FOX Business: The Power to Prosper
Overcoming a slew of global headaches, Wall Street landed in a deadlock and recovered most of an early selloff on Monday amid some enthusiasm for the kickoff to earnings season and a cluster of M&A deals.
The Dow Jones Industrial Average fell 37.31 points, or 0.32%, to 11637.45, the Standard & Poor's 500 lost 1.75 points, or 0.14%, to 1269.75 and the Nasdaq Composite rose 4.63, or 0.17%, to 2707.80. The FOX 50 slipped 1.51 points, or 0.17%, to 909.72.
While the blue chips closed in the red for the third day in a row, they climbed out of an early triple-digit tumble, avoiding their first major selloff in weeks.
The bulls pointed to Alcoa’s (NYSE:AA) quarterly results, which were due out after the close and could mark the start of what analysts predict will be a successful earnings season.
“It’s really hard to get negative on the day of the start of earnings season. That’s just a mistake,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “It’s just a matter of keeping focus on what’s got the market here and what’s going to drive us forward: earnings.”
Most of the 30 stocks on the blue-chip index lost ground, led by AT&T (NYSE:T) and DuPont (NYSE:DD), which announced a $5.8 billion deal to buy a Danish food ingredients company. The index's best performers were 3M (NYSE:MMM) and Bank of America (NYSE:BAC).
After sliding early in the day, the Nasdaq Composite reached the closing bell slightly higher amid strength from tech stocks Apple (NASDAQ:AAPL) and eBay (NASDAQ:EBAY).
The mixed day on Wall Street comes after the markets were spooked a bit on Friday by a foreclosure-related court ruling against Wells Fargo (NYSE:WFC) and US Bancorp (NYSE:USB) that could hurt the broader industry. But for the first week of 2011, the bulls added 95 points to the blue chips and overcame December's weaker-than-expected jobs report.
While he said it would be a “mistake” to be bearish now, Pado does predict a “major pullback” towards the end of January after many big-name companies report quarterly results.
Aluminum maker Alcoa traditionally has the honors of kicking off earnings season. The Dow member is expected to say its third-quarter profits dropped 21%. Overall, fourth-quarter earnings for S&P 500 companies are expected to jump 32% from a year earlier and revenue is seen increasing just 6%. Later in the week chip giant Intel (NASDAQ:INTC) is scheduled to release its results, starting off earnings season for the tech industry.
Wall Street also showed limited enthusiasm for a pair of M&A deals, headlined by Duke Energy's (NYSE:DUK) $13.7 billion bid to buy Progress Energy (NYSE:PGN), creating the largest power company in the U.S. The all-stock deal is worth $46.68 a share and represents just a 4% premium on Progress's shares.
Also, DuPont (NYSE:DD) reached a $5.8 billion deal to acquire Danish food ingredients and enzymes company Danisco. The acquisition carries a 25% premium on Danisco's stock.
Shares of Sara Lee (NYSE:SLE) jumped 4% to 52-week highs after The Wall Street Journal reported private-equity firm Apollo Global Management and investor C. Dean Metropoulous are eyeing a buyout of the company.
Earlier in the day Wall Street came under pressure from global concerns, especially in Europe. Reports swirled that Portugal is being pressured to accept a bailout from the European Union. Despite the reports being denied, stocks took a hit and the cost to insure Portugal’s debt hit a new record high. The concern is that after Portugal, the markets will next target Spain, which has a larger economy than those of Greece, Ireland, Portugal and Belgium combined.
“Europe is sick. A year into its illness it still has yet to properly diagnose its problems,” Marc Chandler, global head of currency strategy at Brown Brothers Harriman, wrote in a note. “The failure of the diagnosis is evident in its inability to find a cure. The fever will intensify. Portugal will succumb next.
Asian markets also slumped as traders fretted about inflation and central banks' efforts to contain it, especially in China and India.
Meanwhile, crude oil showed strength due to an outage of a key pipeline in Alaska. Crude jumped $1.22 a barrel, or 1.39%, to $89.25. Gold added $5.20 a troy ounce, or 0.38%, to $1,373.70.
Playboy Enterprises (NYSE:PLA) signed off on deal to be taken private by its founder Hugh Hefner for $207.3 million. The “go-private” transaction values Playboy at $6.15 a share, representing an 18.3% premium to its close on Friday and a 56.1% premium on Playboy’s close on July 9, the last trading day before a deal was first announced. CEO Scott Flanders will keep his job under the new ownership.
AT&T (NYSE:T) slid nearly 2% as shareholders brace for the likelihood the company will lose its exclusivity on Apple’s (NASDAQ:AAPL) iPhone to Verizon’s (NYSE:VZ) Verizon Wireless. AT&T’s three-year stranglehold on the hot phone is expected to end on Tuesday when Verizon is reportedly set to announce it will carry the iPhone under its existing wireless service plans.
Strayer Education (NASDAQ:STRA) plunged 23% to a near four-year low after slashing its forecast and saying new enrollments tumbled by 20% in the winter term. The news sparked a sell off in related stocks, including DeVry (NYSE:DV) and Apollo Group (NASDAQ:APOL).
Walt Disney (NYSE:DIS) is considering making video from some of its TV networks available on sets embedded with Yahoo!’s (NASDAQ:YHOO) Internet TV software, The Wall Street Journal reported. Disney is looking to create widgets for its ESPN, ABC and Disney networks that could feed video over the Internet to Yahoo sets, the paper reported.
The U.K.'s FTSE 100 fell 0.47% to 5956.30, Germany's DAX declined 1.31% to 6857.06 and France's CAC 40 lost 1.64% to 3802.03.
In Asia, Japan's Nikkei 225 was closed, but Hong Kong's Hang Seng slid 0.67% to 23527.30 and China's Shanghai Composite dropped 1.66% to 2791.81.