Stocks were in rally mode on Monday as the Dow added 1% and the Nasdaq made a new 14-year high. Stocks opened higher, and with no geopolitical concerns or major economic data to key off, markets stayed near their highs for most of the day.
First, the scoreboard:
- Dow: 16,838.74, +175.8, (+1.06%)
- S&P 500: 1,971.74, +16.7, (+0.85%)
- Nasdaq: 4,508.31, +43.4, (+0.97%)
And now, the top stories on Monday:
1. The lone economic data point out of the U.S. was the National Association of Homebuilders’ latest homebuilder confidence survey, which showed the headline index climbing to 55 in July from 53 in June. This reading, which was a seven-month high for the index, also topped expectations for a reading of 54. “Homebuilder sentiment stands only three points below where it stood a year ago. History suggests that the index of future single-family sales is a reasonable gauge of start activity six months ahead. We view this report as consistent with our outlook that improved sentiment should support start activity in the coming quarters,” said Barclays’ Michael Gapen.
2. In mergers and acquisitions news, Dollar General made a $US9.7 billion bid for Family Dollar that topped the $US8.95 billion offer made in late July by Dollar Tree. Dollar General’s offer sent shares of Family Dollar up 5% to more than $US78.50 per share value implied in its offer, indicating that investors think an even higher offer for Family Dollar could materialise.
3. Shares of TASER International were up more than 5% after gaining more than 9% on Friday as investors view the situation in Ferguson as a catalyst for increased orders of TASER’s wearable police cameras.
4. Procter & Gamble, which last month said it would divest up to 100 of its brands, is likely to offload its Duracell and Braun brands, according to a Reuters report. Duracell, which is the world’s best-selling battery brand, has estimated annual earnings before interest, taxes, depreciation, and amortization, or EBITDA, of $US500 million.
5. Palladium prices hit a 13-year high of $US900 per troy ounce, as investors make bets that sanctions against Russia will limit global supply of the “white metal.” Use of palladium is concentrated in the auto industry, and in a recent note to clients, Morgan Stanley’s Adam Longson said prices are likely to be supported for some time due to expectations of reduced supply.
6. Goldman Sachs expects the S&P 500 to return 6% over the next twelve months ahead of the Federal Reserve’s first anticipated interest rate increase. “Markets do not always follow historical patterns,” Goldman’s David Kostin and his equity strategy team write, “but we forecast the S&P 500 will rise by 6% during the next 12 months before the expected first Fed hike in 3Q 2015. Stocks also rallied during the year ahead of first Fed tightening actions in 1994, 1999, and 2004. Both micro and macro data suggest the U.S. economy is strengthening.”
7. Famed short seller Jim Chanos of Kynikos Associates was a guest on Barry Ritholtz’s Master in Business radio program this weekend on Bloomberg radio, and among other topics Chanos debunked the two biggest truisms in short-selling and the stagnant growth in corporate America.
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