INO.com News - Stocks Showing A Lack Of Conviction In Mid-Afternoon Trading

Stocks Showing A Lack Of Conviction In Mid-Afternoon Trading - U.S. Commentary

(RTTNews) - After recovering from a moderate pullback at the outset of the session, stocks are showing a lack of direction in mid-afternoon on Tuesday, as traders await more significant economic catalysts forthcoming in the second half of the week.

Traders pulled capital out of the equity markets earlier, as profit taking largely overwhelmed positive news on factory orders and some isolated gains on the heels of two significant M & A announcements.

This morning, the Commerce Department reported that orders for manufactured goods increased by a little more than expected in the month of September, with the report also showing a notable increase in shipments.

On the M&A front, Berkshire Hathaway (BRKa) entered an agreement to acquire the shares of Burlington Northern Santa Fe (BNI) it does not already own for $100 per share, while Stanley Works (SWK) and Black & Decker (BDK) also announced a merger agreement.

The transactions resulted in some upbeat sentiment that M&A activity may be picking up, helping to limit the pullback.

In other news, Ford, Toyota and Nissan all reported a pick-up in October sales, despite the end of the cash for clunkers program, which contributed to the inflated September numbers.

Meanwhile, the Federal Open Market Committee has begun its two-day rate setting meeting today and is scheduled to make an announcement regarding the near-term direction of monetary policy at 2:15 p.m. ET on Wednesday.

The major averages are currently posting modest losses, well off their worst levels of the day. The Dow is currently down 37.18 at 9,752.26, the Nasdaq is down 1.51 at 2,047.69 and the S&P 500 is down 0.06 at 1,042.82.

Dow Components

A majority of the Dow components are in negative territory in mid-afternoon trading, contributing to the modest loss being shown by the blue chip index.

Intel (INTC) is seeing one of the steepest declines in the Dow, posting a loss of 3.1 percent. With the pullback, the stock is on pace to end the day at its lowest closing price in two and a half months.

Merck (MRK) is also extending its recent weakness, falling by 1.6 percent. Shares of the drug giant are poised to end the session at their worst closing level in nearly two months.

Coca-Cola (KO), Verizon (VZ), Microsoft (MSFT) and General Electric (GE) are also retreating, while Alcoa (AA) is on the rise, climbing by 1.8 percent. Shares of the aluminum producer are attempting to continue the recovery from last week's one and a half month closing low.

Caterpillar (CAT), DuPont (DD) and Disney (DIS) are also moving higher, helping to limit the pullback by the blue chip index.

Sector News

Semiconductor stocks continue to see some of the day's worst performances, with the Philadelphia Semiconductor Index falling by 1.7 percent and setting a two and a half month intraday low earlier in the session.

The index is being dragged down by shares of Micron (MU) and SanDisk (SNDK), which came under after Wedbush Morgan downgraded the stocks and lowered their target prices.

Pharmaceutical and computer technology stocks are also moving lower, while railroad stocks continue to surge following the news of the Burlington Northern Santa Fe acquisition. The Dow Jones Railroads Index has jumped by 11.8 percent.

Biotechnology stocks are also moving considerably higher in mid-afternoon trading, as reflected by the 3 percent gain by the NYSE Arca Biotechnology Index. The advance is helping the index to recover from last week's three month closing low.

Human Genome Sciences (HGSI) is extending its upward move, surging up by 9.5 percent. The stock is poised to close at its best level in nearly eight years. Yesterday, the firm revealed successful results for its lupus treatment Benlysta.

Gold, oil service, steel and housing stocks are also on the rise, mitigating some of the day's pullback.

In Focus: Economic Data, M&A News

As mentioned above, the Commerce Department reported that factory orders increased by 0.9 percent in September following an unrevised 0.8 percent decrease in August. The increase in orders came in slightly above economist estimates for an increase of about 0.8 percent.

In M&A news, Berkshire Hathaway entered an agreement to acquire the remaining shares of Burlington Northern Santa Fe it does not already own for $100 per share.

The transaction is valued at approximately $44 billion and is the largest ever made by Warren Buffet's firm. The news has substantially lifted the railroad sector, despite an overall downtrend present in the equity markets.

Further, power tool maker Stanley Works and Black & Decker Corp. said that they have entered into a merger agreement to create Stanley Black & Decker, an $8.4 billion global industrial leader, in an all-stock transaction valued at about $4.5 billion.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed lower on Tuesday. Hong Kong's Hang Seng Index lost 1.8 percent and India's BSE 30 Index fell by 3.1 percent. The Japanese market was closed for a public holiday.

The major European markets also closed notably lower. The U.K.'s FTSE 100 fell by 1.3 percent, while the German DAX Index and the French CAC 40 Index dropped by 1.4 percent and 1.5 percent, respectively.

In the bond markets, treasuries are considerably weaker. Subsequently, the yield on the benchmark ten-year note is trading at 3.484 percent, posting a gain of 6.2 basis points on the day.

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