Closing Update: Stocks String Together 3 Straight Wins, Commodities Gain

Sep 8, 2009

-NYSE up 88.9 (1.3%) to 6,726.06.

-DJIA up 56.07 (0.6%) to 9,497.

-S&P 500 up 9 (0.9%) to 1,025.

-Nasdaq up 18.9 (0.9%) to 2,038.

GLOBAL SENTIMENT

Hang Seng up 2.14%

Nikkei up 0.7%

FTSE up 0.32%

UPSIDE MOVERS

(+) GE gets analyst upgrade.

(+) LVS completes pre-IPO financing.

(+) FACT rejects Biogen Idec bid.

(+) COST gets analyst upgrade.

(+) NVMI says stand-alone optical CD system accepted.

(+) HLCS jumped on genetic analysis systems sale.

(+) ITLN sold to Atheros in stock and cash deal.

(+) CYTR to submit revised protocol for Lou Gehrig's disease treatment.

(+) OPXA reports positively on MS treatment.

(+) AMGN gets favorable Barron's coverage.

DOWNSIDE MOVERS

(-) OSIR reports disappointing preliminary Phase 3 trial results for Prochymal.

(-) KFT declines after rejected bid by Cadbury.

(-) AIG gets analyst downgrade.

(-) SFD reports wider loss than Street expected.

MARKET DIRECTION

Stocks finish up just under 1%, in the upper end of the day's range and the third straight gain after volatile trading last week. Investors returned from the Labor Day holiday to a wave of mergers and acquisitions news that may suggest the economy could be picking up.

Overseas, Deutsche Telekom (DT) rose after the company said it was merging its UK mobile phone operations with that of France Telecom SA's to form the UK's largest mobile operator.

There also was a surprise 10.2 billion pound ($16.73 billion) stock-and-cash offer from Kraft (KFT) for Cadbury (CBY). CBY quickly rejected KFT's unsolicited takeover proposal while U.S. investors were out for the Labor Day holiday. But the potential for a drawn-out battle that could dramatically reorder the global candy market has financial markets buzzing, say reports in the Wall Street Journal and elsewhere.

Other deal news, OdysseyRe (ORH) received an unsolicited bid from Fairfax (FFH) to buy the remaining shares of ORH it doesn't already own at $60 in cash per share. Intellon (ITLN) will be bought by Atheros (ATHR) in a $244 million cash and stock deal.

Analyst moves also dominated Tuesday's news. Industrial bellwether GE (GE) was up after the stock was upgraded by JPMorgan to "overweight" from "neutral."

Tech shares were mostly firmer. Morgan Stanley changed its tech sector view this morning, according to a report on MarketWatch. The analyst, in general, is upgrading systems and PC hardware to Attractive from In Line but is downgrading software to In Line vs Attractive.

On the downside, AIG (AIG) fell after the stock was downgraded by Credit Suisse to "underperform" from "neutral." Separately, Chinatrust Financial, a Taiwan-based firm, offered $2.4 bln for AIG's Taiwan Nan Shan Life unit, according to a Reuters report.

Crude oil closes up 4.5% at $71.10 a barrel. Gold closes below $1,000 after hitting 18-month highs. Actively traded December delivery closed up $3.10, or 0.3%, at $999.80 an ounce. Oil and gold rose as the dollar hit a new low for 2009 against the euro and is broadly lower against all major currencies.

In late economic news, July consumer credit fell at 10.4% rate, the biggest decline since the government began keeping records.

Over the weekend, a Group of 20 leadership pledge to continue global economic stimulus is also providing stocks with some underlying support.

Comments

[David White:]

Mergers may just suggest that some companies think they will do better if they take advantage of economies of scale. Some may feel they need to do this to survive. It is not necessarily a sign that the economy is picking up. The almost $22B reduction in consumer credit is also a reduction in the amount of money that is stimulating the economy. Longer term it is likely a good thing. However, short term it may have negative implications with respect to retail sales and perhaps the GDP.

SPY has dragonfly (or hanging man) doji for today on its daily chart. That may signal the end of this short term up trend for the SPY. It's a very bearish indicator.

SPY was up on extremely light volume. 131M shares traded vs. the average of 191M shares. It's a very bearish indicator.

Sep 08 04:41 PM

[whidbey:]

"July consumer credit fell at 10.4% rate, the biggest decline since the government began keeping records."

This is the type of indicator that tells us we are not headed toward a recovery any time soon.

The market can do as it will, but the belief we are heading into a growth in demand is silly. The stimulus and junker car programs were going in July and consumers did not spend; may have paid down some debt. The road to nowhere is long and winding and we have just started. Liquidate the dead banks and start over in banking.

Sep 08 04:52 PM

[enigmaman:]

consumers reduced credit borrowing by 21.6 billion in the month of June, economist predicted the number to be 4 billion so the economic geniuses who tell us what to expect from the future missed by a factor of 5, what else might they have gotten wrong about the economic recovery, for one thing if they are waiting for the consumer to return they will have to wait a lot longer then they expected, multiple by 5 the number of months they had anticipated the return of the consumer and then maybe we will be dealing in reality, this sobering consumer stat has to do something to make the market pause and ask, WHAT!

Sep 08 04:58 PM

[bricki:]

The thing that I find incredible is all the talk about inflation. Consumers aren't borrowing - they are paying down debt which is deflationary. Banks are deleveraging, unemployment is high, asset prices except equities are falling, capacity utilization is horrible...

If we have inflation there is going to have to be a recovery first.

On Sep 08 04:58 PM enigmaman wrote:

> consumers reduced credit borrowing by 21.6 billion in the month of
> June, economist predicted the number to be 4 billion so the economic
> geniuses who tell us what to expect from the future missed by a factor
> of 5, what else might they have gotten wrong about the economic recovery,
> for one thing if they are waiting for the consumer to return they
> will have to wait a lot longer then they expected, multiple by 5
> the number of months they had anticipated the return of the consumer
> and then maybe we will be dealing in reality, this sobering consumer
> stat has to do something to make the market pause and ask, WHAT!

Sep 08 05:16 PM