By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market wobbled in early
trade Monday, edging lower with the S&P 500 index and Dow Jones
Industrial Average hovering near record levels reached on
Friday.
Analysts said stock markets were overextended after six sessions
of gains that sent the benchmarks to all-time highs. Economic data
released on Monday were positive, but not strong enough to reignite
a rally.
The S&P 500 (SPX) was down 2 points, or 0.2%, at 1,960.79,
hovering near record levels. The Dow industrials (DJI) shed 32
points, or 0.2%, to 16,914.81. The Nasdaq Composite (RIXF) was off
2 points at 4,365.78.
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action.
Randy Frederick, managing director of trading and derivatives at
Charles Schwab, says markets are ripe for a pullback.
"Markets are overbought and are ready for a 3-4% pullback. Last
week the S&P 500 hit record levels three times and had 6 up
days in a row, while the Vix is at extremely low levels, Frederick
said.
"The picture was too rosy and when there is a lot of
complacency, market tend to flip," he added.
Craig Callahan, founder and chief executive officer of
Denver-based ICON Advisors, said the markets are within 1% of fair
value, but the environment for equities is favorable as earnings
are growing, interest rates are low and credit spreads are
narrowing.
In economic news, a gauge of economic activity in May from the
Chicago Federal Reserve tick up, while a preliminary June reading
of business activity from Markit's Purchasing Managers' Index rose
to the highest level since May 2010.
Sales of existing homes increased 4.9% in May to a seasonally
adjusted annual rate of 4.89 million, the National Association of
Realtors reported Monday. A strengthening labor market, expanding
inventories and recent drops in mortgage rates supported the second
straight monthly increase in sales.
Ahead of U.S. markets, investors received a mixed batch of
global PMI reports. HSBC's closely watched preliminary read on the
Chinese manufacturing sector swung to growth from contraction,
hitting a seven-month high at 50.8. But business activity in the
manufacturing and services sectors in the euro zone slowed for a
second straight month in June.
Integrys Energy, Central Garden & Pet soar on M&A
news
In corporate news, Integrys Energy Group Inc. (TEG) shares
surged 12% after the Wisconsin Energy Corp. (WEC) agreed to acquire
Integrys in a cash-and-stock deal worth about $5.71 billion. Shares
of Wisconsin Energy fell 3%.
Central Garden & Pet Co. (CENT) shares jumped 9% after
Philip Falcone's Harbinger Group Inc. offered to buy Central Garden
& Pet for $10 a share in cash.
Oracle Corp. (ORCL) agreed to buy Micros Systems Inc.(MCRS) for
$5.3 billion in cash. Oracle shares were 0.6% higher. Micros share
rose 3.4%.
Shares of Lululemon Athletica Inc. (LULU) rose 3.4% after The
Wall Street Journal reported the yoga-apparel company's founder,
Dennis "Chip" Wilson, is working with Goldman Sachs bankers as he
seeks to influence the company's operations. Wilson gave up his
role as Lululemon's chairman last month.
AbbVie Inc. (ABBV) shares rose 1.8% after the pharmaceutical
company lifted the midpoint of its 2014 per-share earnings
outlook.
FMC Corp. (FMC) shares fell 3.9% after the chemical company cut
its second-quarter and full-year outlook for earnings.
European stocks fall, oil and gold ease back
In other financial markets, Chinese and Hong Kong shares lost
grip of gains that came after an upbeat preliminary reading from
HSBC's China purchasing managers index, while other Asian markets
closed higher.
European stocks stayed lower following a report of slower
euro-zone business activity in June.
Gold for August delivery (GCQ4) picked up $2 to $1,318.8
building on last week's rise of 3.3%. Oil prices rose initially,
but eased back. Nymex August oil (CLQ4) and August Brent crude
futures were 0.7% and 0.6% lower respectively.
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