For a second consecutive trading session, the broad-based S&P 500 (SNPINDEX:^GSPC) got absolutely rocked.
Despite a lack of critical economic data today, investors took time to take profits as fears continue to build that the winding down of the Federal Reserve's economic stimulus known as QE3 could send growth significantly lower.
QE3 was instituted in order to dually help prop up weakened housing sector and to keep lending rates near historic lows to encourage businesses to borrow and expand, thus adding to the workforce and lowering unemployment. To that end QE3 has been very successful, with GDP growing by a healthy 4.1% in the third quarter and 2.6% in the fourth quarter. However, a scaling back of funds used to purchase long-term Treasuries could reduce bond prices which will increase yields. Higher yields are great for banks and insurers which invest in fixed-income assets, but they're terrible news for John and Jane Q. Public who have debt or are looking to purchase a home, as well as businesses that are looking to expand.
By day's end, investors digested these concerns and pushed the S&P 500 decisively lower by 20.05 points (-1.08%). The S&P 500's close of 1,845.04 is now 2.4% lower than when it set an all-time high just this past Wednesday.
In spite of market weakness cloud-based marketing and public relations software developer Vocus (UNKNOWN:VOCS.DL) soared 47.1% after agreeing to be acquired by GTCR Valor for $446.5 million in cash, or $18 per share. As noted by management, which voted unanimously for the buyout, GTCR's offer represents a significant premium to Vocus' historic average share price, so the deal should produce more winners than losers. The deal is expected to close sometime in the second quarter. With shares trading at just $0.08 below their buyout price it might be best to cash in your chips and put that money to work elsewhere.
Clinical-stage biopharmaceutical company Agios Pharmaceuticals (NASDAQ:AGIO) also had a magnificent day, gaining 27.8% after the company announced positive interim phase 1 results for its oral inhibitor of IDH2 mutations in patients with blood cancers. Its experimental drug, AG-221, was shown to be safe and tolerable in its initial patient cohorts, but that's not what got shareholders so excited. Agios also noted that of seven evaluable patients, six had an objective response with three complete clinical remissions. Although dose escalation is still ongoing and this is just an early stage study with a much larger patient pool needed, the simple fact that three blood cancer patients had a complete remission is astounding!
Shareholders should also consider this a win for Celgene, which is partnered with Agios on developing AG-221. Celgene hasn't been shy about spreading around its cash flow to find the next home run drug. Given today's early data, AG-221 should certainly be on that home run radar.
Finally, embattled pharmaceutical company Questcor Pharmaceuticals (UNKNOWN:QCOR.DL) rose 18.7% before the opening bell after announcing that it was being acquired by Mallinckrodt (NYSE:MNK) for approximately $5.6 billion. According to the press release, shareholders of the Acthar Gel manufacturer, which is approved for use in 19 different autoimmune and inflammatory disease indications, will receive $30 per share in cash and 0.897 shares of Mallinckrodt. In addition Mallickrodt will purchase all of Questctor's unexpired options. While pessimists in this highly short-sold stock got burnt badly today, they haven't given up hope – and with good reason. Neither company's shareholders have approved the deal yet, so it could still get voted down; and the gray cloud that is the ongoing FDA investigation into Questcor's marketing practices of Acthar Gel could still stymie the buyout. With considerable downside and limited arbitrage upside I would suggest you pass on Questcor.