Stocks have largely overlooked this morning's weaker than expected factory report amid increasing optimism on trade and support from the Fed's recent indication that while it may not cut rates again in the near-term it is also a long way from tightening. Commerce Secretary Wilbur Ross reiterated Sunday that good progress was being made on a "phase one" deal with China and also suggested the U.S. may not need to impose auto tariffs on imported vehicles following "good conversations" with EU automakers, priming the market for a good start to a week that will feature another heavy dose of corporate earnings reports.
ECONOMIC EVENTS: In the U.S., factory orders dropped 0.6% in September.
TOP NEWS: McDonald's (MCD) shares have slid 3% after the announcement last night that CEO Steve Easterbrook was let go due to a consensual relationship with an employee that violated the company's rules. While the company's fundamentals are solid, CEO changes "of this magnitude tend to be disruptive," said Piper Jaffray analyst Nicole Miller Regan, who downgraded the stock to Neutral. Taking the other side, analysts at Stephens, Credit Suisse and Barclays recommended buying McDonald's shares amid weakness due to the surprise CEO change.
Shares of Under Armour (UAA) have sunk 17% after the company reduced its revenue outlook for the fiscal year, citing "traffic challenges," and confirmed a federal probe of its accounting practices. On Sunday, The Wall Street Journal reported that both the Justice Department and the Securities and Exchange Commission are examining Under Armour's accounting practices, specifically looking at "whether the sportswear maker shifted sales from quarter to quarter to appear healthier." According to a Journal source, the Justice Department is conducting a criminal inquiry into the matter, and coordinating with civil investigators at the SEC. Under Armour responded to the probes, telling CNBC in a statement that the company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company "firmly believes that its accounting practices and disclosures were appropriate."
In M&A news, Stryker (SYK) announced an agreement to acquire Wright Medical Group (WMGI) for $30.75 per share, or a total equity value of approximately $4B and a total enterprise value of approximately $5.4B. Pattern Energy Group (PEGI), meanwhile, announced an agreement to be bought by Canada Pension Plan Investment Board, or CPPIB, in an all-cash transaction for $26.75 per share, implying an enterprise value of approximately $6.1B, including net debt.
MAJOR MOVERS: Among the noteworthy gainers was Karyopharm (KPTI), which rose 9% after it reported quarterly results and it said it expects topline data from the Phase 3 portion of its SEAL study in 2020.
Also higher were shares of BioNTech (BNTX), which gained 17% after the stock was initiated with a Buy or equivalent rating at Canaccord, JPMorgan, Berenberg, SVB Leerink and UBS as analysts rolled out coverage following last month's initial public offering.
Among the notable losers was Omeros (OMER), which slid 15% after the Centers for Medicare & Medicaid Services announced a final rule, with comment period, that revises the Medicare hospital outpatient prospective payment system and the Medicare ambulatory surgical center payment system for calendar year 2020. As part of its final rule, the CMS stated that the results of a CMS study of cataract procedures performed on Medicare beneficiaries in the OPPS between January 2015 and July 2019 comparing procedures performed with Omidria to procedures performed without Omidria did not demonstrate a significant decrease in fentanyl utilization during or after the cataract surgeries when Omidria was used. Also lower was Insperity (NSP), which fell 34% after reporting quarterly results.
INDEXES: Near midday, the Dow was up 109.06, or 0.40%, to 27,456.42, the Nasdaq was up 43.77, or 0.52%, to 8,430.17, and the S&P 500 was up 13.39, or 0.44%, to 3,080.30.