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Midday Market Update

Stocks Fall Ahead of Fed Minutes; Data, M&A Eyed

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U.S. Market    
Stocks were lower at midday with data and earnings making headlines along with corporate merger news. Investors will also be watching for any signals of policy measures in the Federal Open Market Committee's January meeting minutes, scheduled for release this afternoon.  

U.S. housing starts dropped by 8.5% last month, worse than expected and countering a double-digit gain in December, as multifamily construction projects, such as apartment complexes, fell by 26.1%. That said, single-family housing starts improved by 0.8% to their best adjusted rate since 2008, and new building permits also rose to their best rate since 2008. 

The producer price index increased by 0.2% in December, the first monthly increase in three months, though not as high as the expected 0.5% rise. Core prices were in line with expectations, rising 0.2%. Food costs led to the overall index increase, but inflationary pressures remained subdued. 

The Dow had lost 0.3% at midday, while the S&P 500 and the Nasdaq were 0.5% and 0.6% lower. 

Stocks on the Move
After reports surfaced earlier this week that office-supplies retailers  OfficeMax (OMX) and  Office Depot (ODP) were in talks to merge, the firms announced Wednesday that they have entered a definitive merger agreement. Both companies agreed to a stock swap, though Office Depot will hold a slight majority of the shares. The deal is expected to close at the end of the year, but executive management is yet to be determined. Meanwhile, Office Depot also reported its fourth-quarter results a week earlier than expected, with one-time items sending the firm to a loss and a drop in revenue. OfficeMax also posted a quarterly per-share loss and revenue decline. After jumping Tuesday, OfficeMax shares were down by 3.2% at midday, while Office Depot shares had lost 12.4%. Shares of chief competitor  Staples (SPLS) were 3.9% lower, also after sharply gaining Tuesday. 

 Dell (DELL) shares were nearly flat at midday after the firm reported a 31% drop in earnings and an 11% decline in sales. The results were still in the upper portion of the firm's and Wall Street's forecasts. Although the firm still faces myriad headwinds, many shareholders think Dell's recently announced private takeover undervalues the company. 

 DISH Network (DISH) shares were also flat at midday as the firm posted fourth-quarter profit and revenue declines, though it increased its subscriber base year over year. During the current quarter, investors will be watching for progress on the firm's bid for Clearwire (CLWR)

Homebuilder  Toll Brothers (TOL) shares were down by 6.5% at midday as the firm's first-quarter results fell short of expectations despite a 32% gain in revenue and a slight earnings increase. 

Foreign Markets
Asian stocks were higher Wednesday, with the Shanghai Composite gaining 0.6%, the Hang Seng rising by 0.7%, and the Nikkei 225 finishing up by 0.8%. 

Stocks in Europe were mixed as the Paris CAC and the DAX fell by 0.3% and 0.7%, while the FTSE 100 rose by 0.3%. 

Kevin O'Shaughnessy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.