It certainly wouldn't qualify as a bloodbath, but make no mistake about it -- it was the worst day the broad-based S&P 500 (SNPINDEX:^GSPC) has seen in quite some time.
The primary culprit that caused the markets to dive precipitously throughout the day was the release of January's ISM report, which measures manufacturing activity in the U.S. In December, the ISM Index registered robust expansion with a reading of 56.5. This month economists had expected much of the same; instead they got a reading of 51.3, well below estimates. This figure would insinuate a manufacturing sector that's growing much slower than expected and could halt this multiyear stock rally in its footsteps.
Construction spending was another somewhat sore spot despite meeting the Street's estimates. Construction spending in December rose just 0.1% after popping 0.8% in November. Slowing construction growth could weigh on the jobs market and the housing sector if it drops much further.
By days end, the S&P 500 had been absolutely clobbered, finishing lower by 40.70 points (-2.28%) to close at 1,741.89, its lowest close since mid-October. Yet in spite of this huge drop, three stocks still managed to rocket to the upside.
Leading the charge higher was cardiac monitoring device maker BioTelemetry (NASDAQ:BEAT) (formerly CardioBeat) which jumped 22.1% after announcing a patent litigation victory in its case against Mednet Healthcare Technologies. The ruling, as BioTelemetry's press release points out, notes that Mednet infringed on five of BioTelemetry's patents. The outcome resulted in BioTelemetry acquiring Mednet for $16 million, of which $5.5 million was in cash, $0.8 million in common stock, and the assumption of $9.7 million in debt. What's truly notable for BioTelemetry is that Mednet produced more than $25 million in revenue annually, and should be accretive to EBITDA by $4 million to $5 million. I'd call that quite a victory for BioTelemetry shareholders.
Shares of Globalstar (NYSEMKT:GSAT), a satellite-based mobile voice and data communications service company, also shot higher today by 14.8% despite a lack of company-specific news ... today, at least. Last week, however, Globalstar introduced Sat-Fi, its revolutionary new voice and data solution which allows standard mobile Wi-Fi-capable devices to connect to Globalstar's satellite network. The one factor that's really held Globalstar back is accessibility, and the introduction of this merging of standard mobile devices with Globalstar's satellite network should provide a boost to its top-line growth. I will personally be sticking to the sidelines until Globalstar's losses shrink considerably, but I do consider last week's tech solution a big positive and a step in the right direction.
Finally, and moving back to the medical device sector, surgical products developer ArthroCare (UNKNOWN:ARTC.DL) gained 8.2% after rival Smith & Nephew (NYSE:SNN) agreed to acquire the company in a $1.5 billion deal for $48.25 per share in cash. The deal certainly makes sense on paper with ArthroCare and Smith & Nephew both focused on the highly lucrative knee and shoulder repair surgeries. As the baby boomer population ages, one can only imagine the demand for these products is going to rise. ArthroCare actually finished the day higher than its buyout price signaling hope from investors that a competitor will enter the fray with a higher bid. As for me, I'm not convinced that will happen and see Smith & Nephew and ArthroCare as a good fit for one another.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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