Stock Market News for August 24, 2010

U.S. stocks dropped on Monday as economic worries prevailed over early-morning enthusiasm resulting from Hewlett’s Packard’s bid for 3Par. The takeover tussle for 3Par sent technology shares almost to the bottom of the decliners’ list as investors rushed to safe havens and defensive stocks.

Hewlett-Packard’s (NYSE:HPQ) shares fell 2% after the computer maker offered to buy data storage company 3Par (NYSE:PAR), rivaling a prior offer from Dell Inc. (NASDAQ:DELL). All stock indexes fell on the day, led by a 0.9% drop in tech-heavy Nasdaq. H.P. said it will pay $1.6 billion for 3Par.

The Dow industrials, up 91 points at one time, closed with a loss of 39 points, or 0.4%, at 10174.41. The broader S&P 500-stock index fell more than 4 points, or nearly 0.4%, to 1067.36. On the New York Stock Exchange, declining issues beat those that rose in price by a three-to-two margin on volume of 865 million shares.     

This morning’s stock futures suggest the weakness in stock market is likely to continue amid lingering recovery-related worries. Ahead of the opening bell, Dow Jones industrial average futures dropped 106 points, or 1%, to 10,051. Standard & Poor's 500 index futures fell 12.20 points, or 1.1%, to 1,053.40, while Nasdaq 100 index futures fell 23.75 points, or 1.3%, to 1,785.75.

Leading the S&P500 industry-sector lower were industrials (-1.2%), basic materials (-1.1%), and tech sector shares (-1.0%). Investors’ rush to defensive stocks boosted utilities (+0.5%) and health care (+0.2%) sectors. Utilities benefitted from a UBS (NYSE:UBS) research note that said utilities had already discounted possible future dividend hikes "in the low 30% range."

The weakness was broad based yesterday, with only 17 of the Nasdaq 100 marking gains on the day. Strength in US dollar weakened firms that derive a fair share of their revenues from overseas operations. Leading the decliners were Caterpillar (NYSE:CAT), off 2.9%, Boeing (NYSE:BA), down 2.0%, Hewlett-Packard (NYSE:HPQ), down 2.0%, and United Technologies (NYSE:UTX), off 1.3%.

Merck (NYSE:MRK), considered a defensive stock rose 1.5% after it filed a patent suit against Impax Labs (NASDAQ:IPXL), which is seeking FDA approval to sell Vytorin’s generic version. Wal-Mart gained 1.8%. Shares in Pfizer (NYSE:PFE) gained 1.1% on a Dutch study that showed heart disease rates accelerated among patients switching from its patented Lipitor to generic cholesterol-reducing drugs.

The rush to safe havens sent US Treasuries lower, sending yields to record lows. Prices on the 10-year rose 5/32 as its yield dipped to 2.600%. Meanwhile, a well-received auction of $7 billion 30-year inflation-protected Treasuries helped boost the outlook for the week's upcoming sale of 2-, 5-, and 7- year notes.

Crude prices fell to their lowest since July 6, easing 0.1% to $73.10, as a stronger US dollar weighed on commodities priced in dollars. The US dollar rose 0.2% against a basket of foreign currencies. Gold prices fell 1% to finish at $1,228.50.

Stocks were generally weaker in Asia today. However, China's Shanghai Composite Index edged up 0.4% after Blackrock (NYSE:BLK) noted yesterday it had made investments in the home property market in the country. Also, Sina.com reported residential real estimate transactions increased the most since May.

Today's earnings releases include Big Lot (NYSE:BIG), Burger King (NYSE:BKC) and Medtronic (NYSE:MDT).

Read the full analyst report on HPQ

Read the full analyst report on PAR

Read the full analyst report on DELL

Read the full analyst report on CAT

Read the full analyst report on BA

Read the full analyst report on HPQ

Read the full analyst report on UTX

Read the full analyst report on MRK

Read the full analyst report on IPXL

Read the full analyst report on PFE

Read the full analyst report on BLK

Read the full analyst report on BIG

Read the full analyst report on BKC