Microsoft Corporation (MSFT), Nokia Corporation (ADR) (NOK), Verizon Communications Inc. (VZ): Big Deals Hold Back the Dow

Although we don’t believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes — just in case they’re material to our investing thesis.

Two massive corporate deals have the Dow Jones Industrial Average near breakeven for the day despite positive economic news. As of 1:30 p.m. EDT the Dow is down 0.11% to 14,795, while the S&P 500 is up a modest 0.22%.

There were three U.S. economic releases today.

Report Period Result Previous
Markit PMI August 53.1 53.7
ISM PMI August 55.7% 55.4%
Construction spending July 0.6% 0%

The purchasing managers’ indexes from both the Institute for Supply Management and Markit showed that economic activity expanded in August from July. Markit’s PMI showed activity expanding at a slower rate than in July. ISM’s reading showed activity expanding at a slightly faster rate than in July, with the new-orders index up nearly 5 percentage points. The only potentially worrisome sign was a large jump in respondents paying higher prices.

Source: Institute for Supply Management.

Today’s other economic release was construction spending for the month of July. The Department of Commerce reported that construction spending rose 0.6% in July to a seasonally adjusted annual rate of $900 billion. That’s 5% above last year and higher than June’s report of flat construction spending. Analysts had expected only a 0.3% rise.

US Construction Spending Chart

US Construction Spending data by YCharts.

Labor Day deals

The big news over the holiday weekend was that Microsoft Corporation (NASDAQ:MSFT) announced that it will acquire Nokia Corporation (ADR) (NYSE:NOK)‘s mobile business for $7.2 billion. Microsoft Corporation (NASDAQ:MSFT)’s stock is down nearly 6% on the news, while Nokia Corporation (ADR) (NYSE:NOK)’s stock is up 30%. Microsoft said it “aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.” Nokia Corporation (ADR) (NYSE:NOK)’s Steven Elop made a big bet on Microsoft Corporation (NASDAQ:MSFT)’s mobile operating system years ago. Now, as one of the main carriers of the operating system, Nokia will give Microsoft Corporation (NASDAQ:MSFT) a stronger competitive foothold to compete against Apple’s iOS and Google’s Android operating system.

Second, Verizon Communications Inc. (NYSE:VZ)‘s deal for Vodafone Group Plc (ADR) (NASDAQ:VOD)‘s 45% stake in Verizon Wireless was finally officially announced. Verizon Communications Inc. (NYSE:VZ) will pay Vodafone $130 billion — roughly $59 billion in cash and the remainder in stock — for Vodafone’s 45% stake in Verizon Wireless. For Verizon Communications Inc. (NYSE:VZ) shareholders, the company seems to be making a big bet at a time when margins are at five-year highs and everything is going well. Vodafone Group Plc (ADR) (NASDAQ:VOD) shareholders can look forward to a large special dividend and buybacks, with the company committing to return 70% of the deal’s value to shareholders.

The article Big Deals Hold Back the Dow originally appeared on and is written by Dan Dzombak.

Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. He owns shares of Vodafone. The Motley Fool recommends Vodafone. The Motley Fool owns shares of Microsoft.

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