Stocks Wobble as Traders Eye Economy

By

Published April 05, 2011

| FOXBusiness

FOX Business: The Power to Prosper

The markets were on the fence as traders digested mixed signals from the Federal Reserve on when it would end its accommodative monetary policy regime. 

Today's Markets

As of 3:16 p.m. ET, the Dow Jones Industrial Average was down 1 point, or 0.01%, to 12,399, the S&P 500 was unchanged at 1,333 and the Nasdaq Composite traded lower by 0.4 point, or 0.1%, to 2,789. The FOX 50 slipped 0.36 point to 934.  

The Federal Open Market Committee -- which controls the Federal Reserve's monetary policy decisions -- released the minutes from its last meeting.  The minutes show there were divergent views among Fed officials as to whether the central bank should continue its expansionary monetary policy past 2011. 

The Fed has taken unprecedented measures, including buying huge swaths of long-term treasuries and keeping short-term interest rates near 0%, in a bid to keep the economy afloat.  However, some economists worry these measure can spark long-term inflation. 

In a speech Monday night, Fed Chairman Ben Bernanke said he believes "global supply and demand conditions" have led to short-term increases in the price level, but prices "will eventually stabilize." 

Also on the economic front, expansion in the services sector of the economy slipped slightly in March, but pointed to significant expansion, according to a report by the Institute of Supply Management. The ISM non-manufacturing index edged lower to 57.3 after hitting a five-year high of 59.7 in February. 

"While the deceleration in momentum was somewhat abrupt - especially the business activity and inventory sentiment gauges - the overall levels ... still look quite healthy," wrote Brian Bethune, chief U.S. financial economist at IHS Global Insight, in a research note. 

The Nasdaq OMX Group (NDAQ) said Tuesday it would rebalance its Nasdaq 100 index, which includes 100 large-capitalization, non-financial companies, effective May 2.  Apple's weight on the index will be cut from 20.5% to 12.3% -- meaning exchange traded funds, such as the QQQ (QQQ) , that track the Nasdaq 100 will have to cut their holdings of Apple to reflect the new index. 

Apple shares were under pressure after the announcement, however, other technology issues that were more heavily weighted such as Cisco (CSCO) and Ebay (EBAY) benefited. 

The Federal Trade Commission is mulling a broad probe of Google's (GOOG) dominance in the search market, according to a report by Bloomberg.  

"Since competition is one click away on the Internet, we work hard to put our users' interests first and give them the best, most relevant answers to their queries," the search giant said in a statement in response to the report.

Google's key competitors in the search realm, Yahoo! (YHOO) and Microsoft (MSFT), who have previously complained of Google's strong hold over the market, could potentially gain as a result. 

Texas Instruments (TXN) unveiled its plan to acquire National Semiconductor (NSM) for $6.5 billion after the bell on Monday, capping a day full of mergers and acquisitions.  While shares of National Semiconductor soared after the announcement, Texas Instrument issues fell more than 2%. 

Trading has been extremely light in recent sessions, with volume at the New York Stock Exchange hitting its lowest level since December 2010 on Monday. 

"Volume continues to be a source of real concern," wrote Peter Kenny, managing director at Knight Capital Group, in a research note. 

In energy markets, oil pulled back somewhat, but is still hovering around its highest levels since September 2008.  

Light, sweet crude slipped 13 cents, or 0.12%, to $108.34 a barrel.  The price of a gallon of regular gas at the pump climbed to $3.69 on average nationwide, up from $3.50 last month and $2.83 last year, according to the AAA Fuel Gauge Report. 

Crude prices began spiking amid geopolitical tumult in the Middle East and North Africa and have been able to hold on to gains as traders see accelerating economic expansion pointing to increased demand for oil. 

The euro recently traded 0.02% higher against the greenback. Gold soared $19.50, or 1.4%, to $1,453 a troy ounce. 

Corporate News

Merck (MRK) revealed plans to acquire Inspire Pharmaceuticals (ISPH) in a deal valued at roughly $430 million. 

Abercrombie & Fitch (ANF) shares soared to a 33-month high after the clothing-maker said it expects to earn $4.75 a share in the fiscal year ending January 2013, besting Wall Street's estimates of $3.97. 

Diamond Foods (DMND) agreed to buy Procter & Gamble's (PG) Pringles potato chip business for a deal valued at $2.4 billion. 

KB Home (KBH) revealed a wider-than-expected quarterly loss as a precipitous drop in new orders cut the home builder's revenue.  Shares tumbled after the report was released. 

Expedia (EXPE) shares got a boost after it reached an agreement with AMR's (AMR) American Airlines to restore fares on its popular travel Web site. 

Citigroup (C) was upgraded to "outperform" from "market perform" by analysts at Bernstein. 

Cubist Pharmaceuticals (CBST) settled a lawsuit with Teva Pharmaceutical Industries (TEVA) over its Cubicin antibiotic that pushes back the launch of a generic version of the drug until at least 2017. 

Foreign Markets

European markets were modestly lower amid concerns of Portugal's sovereign debt crisis.  Moody's cut Portugal's debt rating one notch and warned of further cuts if the incoming government does not seek assistance from the European Union

The English FTSE 100 was down 0.16% to 6,007, the French CAC 40 was off 0.03% to 4,042 and the German DAX was unchanged at 7,175. 

In Asia, the Japanese Nikkei 225 was off 1.1% to 9,616 as shares of the Tokyo Electric Power Company hit all time lows as fears remained about the company's ability to stabilize the situation at its stricken nuclear reactors. The Chinese Hang Seng gained 1.5% to 23,151 on the day. 

URL

http://www.foxbusiness.com/markets/2011/04/05/tech-stocks-drive-futures-lower/