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Wall Street Wrap – Abbott and Xerox go Shopping

By Robert Perrego, at 5:16 pm on September 28th, 2009

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

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News

Wall Street Wrap – DELL, AIG and E-Trade make Moves on a Slow Day

By Robert Perrego, at 4:50 pm on September 21st, 2009

As detailed in last Friday’s RakedInSights “Wall Street Wrap,” E-Trade Financial Corp. (NSDQ: ETFC) has been in play with everything from debt for equity swaps, canceled insider selling, debt upgrades and stock upgrades.  Today, on a light volume down day for the market, E-Trade traded up as high as $2.04 or +10.9% and closed at $1.99 on over three times its average daily volume.  E-Trade is in play, and so was American International Group Inc. (NYSE: AIG) on a story that the lawmaker that chairs the Government Reform Committee might make it easier for the insurer to repay its federal obligations.

AIG recently fired up from the low 30’s to the mid 50’s in a matter of days (see past RakedInsights for more details) on a massive short squeeze.  Well, newsflash, this all could be happening again.  As the first squeeze ripped AIG higher on positive company news that caught the short sellers napping, the stock simply traded up too high and I would not be surprised if the shorts got back in sensing a profit opportunity.  This latest news, as AIG is into the government for some $129 billion or so, sounds like a very real positive catalyst for the stock that should send any remaining shorts running for cover.   AIG closed up $8.49 or +21.27% at $48.40.

DELL Inc. (NSDQ: DELL) offered $30 a share cash for Perot Systems Corporation (NYSE: PER), which is a 68% premium to Friday’s closing price.  It seems DELL could be following International Business Machines (NYSE: IBM) and Hewlett Packard (NYSE: HPQ) out of the pure computer hardware business.  Just as HP bought Electronic Data Systems, ironically another company started by Ross Perot, DELL’s acquisition of Perot Systems will diversify their revenue streams, bringing the one time pure personal computer play into the information technology services and business solutions space.

The more predictable and contracted multi-year revenue streams from IT services and business solutions can give a company a higher P/E, and thus a higher stock price, as this stabilization of revenues translates into less risk for the stockholder.

The very large 68% premium bid could be that high as DELL was making sure no one else was going to come in and bid on Perot.  DELL did not want to take the chance of another company entering a bidding war, possibly taking their new strategic direction away from them.  Hit ‘em fast and hard.  DELL closed at $16.01 (-4.07%) and  Perot Systems closed up $11.65 at $29.56 (+65.04%).

The Dow dropped 41.34 points today (-0.42%, 9778.86) and we had a split market with the Nasdaq closing positive (+6.34, +0.36%, 1731.58) on the DELL buy out.  The S&P 500 lost 3.64 points (-0.34%, 1064.66).

The energy sector led the way lower losing 1.01% with finance losing 0.88% and the industrials down 0.73%.  Consumer non-cyclicals were up 0.28%.

Gold opened down double digits as the dollar opened strong today.  New York Spot Gold traded as low as $995.20 an ounce before trading up on mid-day dollar weakness, and was last seen trading at $1,003.10 an ounce (4:20 p.m.).  Oil dropped 3.24% or $2.33 a barrel on the dollar strength, trading at $69.61 a barrel at 4:29 p.m.

Tomorrow we get ICSC-Goldman Store Sales and Redbook reports before the open.  There is a Federal Reserve Open Market Committee meeting on Wednesday and their interest rate decision is expected at 2:15 p.m.  Interest rates are expected to remain unchanged.

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News

Wall Street Wrap – IBM 52 Week High and GE on a Roll

By Robert Perrego, at 4:53 pm on September 16th, 2009

The Market posted a strong rally today closing at 2009 highs for all three major indexes.  Today’s rally was the strongest we have seen in 4 weeks with many 52 week highs in individual stocks including International Business Machines (NYSE: IBM), Google Inc. (NSDQ: GOOG), Apple Inc. (NSDQ: AAPL) and 3M Company (NYSE: MMM).  The dollar traded down to new lows and gold closed at an all time high.

The Dow Jones Industrial Index added 108.30 points (9791.71, +1.11%) and the Nasdaq 100 rose 24.20 (1723.73, +1.42%) with the S&P 500 leading the charge gaining 1.53% and adding 16.13 points to close at 1068.76.  Strength was seen across the board with new 52 week highs in stocks from all sectors of the market.

The strongest sector today was finance jumping 3.78% with energy up 2.74% and consumer cyclicals posting a 1.66% gain.  The super regional banks were strongest within the financials with SunTrust Banks Inc. (NYSE: STI) up 5.93%.  Yesterday, SunTrust CEO James Wells III stated that the banks underlying financial condition is stabilizing and that he wants to repay TARP loans as soon as possible.  The strong showing in consumer cyclicals shows an appetite for risk and return and a positive underlying bullish perception of the market.

The dollar traded lower again and is entering the lowest trading range it has been in since the the summer of 2008.  The PowerShares DB US Dollar Bull ETF (NYSE: UUP) is within 1% of its all time low close and closed at its 52 week low trade today.  Since September 4rth the UUP, which is structured to mirror the value of the dollar, has dropped 2.62%.  New York Spot Gold traded as high as $1,021.80 today and was last seen trading at $1.017.90 an ounce up 1.06%, leaving it less than $17 from its all time high trade.

The most commonly cited reason for strength in gold is the current dollar weakness.  There is speculation that foreign governments and investors are using gold as a hedge against their dollar holdings.  If a foreign investor, be it a hedge fund, mutual fund, government or individual investor, is invested in U.S. stocks to make money on this latest market run, they basically own dollars.  Their investment thesis is assumed to be that by owning gold alongside their stocks, hopefully this can protect them against the losses they will see when they swap dollars back into whatever their home currency is when they sell any stock.

Oil gained $1.58 a barrel trading at $72.36 at 4:45 p.m.

Federal Reserve Chairman Ben Bernanke stated yesterday that the “recession is very likely over”, and he made this statement without mentioning raising interest rates.  This statement may have given a buy signal to money that has been sitting on the sidelines fueling this rally.

General Electric Co. (NYSE: GE) added 6.25% today (+$1.00, $17.00) and has seen its market capitalization increase by over $24 billion in the last three trading days.  IBM traded up 2.06% and closed at $121.82, a 52 week high.  Other tech giants Apple Inc. (+3.83%, +$6.71, $181.87) and Google Inc. (+2.25%, +$10.75, $488.29) both closed at new 52 week highs along with Dow Jones component 3M, which rose 70 cents or 0.93 % finishing up at $75.38.

On the economic calendar we have Housing Starts (600K expected) and Jobless Claims (575K exp.) before the open tomorrow and the Philly Fed Survey at 10 p.m. (8.0 exp.).

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