Insights

Wall Street Wrap – Abbott and Xerox go Shopping

Merger Monday returned in force today as Abbott Laboratories (NYSE: ABT) put up $6.6 billion cash to buy Solvay SA’s pharmaceutical unit and Xerox Corp. (NYSE: XRX) placed a stock and cash bid for Affiliated Computer Systems (NYSE: ACS) totaling $6.4 billion.  Cisco Systems Inc. (NSDQ: CSCO) caught an upgrade and, with no real bad news today, the market was off to the races.

Abbott currently markets TriCor and Trilipix cholesterol drugs in the United States and pays Solvay royalties, and this acquisition now gives them full global rights to these drugs.  Abbott sells $1.34 billion worth of TriCor/Trilipix and now this acquisition gives them full participation in the lucrative cholesterol drug space.  Abbott gained $1.25 on the day (+2.64%, $48.58) as the market approved of the deal, possibly because the deal is for cash for a proven money making franchise and no dilutive new shares will be used.

Xerox sounds like they are taking a page from the International Business Machines (NYSE: IBM), Hewlett Packard Co. (NYSE: HPQ) and Dell Inc. (NSDQ: DELL)  playbook by expanding into the software and services space and diversifying their business away from producing technical machinery and hardware.  The initial price for ACS was a 33% premium but dropped as Xerox shares lost $1.29 today (-14.45%, $7.68).  Each share of ACS will receive $18.60 per share in cash plus 4.935 Xerox shares.  ACS gained 13.98% on the day (+$1.25, $53.86).

Tech behemoth Cisco Systems got upgraded to ‘overweight’ from ‘equal weight‘ by Barclay’s and jumped 4.37% today (+$0.99, $23.61), further energizing the tech sector.

The Dow Jones Industrial Average gained 124.17 points (+1.28%, 9789.36) and the S&P 500 was up 18.60 points (+1.78%, 1062.98).  The Nasdaq 100 was the percentage gain winner edging out the S&P 500 up 1.79% (+30.44, 1724.59).

Even with the action in tech, finance led the sector race up 3.96% with tech and energy running even both up 2.06%.  Inside the finance sector, the life/health insurance space was strongest gaining 5.42%, with the Principal Financial Group (NYSE: PFG) adding 8.41% (+$2.17, $27.97) even in the face of a Bernstein downgrade.

Gold was up early, but traded off to finish relatively unchanged at $990.00 an ounce (4:40 p.m.) as the dollar rallied mid-day.  Oil gained 82 cents to trade $67.10 at 4:40 p.m.  The dollar index future, the DXY, was up 34 cents to close at 76.99 (+0.44%).

There were no economic releases today, but the week is full with major releases starting with Consumer Confidence tomorrow at 10:00 a.m. (expected 57.0), 2Q first revision of GDP on Wednesday at 8:30 a.m. (exp. -1.2%), Jobless Claims Thursday morning at 8:30 a.m. (exp. 537K) and the Employment Situation on Friday at 8:30 a.m. (exp. -170K, 9.8%).  Besides these headline numbers, there are many other housing, manufacturing and personal finance numbers to fill the week with twists and surprises.

Let’s hope the run up today gives us enough