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Stocks held slight gains through to mid-afternoon Tuesday after weaker U.S. services activity pushed back the chances of a September interest rate hike.
The S&P 500 was up 0.15%, the Dow Jones Industrial Average added 0.14%, and the Nasdaq rose 0.31%. Stocks had pulled lower earlier in the day.
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.
Crude oil closed slightly higher on Tuesday despite fading hopes of a production freeze agreement among major oil-producing nations. Prices had climbed earlier after Saudi Arabia and Russia agreed to cooperate on output discussions. However, Saudi Arabian Energy Minister Khalid al-Falih later said production levels were fine as is.
West Texas Intermediate added 0.9% to $44.83 a barrel.
In deal news, General Electric (GE - Get Report) 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 52% higher Tuesday after Danaher Corp (DHR - Get Report) 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.
Spectra Energy (SE - Get Report) increased 16% after agreeing to merge with Enbridge (ENB - Get Report) 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 - Get Report) jumped 42% 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.
Apple (AAPL - Get Report) was on watch ahead of its announcement set for Wednesday. Tech pundits expect the world's largest company to unveil the iPhone 7, Apple's latest smartphone which is presumed to include a more sophisticated camera and faster processor.
Finisar (FNSR - Get Report) rose nearly 2% after being upgraded to buy from hold at Stifel ahead of its first-quarter earnings report. The firm believes that the demand outlook for the company's 100G high-speed receivers and photodetectors portfolio has improved. The networking-tech developer is set to report earnings after the bell Thursday.