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Benchmarks ended Monday’s choppy trading session little changed as investors assessed new deals and discouraging housing data. The new deals helped offset the discouraging pending home sales data. While the S&P 500 and Dow finished with meager gains, the Nasdaq was weighed down by declines in bio-tech stocks. Investors were also cautious ahead of a slew of upcoming economic data and second-quarter earnings results. 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 (DJI) gained 0.1% to close Monday’s trading session at 16,982.59. The Standard & Poor 500 (S&P 500) advanced a meager 0.03% to finish at 1,978.91. The tech-laden Nasdaq Composite Index closed at 4,444.91; declining 0.1%. The fear-gauge CBOE Volatility Index (VIX) dropped 1.0% to settle at 12.56. Total volume on the New York Stock Exchange (NYSE) was about 2.8 billion. Decliners outpaced advancing stocks on the NYSE. For 55% stocks that declined, 41% advanced.
Benchmarks started July’s last week witnessing new rounds of merger and acquisition activities in the consumer discretionary and technology sectors. Shares of Family Dollar Stores Inc. surged 24.9% after the company declared that it would acquire Dollar Tree, Inc. ( DLTR - Analyst Report) in a cash-and-stock deal valued at about $8.5 billion. Family Dollar will buy Dollar Tree for $74.50 a share, roughly at a premium of 23% over Family Dollar’s closing price on Friday. Family Dollar turned out to be S&P 500’s biggest percentage gainer. Shares of Dollar Tree also went up 1.2%.
In another deal, Zillow, Inc. ( Z - Snapshot Report) agreed to buy Trulia, Inc. for $3.5 billion in stock. Shareholders of Trulia are expected to receive 0.444 shares of Zillow stock for each Trulia share. Further, they will own about 33% shares of the combined company. Zillow offered the deal at a 25% premium to Trulia's closing price on Friday. Shares of Trulia soared 15.4% while shares of Zillow gained 0.9%.
Economic data on pending home sales was disappointing. A gauge of pending home sales numbers retreated in June after three consecutive months of solid growth. The National Association of Realtors reported that Pending Home Sales Index, a forward looking indicator based on contract signings, dropped 1.1% to 102.7 in June from May’s revised figure of 103.8. The drop in pending home sales in June was in contrast to the consensus estimate of a rise by 0.3%.
The report followed discouraging new home sales numbers. Last Thursday, the U.S. Census Bureau and the Department of Housing and Urban Development had revealed sales of new single-family houses decreased 8.1% to 406,000 in June. New home sales registered its biggest drop in almost a year.
The decline in pending home sales numbers negatively impacted home builder stocks. The SPDR S&P Homebuilders (XHB) declined almost 1.6%, the largest decliner among the S&P 500 sectors. Key housing stocks from the sector such as Toll Brothers Inc. ( TOL - Analyst Report) , PulteGroup, Inc. ( PHM - Analyst Report) , Lennar Corp. ( LEN - Analyst Report) , KB Home ( KBH - Analyst Report) , DR Horton Inc. ( DHI - Analyst Report) and Beazer Homes USA Inc. ( BZH - Snapshot Report) decreased 1.5%, 0.9%, 2.1%, 1.7%, 0.6% and 2.8%, respectively.
Separately, declines in bio-tech stocks dragged the Nasdaq down. Bio-tech companies such as Vertex Pharmaceuticals Incorporated ( VRTX - Analyst Report) , Amgen Inc. ( AMGN - Analyst Report) and Regeneron Pharmaceuticals, Inc. ( REGN) decreased 0.2%, 0.2% and 0.3%, respectively.
Meanwhile, investors waited for the outcome of the Federal Open Market Committee’s (FOMC) two-day policy meeting to be held on Tuesday and Wednesday. Investors will also look forward to the upcoming GDP advance estimate report and Friday’s monthly jobs report for July. Analysts expect the economy to expand by 3.0% in the second-quarter. Analysts also expect the Labor Department to report 230,000 jobs were added on July.
Moreover, there are some key earnings results lined up for release this week. According to FactSet Research Systems Inc. ( FDS), 148 companies of the S&P 500 are due to post earnings this week. According to FactSet, S&P 500 companies’ profits are on track to grow at 6.4% for the second quarter, more than the expected growth of 4.9% at the beginning of the earnings season.
Coming back to the day’s events, El Pollo Loco Holdings, Inc. (LOCO) turned out to be the most active stock. Shares of the restaurant chain soared 43.5% on its second day of trading.
Tyson Foods, Inc. ( TSN) reported third-quarter fiscal 2014 adjusted earnings of 75 cents per share, missing the Zacks Consensus Estimate of 83 cents. However, the company expects earnings per share growth of 10% for fiscal 2015. Shares of Tyson Foods gained 2.6%.
Cummins Inc.’s ( CMI) earnings per share for the second quarter of 2014 came in at $2.43, surpassing the Zacks Consensus Estimate of $2.39 per share. Moreover, Cummins increased its 2014 revenue guidance to the range of 8–11% from previous projection of 6–10%. However, shares of Cummins dropped 3.2% as the full-year revenue outlook failed to impress investors.
Six out of 10 sectors of the S&P 500 ended in the green. The Utilities Select Sector SPDR (XLU) led the advance as the sector gained 1.4%. Top holdings from the Utilities sector such as Duke Energy Corporation ( DUK), Dominion Resources, Inc. ( D), NextEra Energy, Inc. ( NEE), Southern Company ( SO) and Exelon Corporation ( EXC) increased 1.6%, 1.5%, 1.2%, 1.4% and 1.6%, respectively.