Stocks fell sharply on Monday, Oct. 29, as investors juggled a collection of political and economic risks that along with slowing U.S. corporate earnings could cloud the near-term outlook for risk markets ahead of next week's midterm elections in the United States.
Wall Street's chief concern has appeared to be the weakening outlook for U.S. corporate profits as the mid-point of the third-quarter earnings season is reached and fewer companies are beating analysts' forecasts, while some of the biggest names across a variety of sectors -- from Caterpillar Inc. (CAT) to Amazon.com Inc. (AMZN) -- have issued cautious forecasts for the months ahead.
The Dow Jones Industrial Average ended off 245, or 1% at 24,443, the S&P 500 fell by 0.66%, and the Nasdaq fell 1.6%. All three indexes managed to end the day off their lows. Earnings worries pushed stocks on Friday back into the red for the year after another selloff. Before today, the Dow had declined 6.7% in October and the S&P 500 had fallen 8.8%.
International Business Machines Corp. (IBM) reached a deal to acquire Red Hat Inc. (RHT) in a transaction valued at $34 billion.
IBM will buy Red Hat for $190 a share, a 63% premium to its closing price on Friday, Oct. 26, of $116.68 and will finance the deal with a mixture of cash and debt. Red Hat shares jumped 45% on Monday to $169.56. IBM declined 4.8%.
IBM Shares Slide to Nine-Year Low After $34 Billion Red Hat Cloud DealRed Hat will become a unit of IBM's Hybrid Cloud division. It will be run by Red Hat CEO Jim Whitehurst.
"The acquisition of Red Hat is a game-changer. It changes everything about the cloud market," said IBM CEO Ginni Rometty. "IBM will become the world's No. 1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the full value of the cloud for their businesses."
Other software stocks wavered Monday after rising earlier in the session. Salesforce.com Inc. (CRM) fell 3.3%, Adobe Inc. (ADBE) fell 2.3%. Splunk Inc. (SPLK) ended up 3.6%.
Walmart Inc.'s (WMT) Sam's Club, in an effort to compete with Amazon, will open a store in Dallas that will allow the retailer to test technology before it's implemented in stores. That technology includes a store without cashiers.
Sam's Club Now will be a 32,000-square-foot store, which is a quarter of the size of an average store operated by the retailer, according to Reuters. It will begin testing technology like electronic shelf labels that automatically will update prices and use 700 installed cameras to better manage inventory.
Walmart rose 0.9% to $99.80. Its price target was raised on Monday to $120 from $115 at Cowen.
Sam's Club Skips Checkout Lines in High-Tech Dallas ShopTesla Inc. (TSLA) rose 1.8% after its third-largest shareholder said it would be happy to invest more cash into the company, on top of its already large stake.
"If he [Elon Musk] needs more capital we would be willing to back him," said Nick Thomas, partner and portfolio manager at Baillie Gifford, a Scotland-based asset manager with about 200 billion euros under management. Baillie Gifford holds about 7.72% of Tesla stock.Amazon.com and Salesforce.com are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMZN or CRM? Learn more now.
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