MarketView for Febuary 24

Summary

Oh, so close and yet so far as the S&P 500 index ended the day less than one point below its closing high on Monday, although it did reach a record intraday high, helped by gains in health insurers' shares and optimism about merger activity. At the same time, the Nasdaq reached a 14-year high, though all three indexes closed off their highs for the session. The Dow Jones Transportation Average, whose components include FedEx and United Parcel Service, rose 0.4 percent.

Humana and UnitedHealth Group ranked among the S&P 500's largest percentage gainers, with Humana's stock ending the day up 10.6 percent to close at $113.69 after it said the government's proposed cuts to the private Medicare program appeared to be less than it had forecast. UnitedHealth shares ended the day up 3 percent at $76.01. Aetna was up 2 percent at $71.80 after giving a 2014 earnings outlook.

Weak economic data has largely been blamed on harsh winter weather, which has kept alive the hypothesis that the economy's recovery remains intact. The latest data indicated that the Chicago Fed National Activity index fell to -0.39 in January from 0.16 in December while financial data firm Markit's preliminary February reading on the services sector fell to 52.7 from 56.7.

In the deal arena, RF Micro Devices has agreed to acquire TriQuint Semiconductor for about $1.6 billion. Men's Wearhouse raised its cash tender offer for rival Jos. A. Bank to $63.50 per share, up from $57.50. Shares of RF Micro shot up 21 percent to $7.03 while TriQuint's stock surged 26.1 percent to $11.64.

Men's Wearhouse ended the day up 7.5 percent to close at $48.51, while Jos. A. Bank's shares were up 9.1 percent at $60.04.

Adding impetus to the Nasdaq was eBay, which chalked up a 3.1 percent gain to close at $56.30 after billionaire investor Carl Icahn again called for the spinoff of eBay's fast-growing PayPal payments business.

Many on the Street are looking ahead to Thursday, when Fed Chair Janet Yellen will speak to the Senate Banking Committee in her semi-annual testimony about monetary policy. Yellen's comments will be scoured for insight into the extent to which bad weather has affected economic activity, as well as for confirmation that the Fed will not make any changes to its schedule for trimming stimulus.

After the bell, shares of Tenet Healthcare fell 3.8 percent to $46.50 following the release of its results.

Approximately 7.1 billion shares changed hands on the major equity exchanges, just above the 7 billion average so far this month, according to data from BATS Global Markets.

Service Sector Slows

Growth in the services sector as well as the pace of hiring slowed in February, financial data firm Markit said on Monday. It was the latest data to suggest an unusually cold winter is dragging on economic activity.

According to Markit its "flash" or preliminary services sector purchasing managers index slipped to 52.7 in February from 56.7 in January. A reading above 50 signals expansion in economic activity.

Service sector employers continued adding staff, but at the slowest pace in almost a year. At 52.0, down from 54.1 in January, the employment component notched its lowest reading since March 2013.

"The unusually severe winter weather undoubtedly looks to have taken its toll on the economy in the first quarter," said Chris Williamson, Markit's chief economist.

A range of economic data has indicated that this Winter’s weather has been a major factor in reducing economic activity, from a slump in home building and sales to factory output.

"However, companies clearly remained in expansion mode, with just over half of all firms expecting activity to rise over the coming year against just 3 percent expecting a decline," Williamson added.

This month's preliminary composite PMI, a weighted average of manufacturing and services indexes that was also reported by Markit on Monday, fell to 53.5 from 56.2 in January. The employment component of that index slipped to 52.4 in February from 53.9 in January, matching its level of November. However, the backlog of work number grew, moving into expansion after having posted a contraction in the previous month.