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.
Obviously, the broad-based S&P 500 (SNPINDEX:^GSPC) got up on the wrong side of the bed today, with the index suffering its worst loss of the year on weakening earnings expectations from other S&P components.
It was a light day on the economic data front, with the U.S. Treasury reporting a budget surplus of $53.2 billion in December, compared with forecasts that had called for a surplus of just $44 billion. This is good news, as it'd likely signal that budget deficit reductions are beginning to work, which could go a long way to reducing the exponential climb in U.S. debt that is viewed as unsustainable over the long term.
On the flipside, though, data from Thomson Reuters has shown that the vast majority of S&P 500 components that have pre-announced their earnings for the upcoming quarter have lowered their estimates -- not a good sign. It's been my contention as a tried-and-true skeptic of this rally that cost-cutting and share buybacks are masking a lack of top-line organic growth, and this is only more fuel for the fire.
By day's end, the S&P 500 had tumbled 23.17 points (-1.26%) to close at 1,819.20, its lowest close since Dec. 20. However, in spite of the significant down day, three companies scorched to the upside, leaving the S&P 500 in their dust.
Biopharmaceutical company Alnylam Pharmaceuticals (NASDAQ:ALNY) topped the charts with a gain of 40.9% after announcing a collaboration/investment of $700 million with Sanofi subsidiary Genzyme. The deal is a bit complex, but the gist is that Sanofi gains access to patisiran, Alnylam's familial amyloidotic polyneuropathy drug, ALN-TTRsc, two additional early-stage products in development, and the ability to license all of Alnylam's rare genetic disease drugs, globally, with the exception of North American and Western European markets. In addition, Sanofi will be taking a 12% stake in Alnylam and purchasing those shares at a 27% premium to Friday's close, or $80 per share. Wall Street and investors are clearly pleased with the potential for a future buyout, but I'd approach things more cautiously and wait for Alnylam's pipeline to do the talking.
Distilled-spirits maker Beam (UNKNOWN:BEAM.DL), the company behind Maker's Mark whiskey and Jim Beam bourbon, soared 24.6% after announcing an agreement to be purchased by Japan's Suntory for $83.50 per share, or $16 billion including debt. The deal will result in a company with spirits product sales in excess of $4.3 billion on an annual basis, according to the companies, and would move Suntory into the role of third-largest global spirits retailer. Suntory plans to fund the transaction with cash on hand as well as a loan from the Bank of Tokyo. At nearly 30 times next year's earnings, Beam is seeings its shareholders getting a fair deal.
Finally, NII Holdings (OTC:NIHDQ), a mobile-service provider in Latin America, gained 24.4% after it and Spain's Telefonica (NYSE:TEF) announced a network agreement in Mexico and Brazil. Under the terms of the deal, NII Holdings, which supplies service to Nextel brand customers in Mexico and Brazil, will be allowed to use Telefonica's network to reach those customers and hopefully expand its subscriber base. The deal works symbiotically for Telefonica, allowing its Brazilian wireless brand, Vivo, access to a larger market in Brazil. While the deal could ultimately tie Telefonica and NII Holdings at the hip, which is great news for the struggling NII, it doesn't help NII's growing debt load or bring the company back to profitability. In other words, it's one step in the right direction, but the company still has a mile to walk before it'd be a viable investment opportunity.