Please ensure Javascript is enabled for purposes of website accessibility

What Happened in the Stock Market Today

By Jim Crumly – Updated Jun 25, 2019 at 5:03PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

AbbVie became the latest player to pursue a pharma megadeal, and Lennar beat expectations for the second quarter.

Major indexes slumped Tuesday after comments from Federal Reserve officials indicated that an interest rate cut may not happen soon. The Dow Jones Industrial Average (^DJI 1.46%) and the S&P 500 (^GSPC 1.48%) opened roughly flat but fell through the session, finishing with moderate losses.

Today's stock market

Index Percentage Change Point Change
Dow (0.67%) (179.32)
S&P 500 (0.95%) (27.97)

Data source: Yahoo! Finance.

As for individual stocks, AbbVie (ABBV 1.89%) announced plans to buy Allergan (AGN), and Lennar (LEN 4.34%) reported quarterly results.

Falling, colorful graph.

Image source: Getty Images.

AbbVie wants to acquire Allergan in the latest pharma megadeal

AbbVie announced it plans to buy Botox maker Allergan in a deal worth $63 billion, but AbbVie investors panned the move, sending its shares down 16.3%. Allergan stock soared 25.4% to $162.43. Under the terms of the agreement, AbbVie will pay $120.30 in cash and 0.866 AbbVie shares for each share of Allergan, representing a whopping 45% premium based on yesterday's closing prices.

Motivating AbbVie to make such an expensive acquisition is the fact that Humira -- the world's top-selling drug, accounting for about 60% of the company's revenue -- will have biosimilar competition in the U.S. beginning in 2023. After the merger, Humira's $19 billion in sales would make up less than 40% of the total. AbbVie believes that it can find $2 billion in annual cost savings and that the combined company, excluding Humira, can generate high-single-digit sales growth.

Allergan has had its own growth challenges lately, with revenue falling 2% last quarter. The transaction is subject to regulatory approval and a vote by Allergan shareholders, who have plenty of reason to be happy with the deal.

Lennar reports a strong quarter, but guidance stirs worries

Homebuilder Lennar reported fiscal second-quarter results that beat expectations, but followed them with weak guidance, and shares fell 6.2%. Revenue grew 1.9% to $5.2 billion and earnings per share increased 38% to $1.30. Analysts were expecting the company to earn $1.14 per share on revenue of $5.1 billion.

Deliveries of homes rose 5% to 12,729 and new orders were up 1% to 14,518 homes. Lennar said more moderate price increases and lower interest rates were leading buyers back into the market after a pause in the second half of 2018.

Lennar shares opened higher but started to fall during the conference call when company officials said that labor and land shortages are adding to costs and that tariffs are adding $500 to the cost of a new home. Furthermore, the company forecast Q3 EPS between $1.25 and $1.35, compared with the analyst consensus of $1.52.

Lennar continues to be optimistic about the housing market, but investor nervousness about a slowdown and a report from the Commerce Department showing weak new home sales in May contributed to the decline in share price.

Jim Crumly owns shares of AbbVie. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lennar Corporation Stock Quote
Lennar Corporation
$76.66 (4.34%) $3.19
Allergan plc Stock Quote
Allergan plc
AbbVie Inc. Stock Quote
AbbVie Inc.
$144.40 (1.89%) $2.68
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$29,560.11 (1.46%) $425.12
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,701.10 (1.48%) $53.81

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.