Stocks Push Higher
Solid third-quarter earnings reports and a smattering of M&A activity fed investors' hopes for an economic recovery. Gannett (GCI) was among the stocks that rose on earnings news Monday. Caterpillar (CAT) rallied on positive analyst comments.
On Monday, the 30-stock Dow Jones industrial average finished higher by 96.28 points, or 0.96%, at 10,092.19, paced by strength in Caterpillar (CAT) and IBM (IBM). The broad Standard & Poor's 500-stock index was up 10.23 points, or 0.94%, at 1,097.91. The tech-heavy Nasdaq composite index added 19.52 points, or 0.91%, to 2,176.32.
The basic materials, consumer services, gas and oil, and industrials sectors led the market higher.
Treasuries rose. The dollar index fell. Gold futures rallied. Crude oil futures hit a 12-month high.
European stocks advanced, with benchmark equity indexes up 1.76% in London, 1.69% in Paris, and 1.90% in Frankfurt.
Asian equity markets finished mixed, with Tokyo stocks falling 0.21%, Hong Kong up 1.23%, and Shanghai climbing 2.07%.
Investors anticipated Apple's (AAPL) fourth-quarter earnings report after the close of trading Monday. The company posted a better-than-expected net profit of $1.82 per share on revenue of $9.87 billion.
In a speech Monday, Federal Reserve Chairman Ben Bernanke noted that the Asian region seems to be leading the global recovery; it came into the crisis with fairly strong fundamentals, and that provided scope for a strong policy response in many countries. He argued for trade openness, saying it's an important source of growth, and added that protectionism should be "strongly resisted."
In a Q&A session after the speech, Bernanke addressed "exit strategies" which the Fed Chairman suggested were "critically important" to maintaining confidence in the U.S. economy and currency. He reemphasized the importance of rectifying global imbalances, warned about asset price bubbles in Asia and noted that foreign-exchange flexibility would help address those bubbles. Bernanke said the financial regulatory system was overwhelmed by capital flows and did not manage them well, while the best way to manage countries holding excess reserves was dealing with global imbalances.
A Barron's piece over the weekend that said the Fed should start raising rates and reducing accommodation created some buzz in credit markets Monday.
Federal investigators are gearing up to file charges against a wider array of insider-trading networks, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said. The pending crackdown, based on at least two years of investigation, targets securities professionals including hedge- fund managers, lawyers and other Wall Street players, the people said, declining to be identified because the cases aren't public. Some probes, like the one that focused on Rajaratnam, rely on wiretaps. Others stem from a secret SEC data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments. SEC spokesman John Nester declined to comment, as did Alejandro Miyar, a spokesman for the Justice Department. According to a Reuters report Monday, Carl Icahn said he offered to underwrite a $6 billion loan to CIT Group and complained that horse-trading between the troubled lender and its largest creditors was harming other bondholders. In a letter to CIT's board, Icahn said the cash-strapped commercial lender is offering certain large bondholders the opportunity to purchase $6 billion in secured loans well below their fair market value. Icahn said the offer comes at the expense of thousands of smaller bondholders who would not have the same opportunity.
The National Association of Home Builders reported its homebuilder sentiment index dipped to 18 in October from 19 in September. Analysts expected the index to climb to 20. The index had been improving since early in the year when it hit an all time low of 8 in January. The present single family sales index dipped to 17 from 18. The future index fell to 27 from 29. The index of prospective buyer traffic fell to 14 from 17. It's the first time since November that all three indexes declined. The real time data could provide some rationale for profit taking in stocks but the market isn't responding.
Among companies in the news Monday, Eaton Corp. (ETN) reported third quarter earnings per share from operations of $1.21, vs. $1.95 EPS one year earlier, on a 26% revenue decline. Wall Street was looking for EPS of $0.92. The company sees 2009 op. EPS of $2.40-$2.50.
Hasbro (HAS) reported third-quarter earnings per share of $0.99, vs. $0.89 EPS one year earlier, on a 1% revenue rise (excluding the impact of foreign currency). The company sees 2009 revenue growth, if its consumer retail takeaway continues to improve in line with recent fourth-quarter trends, along with growth in EPS (including expected dilution from investment in a joint venture with Discovery Communications).
IPCS (IPCS) agreed to be acquired by Sprint Nextel (S) a in deal valued at about $831 million, including assumption of $405 million of net debt, or $24.00 per IPCS share.
CME Group (CME) is putting out feelers to the Chicago Board Options Exchange about a takeover that would value the biggest U.S. stock-options market at as much as $5 billion, according to an article in Crain's Chicago Business.