Stocks are continuing to show weakness during early afternoon trading on Monday, as profit taking and reports of a failed merger between Sun Microsystems (JAVA) and IBM (IBM) are driving the broader markets lower.
Sun Microsystems is suffering considerable weakness after media reports said that acquisition talks between IBM and Sun have collapsed, putting the deal at risk of failure. Shares of Sun are currently down 24 percent.
The reports said that Sun's board rejected a formal acquisition offer by IBM on Saturday, sending a notice terminating Sun's deal to hold talks exclusively with IBM. In response, IBM reportedly withdrew its offer to acquire Sun on Sunday.
Additionally, the banking sector has come under pressure after veteran banking analyst Mike Mayo initiated coverage on many banks at Sell or Underperform.
In other news, the U.S. Treasury Department has extended the deadline for applications to its public-private initiative to buy up distressed assets from banks. The deadline has been pushed out two weeks until April 24.
The treasury's program allows fund managers to participate with the government in an initiative aimed at taking distressed assets off the balance sheets of banks. These assets have become nearly impossible to sell since the financial turmoil that set in last year, forcing banks to announce huge write-offs and putting the overall financial system in jeopardy.
Meanwhile, President Barack Obama told Turkish lawmakers Monday that he stood behind their bid to join the European Union. The president also stressed that the U.S. remains a friend to the Muslim world, even as the country fights Islamic terrorism.
Speaking before Turkey's parliament, Obama unequivocally repeated that the U.S. strongly supports Turkey's attempt to join the European Union.
We speak not as members of the EU, but as close friends of both Turkey and Europe, the president said, adding, Turkey is bound to Europe by more than the bridges over the Bosphorous.
The president also used the opportunity to affirm America's friendship with Muslim countries, highlighting his own connection to Islam.
So let me say this as clearly as I can: The United States is not, and will never be, at war with Islam, Obama said.
The major averages have seen some further downside in recent trading, falling to new lows for the session. The Dow is currently down 150.30 at 7,867.29, the Nasdaq is down 39.22 at 1,582.65 and the S&P 500 is down 18.84 at 823.66.
Reflecting broad based weakness in the markets, the vast majority of the major sector indices continue to post notable losses. Gold stocks are posting notable losses amid a steep decline by the price of the precious metal.
With gold for June delivery currently down $24.60 at $872.70 an ounce, the Amex Gold Bugs Index is suffering a loss of 4.7 percent on the day. With the loss, the index is pulling back further off the six-month closing high it set last Wednesday.
Computer hardware and steel stocks are also helping to lead the broader markets lower. The Amex Computer Hardware Index is down 6.5 percent, while the Amex Steel Index is suffering a loss of 5.6 percent.
The weakness in the computer hardware index comes amid the crushing loss being shown by Sun Microsystems after the collapse of the merger.
Railroad, oil services, and housing stocks are also showing noteworthy declines during Monday's session.
At the other end of the spectrum, health insurance stocks are holding onto strong gains in early afternoon trading. The Morgan Stanley Healthcare Payor Index is posting a gain of 1.7 percent.
Stocks In The News
Avocent Corp. (AVCT) is suffering a loss of 8.9 percent after the company cut its first quarter revenue outlook. With the decline, the stock has pulled back well off the nearly two-month closing high it set on Friday.
The company announced that it has lowered its first quarter revenues outlook to a range of $125 to $127 million, from its prior outlook of $138 to $146 million. The company expects first quarter operational earnings between $0.19 and $0.24 per share.
Analysts had expected the company to report earnings of $0.32 per share on revenues of $141.32 million for the first quarter.
Additionally, BorgWarner (BWA) is down 3.6 percent after the company announced that it intends to offer and sell about $275 million in aggregate principal amount of convertible senior notes due 2012.
Meanwhile, SumTotal Systems (SUMT) is posting a 47.8 percent gain following news that Vista Equity Partners Fund III, L.P., a private equity firm, has offered to acquire SumTotal for $3.25 per share in cash in a transaction that values the company's outstanding equity at about $103 million.
In overseas trading, stock markets across the Asia-Pacific region ended the day higher, shrugging off news of the rocket launch by North Korea on Sunday. Japan's benchmark Nikkei 225 Index ended the day up 1.2 percent.
Meanwhile, the major European markets are still suffering notable weakness. The U.K.'s FTSE 100 Index is down 0.9 percent, while the French CAC 40 Index and the German DAX Index are posting losses of 1 percent and 0.8 percent, respectively.
In the bond market, treasuries have shown a lack of direction over the course of the trading day, with the benchmark 10-year note currently nearly unchanged. Subsequently, the yield for the 10-year note is currently down less than a basis point at 2.904 percent.
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