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Benchmarks finished mixed yesterday following merger and acquisition news, disappointing corporate results and dismal economic data. While news about a business acquisition boosted investors’ confidence in markets, dismal economic data was overlooked as an outcome of the bitter winter season. However, while S&P 500 and Nasdaq settled in the green, Dow closed in negative territory following Coca Cola’s dismal results. Nasdaq has now gained for eight straight sessions. For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average slipped 0.05% to close the trading session at 16,146.81. The Standard & Poor 500 (S&P 500) managed gains of about 0.2% to move up to 1,841.52. The tech-laden Nasdaq Composite Index rose roughly 0.7% to finish Tuesday’s trading session at 4,273.29. The fear-gauge CBOE Volatility Index (VIX) added 2.2% to settle at 13.87. Total volume on the New York Stock Exchange was 3.4 billion. Advancers beat the decliners on the NYSE; as for 64% stocks that gained, 33% stocks closed in the red.
Tuesday was the first trading day this week as markets were closed on Monday due to President's Day holiday. Coming back from the long weekend, investors had to focus on a mixed bag of news that included corporate news, results as well as economic data.
Actavis plc (NYSE:ACT) said it will acquire Forest Laboratories Inc. (NYSE:FRX) for $25 billion in cash and stock. The news bolstered shares of Forest Laboratories by 27.5% while Actavis’ shares were up 5%. The merger of the Irish generic drug maker Actavis with US specialty pharmaceuticals company Forest Laboratories will be one of the biggest mergers in specialty pharma. The merged entity is expected to have annual sales worth about $15 billion.
Gains in Forest Laboratories led the race among the S&P 500 stocks. Separately, other pharma stocks also closed with decent gains and included the likes of Mylan, Inc. (NASDAQ:MYL), Teva Pharmaceutical Industries Limited (NYSE:TEVA), Merck & Co. Inc. (NYSE:MRK) and Bristol-Myers Squibb Company (NYSE:BMY). These stocks were up 4.8%, 3.4%, 0.5% and 0.5%, respectively.
Meanwhile, shares of Tesla Motors, Inc. (NASDAQ:TSLA) soared to a historic high yesterday on reports that Apple Inc. (NASDAQ:AAPL) may buy this electric car maker. Tesla’s shares closed with gains of 2.8% yesterday, while Apple rose 0.4%.
While Forest Laboratories was the best performer in S&P 500 and largely helped the index finish in the positive zone, The Coca-Cola Company (NYSE:KO) was a big drag on the Dow. Shares of Coca-Cola dropped 3.8%, with the company emerging as the biggest laggard among 30 Dow components, after reporting dismal fourth quarter performance. Its adjusted earnings of 46 cents a share were in line with expectations, but sales declined 4% year on year. Sales for 2013 were down 2% and also lagged expectations.
Investors also had to digest a couple of dismal economic report. A bitter winter season was blamed for all the poor economic activity. The National Association of Home Builders/Wells Fargo said U.S. homebuilders’ confidence slumped in February. The sentiment gauge was down to 46 in February from January’s reading of 56. This was the largest decline since NAHB started reporting the gauge in 1985.
The monthly survey of manufacturers in New York State by the Federal Reserve Bank of New York also showed dismal readings. General business conditions dropped 8 points to 4.5 in February and new orders dropped to zero. Unfilled orders index was stable at -6.3.
Benchmark’s mixed finish on Tuesday comes after they closed with second consecutive weekly gains last week. Both Dow and S&P 500 were up 2.3% for the week. Nasdaq closed the week with gains of 2.9%. Much of the weekly gains came on the back of optimism offered by Federal Reserve Chairwoman Janet Yellen. Her pledge to keep interest rates low led benchmarks sharply higher last week. In her first speech before Congress after taking up the top position at the central bank, Yellen also supported the tapering process.