What you need to know…

The S&P 500 Index ($SPX) (SPY) Monday closed up +0.31%, the Dow Jones Industrials Index ($DOWI) (DIA) closed up +0.22%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.74%.

Stock indexes Monday posted modest gains.  An increase in M&A activity boosted the overall market, with Seagen surging more than +10% after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the company.   Also, Focus Financial Partners closed up more than +3% after CD&R said they would purchase the company for $53 a share in a deal valued at more than $7 billion.

Monday's decline in bond yields supported stocks, as the 10-year T-note yield fell -1.7 bp to 3.926%.

Stocks fell back from their best levels after Monday’s U.S. economic news showed the economy remains robust, which may keep the Fed aggressive in tightening monetary policy.  Jan capital goods new orders nondefense ex-aircraft, a proxy for capital spending, unexpectedly rose +0.8% m/m, stronger than expectations of unchanged and the biggest increase in 5 months.  Also, Jan pending home sales rose +8.1% m/m, stronger than expectations of +1.0% m/m and the biggest increase in 2-1/2 years.  Conversely, the Feb Dallas Fed manufacturing outlook level of general business activity fell -5.1 to -13.5, weaker than expectations of -9.3.

Positive corporate news was supportive of the overall market. Union Pacific closed up more than +9% after the company said it would replace CEO Fritz amid pressure from major shareholder Soroban Capital Partners.  Also, Albemarle closed up more than +3% as lithium-production stocks gained after China shut down a lithium production hub after an environmental probe found mining violations.

On the negative side,  Tegna closed down more than -18% after the Federal Communications Commission shelved Standard General’s proposed $5.4 billion buyout of the company. Also, Range Resources closed down more than -8% after Pioneer Natural Resources said it’s “not contemplating “ a deal for the company.  In addition, Lumen Technologies closed down more than -4% after Moody’s Investors Services downgraded the company’s long-term corporate debt rating to B2 from Ba3. 

Overseas stock markets Monday settled mixed.  The Euro Stoxx 50 today closed up +1.66%.  China’s Shanghai Composite stock index closed down -0.28%, and Japan’s Nikkei Stock Index closed down -0.11%. 

Today’s stock movers…

Union Pacific (UNP) closed up more than +9% to lead gainers in the S&P 500 after the company said it would replace CEO Fritz amid pressure from major shareholder Soroban Capital Partners. 

Seagen (SGEN) closed up more than +10% to lead gainers in the Nasdaq 100 after the Wall Street Journal reported that Pfizer is in early-stage talks to acquire the company. 

Albermarle (ALB) closed up more than +3% as lithium-production stocks gained after China shut down a lithium production hub after an environmental probe found mining violations. 

Pioneer National Resources (PXD) closed up more than +3% after Tudor Pickering & Co upgraded the stock to buy from hold.   

Universal Insurance Holdings (UVE) closed up more than +21% after Piper Sandler upgraded the stock to overweight from neutral.

Pulmonx Corporation (LUNG) closed up more than +5% after Wells Fargo Securities upgraded the stock to overweight from equal weight.

Frontier Communications (FYBR) closed up more than +4% after Raymond James upgraded the stock to strong buy from outperform.

Focus Financial Partners (FOCS) closed up more than +3% after CD&R said they would purchase the company for $53 a share in a deal valued at more than $7 billion. 

Dish Network (DISH) closed down more than -8% to lead losers in the S&P 500 after analysts cut their price targets on the stock by an average of 9.2% since the company reported quarterly earnings last Thursday.

Lumen Technologies (LUMN) closed down more than -4% after Moody’s Investors Services downgraded the company’s long-term corporate debt rating to B2 from Ba3. 

Tegna (TGNA) closed down more than -18% after the Federal Communications Commission (FCC) shelved Standard General’s proposed $5.4 billion buyout of the company.  Wells Fargo Securities said the FCC’s move suggests the deal will fall through. 

Range Resources (RRC) closed down more than -8% after Pioneer Natural Resources said it’s “not contemplating “ a deal for the company.

Charles Schwab (SCHW) closed down more than -3% after a judge let an antitrust litigation case go forward that seeks to unwind Schwab’s $26 billion acquisition of TD Ameritrade over claims the transaction reduced rebates and discounts for retail investors.

Viatris (VTRS) closed down more than -2% after reporting Q4 net sales of $3.87 billion, below the consensus of $3.96 billion, and forecasting 2023 free cash flow of $2.3 billion-$2.7 billion, weaker than the consensus of $2.8 billion.

Across the markets…

March 10-year T-notes (ZNH23) on Monday closed up +7 ticks, and the 10-year T-note yield fell by -1.7 bp to 3.926%.  Mar 10-year T-notes Monday settled moderately higher on some short covering.  Month-end portfolio rebalancing by bond fund managers supported T-note prices.  Also, reduced supply concerns are bullish, with no Treasury bond auctions until March 7.  

Higher European government bond yields Monday limited the upside in T-note prices, with the 10-year German bund yield climbing to an 11-year high of 2.593% and the 10-year UK gilt yield climbing to a 4-month high of 3.825%.  Also, stronger-than-expected U.S. economic reports Monday on Jan capital goods new orders and Jan pending home sales weighed on T-notes

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