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Stocks held mixed by mid-morning Tuesday after U.S. services activity last month declined more than expected.
The S&P 500 was down 0.11%, the Dow Jones Industrial Average fell 0.12%, and the Nasdaq rose 0.09%.
Activity in the services sector unexpectedly retreated in August to its slowest growth since 2010. The ISM Non-Manufacturing Index fell to 51.4 in August, remaining above the threshold separating expansion from contraction. Analysts had expected a reading of 55, down from 55.5 in July.
"This report confirms our view that the overall softness in August payrolls was likely consistent with the underlying pace of activity and that it was not driven primarily by statistical noise," Barclays analysts wrote in a note. "This morning's report indicates that service sector activity continues to expand, albeit at a much softer pace than earlier in the summer."
Weaker services activity reduced the chances of a September hike in interest rates from the Federal Reserve. The likelihood sits at 18%, according to CME Group Fed funds futures, down from 21% at the beginning of the day.
The Fed will next meet in two weeks. Fed members have recently taken a hawkish turn, shifting their tone to suggest another rate hike is warranted.
"The stock market has been in a narrowing trading range for the last 30 days and I would expect a 'wait and see' attitude until our Fed meeting," Rick Keller, chairman of the board at First Foundation, told TheStreet.
In deal news, General Electric (GE) announced Tuesday it acquired two 3D printing companies in Europe for $1.4 billion. GE bought Arcam and SLM Solutions, both suppliers of additive manufacturing equipment, as it looks to bulk up the use of 3D printing in the manufacturing of jet engines and cars. GE E intends to maintain the headquarters and management for each company.
Cepheid (CPHD) shot 51.8% higher Tuesday after Danaher Corp (DHR) announced plans to purchase the diagnostics company in a deal worth roughly $4 billion. The offer values Cepheid at a 53% premium to its close on Friday. Cepheid reported total revenue of $539 million last year and expects sales to increase to $618 to $635 million this year.
Bayer (BAYRY) upped its offer for seed company Monsanto (MON) again overnight. The German chemicals company increased its offer to $127.50 a share, higher than $125 a share offered in July. Bayer first made a play for Monsanto on May 19. Monsanto said it was currently evaluating the latest offer. Monsanto rose 0.5%.
Spectra Energy (SE) increased 13% after agreeing to merge with Enbridge (ENB) on Tuesday. The deal would form a company with a total value of $127 billion, marking it as the largest energy infrastructure company in North America. The deal is expected to close in the first quarter of next year.
Navistar International (NAV) jumped 50% after forming a strategic alliance with Volkswagen (VLKAY) . Volkwagen will purchase 16.2 million recently issued shares in Navistar for a 19.9% position. Navistar will receive $256 million which will be put toward general corporate purposes.
Marvell Technology (MRVL) fell 2% after reporting disappointing sales in its recent quarter. Quarterly revenue sank 12% to $626.4 million, coming in short of consensus of $630 million. Adjusted profit beat estimates though, more than doubling to 18 cents a share from 7 cents a year earlier. Analysts expected 11 cents.
Gilead Sciences (GILD) was upgraded to buy from hold at Jefferies. The firm said the move was a valuation call as the stock is trading at less than seven times earnings. Analysts also downgraded Biogen (BIIB) to hold, another valuation call based on a $323 price target.