Stocks Stumble to a Mixed Close
Updated from 4:13 p.m. EDT
New York's major averages finished about where they started Monday as investors awaited the upcoming
Federal Reserve
gathering and digested a batch of merger news and positive earnings reports.
After spending much of the afternoon modestly higher, the
Dow Jones Industrial Average
ended down 20.11 points, or 0.16%, to 12,871.75, having swung in a range of about 80 points. The
S&P 500
ticked down 1.47 points, or 0.11%, at 1396.37, and the
Nasdaq Composite
gained 1.47 points, or 0.06%, to 2424.4.
Alan Gayle, senior investment strategist with RidgeWorth Capital Management, said, "My guess is that a lot of investors don't want to make big calls in front of a Fed meeting and all the other data that's coming out."
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The Fed will begin its two-day meeting Tuesday, and it is widely expected to cut the fed funds target rate by 25 basis points. Many analysts also believe the central bank will signal a pause in its months-long easing cycle, which since September has taken the overnight lending rate down three percentage points to 2.25%.
Gayle also pointed out that this week we will see nationwide manufacturing data from the Institute for Supply Management and the Labor Department's monthly unemployment report. "The market's had a positive couple of weeks," he said, "and right now this week's calendar is either going to reinforce that or it's going to challenge it. So far it looks like not too many money managers want to step out in front of that."
Breadth was positive in spite of the market's lackluster close. Advancers outpaced decliners by 3-to-2 on the
New York Stock Exchange
, which saw volume reach about 1.77 billion shares. Roughly the same amount traded on the Nasdaq as winners edged out losers 5 to 4.
Regarding the afternoon uptick, Fred Dickson, senior vice president and market strategist with D.A. Davidson, said the pickup in merger activity could reflect an uplifted mood overall.
Dickson added: "I think there's a general feeling that, while the credit crisis hasn't entirely passed, the front wall of the hurricane has passed." He cited the recent stabilization of triple-A-rated subprime mortgage credit swaps, as well as an earnings season that so far hasn't been quite as calamitous as many had feared.
As for the M&A news,
Wrigley
(WWY)
today shot up 23.2% to $76.91 after Mars and Warren Buffett's
Berkshire Hathaway
(BRK.A) - Get Report
said they would acquire the chewing-gum outfit for roughly $23 billion, or $80 a share.
Wrigley also beat analysts' first-quarter expectations with earnings that surged 18.1% to $168.6 million, or 61 cents a share.
Rival
Hershey
(HSY) - Get Report
, meanwhile, climbed 4.6% on the hope that the chocolatier would seek a similarly generous bid. Britain's
Cadbury Schweppes
(CSG)
, which has discussed a potential merger with Hershey several times in the past, bumped up 2.6% on the NYSE
Ford
(F) - Get Report
was also advancing on word that Kirk Kerkorian's Tracinda has collected a 4.7% stake in the automaker, or about 100 million shares, and plans to offer $8.50 each for an additional 20 million shares. Ford spiked 9.5% to $8.21, and the Dow's
General Motors
(GM) - Get Report
simultaneously added 2.6%.
Also, reports surfaced this morning that United Airlines parent
UAL Corp.
(UAUA)
is in "very advanced" talks to merge with
U.S. Airways
(LCC)
. The
Associated Press
said a merger announcement should come within two weeks. UAL shares slumped 2.6%; U.S. Airways soared 20.4%.
The news came just as United said it would abandon talks with
Continental
(CAL) - Get Report
, which said this weekend it would
. Continental stock lost 1.5%.
Elsewhere, Dow component
Verizon
(VZ) - Get Report
posted
in-line first-quarter earnings
, lifting shares by 2.5%. Separately, health insurer
Humana
(HUM) - Get Report
padded its full-year earnings guidance as first-quarter income jumped 12.5% and topped the average Wall Street consensus. Shares closed up 3.3% at $46.38.
On the losing side, conglomerate
Loews
(LTR)
reported that consolidated earnings -- which includes results from cigarette subsidiary
Carolina Group
(CG) - Get Report
-- slid 13.8% to $662 million. Both companies, by themselves, saw earnings declines from last year. Loews lost 5.3% as Carolina gave up 6.5%.
Back in merger news, the deadline for
Yahoo!
(YHOO)
to respond to
Microsoft's
(MSFT) - Get Report
takeover bid passed without any comment from either company. Shares of Microsoft shed 2.8%; Yahoo! ended down 1.4% at $26.43.
Traders were also dealing with another new high for crude oil, which reached $119.93 a barrel before pulling back to a 23-cent gain at $118.84. Gold ratcheted up $5.80 to $895.50 an ounce. The U.S. dollar was slipping against both the euro and the yen.
At the same time, the European Union predicted that eurozone countries would see inflation spike to 3.2% this year, compared with 2.1% in 2007. The forecast could keep the European Central Bank from making cuts to its own benchmark lending rate, even as many of its member countries suffer economic slowdowns.
Treasury prices were rising. The 10-year note added 11/32 in price to yield 3.83%, and the 30-year bond stepped up 16/32 in price, yielding 4.56%.
Markets overseas were mostly rising. The Nikkei 225 in Japan added 0.2% overnight, and the Hang Seng Index in Hong Kong climbed 0.6%. Among European bourses, London's FTSE 100 was ticking down, and Germany's Xetra Dax advanced 0.4%. The Paris Cac tacked on 0.7%.
