Market Snapshot November 25, 2009, 4:30PM EST

Stocks Gain on Recovery Optimism

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General Dynamics (GD) was up 1.2% after it announced that the U.S. Army TACOM Life Cycle Management Command has awarded a $2.2 billion contract to General Dynamics Land Systems-Canada for 724 Light Armored Vehicles for a foreign military sale. Vehicle deliveries will begin in April 2011.

Diedrich Coffee (DDRX) said its board has determined that the recently revised offer from Green Mountain Coffee Roasters (GMCR) continues to be a superior merger proposal to the terms of an offer from Peet's Coffee & Tea (PEET). Green Mountain has offered to buy all the outstanding shares of Diedrich for $32 per share in cash. Peet's recently proposed to acquire Diedrich for a combination of $19.80 in cash and 0.321 of Peet's stock for each Diedrich share.

Diedrich shares lost 2.0% in Wednesday's session, while Green Mountain fell 0.9% and Peet's gained 2.0%.

In economic news Wednesday, U.S. new home sales rose 6.2% to a 430,000-unit annual pace in October, following a revised 405,000 pace in September (from 402,000). Strength was seen only in the South where sales climbed 23.2%; declines were seen in the West (-5.1%), the Northeast (-5.1%), and the Midwest (-20.0%). The months' supply of unsold homes dropped to 6.7 months (the lowest since December 2006) from 7.4 (revised from 7.5). The median sales price rose to $212,200, from an upwardly revised $210,700 (was $204,800).

U.S. consumer sentiment improved to 67.4 in the final November reading from the University of Michigan survey, following the drop to 66.0 in the preliminary report. The index was 70.6 in October and hit a high for the year t 73.5 in September. The current conditions component remained soft, falling to 68.8 versus the 69.6 preliminary (73.7 October). The future index jumped to 66.5 from the preliminary 63.7 (68.6 October).

U.S. durable goods orders fell 0.6% in October following an upwardly revised 2.0% in Sepember (was 1.4%). Transportation orders clmibed 1.5%, while orders excluding transportation declined 1.3%. Non-defense capital goods orders excluding aircraft declined 2.9%, erasing September's 2.6% gain. Shipments dipped 0.2% following a 1.6% increase in September. Inventories were flat. The inventory-sales ratio was steady at 1.75 (September's 1.77 was revised down).

U.S. initial jobless claims were down 35,000 to 466,000 in the week ended November 21 from a revised 501,000 (was 505,000) the week before. That is the lowest level since the September, 2008 week. Continuing claims declined a large 190,000 to 5,423,000 in the week ended November 14, from a revised 5,613,000 (was 5,611,000) the week before.

"The data are much better than expectations, and should weigh on Treasury yields, and the dollar, and support Wall Street," says Action Economics.

U.S. personal income rose 0.2% in October, and spending increased 0.7%. September's flat income reading was revised up to 0.2%; the 0.5% dip in spending in September was revised lower to -0.6%. Wages and salaries were flat last month and disposable income rose 0.4%. The savings rate slowed to a 4.4% clip from 4.6%. The PCE price index rose 0.3% on the month, and is up 0.2% year-over-year following five months of declines. The core PCE deflator edged up 0.2% in October and accelerated to a 1.4% year-over-year rate vs. 1.3% previously.