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Weaker chances of a rate hike when the Federal Reserve meets in two weeks left Wall Street in a bright mood on its return from the long Labor Day weekend.
Stocks held slight gains through the afternoon session after a choppy morning. The S&P 500 finished up 0.30%, the Dow Jones Industrial Average added 0.25%, and the Nasdaq rose 0.50%, closing at a new record high of 5,275.91.
Weaker U.S. services activity in August pushed back the chances of a September interest rate hike. The ISM Non-Manufacturing Index fell to 51.4 in August, its slowest growth since 2010, but 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."
The latest data reduced the chances of a September hike in interest rates from the Fed. The likelihood sits at 18%, according to CME Group Fed funds futures, down from 21% at the beginning of the day.
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 1.02% to $45.50 a barrel.
It was a busy day in deals news. Top of the list, 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 13% 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 40% 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.