Benchmarks ended a narrow trading session in the green on Monday, boosted by gains in Internet, bio-tech and small-cap stocks. However, developments on the deals front were mixed, limiting the Dow’s gains. While AT&T agreed to acquire DirecTV, Pfizer’s final bid was rejected by AstraZeneca. As the day was devoid of any major economic data, investors focused their attention on two Federal Reserve speakers. Investors witnessed one of the slowest trading days on Monday as trading volumes turned out to be the third-lowest this year.
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The Dow Jones Industrial Average (DJI) went up 0.1% to close Monday’s trading session at 16,511.86. The Standard & Poor 500 (S&P 500) gained 0.4% to finish at 1,885.08. The tech-laden Nasdaq Composite Index rose 0.9% to 4,125.81. The fear-gauge CBOE Volatility Index (VIX) dropped 0.2% to settle at 12.42. Total volume for the day was roughly 4.94 billion shares, lower than this month’s average of 6.05 billion. Advancers outpaced declining stocks on the NYSE. For 63% stocks that advanced, 34% declined.
Benchmarks ended higher on Monday boosted primarily by gains in high-growth stocks. Shares of Internet television network provider Netflix, Inc. (NASDAQ:NFLX), online travel company TripAdvisor Inc. (NASDAQ:TRIP) and The PricelineGroup Inc. (NASDAQ:PCLN) increased 4.2%, 5.2% and 1.9%, respectively.
Internet stocks from the Technology sector such as Facebook, Inc. (NASDAQ:FB), Google Inc. (NASDAQ:GOOG), Groupon, Inc. (NASDAQ:GRPN), Yelp, Inc. (NYSE:YELP), LinkedIn Corporation (NYSE:LNKD), FireEye, Inc. (NASDAQ:FEYE) and Yahoo! Inc. (NASDAQ:YHOO) gained 2.1%, 1.6%, 0.7%, 4.7%, 3.0%, 3.7% and 1.4%, respectively.
Shares of technology bellwethers also ended in the green. Stocks such as Apple Inc. (NASDAQ:AAPL), Verizon Communications Inc. (NYSE:VZ) and Oracle Corporation (NYSE:ORCL) increased 1.2%, 0.2% and 1.1%, respectively. The Technology Select Sector SPDR (XLK) gained 0.7%, the highest among the S&P 500 sectors. Overall, eight out of 10 sectors of the S&P 500 ended in the green.
Separately, shares of momentum stocks such as electric car maker Tesla Motors, Inc. (NASDAQ:TSLA) and Internet radio service provider Pandora Media, Inc. (NYSE:P) advanced 2.4% and 5.3%, respectively.
Bio-tech stocks too boosted the broader markets on Monday. Gilead Sciences Inc. (NASDAQ:GILD), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) and Amgen Inc. (NASDAQ:AMGN) increased 1.6%, 3.4% and 0.1%, respectively. Overall, the Health Care Select Sector SPDR (XLV) advanced 0.6%.
Small-cap stocks also extended their gains. The Russell 2000 Index of small-caps went up 1.0% on Monday. The index reached as high as 1,116.04 before settling at 1,114.43. The index fell short of its 200-day moving average of 1,117.04. Last week, the index rebounded 0.6% on Friday after it had dropped for three consecutive days. On Thursday, the index slipped 0.7% followed by a decline of 1.6% on Wednesday and a drop of 1.1% on Tuesday. Currently, the index is 7.8% below its record high of 1,208.65 achieved on March 4.
Markets also received mixed news on deals. AT&T, Inc. (NYSE:T) agreed to buy the largest U.S. satellite-television provider DIRECTV (NASDAQ:DTV) for a total equity value of $48.5 billion as well as all of DIRECTV’s net debt. This amounts to a stock-and-cash transaction of $95 per share, based on AT&T’s closing price on Friday. Shares of AT&T dropped almost 1.0% on Monday as investors remained concerned about possible regulatory hurdles. Shares of DIRECTV also declined 1.8%.
Meanwhile, AstraZeneca PLC’s (NYSE:AZN) shares plunged 12.0% after the company rejected Pfizer Inc.’s (NYSE:PFE) final takeover proposal which valued AstraZeneca at approximately £55 per share. AstraZeneca stated that the proposal was undervalued since the company was looking for an offer price close to £58.85 per share. This is 10% higher than Pfizer’s last offer price of £53.50 per share. Shares of Pfizer went up 0.6% despite the development.
Meanwhile, investors assessed Federal Reserve Bank of San Francisco President John Williams and Dallas Fed President Richard Fisher’s comments as the day lacked key economic data that could move the markets. John Williams stated that it will take more than a year for the Federal Reserve to hike the key lending rates. On the other hand, Richard Fisher criticized Congress’s aggressive economic stimulus program which he believes is acting like a brake on growth.
Earlier in May, Federal Reserve Chairwoman Janet Yellen reiterated the central bank’s intentions to keep federal funds rates low for some time. She said that the Fed would continue to maintain this stance even after employment and inflation rates return to the desired level. Yellen commented: “Interest rates are unlikely to begin rising until we are in a strong economic recovery”.
Also, in April, the Federal Open Market Committee’s (FOMC) policy statement had confirmed that the central bank will cut its buyback plan by another $10 billion starting May. Thus, the bond-buyback program will be brought down to $45 billion a month.