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Dow Gains as Investors Prepare for First Rate Cut in 10 Years

Here Are 3 Hot Things to Know About Stocks Right Now

  • The Dow Jones Industrial Average finished up Monday as investors prepared this week for a likely quarter-point rate cut from the Federal Reserve and earnings from nearly a third of the companies in the S&P 500.
  • Mylan (MYL) and Pfizer (PFE) agreed to combine their off-patent drug businesses in an all-stock deal. Mylan is Real Money’s Stock of the Day.
  • Cancer diagnostics company Exact Sciences (EXAS) will acquire Genomic Health (GHDX) for about $2.8 billion.

Wall Street Overview

Stocks finished mixed Monday, following Friday’s record closings for the Nasdaq and the S&P 500, as investors look ahead to a likely quarter-point rate cut from the Federal Reserve and await earnings from nearly a third of the S&P 500 companies.

The Dow Jones Industrial Average rose 28 points, or 0.11%, to 27,221. The S&P 500 slipped 0.16% and the Nasdaq dropped 0.44%.

Leading the Dow were Johnson & Johnson ( JNJ) , Intel ( INTC) , and 3M ( MMM) .

Pfizer (PFE)  was the Dow’s biggest loser after the drugmaker and Mylan  (MYL)  agreed to combine their off-patent drug businesses in an all-stock deal that will create a new U.S.-based company.

Both companies also reported earnings Monday, with Pfizer beating earnings expectations but missing on revenue, and Mylan topping both earnings and revenue forecasts. S&P Global Ratings downgraded Pfizer’s credit rating from AA to AA- after the deal was announced.

Shares of Pfizer were down 3.8% to $41.44, while Mylan surged 13% to $20.78. Mylan is Real Money’s Stock of the Day.

The Federal Reserve will meet Tuesday and Wednesday, with an announcement on interest rates expected at 2 p.m. ET on Wednesday. Fed watchers expect the central bank to lower its benchmark interest rate by a quarter-point, which would mark the first cut in 10 years.

“Economic fundamentals remain relatively sound, largely bolstered by a strong consumer,” said Glenmede Trust’s Investment Strategy Team in a research note.

“Though amid weaker manufacturing conditions and lingering trade frictions, the Fed may take a measure of ‘insurance’ to help protect against relatively unpredictable risks. Officials have noted, however, that an insurance cut may not be without its costs — lower rates could stimulate appetite for risk, which may threaten to overheat markets at a time when valuations remain elevated.”

Janet Yellen, the former chair of the Federal Reserve, said Sunday she she supports an interest-rate cut of 25 basis points, noting that the economy is weakened “because of conflicts over trade and the uncertainty that’s caused for businesses.”

Regarding trade, negotiations between the U.S. and China are scheduled to resume Tuesday in Shanghai. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer will meet with a delegation led by China’s economy czar, Vice Premier Liu He.

President Donald Trump said Friday that he didn’t know if the world’s two largest economies would reach an agreement. “Maybe they will, maybe they won’t,” he said. “I don’t care.”

Trump took to Twitter on Monday complaining that “the Fed ‘raised’ way too early and way too much.”

“Their quantitative tightening was another big mistake,” Trump said. “While our Country is doing very well, the potential wealth creation that was missed, especially when measured against our debt, is staggering.”

Trump added that “we are competing with countries that know how to play the game against the U.S.”

“That’s actually why the E.U. was formed,” he said. “….and for China, until now, the U.S. has been ‘easy pickens.’ The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!”

Boeing (BA) shares fell 1.4% to $340.29 after analysts at Standard & Poor’s cautioned they may lower their credit rating for the world’s biggest plane maker because of the ongoing crisis in its 737 MAX program.

Cancer diagnostics company Exact Sciences ( EXAS)  will acquire healthcare company Genomic Health ( GHDX)  for about $2.8 billion, the companies said. Shares of Exact Sciences fell slightly to $117.57, while Genomic Health advanced 6.4% to $73.07.

 

Shares of Parker Hannifin ( PH)  dipped 1.2% to $172.82 after the aerospace motion and control-technology company said it would acquire aircraft exhaust systems maker Exotic Metals Forming Co. in a $1.56 billion all-cash deal.