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Monday, June 30, 2014

STOCKS GO NOWHERE: Here's What You Need To Know

Closing Bell

June 30, 2014

Stocks closed mixed but little changed in the final trading session of the second quarter and the first half of the year.

First, the scoreboard:

Dow: 16,826.60, -25.2, (-0.15%)
S&P 500: 1,960.23, -0.7, (-0.04%)
Nasdaq: 4,408.18, +10.2, (+0.2%)

And now, the top stories of the day:

1) This morning saw four economic data points, headlined by the Chicago Purchasing Manager Index, or PMI, which came in at 62.6. This what slightly below expectations for 63 and down from May's 65.5 reading. Ian Shepherdson of Pantheon Macro chalked up the report to falling orders from Boeing. "The Chicago PMI slipped to 62.6 in June from 65.5 in May, very close to the consensus, 63.0. In recent years the headline Chicago index has been little more than a lagging indicator of movements in orders for Boeing aircraft, and these data do nothing to change that impression. In recent months Boeing orders have fallen, but not by enough materially to depress the Chicago PMI, which should remain in the low 60s through the summer. Aircraft orders have been stronger than the broad manufacturing sector in recent years so the Chicago PMI has tended to run well above the national ISM index, but the gap should somewhat over the next few months because the ISM will enjoy a significant boost from generous seasonals, as it did last year. Overall, manufacturing now looks to be in decent shape.

2) This morning also saw pending home sales for May jump 6.1%, beating expectations for a more modest 1.2% increase. Pantheon Macro's Ian Shepherdson said of the report, "The surge in new home sales in May to a six-year high suggested upside risk for pending home sales but this is better than we expected. New and pending sales both capture transactions at the point contracts are signed and, while they don't move perfectly in line each month, it would have been surprising if pending sales had been weak after the report 18.6% m/m jump in new home sales."

3) The Dallas Fed's latest manufacturing survey jumped to 11.4 in June from 8.0 in May. This also topped economists' expectations for an 8.5 reading. The report's internals also showed stronger employment readings and more optimism regarding future business conditions. From the Dallas Fed: "Labor market indicators reflected stronger employment growth and longer workweeks. The June employment index rebounded to 13.1 after dipping to 2.9 in May. Twenty-one percent of firms reported net hiring compared with 8 percent reporting net layoffs. The hours worked index edged up from 2.8 to 4.7, indicating a slightly stronger rise in hours worked than last month... Expectations regarding future business conditions were more optimistic in June. The index of future general business activity rose 7 points to 18.7, while the index of future company outlook rose 14 points to 33.8, reaching its highest level since 2011."

4) The Institute for Supply Management-Milwaukee's latest survey fell to 60.57 in June from 63.49 in May. Economists were expecting a reading of 60.

5) In corporate news, General Motors announced the recall of 7.6 million more vehicles in the U.S., with the recall including model years from 1997 to 2014. Including vehicles recalled in Canada, the company is recalling more than 8.45 million vehicles, and GM also said it would take a $1.2 billion charge in the second quarter. This charge is up from the $700 million that was previously announced. Shares of GM were halted ahead of the announcement, and closed down about 1%.

6) Shares of wearable camera company GoPro gained more than 13%, adding to the stock's 14% gain on Friday to bring its post-IPO gains to more than 38%. GoPro made its debut on the Nasdaq last Thursday, and after its shares initially priced at $24, shares closed north of $40 today.

7) Today marked the final trading day of the second quarter, as well as the first half of the year, and so far mergers & acquisitions activity is on pace for the strongest year since 2007. According to Goldman Sachs's David Kostin, M&A activity totaled $750 billion through June, and if that annualized pace of $1.5 trillion continues through year-end, it would be the second-busiest year for M&A since 2007. In 2007 there was nearly $1.6 trillion in M&A activity, fueled largely by a leveraged-buyout boom.

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