U.S. equities closed slightly higher on Monday amid dealmaking news, but a decline in General Electric shares, coupled with worries about tax reform, capped gains in the major indexes.
The S&P 500 rose 0.1 percent to 2,584.84, with Mattel shares surging 20 percent on news that Hasbro has approached the toy maker about a takeover. Hasbro’s bid for Mattel is the latest news out of a dealmaking space that has recently picked up steam. Last week, CNBC learned that 21st Century Fox has been in talks to sell most of the company to Disney. Also, Qualcomm rejected a $105 billion bid from Broadcom.
GE, meanwhile, was the worst-performing stock in the S&P 500. It fell 7.2 percent after the company issued weaker-than-expected guidance for 2018. The industrial giant also slashed its dividend by 50 percent and announced it will focus on its health care, aviation and energy businesses moving forward.
The Nasdaq composite finished 0.2 percent higher at 6,757.60, with Facebook, Amazon and Netflix rising, while Apple and biotech stocks declined.
The Dow Jones industrial average rose 17.49 points to end at 23,439.70, with Boeing among the biggest contributors of gains, while GE was the biggest decliner on the index. Dubai airline Emirates unveiled a provisional order for 40 of Boeing’s 787 Dreamliners. The deal is worth $15.1 billion.
Market sentiment has been on edge as of late as investors wonder whether the government will get tax reform done at all this year.
There are also worries that, even if tax reform gets done, a corporate tax cut could be delayed until 2019. These concerns came about after the Senate unveiled its own tax reform bill. In contrast, a House bill would slash the corporate rate immediately. The House wants to vote on its bill this week.
“As the tax debate intensifies, investors are becoming more skeptical” that lower corporate taxes will arrive this year, said Peter Cardillo, chief market economist at First Standard Financial. “I think the market is caught in a reality check right now.”
Equities had rallied to record highs amid renewed hope that the GOP-led Congress, along with the Trump administration, would be able to move forward with tax reform this year.
President Donald Trump said in a tweet Monday that he was proud of the House and Senate ” for working so hard on cutting taxes {& reform.} We’re getting close!”
If the government can move forward with tax reform this year, the market could be set up for an “upside surprise,” said Jason Pride, director of investment strategy at Glenmede, in a note. “Skepticism that meaningful reform on the corporate side is mounting,” he said, adding that “market expectations for tax reform are quite low.”
Elsewhere, there are no major economic data set for release Monday, but investors are looking ahead to key inflation data due later in the week.
Earnings rolled again Monday, with Tyson Foods and JD.com reporting quarterly results before the open. Switch is set to report after the bell. Other retailers, such as Home Depot, Lowe’s and Wal-Mart will release their quarterly results later this week.
Retail “has been such a weak sector that investors are hoping to find some bargains,” said Kate Warne, investment strategist at Edward Jones. She noted, however, that the market will punish those companies that post disappointing results as the margin of error will be very small.
Overseas, European markets fell broadly. The Stoxx 600 index, which is made up of a broad swath of European equities, fell 0.7 percent, while markets in Asia finished mostly in the red.
Source: CNBC
