Stocks finished mixed on Monday in cautious trading ahead of key inflation reports this week. Uncertainty about the Federal Reserve's interest rate policy following the Katrina disaster capped potential market gains, says Standard & Poor's MarketScope.
The Dow Jones industrial average rose 4.38 points, or 0.04%, to 10,682.94. The broader Standard & Poor's 500 index was down 0.92 point, or 0.07%, to 1,240.56. The tech-heavy Nasdaq composite index added 7.32 points, or 0.34%, to 2,182.83.
In the energy markets, October West Texas Intermediate crude oil closed down 75 cents at $63.33 a barrel, off a session low of $62.50. Selling came on the perception that demand growth, both globally and in the U.S., is beginning to cool, though for the U.S., production shut ins due to Katrina have mitigated this sentiment to a degree, says Action Economics. Elsewhere, front-month gasoline closed down over 4.5%, trading to lows of $1.86 a gallon, to levels last seen seen prior to the arrival of hurricane Katrina, says Action Economics.
Tuesday's release of the August overall producer price index (PPI) is expected to jump 0.7%, while the core index rises 0.1%. The big story on the month will be another spike in energy prices, where whoesale gasoline prices will likely post a double-digit gain, while the overall energy aggregate could jump close to 5%, says Action Economics. Outside of energy, however, it should be a benign report.
The data should flag a similar tone for the CPI, which will be reported on Thursday. Hurricane Katrina has prompted risk of a further surge in energy prices in September.
Also coming Tuesday is the July trade deficit, which is expected at $59.8 billion, compared with June's level of $58.8 billion.
Mergers, particularly in the tech sector, dominated the news on Monday. As expected, eBay (EBAY) agreed to acquire Luxembourg-based Skype Technologies for about $2.6 billion in up-front cash, stock, plus potential performance-based consideration.
Oracle (ORCL) agreed to acquire Siebel Systems (SEBL)for $10.66 per share in a deal valued at about $5.85 billion. Separately, The Wall Street Journal reports CEO Lawrence Ellison will to pay $100 million to charity to resolve a lawsuit charging that he engaged in insider trading in 2001.
Wachovia (WB) says it will acquire Westcorp (WES) in $3.42 billionB deal to expand its auto finance group into national business. Wachovia also agreed to acquire the 16% of WFS Financial (WFSI) not already owned by Westcorp for $490 million.
In other corporate news, Delta Air Lines (DAL) is expected to file for bankruptcy-court protection as early as this week. The carrier is nearing a deal to keep it flying while it seeks to restructure, but it would have to hock almost every unencumbered asset, reports The Wall Street Journal.
There were no economic releases on Monday.
Treasury yields rose both in the U.S. and Europe, amid lower energy prices, political pessimism in Germany, and Dutch pension reform delay. Prime Minister Junichiro Koizumi's landslide win in Japan weighed as it added to the prospects of reform and the likelihood of Japanese investor repatriation of capital, says Action Economics. Additionally, the improved post-Katrina environment and the advent of inflation data this week helped keep bonds somewhat defensive, says Action Economics. The benchmark 10-year note was yielding 4.17%.
European stock markets finished mixed on Monday.
London's Financial Times-Stock Exchange 100 index was up 15.8 points, or 0.29%, to 5,375.1. In economic news, UK producer output prices rose 0.3% in August after gaining 0.8% in July -- this puts pressure on margins. At the same time, UK August PPI input prices rose just 0.2%.
Germany's DAX index fell 15.95 points, or 0.32%, to 4,989.48 as polls showed German opposition leader Angela Merkel will fail to get a majority in next week's national election. The euro is down to $1.2309 on the news that damages hopes for structural German reform, reports Standard & Poor's MarketScope.
In Paris, the CAC 40 index barely budged, closing at 4,491.82.
Asian markets finished higher on Monday.
Japan's Nikkei 225 index rallied 204.39 points, or 1.61%, to 12,896.43. Japan's two major stock indices rallied to four-year highs as Prime Minister Junichiro Koizumi won Sunday's general election by a landslide. The market was also boosted by 0.8% growth in second-quarter GDP. The broad-based TOPIX index jumped 16.45 points, or 1.27%, to 1309.8. Banking stocks led the market's advance, topped by Mizuho Financial and Sumitomo Mitsui.
In Hong Kong, the Hang Seng index rose to 15,199.79 as gains on Wall Street Friday and strong property sales locally over the weekend boosted sentiment. Market gains were capped by caution due to uncertainty over the U.S. Federal Reserve's rate policy course, reports Standard & Poor's MarketScope.