U.S. stocks were trading mixed on Monday, with markets wary of more bad news on the economic data front while turning a skeptical ear to the Treasury Secretary's proposed plan for increased and comprehensive regulatory oversight of U.S. financial markets.
The Dow Jones Industrial Average gave up initial gains to trade 24.17 points, or 0.20%, lower at 12,192.23. The S&P 500 index edged up 1.94 points, or 0.15%, to 1,317.16. The Nasdaq composite index was up 2.50 points, or 0.11%, at 2,263.68.
On the New York Stock Exchange, 17 stocks were climbing higher for every 11 that were sinking, while on the Nasdaq the ratio was 14-10 positive amid active trading.
Investors were also weighing negative news involving two major U.S. pharmaceutical outfits. Schering-Plough (SGP) shares plunged 26.8% after the company and partner Merck & Co Inc. (MRK) announced that ENHANCE trial results show no statistically significant difference between the two treatment groups on the change in the average carotid artery intima-media thickness at three carotid artery locations. An expert panel says patients should use statin and other proven drugs rather than Vytorin, the cholesterol drug jointly developed by the two drug makers. Cowen cut its rating on Schering-Plough to neutral from outperform. Merck shares were down 16%.
U.S. markets will be listening for details in Treasury Secretary Henry Paulson's speech outlining the overhaul of U.S. bank regulatory operations that would give the Federal Reserve more power, but the plan won't pass this year, S&P MarketScope said. The blueprint reportedly would reduce the oversight role of the Securities and Exchange Commission, which might merge with the more permissive Commodities Futures Trading Commission. But some critics are concerned that the plan won't address the problems around new derivative products, which Paulson expects "market discipline" to control.
The eagerly awaited U.S. Department of Agriculture's planting report shows that U.S. farmers plan to cut corn acreage by 8% to 86 million acres and to boost plantings of soybeans and wheat in response to strong demand and higher prices. Soybean acreage will grow by 18% to more than 74 million acres while farmers will plant 63.8 million acres of wheat, a 6% increase from last year. The report suggests an attempt to alleviate some of the agricultural commodity price pressure and also has implications for supply of ethanol.
Defying recent signs of stabilization in the financial sector, Standard & Poor's downgraded FGIC's credit rating to junk after the close of trading Friday and said the insurance provided by the bond insurer was now effectively worthless. S&P cut FGIC's insurance rating by six notches from A to BB, two steps below investment grade, noting its inability to raise capital or write new business. The move comes close on the heels of Fitch Ratings' downgrade of FGIC's rating to BBB from AA last week.
PMI Group, FGIC's principal owner, has said it isn't considering contributing additional capital to the troubled bond insurer.
U.S. Chicago PMI rebounded 3.7 points to 48.2 in March after falling to 44.5 in February. It was also better than the 46.0 reading that markets had expected. Employment rose to 44.6 after falling to a six-year low of 33.5 the month before. The new orders rose to 53.9 from 48.8, while prices paid climbed to 83.9 from 79.4. While coming in better than expected, the index has been below the 50 point neutral reading for three straight months.
The Chicago survey is the first of a raft of new data that will be pored over for clues about whether the U.S. has entered a recession. The ISM's index of manufacturing activity, due out on Tuesday, and the ISM’s nonmanufacturing gauge, on tap for Thursday, will be watched particularly closely, but Friday's nonfarm payrolls and unemployment rate for March are seen as the most important.
On Wednesday, Fed Chairman Ben Bernanke will testify before the Senate's Joint Economic Committee on the economic outlook.