The stock markets in the United States ended the trading session lower on Monday as investors continue to sell off their investments in the technology sectorm particularly in the so-called momentum stocks or the highest gainers in the bull market. Investors are concerned that the valuations have gone too high.
Wes Mills, chief investment officer at Scotia Private Client Group told Bloomberg that the decline of the stock markets today is a “carryover” from the selloff last Friday. According to him, “It’s a risk off move. Markets had risen to the point where people are a little skittish and locking in profits ahead of the earnings season.”
The Nasdaq Composite Index suffered the biggest decline in two months last April 4. The Nasdaq trades at 31.5 times reported earnings of the companies listed in the index, which is almost two times the trading ratio of the S&P at 17 times earnings.
In an interview with Bloomberg, Kevin Caron, a market strategist at Stifel Nicolaus & Co. commented, “It’s just a continuation of momentum. The market, having had a very sharp rally last year is set to consolidate some of those gains, and that’s what we’re seeing here. It’s going to be a tug of war between valuations and data here and out.”
On the other hand, Ryan Detrick, a senior technical strategist at Shaeffer’s Investment Research opined, “If you take a closer look under the hood, things have been deteriorating for a while now.” He noted that over the past month, the tech and small cap stocks are breaking down with blue chips holding tough. “Well, now it looks like the last place bulls were hiding is finally starting to crack,” added Detrick.
Investors will focus their attention on the earnings season this week.
- Dow Jones Industrial Average (DJIA)- 16,246.00 (-1.02%)
- S&P 500- 1,845.07 (-0.07 %)
- NASDAQ- 4,079.75 (-1.16%)
- Russell 2000- 1,137.03 (-1.42%)
- EURO STOXX 50 Price EUR- 3,185.97 (-1.37%)
- FTSE 100 Index- 6,622.84 (-1.09%)
- Deutsche Borse AG German Stock Index DAX- 9,510.85 (-1.91%)
Asia Pacific Markets
- Nikkei 225- 14,808.85 (-1.69%)
- Hong Kong Hang Seng Index- 22,377.15 (-0.59%)
- Shanghai Shenzhen CSI 300 Index- 2,185.47 (+0.95%)
Stocks in Focus
The stock price of Questcor Pharmaceuticals Inc (NASDAQ:QCOR) gained 18.73% to $80.58 per share driven by reports that it will be acquired by Mallinckrodt PLC (NYSE:MNK) for approximately $5.6 billion. Under the terms of the transaction, the shareholders of Questcor will receive $30 per share in cash and 0.897 Mallinckrodt shares.
The combined company will be owned by Mallinkrodt shareholders, which will control 50.5% while the remaining 49.5% will be controlled by Questcor shareholders. The stock price of Mallinckrodt PLC (NYSE:MNK) closed at $60.95 per share, down by 2.51%.
The shares of Vocus, Inc. (NASDAQ:VOCS), a cloud-based software manufacturer, rose 47.13% to $17.92 per share after the company announced that it will be acquired by private equity firm GTCR Valor Merger Sub Inc for $447 million or $18 per share, a 48% premium on its closing price last Friday. The privately equity firm also agreed to buy the Series A convertible stock for Vocus for $77.3 million.
Genworth Financial Inc (NYSE:GNW) fell 4.21% to $17.07 per share today. Last Friday, a law firm representing its institutional investors filed a class action lawsuit against it. The company is among the worst performers in the S&P 500 today.