16:35 ET Dow +38.47 at 8116.46, Nasdaq +12.17 at 1489.46, S&P +4.62 at 836.57:
[BRIEFING.COM] Financials threatened to undercut the broader market's gains, but stocks still posted a healthy advance amid a heavy flow of headlines Monday.
Financial stocks finished the session as the worst performing economic sector. They had been up more than 4% in the early going, but finished with a 2.1% loss. The initial advance seemed to come on the back of a rebound in European financial stocks, which have been dogged by profit concerns and fears of nationalization. Still, the gains proved unsustainable and as finacials slipped so, too, did the broader market.
Health care (-0.2%) stocks finished modestly lower, weighed down by Pfizer (PFE 15.65, -1.80). The pharmaceutical giant is acquiring Wyeth (WYE 43.39, -0.35) for $68 billion, or $50.19 per share. The offer comes as a 29% premium to where WYE shares closed before The Wall Street Journal first reported the companies were in talks. Pfizer is looking to fund the offer with a mix of cash, stock, and debt.
Though the deal will help Pfizer bolster its portfolio and further develop its drug pipeline, investors were disappointed when the company announced that in connection with the transaction it will halve its quarterly dividend to $0.16 per share. Coupling that with downside guidance sent shares of PFE to new January lows. As for the latest quarter, Pfizer topped earnings expectations, but Wyeth fell short of the quarterly consensus earnings estimate.
Despite Pfizer's announcement, tight credit conditions are weighing on merger activity elsewhere. Dow Chemical (DOW 13.24, -1.09) announced this morning that it does not intend to close the pending acquisition with Rohm & Haas (ROH 57.10, -8.72) on or before tomorrow. The announcement wasn't a total surprise, though. Tighter credit and a severed deal between Dow and a Kuwaiti petrochemicals outfit put have had the deal on tenuous footing for weeks. Shares of DOW and ROH weighed on the materials sector (-1.5%), as did DuPont (DD 23.18, -0.98). DuPont, which is a Dow component, reports its latest results ahead of tomorrow morning's opening bell.
Caterpillar (CAT 32.28, -3.38) fell to a new multiyear low after reporting dissapointing earnings and issued downside guidance. Challenging macro conditions have the firm looking to cut roughly 20,000 jobs.
One bright spot for the session, McDonald's (MCD 58.51, +0.49) bested the consensus quarterly earnings forecast and indicated that global comparable sales continue to be strong in January. Same-store sales increased more than 7% in the fourth quarter. However, many investors continue to question how long McDonald's can continue logging strong comparables.
Stocks began the session in a relatively quiet manner, but quickly climbed to a gain of 2.5% after it was announced December existing home sales increased 6.5% to an annualized rate of 4.74 million units. The December number was better-than-expected (consensus was 4.40 million). Though the headline alone qualifies as relatively good news, it was supported by a 9.3% drop in median home prices. That is the biggest drop since the 1930s. The month's supply of unsold homes at the current sales rate fell to 9.3 in December from 11.2 in November.
The Federal Open Market Committee begins its two-day meeting tomorrow. It will announce its latest monetary policy decision Wednesday. Tomorrow's focus, then, will be on earnings results from Verizon (VZ 30.99, +0.55), Bristol Myers Squibb (BMY 22.25, -0.14), Yahoo! (YHOO 11.17, -0.15), and a raft of other reports, which are tomorrow morning.
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