US top stocks end flat but many others chalk record highs

US stocks closed mixed on Monday, as the S&P 500 ended flat while the Dow Jones Industrial Average notched up a third successive record high close and smaller caps posted record highs too

US stocks jump, as Dow, small-caps gain, but S&P 500 drops again
Investors were looking at new horizons in Trump era

US stocks closed mixed on Monday, as the S&P 500 ended flat while the Dow Jones Industrial Average notched up a third successive record high close and smaller caps posted record highs too.

The S&P 500 market bellwether looked almost out of touch with events around it as it closed at 2,164, feeling the pinch of weaker tech stocks that were out of favour with US president-elect Donald Trump, and therefore with investors too.

The S&P 500 gainers were topped by bank Keycorp (NYSE:KEY), up 128.8% to $37.36. Banks were in vogue as expectations of a US rate hike next month rose to 92% on Monday. Read more

Conversely, the Dow notched up an impressive record high close of 18,868, up 0.1% on the day. However, that was well off an intraday record high it scored at 18,934.05.

Smaller stocks put in strong performances too. It was also an irony that those tickers were mostly led by rising tech stocks even if the overall tech-heavy Nasdaq Composite was the market laggard, down 0.3% to 5,218.

The S&P Midcap 400 was up 1.6% at 1,588 – a fresh record high close - and led higher by takeover target Mentor Graphics (NASDAQ:MENT), up 18.3% to $36.29.

The S&P Smallcap 600 closed up 1.4% at 793, a fresh record high close. It too managed an intraday record high of 799. The ticker was led higher by a stock that would benefit from a largely expected rate hike next month, personal credit finance group Enova International Inc (NYSE:ENVA), up 15.6% to $11.50.

The wider small-cap Russell 2000 index ended up 1.3% at 1,298 – a record high close. No less than 10 stocks clocked up gains of more than 100% and the top riser, more than 4000%.

In Toronto, the TSX Composite ended up 0.3% at 14,598.

Early trading

US shares opened firmer and the Dow Jones Industrial Average and small-cap Russell 2000 and S&P 600 indices all scaled a fresh record high on Monday as investors continued to rotate stock sectors.

The Dow hit 18,934 earlier and was last seen up 0.06% at 18,859 while the Russell 2000 hit 1,306 and was last up 1.1% at 1,296. The S&P Smallcap 600 was up 1.3% at 791 having earlier hit 799.

The S&P 400 index was also powering higher, up 1% at 1578.

Meanwhile, the market bellwether, S&P 500, continued to depress. It was down 0.2% at 2160 having earlier come close to marking a fresh record high.

The markets have displayed a see-saw volatility since the surprise election of Donald Trump as US President last Wednesday.

Trump has promised pro-business policies when he assumes office next year but also has waged war with Silicon Valley. No surprises, the tech-heavy Nasdaq Composite was the biggest faller, down 0.7% at 5200.

Fashion house Michael Kors (NYSE:KORS) extended its losses from last week and was down the most among S&P 500 stocks, by 4.7% to $47.38.

Ironically, it was Nasdaq-listed stocks which led tickers higher.

Leading mid-caps higher was Mentor Graphics (NASDAQ:MENT), up 18.7% to $36.42 after German industrial equipment maker Siemens AG said it has agreed to buy the software maker for $4.5bn, broadening Siemens digital capabilities.

Meanwhile, leading the S&P 600 higher was Digi Intl Inc (NASDAQ:DGII), up 13.7% at $13.25.

Leading the Russell 2000 was one stock on a completely different wavelength. Galena Biopharma In (NASDAQ:GALE) was up a blinding 1,666.7%, or $3.50, to $3.71.

The biopharmaceutical company committed to the development and commercialization of hematology and oncology therapeutics today announced successful data from Galena's GALE-301/GALE-302 clinical program at the Society for Immunotherapy of Cancer Conference 2016 in National Harbor, Maryland.


--- UPDATE ---

Dow Jones Industrial Average index briefly chalks up fresh record high of 18,934.

US stocks are expected to open firm on Monday after last week’s gains by small-caps and rotation among top stock sectors in the wake of Donald Trump’s election victory.

Although certain sectors suffered last week – most prominently tech stocks – while others gained such as pharma and banks the other big rout going on is in fixed income markets as investors seek to get into US assets, especially equities.

The S&P 500 index is indicated opening up 0.3%.

The global bond sell-off is showing no signs of abating as the US wakes up, with the yield on two-year Treasuries popping above 1% for the first time since January, while the yield on 30-year debt has reached the highest level this year.

Interest rate-sensitive two-year Treasury yields above 1% are also pricing in the continued prospect of a Fed rate hike in December. Fed speakers like James Bullard and Stanley Fischer last week did nothing to calm markets fearing a rise in credit costs. Three more Fed official speak late on Monday, Robert Kaplan from Dallas, Jeffrey Lacker from Richmond, and John Williams from San Francisco.

Meanwhile, 30-year US T-Bond yields were above 3%, as fears of rising interest rates were accompanied by expectations of inflationary Trump policies.

Put another way – markets already expected a need for the Fed to hike rates after the US presidential election if Hillary Clinton the status quo candidate, had won the White House race. But with a prospect of fresh and stimulating economic activity plans from Trump’s camp that takes on a new dimension – inflation.

Sluggish economic growth and a shift to fiscal stimulus measures such as those proposed by Trump are bad for global creditworthiness, ratings agency Moody’s warned, as it reported that the proportion of countries with a “negative” credit outlook – set for a possible downgrade - has climbed to its highest level since 2012. Some 26% of countries rated by Moody’s now have a “negative” outlook, up from 17% at the end of last year.

In what was a likely swipe at Trump, the ratings agency added: “any increase in debt to finance current spending that has little lasting benefit to economic growth prospects would be negative”.

Korea’s Samsung Electronics has announced it's taking over Harman International Industries (NYSE:HAR), a US company known for developing connected car systems and audio products.

Samsung is paying about $8bn in cash to do the deal, or $112 per share. That's a 28% premium over Harman's closing share price on Friday. Harman shares were up 26.6% at $110.98 pre-market.

It may be big news on Wall Street, but it is even bigger news in Seoul. The deal marks the biggest-ever overseas acquisition for a South Korean company.

Meanwhile, Kate Spade (NYSE:KATE), the US fashion house, was urged to put itself on sale by New York-based hedge fund Caerus Investors on Monday. Its shares were up 3.7% at $17.24 before the bell.

Shares in Greencore (LON:GNC), the Irish company that supplies half of all pre-packed sandwiches sold in Britain, are having their best day since October 2011 and were up more than 13% in London after it announced a $747.5mln deal that will increase its exposure to the US market.

Greencore is buying US food manufacturer Peacock Foods. It claims the acquisition has the “potential to transform Greencore’s market and channel position in the US and create a strong platform for long-term profitable growth”.

Duke Energy (NYSELDUK) will pay $27 million to settle a lawsuit over its firing of William Johnson in 2012. Johnson had been head of Progress Energy when it was acquired by Duke, and was set to be CEO of the combined company. However, he was fired within hours of the deal's closing. Duke shares were up 0.5% at $75.58 pre-market.

Morgan Stanley upgraded Citigroup (NYSE:C) to "overweight from "equal weight" based on the idea that tax cuts coupled with stronger economic growth under the Trump administration will benefit banks in general, while pointing to Citi as particularly undervalued. Citi shares were up 0.6% at $53.16 pre-market.

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