MarketView for July 29

Summary

The major equity indexes ended the day lower on Monday, as the Street acted cautiously ahead of the upcoming Federal Reserve meeting. The Fed's statement after that meeting could signal when the Fed is going to begin reducing its bond purchases aimed at helping the economic recovery. Those comments will come on Wednesday after a two-day meeting of the Fed's Open Market Committee and it will  be scrutinized in close detail for hints on when the central bank may begin to scale back its massive bond-buying aimed at stimulating the economy.

Monday’s downtrend was led by the energy and financial sectors, with both the S&P energy index and S&P financial index down 0.8 percent. Shares of Southwestern Energy fell 3 percent to $38.14 and shares of Noble Energy were down 2.1 percent, closing at $62.07 following as a decline in natural gas prices.

Several merger announcements helped out the day’s trading activity, along with news of a $1 billion stock repurchase program by Caterpillar that pushed its share price up 1.1 percent to $83.03, making it the day’s key support stock for the Dow Jones Industrial Average. Merger activity could give equities support as big deals show that large investors see value in the market.

Yet, there is concern on the Street that should the jobs numbers, due out on Friday, be better than expected, it would be enough of an economic pickup to prompt an early end to the Fed's bond buying, a program which has helped stocks rally for much of this year. What is being lost in the translation so to speak is that signs of a stronger economy are more important for the market in the long run. The S&P 500 is up 18.2 percent for the year so far.

Meanwhile, Monday's data was less than upbeat. Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high touched in May as rising mortgage rates were starting to dampen home sales.

Looking at the day’s merger activity, Perrigo agreed to buy Irish drug company Elan for $8.6 billion. Elan ended the day up 3.5 percent to close at $15.46. Perrigo was the S&P 500's worst percentage decliner, shedding 6.7 percent to $125.17.

Hudson's Bay said it would acquire luxury retailer Saks for $16 per share. Saks shares rose 4.2 percent to $15.95.

Shares in advertising groups jumped after Publicis and Omnicom said they would merge. The question now is whether the deal will create an opening for rivals to poach defecting clients and potentially trigger more deals. At the same time, Publicis and Omnicom will most likely have to shed some assets in order for their mega deal to win approval from regulators. The merger would combine the No. 2 agency, Omnicom, with the No. 3, Publicis, to create the world's largest agency. The companies have expressed confidence that the transaction will move forward.

Four antitrust enforcers polled by Reuters said they thought the deal would be approved, but require some asset sales to restore competition, while three others were more cautious over the regulatory outcome given the complexity of the deal. Omnicom shares were down 0.6 percent to $64.75 while smaller rival Interpublic Group gained 4.7 percent to close at $16.61.

Among the day's large gainers, shares of CF Industries, the world's second-largest manufacturer of nitrogen fertilizer, rose 11.8 percent to $202.30 after activist hedge fund Third Point LLC said it had acquired a stake.

In earnings news, Loews, the hotel, energy and financial services conglomerate, chalked up a major increase in second-quarter earnings as revenue from its insurance arm, CNA Financial, increased nearly 13 percent. Shares of Loews closed out the trading day up 0.02 percent at $46.06.

After the closing bell, shares of PMC-Sierra were down 8.7 percent at $6.40 following its earnings release.

With results in from more than half of the S&P 500 companies, 67.2 percent are beating analysts' earnings expectations - in line with the 67 percent average beat over the last four quarters. About 56 percent of the companies are beating revenue expectations, more than the 48 percent of revenue beats in the past four earnings seasons, Thomson Reuters data showed.

Approximately 5.2 billion shares changed hands on the three major equity exchanges, a number that was well below the average daily closing volume of about 6.4 billion shares this year.