Big Deals Hold Back the Dow

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Two massive corporate deals have the Dow Jones Industrial Average (DJINDICES: ^DJI  ) near breakeven for the day despite positive economic news. As of 1:30 p.m. EDT the Dow is down 0.11% to 14,795, while the S&P 500 (SNPINDEX: ^GSPC  ) is up a modest 0.22%.

There were three U.S. economic releases today.

Report

Period

Result

Previous

Markit PMI

August

53.1

53.7

ISM PMI

August

55.7%

55.4%

Construction spending

July

0.6%

0%

The purchasing managers' indexes from both the Institute for Supply Management and Markit showed that economic activity expanded in August from July. Markit's PMI showed activity expanding at a slower rate than in July. ISM's reading showed activity expanding at a slightly faster rate than in July, with the new-orders index up nearly 5 percentage points. The only potentially worrisome sign was a large jump in respondents paying higher prices.

Source: Institute for Supply Management.

Today's other economic release was construction spending for the month of July. The Department of Commerce reported that construction spending rose 0.6% in July to a seasonally adjusted annual rate of $900 billion. That's 5% above last year and higher than June's report of flat construction spending. Analysts had expected only a 0.3% rise.

US Construction Spending Chart

US Construction Spending data by YCharts.

Labor Day deals
The big news over the holiday weekend was that Microsoft (NASDAQ: MSFT  ) announced that it will acquire Nokia's (NYSE: NOK  ) mobile business for $7.2 billion. Microsoft's stock is down nearly 6% on the news, while Nokia's stock is up 30%. Microsoft said it "aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing." Nokia's Steven Elop made a big bet on Microsoft's mobile operating system years ago. Now, as one of the main carriers of the operating system, Nokia will give Microsoft a stronger competitive foothold to compete against Apple's iOS and Google's Android operating system.

Second, Verizon's (NYSE: VZ  ) deal for Vodafone's (NASDAQ: VOD  ) 45% stake in Verizon Wireless was finally officially announced. Verizon will pay Vodafone $130 billion -- roughly $59 billion in cash and the remainder in stock -- for Vodafone's 45% stake in Verizon Wireless. For Verizon shareholders, the company seems to be making a big bet at a time when margins are at five-year highs and everything is going well. Vodafone shareholders can look forward to a large special dividend and buybacks, with the company committing to return 70% of the deal's value to shareholders.

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate, and we'll give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!


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10/23/2014 4:32 PM
^DJI $16677.90 Up +216.58 +1.32%
DOW JONES INDUSTRI… CAPS Rating: No stars
MSFT $45.02 Up +0.64 +1.44%
Microsoft CAPS Rating: ***
NOK $8.40 Up +0.47 +5.93%
Nokia CAPS Rating: **
VOD $31.43 Up +0.44 +1.42%
Vodafone CAPS Rating: ****
VZ $48.22 Down -0.09 -0.19%
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