Stocks Drift As Economy Worries Outweigh Deal News
Stocks drifted lower Monday as a fresh round of corporate dealmaking was tempered by skepticism about the strength of the economy.
Stocks got an early lift after a spate of new deals were announced, but the gains faded quickly. The Dow Jones industrial average rose 14 points in afternoon trading. Broader indexes were mixed.
Technology giant Hewlett-Packard Co. offered $24 per share for 3Par Inc. just one week after rival Dell Inc. agreed to buy the data storage provider for $18 a share. Meanwhile Potash Corp. of Saskatchewan Inc. formally rejected BHP Billiton's $38.5 billion offer to acquire the fertilizer company.
European markets rose after banking company HSBC Holdings said it was in talks to buy a controlling stake in Nedbank Group Ltd. of South Africa from Old Mutual for as much as $6.8 billion.
Despite the positive deal news, there are still plenty of worries about the economy which are likely keep a lid on big moves in the market. Stocks slumped last Thursday and Friday after claims for unemployment benefits jumped to their highest level since November.
"Companies are not hiring because they don't know the rules of the game," said. Frank Ingarra, co-portfolio manager of Hennessy Funds. "When you don't know the rules, you pack up and go home."
Ingarra said companies are hesitant to hire because of uncertainty surrounding costs tied to recently passed financial regulation and health care reform. The possibility of rising taxes also has companies worried about consumption, he said.
The Dow Jones industrial average rose 14.23, or 0.1 percent, to 10,227.85 in afternoon trading. The Standard & Poor's 500 index rose 1.31, or 0.1 percent, to 1,072.82, while the Nasdaq composite index fell 8.77, or 0.4 percent, to 2,170.99.
Rising stocks narrowly outpaced those that fell on the New York Stock Exchange, where trading volume remained light. Trading volume was very light at about 520 million shares.
Bond prices dipped slightly. The yield on the 10-year Treasury note, which moves opposite to its price, fell to 2.60 percent from 2.62 percent late Friday. That yield helps set interest rates on mortgages and consumer loans.
"People are focused on the head winds more than the tail winds," said Walter Gerasimowicz, chief investment officer at Meditron Asset Management. He said investors are overlooking historically low interest rates and signs of corporate strength, choosing instead to focus on disappointing economic data.
Reports are due this week on the housing market, durable goods orders, consumer sentiment and a revision to second-quarter gross domestic product.
Housing remains especially weak following the expiration of the government's tax credit earlier this year. Reports on existing and new home sales are due out Tuesday and Wednesday.
Wednesday's durable goods order will be examined for signs that a slowdown in manufacturing was only temporary. A regional manufacturing report Thursday about the Mid-Atlantic region showed activity shrank, spooking investors. Manufacturing had shown the most consistent growth throughout the year.
The University of Michigan also reports its second reading on consumer sentiment for the month.
Hewlett-Packard shares fell 64 cents to $39.21, while 3Par rose $7.78, or 43.1 percent, to $25.82. Dell fell 12 cents to $11.95. Potash rose $2.97, or 2 percent, to $152.64. HSBC shares trading in the U.S. rose 42 cents to $49.72.
Overseas, Britain's FTSE 100 rose 0.8 percent, Germany's DAX index climbed 0.1 percent, and France's CAC-40 rose 0.8 percent. Japan's Nikkei stock average fell 0.7 percent.
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