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Central Bank Meetings Loom Over Stock Market Today

By , Money Morning •

The stock market today sank lower at the open after stimulus expectations fueled a rally Friday.

The U.S. Commerce Department reported Friday that second-quarter gross domestic product (GDP) expanded at a 1.5% rate, which was slightly higher than estimates, but still far too slow to keep up with inflation.

Investors accepted the number as more ammunition for the Fed to make QE3 a reality when the Federal Open Market Committee (FOMC) meets Tuesday and Wednesday. The Dow Jones topped 13,000 for the first time since May.

What comes out of this two-day policy meeting should be an indication of whether or not the Fed will take any further action either now or at Jackson Hole later this month. QE2 was announced at the Jackson Hole meeting in 2010 and many experts think this will be the case again this year.

If no action is taken it will surely upset the markets.

European Central Bank (ECB) president Mario Draghi last week made clear that he will do all he can to prevent a collapse of the euro, and he is not afraid to inject more stimulus into Europe's economy.

Draghi stated, "The ECB is ready to do whatever it takes to preserve the euro."

After the Fed meets the ECB will be in the spotlight, with its Governing Council meeting in Frankfurt on Thursday.

Companies on the Move in the Stock Market Today

Amid a quiet stock market today, here are a few companies making big headlines:

The Shaw Group Inc. (NYSE: SHAW) is today's biggest winner after it was reported that Chicago Bridge & Iron Company NV (NYSE: CBI) will buy The Shaw Group for $3.04 billion in cash and stock.

CB&I said that the deal with Shaw will create one of the world's most complete engineering and construction companies focused on the energy industry.

The Baton Rouge, LA-based Shaw Group provides technology, engineering, procurement, construction, maintenance, fabrication, manufacturing, consulting, remediation and facilities management services to a diverse client base.

CB&I is a Netherlands-based integrated engineering, procurement and construction (EPC) services provider and process technology licensor, delivering solutions to customers primarily in the energy and natural resources industries.

"This is a highly compelling transaction that we believe will create significant value for our shareholders," Philip Asherman, CB&I's president and CEO said in a statement.

The deal came as a surprise since CB&I had earlier indicated it would focus on small acquisition targets this year.

"I don't think anybody expected this," Chase Jacobson, a William Blair & Co. analyst, said in a telephone interview with Bloomberg News. "This is a big change in strategy."

CB&I said it expects the Shaw deal to boost its earnings per share by double-digits in the first year excluding transaction-related costs. Shaw's operations will use the name CB&I Shaw after the deal closes.

The deal still needs shareholder approval, but it certainly won't get any resistance from Shaw investors. The terms of the deal stipulate Shaw shareholders will receive $41 in cash and CB&I stock worth about $5 for each of their Shaw shares.

SHAW stock opened the day up 60% on the news to $43.70, while CBI slipped more than 15%.

Loews Corp. (NYSE: L) before the market opened reported earnings that declined sharply from the previous year due to a one-time charge of $142 million.

The non-cash ceiling test impairment charge occurred because Loews lowered the value of its natural gas and oil properties due to declining prices.

The energy, financial services and hotel conglomerate reported its net income fell to $56 million, or 14 cents per share, for its second quarter ended June 30 compared with $250 million, or 61 cents per share, in the prior-year period.

Total quarterly revenue at Loews was $3.39 billion, down 4.3% from $3.52 billion in the prior-year quarter. Lower net investment income and contract drilling revenues led to the overall decline.

Analysts do expect Loews to have a solid third quarter and end the year strong as EPS estimates for the fiscal year have been raised from $2.94 per share to $3.09 during the last quarter.

Loews owns Diamond Offshore Drilling Inc. (NYSE: DO), HighMount Exploration & Production LLC, CNA Financial Corp. (NYSE: CNA) and Loews Hotels.

Shares of Loews were down 3.5% in early trading.

The Dow Jones today was up 22 points, or 0.17%, and the S&P 500 was up 1.27 points, or 0.09% in early trading.

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