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The DJIA index dropped 82 points on Friday after the U.S. government announced a downward revision of fourth-quarter GDP. Despite the decline, the DJIA index had its best monthly gain since January 2013. Monthly gains were 5.5% for the S&P 500 – the biggest since October 2011 – and 7.1% for the Nasdaq, the biggest since January 2012.
What to Watch Today: Markets will react to a slew of economic data including updates on U.S. consumer spending, income levels, and construction figures.
Still, the real news in focus today is that China has slashed its interest rate for the second time in three months. The People's Bank of China (PBOC) cut its benchmark interest rates by another 25 basis points to 5.35% on Saturday. Renewed woes on the nation's growth are fueling the central bank's aggressive monetary policy actions.
Here's what else you should know about the DJIA futures – including your "Money Morning Tip of the Day" – to make it a profitable Monday:
- Buffett's Billions: Over the weekend, Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) reported weaker than expected earnings for the fourth quarter. The results coincided with Buffett's 50th annual letter to Berkshire shareholders, which displayed his confidence in the U.S. stock markets, his continued optimism for his firm, and reflections on his lifetime as an investment expert.
- Merger Mania: Shares of Austin, Texas-based Freescale Semiconductor Ltd. (NYSE: FSL) jumped more than 8% this morning on news the chipmaker will be purchased by NXP Semiconductors NV (Nasdaq: NXPI) for $11.8 billion. The deal will create a combined company that will make it the semiconductor industry leader in the auto and industrial markets. Shares of NXPI surged more than 12% on the news. This is the largest merger in the semiconductor industry this year.
- Deal Day: U.S. drug manufacturers GlaxoSmithKline Plc. (NYSE ADR: GSK) and Novartis AG (NYSE ADR: NVS) announced an asset swap worth more than $20 million. The deal will reshape the future of the pharmaceutical giants. GSK will sell its portfolio of cancer drugs to Novartis, and Novartis will purchase GSK's line of vaccines. In addition, the two companies will create a consumer health venture. Meanwhile, in the med-tech sector, Boston Scientific Corp. (NYSE: BSX) announced plans to purchase Endo International Plc.'s (Nasdaq: ENDP) urology portfolio for roughly $1.65 billion.
- Floored by Bad Press: Shares of Lumber Liquidators Holdings Inc. (NYSE: LL) cratered more than 22% in pre-market hours after a report on "60 Minutes" questioned the company's safety record. The report also said LL violated California health standards by selling flooring with unsafe levels of formaldehyde. The CBS Corp. (NYSE: CBS) broadcast said it tested flooring in five states, and nearly all the studied samples contained higher levels of the cancer-causing agent than what is deemed acceptable by health standards.
- The Future of the Net: Tech giant Google Inc. (Nasdaq: GOOG, GOOGL) has won a public auction to own the domain ending in ".app." The company beat rivals like Amazon.com Inc. (Nasdaq: AMZN) with a record $25 million bid through ICANN, a nonprofit organization that oversees the Internet.
- Oil Prices Today: Oil prices slipped this morning on increased weakness in China's manufacturing sector and improving crude output in Libya. April 2015 futures for WTI crude slipped nearly 1.6% to hit $48.94 per barrel. Meanwhile, Brent crude fell 2.1% to hit $61.23 per barrel.
- Earnings Reports: Today, expect earnings results from Cheetah Mobile Inc. (Nasdaq: CMCM), Caesars Entertainment Corp. (NYSE: CZR), JinkoSolar Holding Co. Ltd. (NYSE: JKS), Sotheby's (NYSE: BID), Molycorp Inc. (NYSE: MCP), NutriSystems Inc. (Nasdaq: NTRI), and Atlas Resource Partners LP (NYSE: ARP).
Full U.S. Economic Calendar March 2, 2015.
- Personal Income and Outlays at 8:30 a.m.
- Gallup US Consumer Spending Measure at 8:30 a.m.
- PMI Manufacturing Index at 9:45 a.m.
- ISM Manufacturing Index at 10 a.m.
- Construction Spending at 10 a.m.
- 4-Week Bill Announcement at 11 a.m.
- 3-Month Bill Auction at 11:30 a.m.
- 6-Month Bill Auction at 11:30 a.m.
Money Morning Tip of the Day: Healthcare M&A is soaring, and there's an ETF to buy that lets you collect the profits.
Today's tip comes from Money Morning Tech Expert Michael A. Robinson:
This year has been the best start for global healthcare mergers and acquisitions (M&A) since 2009. Total deal value has soared 124% so far this year, to $35.1 billion.
M&A deals will remain a big driver for the whole healthcare industry. The pickup in M&A will accelerate biotech and pharma stocks way past the overall market.
Since the start of 2014, the S&P 500 Health Care Index has soared 29.2%. The Nasdaq Biotech Index has advanced 48.4%. But the wider Standard & Poor's 500 Index has risen only 14.1%.
The best way to profit from healthcare M&A is by buying shares of the SPDR S&P Pharmaceuticals (NYSE Arca: XPH) exchange-traded fund (ETF).
XPH is composed of some of biopharma's leading firms and a smattering of aggressive small caps. Many companies in the fund's portfolio will likely end up growing through mergers. Or they could become targets themselves.
For instance, XPH holds both Pfizer and Hospira. So, XPH profits from the sale of Hospira stock and, over the long haul, from Pfizer's lower-cost, higher-growth business model.
XPH holds 36 stocks, with an average market cap of $36 billion. It's returned roughly 95% to investors over the last two years. That's more than double the S&P's return of 38% during the period.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.