By Anora Mahmudova and Sara Sjolin, MarketWatch
Mylan soars on Teva buyout news
U.S. stocks closed mostly lower on Tuesday, with the S&P 500
and Dow industrials unable to extend the previous session's
gains.
Investors assessed a barrage of earnings, while M&A activity
in the biotechnology industry helped lift the Nasdaq Composite.
The S&P 500 (SPX) closed 3.06 points, or 0.2%, lower at
2,097.34, with seven of its 10 main sectors losing ground. Energy
and materials stocks led the losses.
The Dow Jones Industrial Average (DJI) lost 84.94 points, or
0.5%, to settle at 17,949.72, with nearly two-thirds of its 30
components ending lower. Declines in Travelers Companies Inc. and
DuPont weighed on the blue-chip index.
The Nasdaq Composite (RIXF) outperformed other indexes, rising
19.50 points, or 0.4%, to 5,014.10, as big gains in biotechnology
stocks lifted the index to near record levels.
David O'Malley, chief executive of Penn Mutual Asset Management
with $20 billion in assets under management, said that while
consensus-beating earnings and M&A activity are providing
support, gains were capped by high valuations and worries over
economic growth.
"The S&P 500 has been stuck in a range between 2,040 and
2,120 since February, as different forces are pushing and pulling
this market," O'Malley said.
"The bullish case for stocks is based on PE [profit-to-earnings
ratio] expansion but it is hard to imagine given the drop in
earnings, the Fed's tightening plans and global weakness," O'Malley
said.
High valuations in the face of deteriorating earnings have been
a concern for portfolio managers who question how long the march
higher can continue.
"Gains in U.S. equities since the start of 2009 have been
largely due to multiple expansion and any further expansion will
put equities into dangerous territory," said Jerry Braakman, chief
investment officer at First American Trust, a Santa Ana,
Calif.-based manager with $1.1 billion in assets.
Multiple expansion occurs when investors are simply willing to
pay more for a dollar of earnings.
Earnings:DuPont & Co.(DD) reported a drop in first-quarter
earnings, partly due to the impact from a stronger dollar
(http://www.marketwatch.com/story/dupont-forecasts-larger-forex-hit-as-sales-slip-2015-04-21).
It also said that the strengthening greenback will dent its
earnings for the full year more than it initially forecast in
January. Shares slid 3%.
Harley-Davidson Inc.(HOG) shares slumped 9.8% after it cut
shipment outlook for the year.
Under Armour Inc.(UA) shares slumped 4.8% as sales fell below
expectations due to currency volatility and costs related to
acquisitions.
Travelers Cos.(TRV) shares dropped 4% after it said
first-quarter profit fell from an unusually strong period a year
earlier.
Teva Pharmaceuticals Industries Ltd. (TEVA) said Tuesday it is
offering to buy Mylan N.V.(MYL) for $82 a share in cash and stock.
Mylan shares jumped 8.9%%, while Teva shares rose 1.4%.
For more on today's notable movers read Movers & Shakers
column
(http://www.marketwatch.com/story/yahoo-verizon-chipotle-yum-earnings-in-focus-2015-04-21).
Other markets: Japanese and Chinese stocks closed firmly in
positive territory, and Europe followed suit with solid gains.
Greece's Athex Composite Index , however, bucked the positive
trend and slumped 3.3% amid fears the country is running out of
cash.
Read: Charts show current version of Greek crisis nothing like
2012, so far
(http://www.marketwatch.com/story/charts-show-current-version-of-greek-crisis-nothing-like-2012-so-far-2015-04-21).
The European Central Bank is now looking at measures to rein in
support for Greek banks
(http://www.marketwatch.com/story/ecb-looking-at-reining-in-support-for-greek-banks-reports-2015-04-21)
under its emergency liquidity assistance, according to a Bloomberg
report on Tuesday.
See: Investors may be ignoring potential "collateral damage"
from Greece
(http://www.marketwatch.com/story/investors-may-be-ignoring-potential-collateral-damage-from-greece-2015-04-20).
Oil (CLK5) settled 2% lower
(http://www.marketwatch.com/storyno-meta-for-guid) at $55.26 a
barrel. Gold futures (GCK5) reclaimed the $1,200 level, settling
0.8% higher at $1,203.10.
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