MarketView for June 9

Summary

The Dow Jones Industrial Average and the S&P 500 indexes once again ended at record highs again on Monday as more deal news raised enthusiasm for stocks, though Wall Street's fear gauge advanced. It was a fourth straight record closing high for the S&P 500 and a third for the Dow. The gains, though, have been moderate in most recent sessions and volume lighter than average. The Dow set an intraday record high at 16,970.17, while the S&P 500 touched an all-time intraday high at 1,955.55.

The CBOE Volatility Index rebounded after falling on Friday to its lowest level since February 2007. Wall Street's "fear gauge" rose 3.9 percent to end at 11.15. The VIX remains at nearly half of its historical average.

Monday's merger activity prompted investors to buy some stocks. Merck indicated that it had agreed to buy Idenix in a deal valued at about $3.85 billion. In other deal news, Analog Devices said it would acquire Hittite Microwave in a deal valued at $2 billion. Hittite ended the day up 28.6 percent, closing at $77.90. Analog gained 5 percent to $55.31.

Shares of Idenix, which has three drugs in development to treat hepatitis C, was up 229 percent to $23.79 on heavy volume. In contrast, Gilead Sciences, the maker of the market-leading hepatitis C treatment, Sovaldi, fell 4.1 percent to $79. Gilead was the largest drag on the Nasdaq and the S&P 500. Merck, a Dow component, was up 0.2 percent, closing at $57.94.

Tyson Foods prevailed over Pilgrim's Pride in a bidding war over Hillshire Brands, offering to buy the maker of Jimmy Dean sausages for $8.55 billion, including debt. Hillshire rose 5.3 percent to $62.06. Tyson slid 6.5 percent to $37.50.

Late in the session, International Game Technology rose after Reuters reported the slot machine maker is working with Morgan Stanley to explore a sale. The stock was up 14.4 percent to end at $14.31. It was the S&P 500's top percentage gainer.

Apple was the Nasdaq's most-active stock, rising 1.6 percent to $93.70 in heavy volume in the tech titan's first trading session after a seven-for-one stock split.

Approximately 5.4 billion shares changed hands on the major equity exchanges, with the day’s trading volume below the 5.75 billion share average for the last month, according to data from BATS Global Markets.

Fed Official Says Economy Approaching Normal

James Bullard, president of the St. Louis Federal Reserve Bank, said on Monday that the economy, from a macro standpoint, is much closer to a normal state than it has been in five years. He went on to point out that weak labor markets and low inflation are what is keeping accommodative monetary policy in place.

"The FOMC (Federal Open Market Committee) is much closer to its macroeconomic goals than it has been in the past five years," said James Bullard, president of the St. Louis Federal Reserve Bank, speaking at a conference in Palm Beach, Florida.

"The committee now faces a classic challenge concerning the appropriate pace of monetary policy normalization," he said.

Labor markets do not seem to be fully recovered, Bullard said, and inflation is low though moving back to target.

World shares were within touching distance of all-time highs on Monday, spurred on by the potent combination of record low global interest rates and the improving health of major economies. Moreover, the rising stock market, against the backdrop of near-zero interest rates from the Fed, underscored the tone of Bullard's speech on Monday.

He pointed out that despite encouraging signs of growth in the U.S. economy, the fed funds rate remains near zero and the central bank's balance sheet is large and growing.

"How quickly should the Committee move to return monetary policy to normal given improving macroeconomic conditions?" Bullard asked, adding that the issue will garner greater attention as the economy improves in 2014.