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The S&P 500 closed at a record high and fellow benchmarks also ended in the green boosted by deal news. Possibility of stimulus measures in the Eurozone also lifted the benchmarks. The S&P crossed the 2000-point milestone for the first time, but failed to end above that mark. However, full day trading volume was the lowest this year. 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) rose 0.4% to close at 17,076.87. The Standard & Poor 500 (S&P 500) increased 0.5% to close at 1,997.92. The tech-laden Nasdaq Composite Index closed at 4,557.35; rising 0.4%. However, the fear-gauge CBOE Volatility Index (VIX) rose 2% to settle at 11.70. A total of 4.07 billion shares were traded on Monday, lower than the monthly average of 5.51 billion. Advancers outpaced declining stocks on the NYSE. For 59% stocks that advanced, 37% declined.
Biotech company InterMune has agreed to be bought by Swiss pharmaceutical behemoth Roche Holding AG ( RHHBY - Analyst Report) for an all cash deal valued at about $8.3 billion or $74 per share. This is approximately a 38% premium over InterMune’s closing price on Friday. The deal will allow Roche to expand its horizons, by making sure that it has a stake in the respiratory/lung diseases niche, which is one of the world’s biggest markets for pharmaceutical firms. Shares of InterMune soared 35.4% on Monday. Roche edged up 0.7%.
The deal boosted biotech stocks and also helped the Nasdaq to end higher. Key biotech stocks from the sector such as Gilead Sciences Inc. ( GILD - Analyst Report) , Celgene Corporation ( CELG - Analyst Report) , Regeneron Pharmaceuticals, Inc. ( REGN - Analyst Report) and Vertex Pharmaceuticals Incorporated ( VRTX - Analyst Report) rose 3.4%, 1.9%, 2.1% and 1.7%, respectively.
Shares of Burger King Worldwide Inc. surged 19.5% on news that the second-largest U.S. burger chain is in talks to acquire Tim Hortons Inc. . Following the acquisition, Burger King will move its headquarters from Miami to Canada; making it the latest company seeking to relocate to a country with lower taxes. This would create a company with a market value of roughly $18 billion and the world’s third-largest fast food company. Shares of Tim Hortons jumped 18.9% on Monday.
Separately, comments from the European Central Bank’s President Mario Draghi at Jackson Hole, Wyo, on Friday lifted investor sentiment on Monday. Draghi said the currency bloc’s political leadership should move beyond the tight fiscal policy of the last few years that has dragged down the region’s growth and has done little to combat deflationary pressures.
There are possibilities of further policy flexibility and aggressive stimulus measures in the Eurozone. The financial sector received a boost from such speculation and the Financial Select Sector SPDR (XLF) was yesterday’s second biggest gainer among the S&P 500 sectors. The sector rose 0.9%. Key financial stocks from the sector such as Morgan Stanley ( MS - Analyst Report) , JPMorgan Chase & Co. ( JPM - Analyst Report) , Citigroup Inc. ( C - Analyst Report) and The Goldman Sachs Group, Inc. ( GS) rose 2.2%, 1.5%, 1.4% and 1.4%, respectively.
However, there were some lingering doubts about the timing of rate hike, especially after Fed chair Janet Yellen failed to give any clear indication on it during her speech at Jackson Hole, Wyo, last Friday.
On the other hand, ANN INC.’s shares gained 6.5% after the retailer was pressurized and urged by activists and stakeholders to divest. Both Engine Capital LP, and hedge-fund partner, Red Alder LLC, demanded the sale of Ann Taylor and all its subsidiaries.
On the economic front, the U.S. Census Bureau reported that sales of new single-family houses declined 2.4% to 412,000 in July from the June’s revised rate of 422,000. This was also lower than consensus estimate of 429,000. In June, sales of new single-family houses had declined 8.1%.
Discouraging new home sales data had a negative impact on the SPDR S&P Homebuilders (XHB). The sector declined 0.5% and was the only loser among the S&P 500 sectors. Key housing stocks from the sector such as KB Home ( KBH), Lennar Corp. ( LEN), Toll Brothers Inc. ( TOL) and DR Horton Inc. ( DHI) declined 1.2%, 0.6%, 0.7% and 1.1%, respectively.