Wall Street fluctuated on Monday as futures indicated a higher open to the trading day. What mostly helped the upward momentum ; were M&A news involving the 44% proposed acquisition of Genentech (DNA) from Swiss drug maker Roche Holding, and Q2 results from Bank of America (BAC). The co. beat expectations across the board while solidifying its capital position and consequently boosting investor confidence of a financial sector already on its way to recovery.
Stocks however, reversed direction by late morning – leaning toward a mixed to slightly weak bias as the major averages started to slip off their early highs, break under initial supports to only end up into red territory.
In early afternoon trading, the Dow Jones Industrial Average dipped almost 35 points. Broader indexes also fell. Standard & Poor’s 500 (SPX) index lost 0.12% while the tech-heavy Nasdaq composite (COMP) index dropped over 6 points or 0.29%. The slide could be attributed to the Conference Board U.S. Leading Index which reported a decline of 0.1% for June.
As the trading moved through the midday session, despite the major indexes being slightly lower – market breadth remained positive. However, as crude prices started trading near session highs, gaining almost $3 and closing to $131.56 – Wall Street’s losses accelerated prompting the Dow Jones to close 29 points negative.
On a positive note, on Friday the indices closed out an impressive week: The Dow rose 3.60 percent, the Nasdaq increased 1.95 percent, and the S&P rose 1.71 percent. Last week’s big rally, despite contrarian views – was not just a temporary deviation from the perseverance of weak conditions, that have characterized the markets lately. It is rather in our view, the start of a difficult yet sustainable uptrend, granted – if oil price continue correcting to more reasonable levels. This will subsequently then create favorable condition for the markets to fundamentally maneuver its way to positivity at a faster pace.
Next week the government will report its initial estimates of real economic activity in the second quarter. As we have stressed in numerous occasions – our economy, outside the financial sector, remains strong and quite resilient. The growth rate for the 2Q’08 is likely to come higher than the 2.2% consensus. We forecast a more bullish result, that of 2.7% growth rate.
In other news
– Yahoo! (YHOO) shares fell slightly today. The Web portal announced the appointment of activist investor Carl Icahn and two of his nominees to its board, defusing a proxy battle showdown and making an immediate deal with Microsoft Corp (MSFT) less likely.
– Shares of pharmaceutical companies Merck (MRK) and Schering-Plough (SGP) were under selling pressure throughout Monday’s session, after the companies delayed their earnings reports from this morning to after the market’s close.
– More than 150 S&P 500 co’s are set to report their earnings throughout this week.
– Gold finished higher by $6.20 to $964.20 oz.