Dow 12,880 (+2.20%) S&P 1,362 (+2.49%%)
We’ll tell you right off the bat this is going to be a strange week. On the one hand there’s a serious amount of significant econ data coming out because we’re starting a new month and new quarter. On the other hand, 4th of July festivities will be an eagerly attended mid-week hiccup – with Wednesday off and a ½ day Tuesday, few investors are willing to trade seersuckers for slacks for the full days book-ending the week. With lighter trading volumes today, the Dow slipped only 9 points following the surprisingly poor report on US manufacturing in June.
ISM Manufacturing Index reflects contraction of US manufacturing activity
We’ve seen some storm clouds building on the horizon for the American economy, ominous hints that economic contraction may show its scary face again post-financial crisis. Today’s ISM Manufacturing Index came in at 49.7, less than economic consensus 52. This sub-50 number implies not merely slower growth, but actual contraction of manufacturing activity in American plants for the first time since 2009. It’s the strongest evidence yet that slower growth in China and the crisis in Europe are affecting America, as exports fell in June. Another factor reducing exports is the relative strength of the US dollar compared to the euro because the appreciating dollar has caused US made goods to be more expensive for foreigners to buy. Stocks didn’t drop as much though on the poor news because many investors hope this will only encourage the Federal Reserve to take stimulus action. As America fights against the drag of the world, pray to Uncle Sam for an Independence Day turnaround in data with Friday’s major job numbers.
Best Buy, Dell, Micron and Bristol-Myers Squibb move with notable acquisitions
Sometimes the market is just wheelin’ and dealin’. Mergers & acquisitions drove most of the big individual stock moves today. Best Buy (BBY) was the S&P 500‘s biggest gainer, jumping 5.92% on rumors the founder and former Chairman Richard Schulze is trying to take the electronics firm private (off the public trading markets) after its slowing sales struggles. Dell (DELL) will be buying Quest Software (QSFT) for $2.4B (“Dude, you’re getting a Quest Software…”) and Idaho-based semi-conductor maker (we don’t really know what those are but they’re probably in what you’re reading this on) Micron (MU) is purchasing Japanese rival Elpida Memory for $750M to increase its competitiveness in parts of Asia. And in the pharmaceutical world, diabetes drug-maker Amylin (AMLN) added almost 9% after agreeing to be bought by industry giant Bristol-Myers Squibb (BMY) for over $5B.
- After the market closed, Microsoft (MSFT) announced a $6B write-down (a loss in value) in its online services division’s fiscal 4th quarter mostly from the lack of growth from an internet ad business it bought in ’07 – we’ll have more details tomorrow on how this affects shares
- Some more minor US econ data: “May Factory Orders,” “June Vehicle Sales”
- The New York Stock Exchange will CLOSE early at 1pm so we can all get to the beach on time for the 4th (Thursday & Friday, however, will be packed with some huge econ data)
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