Tech stocks edge higher with M&A boost
Tech stocks got a mild boost from Texas Instruments' bid for National Semiconductor. While tech stocks edged up, however, the Dow and S&P fell slightly.
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Stocks ended mixed as tech stocks lost steam despite earlier gains driven by M&A activity, and as stocks bumped up against recent highs.
The S&P 500 fell 0.24 points, or 0.02 percent, to close at 1,332.63, while the tech-heavy Nasdaq rose 2.00 points, or 0.07 percent, to close at 2,791.19.The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Among key S&P 500 sectors, materials, energy gained, while health care and industrials fell.
Minutes from the Federal Reserve's last policy setting meeting released Tuesday afternoon indicated Fed officials had differing views over how long the Fed should maintain an easy monetary policy.
Some economists and strategists believe it's time for the Fed to put the brakes on its monetary stimulus program, or to even raise interest rates, because the economy is growing. Doug Cote, chief market strategist at ING Investment Management, said the economy is expanding, but, he says, "we think the Fed is OK in taking the go-slow approach, because there is so much slack in the economy."
That slack, including high unemployment, means wages are unlikely to go up, "so the Fed is safe in keeping rates low," Cote said.
"We’re in an expanding economy driven by accelerating corporate profits, booming manufacturing, a resurgent consumer and growth from emerging markets," he said. "Because of that, we see equity markets continuing to go higher and they have compelling value right now."
M&A activity drove much of the market action on Tuesday, after Texas Instruments $6.5 billion cash bid for National Semiconductor appeared to lift tech stocks across the board. National Semiconductor shares soared more than 70 percent, as several brokerages raised their ratings and price targets on the stock. Meanwhile, Citigroup raised its price target on Texas Instruments to $42 a share from $39.
"We’ve been watching a lot of the tech stocks, they are obviously acting pretty well," said Peter Costa, president, Empire Executions, who said he was invested in both companies.
Otherwise, Costa added, the market has been making incremental moves amid "anemic" volume. "It's trying to find a direction and it hasn’t found it yet," Costa said.
Volume on the consolidated tape of the New York Stock Exchange was only 3.7 million shares, while 830 million changed hands on the NYSE floor.
Shares of most rival semiconductor firms gained amid speculation about further consolidation in the sector. The iShares PHLX SOX Semiconductor Sector Index Fund jumped. ON Semiconductor, Micrel and NetLogic Microsystems all advanced.
Intel also rose despite news that Canaccord Genuity lowered its price target for the chip maker to $19 a share from $22, citing a slowdown in the production of personal computers in the second quarter.