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.
So much for our short-lived correction! The broad-based S&P 500 (SNPINDEX:^GSPC) used strength from existing earnings reports and new merger and acquisition announcements to push to a fresh record intraday high, but couldn't hold those gains into the close.
Although there was no economic data on the docket today, it will nonetheless be a very busy week with housing price and consumer confidence data tomorrow, new home sale data on Wednesday, initial weekly jobless claims and durable goods orders on Thursday, and the second GDP estimate and Chicago PMI due Friday. Despite this recent rally, housing data weakness is perhaps the only factor that has held the market back. With more housing data expected over the next two days we may discover that our new highs will be fleeting.
Today, though, a strong push from insurers following a favorable release of future Medicare Advantage rates by the Department of Health and Human Services, and a handful of earnings beats, helped jump-start the S&P 500 to a gain of 11.36 points (0.62%) to close at 1,847.61, less than one point from a new record closing high.
Leading the charge to the upside was the duo of radio-frequency solutions specialists TriQuint Semiconductor (UNKNOWN:TQNT.DL) and RF Micro Devices (UNKNOWN:RFMD.DL), which announced a merger of equals before the opening bell this morning. Under the deal, TriQuint shareholders will receive 1.675 shares of the newly created company for each share of TriQuint they hold, while RF Micro Devices shareholders will receive a one-for-one share swap. Upon completion of the merger, a one-for-four reverse stock split will commence that will result in approximately 145 million outstanding shares remaining.
The deal itself will create a company with more than $2 billion in annual revenue and result in $150 million in cost savings, which is great news for two companies that were threatened with obsolescence in the wake of Qualcomm's rapid technological advancements. Most importantly, the deal is anticipated to be accretive to earnings immediately upon completion of the merger. Shares of TriQuint soared 26.1% on word of the deal and RF Micro shares added 21%.
Finally, shares of Trex (NYSE:TREX), a provider of wood and composite material for decks and railing, jumped as much as 20.7% after the company delivered much better than expected fourth-quarter results. For the quarter, Trex announced that sales grew by 38% to $63.8 million as its adjusted earnings per share totaled $0.23, which reversed a year-ago loss of $0.13 per share. This destroyed Wall Street's expectations for just $50.5 million in revenue on $0.06 in EPS. Confusingly, though, Trex is forecasting first-quarter sales of approximately $115 million, which is below Street estimates, but its combined fourth-quarter and first-quarter sales speak to the early stocking trends by businesses this season. Trex also announced a two-for-one stock split and authorized a $50 million share repurchase plan. While it's tough to deny how strong its fourth-quarter results were, on a valuation basis Trex now looks very frothy, especially considering how touchy investors have been when it comes to rising lending rates.
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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