Investors took a breath Tuesday after a big rally in the previous session. Market players weighed new M&A activity and strength in the dollar
Major stock indexes finished mixed Tuesday, with the Dow Jones industrial average retreating from its surge to record highs in the previous session as investors took profits. Investors weighed more takeover activity, further strengthening of the U.S. dollar, and another drop in oil prices against a report showing further deterioration in the housing sector.
On Tuesday, the Dow Jones industrial average was down 40.24 points, or 0.29%, to 14,047.31. The blue-chip benchmark was pressured by weakness in Exxon Mobil (XOM) and United Technologies (UTX).
The broader S&P 500 index was off 0.41 points, or 0.03%, to 1,546.63.
The tech-heavy Nasdaq composite index was the best performer among the major indexes Tuesday, adding 6.12 points, or 0.19%, to 2,735.69, aided by strength in Symantec (SYMC), Fiserv (FISV), and Genzyme (GENZ) .
The broader market was up as well: NYSE trading breadth was 19-14 positive, while Nasdaq breadth 17-12 positive.
The market is looking ahead to the Institute for Supply Management’s non-manufacturing index for September on Wednesday. Investors appear to be betting that Friday's September employment report will feature improvement in nonfarm payrolls -- the median forecast calls for a gain of 110,000 -- from August's weak showing and that the Fed will cut rates again if it does not.
On Tuesday, the National Association of Realtors said its U.S. pending home sales index fell 6.5% to 85.5 in August after a 10.7% decline in July to 91.4 (revised from 89.9). That's a record low for the index, which was begun in 2001, according to Action Economics. Declines were registered across all four regions for the month.
Automakers began to report September sales figures Tuesday. Ford Motor (F) said that its total sales fell by 17.3% in September compared to the year-earlier period. Strength at GM (GM) (+1%) and Honda (+9%) imply that the overall industry sales tally for September should be 16.1 million units, according to Action Economics.
Former Federal Reserve chairman Alan Greenspan continues to grab headlines while on tour to promote his new memoir. In London, he told Bloomberg News that he now sees less than a 50% risk of the U.S. economy sinking into a recession but added "we're not by any means out of the woods," Action Economics said.
Crude oil for November delivery in New York was down 19 cents to $80.05 a barrel on Tuesday, easing on profit taking ahead of Wednesday's Dept. of Energy weekly inventory report. Various surveys show that the market is expecting a small crude oil decrease and small gasoline and heating oil increases in the report.
Among stocks in the news Tuesday, Commerce Bancorp (CBH) agreed to be acquired by the TD Bank Financial unit of Toronto-Dominion Bank (TD) in a deal valued at $8.5 billion, with shareholders receiving 0.4142 TD shares and $10.50 in cash for each Commerce share they own. Standard & Poor's upheld its hold rating on Commerce.
Palm Inc. (PALM) said it swung to a one-penny net loss in its first quarter (on a GAAP basis) from a 16-cent profit a year ago due to lower gross margins and higher total operating expenses offset a 1.4% rise in revenue. The company expects a net loss of one to three cents a share in the second quarter on revenue of $370 million and $380 million.
Dean Foods (DF) cut its earnings outlook to about 15 cents a share for the third quarter and to about $1.25 for 2007, citing rapidly increasing and record-high dairy commodity costs. The company also plans to cut 600 to 700 jobs, which will affect workers in its Dairy Group across the country and for which it will take a restructuring charge in the third quarter.
European equity indexes finished mixed Tuesday. In London, the FTSE 100 index fell 0.09% to 6,500.4. Germany's DAX index advanced 0.31% to 7,946.79. In Paris, the CAC 40 was up 0.45% to 5,799.27.
Asian markets ended with solid gains. In Japan, the Nikkei 225 index rose 1.19% to 17,845.96. In Hong Kong, the Hang Seng index leaped 3.90% to 28,199.75. The Shanghai composite index climbed 2.64% to 5,552.30.
Treasury prices rose on the back of a record low in the August National Association of Realtor's pending home sales index. The 10-year note rose 05/32 to 101-26/32 for a yield of 4.52%. The 30-year bond climbed 07/32 to 103-21/ 32 for a yield of 4.77%. The next two days of trading will likely be dominated by positioning ahead of the September labor report Friday morning, according to S&P MarketScope.