Why Microsoft's Deal Couldn't Dent the Dow

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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.

The American public might not know when the job market's going to improve; we have little clue as to when and how the Federal Reserve plans to slow quantitative easing, and most of us are still thoroughly in the dark about what form a looming U.S. military intervention in Syria will take. But there are a few things we can be sure of: aside from death and taxes, we now know that American manufacturing is on the rise -- and construction spending is up, too. Armed with this knowledge, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) rose 23 points, or 0.2%, to end at 14,833. 

United Technologies (NYSE: UTX  ) led all Dow gainers, shooting 2.6% higher on the heels of the Institute for Supply Management's August manufacturing reading, which rose to 55.7, the highest level in 14 months. Any reading above 50 shows growth in the sector, while sub-50 readings reflect a decline. While United Technologies is technically in the diversified machinery industry, the $94 billion giant is well-positioned to benefit from a secular uptick in the broad area of manufacturing. 

Wall Street also bid shares of JPMorgan Chase (NYSE: JPM  ) higher today, cheering the hefty profits earned by the bank in quintessential Wall Street fashion. Stock in the megabank ended 1.2% higher Tuesday as Verizon Communications (NYSE: VZ  ) bought out Vodafone's 45% stake in the Verizon Wireless division. The mammoth deal -- the second largest ever on Wall Street -- wasn't without some mammoth fees for the merger and acquisition, or M&A, work led by JPMorgan and Morgan Stanley.

While the two investment banks reportedly raked in around $600 million (on this deal alone) for their M&A wheelings and dealings -- which ran the gamut from advising to underwriting hundreds of billions of dollars' worth of debt and equity to hedging currency risks -- Verizon shares slumped 2.9% Tuesday on news of the agreement. But Verizon shareholders aren't merely selling off because of the size of the bill; shareholders are facing dilution as Verizon issues more shares to finance the $130 billion acquisition. 

Not to be outdone, Microsoft (NASDAQ: MSFT  ) shed 4.6% after completing a major acquisition of its own. The software giant made its most notable announcement today since CEO Steve Ballmer singlehandedly sent shares roaring 7% higher by simply promising to retire. The company will shell out $7.2 billion for Nokia's smartphone business, praying that another company with experience in mobile will help Microsoft catch up in a game it's been woefully behind in for years.

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Related Tickers

9/23/2016 4:55 PM
^DJI $18261.45 Down -131.01 -0.71%
JPM $67.25 Down -0.14 -0.21%
JPMorgan Chase CAPS Rating: ****
MSFT $57.43 Down -0.39 -0.67%
Microsoft CAPS Rating: ****
UTX $102.56 Down -0.44 -0.43%
United Technologie… CAPS Rating: ****
VZ $52.56 Up +0.21 +0.40%
Verizon Communicat… CAPS Rating: ****