A participant arrives on his vintage Riley sports car during the British Car Meeting 2014 in the village of Mollis east of Zurich, August 24, 2014.
Stocks rallied as the S&P 500 cracked 2,000 for the first time on Monday, closing just below that milestone level while making another all-time high.
First, the scoreboard:
- Dow: 17,076.87, +75.6, (+0.4%)
- S&P 500: 1,997.92, +9.5, (+0.5%)
- Nasdaq: 4,557.35, +18.8, (+0.4%)
And now, the top stories on Monday:
1. The top story on Monday was the news that Burger King and Canadian coffee and donut chain Tim Horton's are in talks on a merger. The deal, which would be structured as a "tax inversion" with Burger King moving its tax base to Canada, was cheered by investors, as shares of both companies rallied furiously following the news. Burger King shares gained 20%, while shares of Tim Horton's trading in New York were up more than 18%. Greg Valliere of Potomac Research said the deal "throws down the gauntlet, and Treasury will almost certainly have to respond by proposing curbs on interest payment deductions."
2. Markit's flash PMI reading for U.S. service sector activity in August came in at 58.5, better than the 58.0 expected by economists, but down from 60.8 in July. "The U.S. service sector continues to enjoy a strong growth phase, but the latest survey suggests the recovery has lost some momentum since hitting a post-crisis peak in June," Markit's Tim Moore wrote. "Output expanded at the slowest pace for three months in August, while new business growth picked up only slightly from July’s recent low."
3. New home sales fell 2.4% to an annualized rate of 412,000 units in July, missing expectations for a pace of 429,000. June's report, however, was revised up to 422,000. Following the report, Ian Shepherdson at Pantheon Macro said, "In one line: Rising supply and flat sales is slowing price gains; construction needs to slow."
4. The Dallas Federal Reserve's manufacturing index fell to 7.1, missing expectations for a 12.8 reading and down from July 12.7 mark. The report showed that some companies reduced staff and raised prices as a result of the Affordable Care Act. "The Affordable Care Act is such a huge cost increase we must pass it on to our customers or go broke," one metals manufacturing exec said in the survey. "The projected cost increase is more money than we made last year. This increase will put us at an even bigger cost disadvantage versus imports. We will lose business to imports and plan to reduce our workforce accordingly."
5. BOC Aviation, a Singapore-based company owned by the Bank of China, placed an order for 82 Boeing planes worth $8.8 billion at list prices, according to a report from AFP.
6. Deutsche Bank economist Torsten Slok circulated an email on Monday with the subject line, "Buy equities." "I believe the stock market will continue to go up until we get a recession. And we are nowhere near entering a recession," Slok wrote. Slok's view, however, differs from the Deutsche Bank "house view" currently held by David Bianco and the equity strategy team at the firm, which has a year-end price target of 1,850 for the S&P 500.
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