Apple and Bank of America Fuel the Market's Gains

After yesterday, you'd be excused for thinking that the Dow Jones Industrial Average (DJINDICES: ^DJI  ) wouldn't see the 14,000-point threshold again for a while. And yet, just like that, here we are again. With roughly an hour left in the trading session, is up 131 points to 14,011.

What's fueling stocks today?
Although it's been a relatively quiet day on the macroeconomic front, data released this morning suggests that the domestic services sector is doing better than economists had predicted. According to a report from the Institute for Supply Management, nonmanufacturing activity in the U.S. expanded last month for the 37th consecutive time.

As my colleague Justin Loiseau discussed earlier, the institute's Non-Manufacturing index -- a composite of various indicators including orders, employment, and prices -- registered at 55.2% for January, narrowly beating an expected reading of 55.1%.

The big news today, however, is coming from individual companies. Personal-computer maker Dell (UNKNOWN: DELL.DL  ) said today that it will go private in a deal spearheaded by founder and CEO Michael Dell.

With a small circle of partners including private-equity firm Silver Lake Partners, software giant Microsoft (NASDAQ: MSFT  ) , and a handful of investment banks, Michael Dell will pay $24.4 billion, or $13.65 per share, to assume control of the ailing company. Financing for the deal has been committed by Bank of America (NYSE: BAC  ) , Barclays, and Credit Suisse, among others.

In response to the announcement, technology stocks are widely up. Among others, shares of Apple (NASDAQ: AAPL  ) are higher by more than 3.4%. Although Apple is only one stock, it exerts an inordinate impact on the broader market: As fellow Fool Morgan Housel noted last year, in the first quarter of 2012, its shares drove 15% of the S&P 500's gains. And without the iPhone maker, the S&P's earnings growth at the time would have been 0%.

Getting back to Dell, though, the best response to the deal was that of fellow PC manufacturer Hewlett-Packard (NYSE: HPQ  ) . In a press release immediately following Dell's announcement, HP issued its own statement saying: "Dell has a very tough road ahead. The company faces an extended period of uncertainty and transition that will not be good for its customers." Given HP's own recent history, its reaction seems a bit ironic.

Finally, the other big piece of news to break today is that the U.S. Department of Justice filed a lawsuit against Standard & Poor's Ratings Services for civil violations related to the company's ratings of mortgage-backed securities in the lead-up to the financial crisis. At a news conference this morning, Attorney General Eric Holder intimated that the government could seek more than $5 billion in the suit. Shares of S&P's parent company, McGraw-Hill, are down 11.3% on the news.

Want to learn more about Apple?
There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons both to buy and to sell Apple, as well as what opportunities remain for the company (and your portfolio) going forward. To get instant access to his latest thoughts on Apple, simply click here now.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2237199, ~/Articles/ArticleHandler.aspx, 10/23/2014 9:35:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement