I hope you're a good swimmer, because we were absolutely buried with economic data on this last day of April. The end result was a whipsaw effect in the broad-based S&P 500 (SNPINDEX:^GSPC), which left it modestly higher for the session.
We started the morning off with the ADP employment report that showed that 220,000 private-sector jobs were created in April. This was slightly ahead of economists' forecasts, and a solid jump from the 209,000 private-sector jobs added in March. These additions would imply to investors that the jobs market is still strong, and it may mean that the unemployment rate could drop further.
Shortly thereafter we also got our first look at U.S. first-quarter GDP. According to the U.S. Commerce Department, the U.S. economy slowed to a crawl, growing just 0.1% during the quarter. Weather can be blamed for a lot of the economy's woes, but it also serves as a billboard for the Fed to potentially slow the trimming of its QE3 tapering, which would likely excite investors.
On the flipside, the Chicago PMI reading for April was much stronger than expected. Its reading of 63, up from a reading of 55.9 in March, would imply that manufacturing in the middle of the country is expanding rapidly -- and that's good news for those worried that there was a genuine problem with the U.S. economy following our miserly 0.1% growth in the first quarter.
Lastly, the Federal Open Market Committee decided to leave the federal fund rate unchanged at 0.25% (no surprise there), but it did announce the reduction of another $10 billion in its monthly stimulus known as QE3. This free-money program is one of the greatest Catch-22's in that a continued tapering means the economy is strong enough to stand on its own two feet, but a reduction takes away free money that potentially could drive up lending rates.
By day's end, when this data was factored in along with a boatload of earnings reports, the S&P 500 managed to eke out a 5.62 point gain (0.30%), to close at 1,883.95.
Rocketing to the upside and leading all companies higher was Avanir Pharmaceuticals (UNKNOWN:AVNR.DL), which gained 45.6% after announcing midday that it had prevailed in its Nuedexta patent trial. According to its press release, a U.S. District Court in Delaware ruled in favor of Avanir in the company's patent infringement case against Par Pharmaceuticals and Impax Laboratories. The ruling protects Avanir's Nuedexta patents, a therapy used to treat pseudobulbar affect, through 2026, and prevents Par or Impax from bringing a biosimilar to market. Given that Nuedexta is Avanir's only FDA-approved product, today's ruling is certainly big news. With full-year profitability potentially around the corner in 2015 or 2016, I would suggest that biotech-savvy investors add Avanir to their watchlists, now that this cloud of uncertainty has been removed.
Coming in a distant second, though, with no less important news, was East Coast-based electric utility Pepco Holdings (UNKNOWN:POM.DL), which surged 17.4% after rival Exelon (NYSE:EXC) agreed to buy the company for $6.8 billion, or $27.25 per share in cash.
The deal will create the largest electric and gas utility in the Mid-Atlantic, and will greatly increase Exelon's exposure to regulated energy markets to about 65% of revenue from 55% now. Less exposure to wholesale energy fluctuations, and an improved focus on alternative non-nuclear energy generation, makes the deal a perfect fit for both companies in my eyes and the eyes of investors.
Lastly, integrated communications service provider Level 3 Communications (NYSE:LVLT) jumped 16% after reporting better-than-expected first-quarter results earlier this morning. For the quarter, Level 3 reported a revenue increase of 2%, to $1.61 billion, as core network service revenue increase 6.6%, and enterprise core network service revenue rose 11%. More importantly, the company earned $0.47 per share on a diluted basis with a $140 million improvement in free cash flow compared to a loss of $0.36 per share in the year-ago quarter. By comparison, Wall Street was only looking for a $0.28 per-share profit on $1.59 billion in revenue. While an impressive beat on the surface, I'd encourage investors not to get too carried away with perennial underperformer Level 3 given that it still carries nearly $7.9 billion in long-term debt on its balance sheet.