Dow May Rise On Takeovers And Manufacturing Data

Stock index futures ahead of today’s US manufacturing and construction spending reports suggested that the Dow Jones will open sharply higher this morning.

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LONDON — Stock index futures at 7am ET indicated the Dow Jones Industrial Average (DJINDICES: ^DJI) may open up by 0.70% this morning, while the S&P 500 (SNPINDEX: ^GSPC) may open 0.92% higher.

The CNN Fear & Greed Index remains in ‘extreme fear’ territory, and is set to open at 18 today, down from Friday’s close of 22.

European markets were broadly flat this morning after making strong gains yesterday, when economic reports showed widespread upturns in manufacturing activity across Europe.

Confirmation of Vodafone‘s merger with Verizon Communications also boosted trading volumes yesterday; the $130bn deal will see approximately $84bn of Verizon stock and cash returned to Vodafone shareholders. At 7am ET, the FTSE 100 was down 0.09%, the DAX was down 0.18, and the CAC 40 was down 0.05%.

After yesterday’s eurozone PMIs suggested that a recovery may be in sight, investors will be keen to see if today’s US August Markit PMI, due at 9am ET, shows signs of accelerating growth.

This update will be followed at 10am by the August ISM manufacturing PMI, which is expected to read 53.8, down from 54.4 in July. July’s construction spending report is also due at 10am, and is expected to show that spending rose by 0.3% in July, after falling by 0.6% in June.

Today’s corporate earnings calendar is almost empty, but this week’s takeover news is likely to compensate.

Yesterday, Verizon announced that it will pay $130bn in stock and cash to purchase Vodafone’s 45% stake in Verizon Wireless. Shares in both companies were off this morning, with Vodafone shares down by 3.8% at 7am ET, as investors digested the details of the deal, and Verizon stock was down by 3.5% in pre-market trading.

This morning, Microsoft announced that it will acquire Nokia’s mobile phone business for $7.2bn, in a bid that places it in direct competition with Apple, Google and Samsung in the smartphone arena.

Nokia’s CEO, Stephen Elop, who is a former Microsoft executive, will transfer back to Microsoft as part of the deal. Elop has now become the favourite to replace Microsoft CEO Steve Ballmer when he leaves the firm. Nokia’s share price was up by 41% at the time of writing, but investors seem less sure of the benefits of this deal to Microsoft, whose stock was down by almost 3% in pre-market trading this morning.

Finally, let’s not forget the Dow’s daily movements can add up to some serious long-term gains. Indeed, Warren Buffett recently wrote: “The Dow advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions.

If you, like Buffett, are convinced about the long-term power of the Dow, you should read “5 Stocks To Retire On“. Your long-term wealth could be transformed, even in this uncertain economy. Simply click here now to download this free, no-obligation report.

Roland owns shares in Vodafone but does not own shares in any of the other companies mentioned in this article. The Motley Fool has recommended shares in Vodafone.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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