agreed to be bought for $17.1 billion by private investors Apollo Management and Texas Pacific Group. The deal is for $90 a share in cash, along with the assumption of $10.7 billion in debt and is valued at $27.8 billion. The $90 a share price represents a 36% premium to its Sept. 29 closing price, the day before an initial offer of $81 a share was made.
Steel giant Arcelor Mittal gained 1% to $42.12 after news it is buying Mexico’s Sicartsa from Grupo Villacero for $1.44 billion. This will continue the steel-industry consolidation trend that started when Mittal Steel bought Arcelor. It has also agreed to a 50-50 joint venture to distribute and trade its long products in Mexico and the southwestern U.S. Sicartsa already shares a production site with Mittal Steel Lazaro Cardenas, and combining the two companies will help drive estimated annual synergies of $130 million.
Shares of Palm fell 0.9% after posting a sharp drop in earnings, which was expected, but disappointed with its forecast for the current quarter. For the quarter, the company reported earnings of $12.8 million, against the $260.9 million last year. Revenue for the quarter fell to $392.9 million from $444.6 million.
Shares of Dell Inc. fell 1.4% after the company said it selected Donald Carty, the head of its audit committee and a close friend of founder Michael Dell, to be its new CFO and straighten out the firm’s accounting mess. The move comes as the company copes with investigations into its bookkeeping, corporate stumbles and a faltering stock price.
U.S. light crude oil for February delivery rose 26 cents to settle at $63.72 a barrel on the New York Mercantile Exchange after a weekly report on fuel inventories showed a dip in crude stocks.
All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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