Stocks are showing notable weakness during mid-morning trading on Monday, as investors take profits from last week's gains and respond to some mixed corporate news. The reported collapse of merger talks between IBM (IBM) and Sun Microsystems (JAVA) has helped to drive stocks lower, while positive news from Bristol-Myers Squibb (BMY) is doing little to quell the losses.
Sun Microsystems is suffering considerable weakness during morning trading after media reports said that acquisition talks between IBM and Sun have collapsed, putting the deal at risk of failure.
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.
Some of the weakness in the markets also comes in reaction to negative comments from veteran banking analyst Mike Mayo, who recently left Deutsche Bank AG to join Calyon Securities.
Mayo initiated coverage of several banks with either Sell or Underperform ratings, citing concerns about increased loan losses and the belief that government actions might not help as much as expected.
Meanwhile, Bristol-Myers Squibb announced an agreement with Otsuka Pharmaceutical to extend the U.S. portion of the companies' long-standing agreement for the development and commercialization of Abilify, or aripiprazole, from the currently scheduled end date of November 2012 until the expected loss of exclusivity in April 2015.
In other news, during a speech in Prague over the weekend, President Barack Obama said that the U.S. intends to lead the effort to rid the world of nuclear weapons and condemned a North Korean test launch earlier in the day as provocative.
Obama's first public speech in Europe since his inauguration in January came hours after Pyongyang launched a long-range rocket over the Pacific, defying appeals from the international community to back off its earlier announced launch plans.
Obama described the North Korean rocket launch on Sunday as a provocative act and urged Pyongyang to refrain from further provocative actions.
Speaking at the foot of Prague Castle, Obama pledged to pursue the peace and security of a world without nuclear weapons.
After a failed recovery attempt, the major averages have moved back to the downside in recent trading, falling to new lows for the session. The Dow is currently down 104.90 at 7,912.69, the Nasdaq is down 35.48 at 1,586.39 and the S&P 500 is down 14.87 at 827.63.
Most of the major sectors have come under pressure, contributing to the weakness in the broader markets. Stocks in the computer hardware sector are showing some of the worst performances.
The weakness in the sector immediately follows the disappointing news from IBM and Sun Microsystems. With the weakness in the sector, the Amex Computer Hardware Index is down 6.3 percent, pulling back well off of the six-month closing high it set in the previous session.
Gold stocks are also turning in some of the worst performances of the day, driving the Amex Gold Bugs Index down 5.6 percent. The weakness in the sector comes as the price of gold falls $26 to $871.30 an ounce.
Banking, railroad, and semiconductor stocks are also posting notable losses. The Dow Jones Banks Index is down 4.1 percent, while the Dow Jones Railroads Index and the Philadelphia Semiconductor Sector Index have dropped 3.6 percent and 4.1 percent, respectively.
At the other end of the spectrum, health insurance and airline stocks are bucking the downtrend. The Morgan Stanley Healthcare Payor Index is up 2.9 percent, while the Amex Airline Index is currently posting a 2.7 percent gain.
Stocks Driven By Analyst Comments
Sonic (SONC) is suffering a loss of 7.7 percent after being downgraded at Credit Suisse. With the decline, the stock has pulled back well off the nearly three-month closing high it set on Friday.
The stock was downgraded to Underperform from Neutral, as analysts believe that near-term expectations are too optimistic and the share price has gotten ahead of fundamentals.
Additionally, Dreamworks (DWA) is suffering a loss of 10 percent after being downgraded to Neutral from Buy at Pali. The downgrade came as analysts see the box office for Monsters vs. Aliens as not being strong enough to offset lower DVD sales.
Meanwhile, Wynn Resorts (WYNN) was upgraded at UBS to Buy from Neutral and its price target was increased to $33 from $28. The upgrade came on the back of raising Macau estimates due to better than expected first quarter results and has lifted the stock 6.2 percent on the day.
In overseas trading, stock markets across the Asia-Pacific region ended the day higher, unfazed by news of the rocket launch by North Korea on Sunday. Japan's benchmark Nikkei 225 Index ended the day up 1.2 percent.
On the other hand, the major European markets are currently seeing considerable weakness. The U.K.'s FTSE 100 Index is down 0.8 percent, while the French CAC 40 Index and the German DAX Index are down 1.7 percent and 1.2 percent, respectively.
In the bond market, treasuries are seeing some strength, although they have moved well off their best levels of the day. Subsequently, the yield for the benchmark 10-year note is currently down 2.3 basis points at 2.884 percent.
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