MARKET SNAPSHOT: Stocks Turn Mixed As Takeover Talk Offers Boost

By Victor Reklaitis, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks turned mixed Monday, as buyout chatter helped to offset Japan's weaker-than-forecast second-quarter growth.

The S&P 500 (SPX) was down less than 1 point, or 0.1%, at 1,691, extending its decline of last week, but the Dow Jones Industrial Average(DJI) put aside losses to rise 4 points, or less than 0.1%, to 15,429.

The Dow had been down as much as 0.4% out of the gate. Last week, the S&P 500 shed 1%, and the blue-chip index lost 1.5% to snap a six-week winning streak.

On Monday, IT and telecom stocks were performing best among S&P sectors, as energy and utilities fared worst. Caterpillar Inc.(CAT) and Cisco Systems Inc.(CSCO) did best among Dow components, while Exxon Mobil Corp.(XOM) and Chevron Corp.(CVX) were laggards.

The Nasdaq Composite (RIXF) rose 10 points, or 0.3%, to 3,670, following last week's 0.8% decline.

Japan's disappointing economic report accounted for the negative open, but then takeover talk helped stocks pare losses, said Kim Forrest, senior equity analyst at Fort Pitt Capital Group. She pointed to BlackBerry Ltd. (RIMM) saying it's considering a sale, alongside buyout rumors swirling around U.S. Steel Corp. (X)

"That's sort of making the rounds," Forrest told MarketWatch. "Gains in either are not driven by fundamentals."

BlackBerry, the struggling smartphone maker, was up 5%, while U.S. Steel added 3%.

Forrest suggested stocks are somewhat stretched. Her team is focused on longer-term, value investing, and it's sticking with a year-end price target of 1,625 for the S&P 500. "Stock prices have outperformed the actual results of the companies," she said.

Bruce Bittles, chief investment strategist at R.W. Baird, also said he views the stock market as somewhat extended.

"Over the very near term, we anticipate that the summer rally will resume and could carry into early September," he said in emailed comments Monday. "But the rise in stock values this summer has also introduced more risk in the market. Valuations are stretched."

He added that the strongest support for stocks continues to be Federal Reserve policy, but improving economic conditions are associated with a less stock-market-friendly Fed.

In Japan, the Nikkei 225 shed 0.7% on Monday on news the country's gross domestic product grew by 2.6% in the second quarter, missing forecasts for 3.6%.

"It's a big miss," said Fort Pitt's Forrest. ""That's kind of a cautionary note to the bankers of the world who think they can fix their economies."

Other Asian markets gained ground on Wednesday. The Shanghai Composite and Hong Kong's Hang Seng Index finished 2.4% and 2.1% higher, respectively, after a report that Beijing was "quietly offering financial stimulus" to key cities and provinces to support the local economies.

European stocks dipped on Monday amid the mixed news from Asia.

Apple Inc.(AAPL) advanced 2.5%, providing a lift to the Nasdaq, after a report over the weekend that the next iPhone will debut Sept. 10. Investors also were digesting a price-target cut for the tech giant by Needham analysts.

Gold was up after a major gold-oriented exchange-traded fund logged its first increase in holdings since June. Meanwhile, oil dropped and the dollar advanced.

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