Stocks fall, pausing from recent surge following modest losses overseas, ahead of dataBy Sara Lepro, AP
Monday, September 21, 2009
Stocks follow overseas markets lower after run-up
NEW YORK — Stocks are following overseas markets lower, pausing from a recent surge.
News of Dell Inc.’s plans to buy information technology company Perot Systems Corp. for about $3.9 billion is doing little to rally investors.
Stocks have been on a relentless ascent since early March as investors make bets that the world economy is healing. Analysts say breaks in the rally are perfectly healthy.
Among the economic data to come Monday, the Conference Board’s index of leading economic indicators is expected to have risen 0.7 percent in August for the fifth monthly increase.
The Dow Jones industrial average is down 82 at 9,737. The Standard & Poor’s 500 index is down 9 at 1,059, while the Nasdaq composite index is down 12 at 2,120.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
NEW YORK (AP) — U.S. stock futures are signaling a lower opening Monday on Wall Street as markets around the globe fell, pausing from a recent surge.
All the major European indexes declined in afternoon trading there after stocks fell in Asia overnight. Commodities like oil and gold also retreated, while the dollar inched higher. Bond prices rose.
Stock futures pared their losses briefly after computer maker Dell Inc. announced plans to buy information technology company Perot Systems Corp. for about $3.9 billion. Dell is offering $30 per share in cash — a 68 percent premium over Perot’s closing stock price on Friday.
Stocks and commodities have been on a relentless ascent since early March as investors make bets that the world economy is healing amid improving activity in the housing and manufacturing industries, and better consumer sentiment. Analysts say breaks in the rally are perfectly healthy.
The benchmark Standard & Poor’s 500 index tacked on a 2.5 percent gain last week, bringing its total rise since March to 58 percent, after Federal Reserve Chairman Ben Bernanke declared the U.S. recession was “likely over.” Investors are now waiting to see what the rest of the Fed has to say this week during its two-day rate-setting meeting, which begins Tuesday.
Meanwhile, a private sector group’s forecast of economic activity on Monday should provide further evidence that the recession is ending. The Conference Board’s index of leading economic indicators is expected to have risen 0.7 percent in August. The index, which is meant to project economic activity in the next three to six months, climbed 0.6 percent in July.
Ahead of the market’s open, Dow Jones industrial average futures fell 51, or 0.5 percent, to 9,682. Standard & Poor’s 500 index futures lost 7.50, or 0.7 percent, to 1,053.50, while Nasdaq 100 index futures fell 11, or 0.6 percent, to 1,710.25.
Overseas, Hong Kong’s Hang Seng index lost 0.7 percent. A number of other Asian markets, including Japan’s, were closed for holidays. In afternoon trading, Britain’s FTSE 100 was down 0.8 percent, Germany’s DAX index dropped 1.3 percent, and France’s CAC-40 fell 0.8 percent.
Shares of Perot Systems shot up 66 percent, or $11.78, to $29.69 in pre-market trading. Dell shares slid 84 cents, or 5 percent, to $15.85.
With major stock indexes up more than 50 percent over the past six months, including the Dow Jones industrial average, which is less than 200 points shy of the 10,000 mark, it’s widely believed that the market is ripe for a pullback. But any dip in stocks continues to be met with more buying.
“People are still very underinvested,” said Kent Engelke, chief economic strategist at Capitol Securities Management. “We might even go considerably higher than 10,000 just because there is so much cash on the sidelines.”
Though economic data is expected to continue to improve, there are other worries plaguing the market, such as the potential threat of inflation.
The Federal Reserve is expected this week to keep its key interest rate at a record low of near zero, but the market will be looking for any indication of when the Fed plans to actually raise rates, a tactic it would use to ward off inflation.
The Fed has kept interest rates low to help stimulate the economy, but if the central bank signals inflation is becoming a concern, that could spook investors. Up until now, the Fed has insisted that inflation, which would further erode the value of the dollar and eat into Treasury yields, is largely in check.
Investors will also get reports this week on new and existing home sales, as well as durable goods orders.
In earnings news Monday, homebuilder Lennar Corp. reported a wider loss in its fiscal third quarter as it wrote down the value of unsold homes. Customer orders were down 8 percent year-over-year, but the number of new orders increased each month during the quarter, Lennar said. The company’s stock slipped 54 cents to $16.
Bond prices rose slightly. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.44 percent from 3.46 percent late Friday.
The dollar was slightly higher against other major currencies, while gold prices fell.
Oil prices dropped $1.89 to $70.15 a barrel in premarket trading on the New York Mercantile Exchange.
Tags: New York, North America, Prices, Recessions And Depressions, United States