Wall Street closed higher on Monday to start August on a positive note after four consecutive months of rally. Investors' confidence strengthened following a series of merger and acquisitions news and better-than-expected manufacturing data globally. All three major stock indexes ended in green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) finished in positive note for two successive days after surging 0.9% or 236.08 points to close at 26,664.40. Notably, 20 components of the 30-stock blue-chip index ended in the green while 9 finished in red and one remained unchanged.
The tech-laden Nasdaq Composite ended in positive territory for four consecutive days to close at 10,902.80, surging 1.5% or 157.52 points. This marked a new closing high for the tech-heavy index while in intraday trading Nasdaq Composite attained a fresh all-time high at 10,927.56.
Meanwhile, the S&P 500 gained 0.7% to end at 3,294.61. The Technology Select Sector SPDR (XLK) climbed 2.5% while the Real Estate Select Sector SPDR (XLRE) tumbled 1.6%. Notably, six out of eleven sectors of the benchmark index closed in positive territory while five in negative territory.
The fear-gauge CBOE Volatility Index (VIX) was down 0.7% to 24.28. A total of 9.8 billion shares were traded on Monday, lower than the last 20-session average of 10.5 billion. Advancers outnumbered decliners on the NYSE by a 1.94-to-1 ratio. On Nasdaq, a 2.47-to-1 ratio favored advancing issues.
News On Mergers & Acquisitions
On Jul 2, Microsoft Corp. MSFT confirmed that the company is in talk with Chinese technology company ByteDance to acquire the operations of social app TikTok in the United States, Canada, Australia and New Zealand. Notably, President Donald Trump has opposed the buyout proposal and has decided to ban TikTok.
Meanwhile, Alphabet Inc. GOOGL has agreed to buy 6.6% stake in the home security firm ADT Inc. ADT for $450 million. Moreover, Germany’s Siemens Healthineers has decided to takeover Varian Medical Systems Inc. VAR in a $16.4 billion all-cash deal. Additionally, the news surfaced that a group of buyout investors mulling to offer a $20 billion bid to acquire Kansas City Southern KSU.
Except ADT, all other stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Encouraging Global Manufacturing Data
On Aug 3, the Institute for Supply Management (ISM) reported that the U.S. manufacturing purchasing managers' index (PMI) for July came in at 54.2, its highest reading since March 2019. The consensus estimate was 53.5 while June's PMI was 52.6. Notably, any reading above 50 indicates expansion of manufacturing activities.
Moreover, July was the third consecutive months of manufacturing uptrend after the index attained an 11-year low of 41.5% in April. Furthermore, 13 of the 18 industries tracked by ISM expanded in July. Notably, the manufacturing sector constitutes 12% of the U.S. GDP.
The ISM reported that manufacturing production jumped to 62.1 in July from 57.3 in June. July's reading was the highest since August 2018 buoyed by reopening of more factories. Meanwhile, manufacturing orders climbed to 61.5 in July from 56.4 in June, marking the highest level since September 2019. Employment index rose to 44.2 in July from 42.1 in June. However, the index is still below 50, implying job retrenchment in this sector.
On Aug 3, the IHS Markit reported that its preliminary purchasing managers' index for the U.S. manufacturing sector rose to 50.9 in July from 49.8 in June, reflecting the U.S. manufacturing industries are turning out gradually.
In addition to the United States, the IHS Markit Eurozone manufacturing purchasing managers’ index (PMI) increased to 51.8 in July from 47.4 in June, marking its highest reading since February 2019. The Caixin/Markit manufacturing Purchasing Managers' Index for China rose 52.8 in July from 51.2 in June.
Other Economic Data
The Department of Commerce reported that construction spending fell 0.7% in June while the consensus estimate was for an increase of 1.3%. However, May's data was revised favorably from a decline of 2.1% reported earlier to a decline of 1.7%.
Residential or home building dropped 1.5% in June owing to a 3.6% decline in single-family home projects partially offset by a 3% rise in multi-family home building. Nonresidential construction increased by 0.2%.
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