U.S. stocks fell, with the Standard & Poor’s Index headed for a third day of losses, as health-care shares slid amid a government crackdown on tax-saving mergers and as the Middle East conflict escalated.
Medtronic Inc. slid 3.2 percent after the Treasury Department disclosed plans to limit inversion deals. CarMax Inc. sank 9.7 percent after earnings missed estimates. Apple Inc. and Micron Technology Inc. gained at least 1.4 percent to pace gains in technology shares. Nabors Industries Ltd. (NBR) led energy shares higher, as crude oil prices advanced after the U.S. launched a series of airstrikes against the Islamic State.
The S&P 500 fell 0.5 percent to 1,984.71 at 2:54 p.m. in New York. The Dow Jones Industrial Average lost 102.84 points, or 0.6 percent, to 17,069.84. The Russell 2000 Index fell 0.9 percent for a third straight decline. Trading in S&P 500 (SPX) stocks was 20 percent above the 30-day average at this time of day.
“We’re going to continue to consolidate until we get better visibility as to whether the slowdown this month is for real,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in a phone interview. His firm oversees $4.6 billion. “The tax inversion issue is also hanging over the market in the short-term.”
The S&P 500 fell 0.8 percent yesterday and has now declined 1.2 percent since closing at a record on Sept. 18. Small companies led yesterday’s decline, with the Russell 2000 sliding 1.5 percent. The small-cap index has lost 3.4 percent in the past three days.
At Crossroads
The equity benchmark rallied last week as the Federal Reserve maintained a commitment to keep interest rates near zero for a considerable time after completing asset purchases in October. The gauge has not had a four-day losing streak this year and has not fallen more than 10 percent in three years.
Data today showed the Markit Economics preliminary index of U.S. manufacturing held at a more than four-year high of 57.9 in September. A reading above 50 for the purchasing managers’ measure indicates expansion.
“We’re really at a crossroads in terms of what direction we’ll take,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “What’s going to be the impetus to get us going higher, or to see a correction? The market has gotten a little bit soft here and it needs to get something going. Right now it just doesn’t have that.”
Inversion Rules
The Treasury’s new rules on inversions apply to deals that close starting yesterday. The changes will have the biggest effect on the eight U.S. companies with pending inversions, including Medtronic and AbbVie, which plan the two largest such deals in U.S. history. The rules include a prohibition on “hopscotch” loans that let companies access foreign cash without paying U.S. taxes. They also curb actions that companies can use to make such transactions qualify for favorable tax treatment.
“People are concerned that some of the froth in the market will decrease with lower prospect for larger deals,” John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $230 billion, said in a phone interview. “That’s affecting some specific stocks, particularly health care. And the geopolitical situation is very uncertain and fraught with risk. A major event could have serious effects on the economy.”
Airstrike Worry
In the Middle East, The U.S. and Arab allies Saudi Arabia, Jordan, the United Arab Emirates, Qatar and Bahrain launched a series of airstrikes against Islamic State positions in Syria along the Iraqi border.
The airstrikes against the militant Khorasan Group in Syria were prompted by plans for an “imminent” terror attack on U.S. soil, the Pentagon said. Meanwhile, the Israeli army said it shot down a Syrian fighter jet after it penetrated Israeli air space over the Golan Heights.
“There are a lot of geopolitical worries going around,” said William Hobbs, head of equity strategy at Barclays Plc’s wealth-management unit in London. “The Middle Eastern situation feels like it’s not going to go away very quickly. The Islamic State is a significant and very organized military threat.” The Chicago Board Options Exchange Volatility Index (VIX), the gauge known as the VIX, increased 6.7 percent to 14.61. The index has surged 20 percent in the past two days, the most since August. The gauge lost 29 percent last month, the biggest drop in almost three years.
Winners, Losers
Seven of the 10 main S&P 500 groups retreated, with producers of consumer staples sliding 0.6 percent for the biggest declines.
CarMax Inc. sank 9.7 percent to $47.67 for the biggest drop in the S&P 500. The company reported second-quarter adjusted earnings that missed analysts’ estimates. AbbVie fell 2.4 percent to $57.32. The company agreed in July to buy Dublin-based Shire Plc (SHP) in a 32 billion pound ($52.4 billion) deal where it planned to move its legal address abroad to lower its taxes.
Medtronic declined 3.2 percent to $63.89. Covidien Plc, the Irish medical supplies company that the U.S. company is trying to buy, lost 2.5 percent to $88.12.
Abbott Laboratories declined 1.7 percent to $42.67. Mylan Inc. said in July it agreed to buy Abbott’s generic drug business in developed markets and would form a new company incorporated in the Netherlands to cut taxes. Mylan was little changed at $46.65.
Burger King
Burger King Worldwide Inc. slid 2.2 percent to $30.37. The company, which agreed at the end of August to buy Canada-based Tim Hortons Inc., will proceed with the deal even amid the crackdown on inversions. The deal is driven by long-term growth and not tax benefits, according to Tim Hortons spokesman Scott Bonikowsky.
Salix Pharmaceuticals Ltd. jumped 5.4 percent to $168.58. Allergan Inc. is in talks to acquire the company to help it fend off a hostile takeover offer from Valeant Pharmaceuticals International Inc., people with knowledge of the matter said.
Alibaba Group Holding Inc. fell 2.8 percent to $87.40. The company soared 38 percent on its trading debut on Sept. 19 and fell 4.3 percent yesterday.
source: Bloomberg
Medtronic Inc. slid 3.2 percent after the Treasury Department disclosed plans to limit inversion deals. CarMax Inc. sank 9.7 percent after earnings missed estimates. Apple Inc. and Micron Technology Inc. gained at least 1.4 percent to pace gains in technology shares. Nabors Industries Ltd. (NBR) led energy shares higher, as crude oil prices advanced after the U.S. launched a series of airstrikes against the Islamic State.
The S&P 500 fell 0.5 percent to 1,984.71 at 2:54 p.m. in New York. The Dow Jones Industrial Average lost 102.84 points, or 0.6 percent, to 17,069.84. The Russell 2000 Index fell 0.9 percent for a third straight decline. Trading in S&P 500 (SPX) stocks was 20 percent above the 30-day average at this time of day.
“We’re going to continue to consolidate until we get better visibility as to whether the slowdown this month is for real,” Sam Turner, a fund manager with Richmond, Virginia-based Riverfront Investment Group LLC, said in a phone interview. His firm oversees $4.6 billion. “The tax inversion issue is also hanging over the market in the short-term.”
The S&P 500 fell 0.8 percent yesterday and has now declined 1.2 percent since closing at a record on Sept. 18. Small companies led yesterday’s decline, with the Russell 2000 sliding 1.5 percent. The small-cap index has lost 3.4 percent in the past three days.
At Crossroads
The equity benchmark rallied last week as the Federal Reserve maintained a commitment to keep interest rates near zero for a considerable time after completing asset purchases in October. The gauge has not had a four-day losing streak this year and has not fallen more than 10 percent in three years.
Data today showed the Markit Economics preliminary index of U.S. manufacturing held at a more than four-year high of 57.9 in September. A reading above 50 for the purchasing managers’ measure indicates expansion.
“We’re really at a crossroads in terms of what direction we’ll take,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “What’s going to be the impetus to get us going higher, or to see a correction? The market has gotten a little bit soft here and it needs to get something going. Right now it just doesn’t have that.”
Inversion Rules
The Treasury’s new rules on inversions apply to deals that close starting yesterday. The changes will have the biggest effect on the eight U.S. companies with pending inversions, including Medtronic and AbbVie, which plan the two largest such deals in U.S. history. The rules include a prohibition on “hopscotch” loans that let companies access foreign cash without paying U.S. taxes. They also curb actions that companies can use to make such transactions qualify for favorable tax treatment.
“People are concerned that some of the froth in the market will decrease with lower prospect for larger deals,” John Carey, a Boston-based fund manager at Pioneer Investment Management Inc., which oversees about $230 billion, said in a phone interview. “That’s affecting some specific stocks, particularly health care. And the geopolitical situation is very uncertain and fraught with risk. A major event could have serious effects on the economy.”
Airstrike Worry
In the Middle East, The U.S. and Arab allies Saudi Arabia, Jordan, the United Arab Emirates, Qatar and Bahrain launched a series of airstrikes against Islamic State positions in Syria along the Iraqi border.
The airstrikes against the militant Khorasan Group in Syria were prompted by plans for an “imminent” terror attack on U.S. soil, the Pentagon said. Meanwhile, the Israeli army said it shot down a Syrian fighter jet after it penetrated Israeli air space over the Golan Heights.
“There are a lot of geopolitical worries going around,” said William Hobbs, head of equity strategy at Barclays Plc’s wealth-management unit in London. “The Middle Eastern situation feels like it’s not going to go away very quickly. The Islamic State is a significant and very organized military threat.” The Chicago Board Options Exchange Volatility Index (VIX), the gauge known as the VIX, increased 6.7 percent to 14.61. The index has surged 20 percent in the past two days, the most since August. The gauge lost 29 percent last month, the biggest drop in almost three years.
Winners, Losers
Seven of the 10 main S&P 500 groups retreated, with producers of consumer staples sliding 0.6 percent for the biggest declines.
CarMax Inc. sank 9.7 percent to $47.67 for the biggest drop in the S&P 500. The company reported second-quarter adjusted earnings that missed analysts’ estimates. AbbVie fell 2.4 percent to $57.32. The company agreed in July to buy Dublin-based Shire Plc (SHP) in a 32 billion pound ($52.4 billion) deal where it planned to move its legal address abroad to lower its taxes.
Medtronic declined 3.2 percent to $63.89. Covidien Plc, the Irish medical supplies company that the U.S. company is trying to buy, lost 2.5 percent to $88.12.
Abbott Laboratories declined 1.7 percent to $42.67. Mylan Inc. said in July it agreed to buy Abbott’s generic drug business in developed markets and would form a new company incorporated in the Netherlands to cut taxes. Mylan was little changed at $46.65.
Burger King
Burger King Worldwide Inc. slid 2.2 percent to $30.37. The company, which agreed at the end of August to buy Canada-based Tim Hortons Inc., will proceed with the deal even amid the crackdown on inversions. The deal is driven by long-term growth and not tax benefits, according to Tim Hortons spokesman Scott Bonikowsky.
Salix Pharmaceuticals Ltd. jumped 5.4 percent to $168.58. Allergan Inc. is in talks to acquire the company to help it fend off a hostile takeover offer from Valeant Pharmaceuticals International Inc., people with knowledge of the matter said.
Alibaba Group Holding Inc. fell 2.8 percent to $87.40. The company soared 38 percent on its trading debut on Sept. 19 and fell 4.3 percent yesterday.
source: Bloomberg