U.S. stock markets were mixed on Monday in absence of any major news and low trading volume. Couple of news on mergers and acquisitions front boosted investors’ sentiments, which was partially offset by a delay in second round of fiscal stimulus and intensifying tensions between the United States and China. The S&P 500 and the Nasdaq Composite closed in the green while the Dow ended in red.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) dropped 0.3% to close at 27,844.91. Notably, 19 components of the 30-stock blue-chip index ended in the red while 11 finished in green. However, the tech-laden Nasdaq Composite ended in positive territory to close at 11,129.73, surging 1% or 110.42 points. This was the 33rd closing high for the index so far this year. In the intraday trading, the tech-heavy index recorded its 37th all-time high year to date at 11,144.53.
Meanwhile, the S&P 500 rose 0.3% to end at 3,381.99. The Consumer Discretionary Select Sector SPDR (XLY) surged 1.3% while the Financials Select Sector SPDR (XLF) tumbled 1.7%. Notably, seven out of eleven sectors of the benchmark index closed in positive territory while four in negative territory.
The fear-gauge CBOE Volatility Index (VIX) was down 3.2% to 21.35. A total of 7.9 billion shares were traded on Monday, lower than the last 20-session average of 10 billion. Advancers outnumbered decliners on the NYSE by a 1.22-to-1 ratio. On Nasdaq, a 1.20-to-1 ratio favored advancing issues.
News On Mergers & Acquisitions
On the mergers and acquisitions front, French healthcare company Sanofi SNY entered into a definitive agreement to acquire U.S. biotech company Principia Biopharma Inc. PRNB in an all-cash deal valued around $3.68 billion. Sanofi said that this acquisition will be accretive to its “ongoing R&D transformation to accelerate the development of the most promising medicines.” Moreover, the latest filling by Warren Buffet’s Berkshire Hathaway Inc. BRK.B revealed that the company acquired a stake in Canada-based gold miner Barrick Gold Corp. GOLD.
Consequently, shares of Barrick Gold and Principia Biopharma jumped 11.7% and 9.4%, respectively. Barrick Gold sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Delay in Fresh Fiscal Stimulus
Negotiations between the Republicans and Democrats fell apart. Treasury Secretary Steven Mnuchin said that the Trump administration is ready to further negotiate with Democrats and may provide more money as fiscal stimulus if it was required for an amicable solution. Notably, the unemployment benefit of $600 per week came to an end by the end of July.Meanwhile, new trench of stimulus are unlikely to come before September.
Geopolitical Tensions Between the U.S. and China
Adding to investors’ jitters, the ongoing geopolitical tensions between the United States and China heightened last weekend. The review meeting on the Phase 1 trade deal through a video conference between high-level delegates from both sides was postponed.
Notably, earlier in the month, President Trump banned Chinese social app TikTok and said that he could exert pressure on more Chinese entities. On Aug 17, the Trump administration announced it will further tighten restrictions on China’s Huawei Technologies in order to restrict it to get access to commercially available high-end semiconductors produced by U.S. tech giants.
Economic Data
The National Association of Home Builders/Wells Fargo Housing Market Index came in at 78 for August after gaining 6 points. This marked the highest monthly reading since December 1998. Notably, any reading above 50 indicates positive sentiments for homebuilders. The index plummeted to 30 in April.
The current sales conditions sub-index advanced 6 points to 84. The sales expectations sub-index (for the next six months) rose 3 points to 78 and the buyer traffic sub-index surged 8 points to 65, its highest level in the 35-year history of the survey.
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