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Stocks End Flat as Fed Hopes Offset Weak ISM

Monday, 2 Jul 2012 | 5:09 PM ET

Stocks trimmed most of their losses to close narrowly mixed Monday as hopes for stimulus from the Federal Reserve helped limit losses following a disappointing manufacturing report.

“You had the ISM number come in today and it was way worse than anticipated,” said Mike Murphy, founder and managing partner at Rosecliff Capital on CNBC's "Fast Money Halftime Report." “[But] all traders are talking about today are now saying QE3 is back on the table and big Ben (Fed Chairman Ben Bernanke) will come to the rescue.”

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The Dow Jones Industrial Average slipped 8.70 points, or 0.07 percent, to close at 12,871.39. DuPont led the Dow laggards after Jefferies lowered its rating on the company to "hold" from "buy" and cut its price target to $55 from $62.

The S&P 500 added 3.35 points, or 0.25 percent, to end at 1,365.51. The Nasdaq gained 16.18 points, or 0.55 percent, to finish at 2,951.23.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 17.

Among the key S&P sectors, industrials led the laggards, while telecoms climbed.

On the economic front, the U.S. ISM manufacturing index contracted unexpectedlyfor the first time since July 2009, with the index sliding to 49.7 in June from May's 53.5. Economists had expected a reading of 52.0.

Meanwhile, construction spending rose 0.9 percent to an annual rate of $830.0 billion in May, hitting its highest level in nearly 2-1/2 years in May, according to the Commerce Department.

“It’s going to be a dangerous week—we’re going to have potential skeleton crews here [due to the Independence Day holiday on Wednesday],” said Art Cashin, director of floor operations at UBS Financial Services. “We’ve got big stuff going on—we’re going to get final details on Europe and we’re going to shift to employment—initial claims and non-farm payrolls.”

Growing expectations that more measures will follow, including a rate cut by the ECB this week, sent shares higher in Europe, but a disappointing PMI report out of Chinakept gains in check.

Previewing the Second Half of 2012
How will the markets change over the second half of the year and ahead of election season? Sam Stovall, S&P Capital IQ, and Andrew Goldberg, JPMorgan Funds, provide perspective. "Our belief is that we probably could see a better second half, but I wouldn't really say a big rally," says Stovall.

“China is the big question mark. Let’s see if indeed they can get back on track…A lot of that is also going to depend on how quickly orders from the euro zone start to flow back into the Chinese books,” Jack Bouroudjian, CEO of Bull and Bear Partners in Chicago told CNBC.

Barclays Chairman Marcus Agius resignedfollowing the Libor probe into interest-rate fixing that resulted in Barclays paying more than $450 million in fines.

Best Buy advanced to lead the S&P 500 gainers amid ongoing speculation that founder Dick Schulze may take the consumer electronics retailer private.

Apple edged higher after the tech giant settled its iPad trademark dispute with China's Proview Technology for $60 million, according to a Chinese provincial court.

Also among techs, Groupon tumbled after Susquehanna cut its price target on the daily-deal website to $12 from $15.

On the M&A front, Dell announced it will buy Quest Software in a deal worth $2.4 billion, or $28 a share.

Micron Technology jumpedafter the chipmaker said it will buy Japan's ElpidaMemory in a deal valued at $750 million in cash.

EverBank rallied after the financial company said it would acquire GE Capital's Business Property Lending division for $2.51 billion. (GE is the minority shareholder of NBCUniversal.)

And Amylin soared after Bristol-Myers Squibb announced it would buy Amylin for $31 per share or about $5.3 billion in cash. At least three brokerages raised their price target on Amylin.

And German industrial gas firm Linde plans to sell new shares to help fund its $4.6 billion acquisition of Lincare Holdings .

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

TUESDAY: Factory orders, auto sales; NYSE early close
WEDNESDAY: INDEPENDENCE DAY - Bond, equity markets closed
THURSDAY: Weekly mortgage apps, Challenger job-cut report, ADP employment report, ISM non-mfg index, oil inventories, chain-store sales
FRIDAY: Non-farm payrolls

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