With a disappointing report on U.S. manufacturing generating some negative sentiment, stocks are seeing moderate weakness in mid-day trading on Monday. Nonetheless, selling pressure has remained relatively subdued amid light trading activity.
The major averages are off their worst levels of the day but are currently in negative territory. The Dow is down 57.59 points or 0.5 percent at 12,822.50, the Nasdaq is down 1.85 points or 0.1 percent at 2,933.20 and the S&P 500 is down 3.95 points or 0.3 percent at 1,358.21.
Much of the weakness on Wall Street stems from the release of a report from the Institute for Supply Management showing the first contraction in U.S. manufacturing activity in almost three years.
The ISM said its purchasing managers index dropped to 49.7 in June from 53.5 in May, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 52.0.
With the bigger than expected decrease, the index pointed to a contraction for the first time since July of 2009, when it showed a reading of 49.2.
Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, the economic ills of Europe and China are now showing up on the shores of a fragile U.S. economy."
The disappointing U.S. manufacturing data came on the heels of separate reports showing continued contractions in manufacturing activity in both Europe and China.
Meanwhile, a separate report released by the Commerce Department showed a bigger than expected increase in U.S. construction spending in the month of May. A notable increase in spending on private construction more than offset a drop in spending on public construction.
Despite the pullback by the broader markets, shares of Amylin Pharmaceuticals (AMLN) are up by 8.9 percent after the company agreed to be acquired by Bristol-Myers Squibb (BMY) for $31 per share in cash. The offer price represents a 10 percent premium to Amylin's closing price on Friday.
BrightPoint (CELL) is also posting a standout gain after agreeing to be acquired by Ingram Micro (IM) for $9 per share in cash or $840 million in total. Shares of BrightPoint have jumped 63 percent.
Meanwhile, computer giant Dell (DELL) is trading lower after announcing an agreement to acquire Quest Software (QSFT) for $28 per share in cash. The agreement values Quest at $2.4 billion, net of Quest's cash and debt.
Health insurance stocks have shown a significant move to the downside on the day, dragging the Morgan Stanley Healthcare Payor Index down by 2.2 percent. With the loss, the index is poised to end the session at its worst closing level in over six months.
Molina Healthcare (MOH) and UnitedHealth (UNH) are turning in two of the health insurance sector's worst performances, falling by 4.2 percent and 3.3 percent, respectively.
Considerable weakness has also emerged among chemical stocks, as reflected by the 1.4 percent loss being posted by the Dow Jones Chemicals Index. Chemical giant DuPont (DD) has helped to lead the sector lower, sliding 3.6 percent.
Natural gas, railroad, and gold stocks are also seeing notable weakness on the day, with gold stocks moving lower along with the price of the precious metal.
On the other hand, some healthcare provider, telecom, and biotechnology stocks are posting strong gains, helping to limit the downside for the markets.
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Monday, with Australia's All Ordinaries Index advancing by 0.9 percent. However, Japan's Nikkei 225 Index bucked the uptrend and closed just below the unchanged line.
The major European markets also showed strong moves to the upside on the day. The German DAX Index rose 1.2 percent, the U.K.'s FTSE 100 Index climbed 1.3 percent, and the French CAC 40 Index jumped 1.4 percent.
In the bond market, treasuries have moved sharply higher on the heels of the disappointing manufacturing data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 8.9 basis points at 1.57 percent.
by RTT Staff Writer
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