BLBG: U.S. Stocks Are Little Changed Before Home Sales Report
U.S. stocks were little changed, as the Standard & Poor’s 500 Index headed toward its biggest monthly gain since October 2011, before a report that may show fewer Americans signed contracts to buy houses last month.
Perrigo Co. dropped 4.1 percent after saying it (USPHTMOM) will buy Irish drugmaker Elan Corp. for $8.6 billion. Whole Foods Market Inc. fell 0.7 percent as Cantor Fitzgerald LP downgraded the stock. Omnicom Group Inc. jumped 7.9 percent after saying it will merge with France’s Publicis Groupe SA to create the world’s largest advertising company.
The S&P 500 slipped 0.1 percent to 1,690.63 at 9:48 a.m. in New York. The equity benchmark lost less than 0.1 percent last week, halting its longest streak of weekly gains since May 17. The Dow Jones Industrial Average dropped 12.98 points, or 0.1 percent, to 15,545.85 today. Trading in S&P 500 stocks was 28 percent below the 30-day average during this time of day.
“It’s still the case that macro is driving markets at the moment,” Ramin Nakisa, an asset allocation strategist at UBS AG in London, told Francine Lacqua on Bloomberg Television. “We are entering a world in which rates are rising, and the Fed’s going to taper. There may be higher volatility, but there will be a bigger appetite for risk. Now we’re seeing a rotation into cyclicals, so markets are saying we want growth.”
The S&P 500 has climbed 5.2 percent this month. The benchmark index surged 150 percent since March 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases by the U.S. central bank. The gauge fell in June, after seven consecutive months of gains, as investors examined economic data to assess when the Federal Reserve will reduce its $85 billion of monthly bond purchases.
Fed Timing
The Fed has said economic data will determine the timing and pace of any reduction in its asset purchases. The central bank will probably maintain its benchmark interest rate at 0.25 percent after concluding its two-day policy-setting meeting on July 31, economists predicted. The Fed will begin to reduce its bond-purchase program in September, according to economists surveyed by Bloomberg.
The National Association of Realtors publishes its pending house sales report at 10 a.m. in Washington. The index slipped 1 percent in June, according to economists surveyed by Bloomberg. It rose 6.7 percent in May, the biggest gain since April 2010.
The week will offer further clues to the state of the economy, with the release of data on U.S. gross domestic product and the monthly labor report, as well as monetary policy announcements by the Fed and the European Central Bank.
Earnings Season
Investors will also watch this week’s earnings from more than 130 companies listed on the S&P 500. Of the 265 companies in the S&P 500 that have posted results so far this earnings season, 73 percent have exceeded analysts’ estimates for profit and 56 percent have beaten sales projections, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, or VIX, climbed 6.6 percent to 13.56, after adding 1.4 percent last week. The equity volatility gauge reached its highest level this year in June and has since fallen 34 percent.
Perrigo lost 4.1 percent to $128.70 today. The maker of over-the-counter medicines will pay holders of Elan’s American depositary receipts $16.50 per ADR in cash and stock, according to a joint statement today. That’s 11 percent greater than the July 26 closing price for the ADRs.
Perrigo has agreed to pay a high price for Elan, Exane BNP Paribas analyst Vincent Meunier said today.
Whole Foods
Whole Foods declined 0.7 percent to $55.60. Cantor Fitzgerald cut its rating on the stock to hold from buy before the grocer’s quarterly results on July 31. The share price suggests investors already anticipate the company will upgrade its earnings guidance for the full year after increasing its forecast in May, analyst Ajay Jain wrote in a note.
Omnicom rallied 7.9 percent to $70.28 after agreeing to merge with Publicis to create a company with revenue of $23 billion and a market value of $35 billion. The shareholders of Publicis and Omnicom will each hold about 50 percent of the new entity, Publicis Omnicom Group.
The combined business will use its scale to negotiate better advertising rates for its clients. Publicis’s Chief Executive Officer Maurice Levy and Omnicom’s CEO John Wren will jointly run Publicis Omnicom.
Interpublic Group of Cos. jumped 7.4 percent to $17.04.
Saks Inc. added 3.3 percent to $15.82. Toronto-based Hudson’s Bay Co. will buy the luxury department-store retailer for $16 per share in cash, or $2.9 billion including debt, according to a joint statement today.
To contact the reporter on this story: Sofia Horta e Costa in London at shortaecosta@bloomberg.net
To contact the editors responsible for this story: Andrew Rummer at arummer@bloomberg.net; Lynn Thomasson at lthomasson@bloomberg.net
