Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Throughout most of the day it looked like nothing was going to be able to huff and puff and blow this rally over for yet another day -- but it appears that profit-taking and weak pending home sales data got the better of the broad-based S&P 500 (SNPINDEX: ^GSPC ) by day's end.
Pending U.S. homes sales shrank 0.6% in October from the previous month, marking the fifth straight month of declines. This news is particularly worrisome because lending rates have dipped notably from their recent highs and are sitting at a four-month low. Fewer pending home sales suggests that consumers have been spoiled by years of historically low mortgage rates and simply plan to sit on their hands until they're given another opportunity below 3.5% for a 30-year mortgage. This mode of thinking could be a long-term deterrent to the homebuilding sector regardless of how tightly homebuilders control their inventory.
With few earnings reports on the docket and most U.S. economic data due later this week, the S&P was generally range-bound most of the day, closing only modestly lower by 2.28 points (-0.13%) to finish at 1,802.48.
Topping the charts today for a second-consecutive day was Ariad Pharmaceuticals (NASDAQ: ARIA ) which advanced 35.7% -- this on the heels of a 35.5% move on Friday -- after the Committee for Medicinal Products for Human Use, or CHMP, advocated the continued use of leukemia drug Iclusig in patients. The European Medicines Agency's advisory panel merely suggested a number of safety protocols be put in place prior to patients being prescribed Iclusig. The news, while a few days old, is clearly crucial as it keeps Ariad's only approved product on the market in Europe and lends hope that its numerous other clinical trials which involve Iclusig can proceed. It still doesn't spell out exactly what the Food and Drug Administration will do with Ariad's Iclusig in the United States, where sales of the drug are on temporary suspension, but it provides a little more clarity that Ariad's revenue stream won't completely dry up following its unwelcome two-year follow-up safety study results.
Chinese online game developer Giant Interactive Group (UNKNOWN: GA.DL ) jumped 12.6% by day's end after receiving a nonbinding go-private offer from the company's Chairman Yuzhu Shi and other affiliates for a sum of $11.75 per share. According to a press release, as of today this consortium of investors already owns 47.2% of all outstanding shares in the company. The go-private price represents a 16% premium from Friday's closing price and is being reviewed by the board, minus the chairman. Given the consortium's already high levels of share ownership in the company, I see the likelihood of this deal going through as pretty high, although with China's online gaming growth erratic, but still in its infancy, I'd suggest that Shi and his affiliates are getting quite the steal at this level.
Finally, commercial finance company NewStar Financial (NASDAQ: NEWS ) which supplies secured cash flow loans and second lien loans for enterprises to use for acquisitions, dividend recapitalizations, refinancings, and restructurings, gained 9.6% despite no company-specific news. However, peer Carlyle Group (NASDAQ: CG ) did announce that it was able to raise $13 billion for its U.S. private equity fund, signaling the ongoing strength in private-equity acquisitions in a red-hot market. Shareholders may have taken Carlyle's massive financing as a sign that private-equity purchases may still be alive and well, which would be great news for NewStar Financial which is valued aggressively at 30 times next year's earnings.
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