A fall in crude prices Monday helped ease inflation fears. Hewlett-Packard was reportedly close to a deal to buy EDS
Stocks closed solidly higher Monday, bolstered by a pullback in oil prices and a press report that said Hewlett-Packard (HPQ) was close to a deal to buy Electronic Data Systems (EDS). Shares of EDS jumped nearly 28% before being halted for pending news.
On Monday, the Dow Jones industrial average finished higher by 130.43 points, or 1.02%, at 12,876.31. The broader S&P 500 index added 15.30 points, or 1.10%, to close at 1,403.58. The tech-heavy Nasdaq composite index gained 42.97 points, or 1.76%, to end the session at 2,488.49.
On the New York Stock Exchange, 22 stocks were higher in price for every nine that declined. The ratio on the Nasdaq was 20-9 positive.
Transportation and retail stocks were among biggest beneficiaries of the lower oil prices. Retailers also got a boost from a raised first-quarter earnings forecast by AnnTaylor (ANN), which preceded Wal-Mart’s (WMT) first-quarter report due Tuesday.
Financials rose with the help of better-than expected earnings news from HSBC (HBC) and MBIA (MBI). Another major gainer was Research In Motion (RIMM) after the company unveiled a new Blackberry and new investment
On the downside, Cumulus Media (CMLS) was sharply lower after announcing an investor group's termination of its merger agreement.
Treasuries ended marginally higher in price. Gold fell, while the dollar index was off slightly.
On Monday, oil prices declined after a series of record highs last week due to concerns that high prices will curb demand. Bloomberg News reported a decline China's oil imports in April as crude costs prompted refiners in the world's second-largest energy-consuming country to cut demand. Industrial production in India grew at the slowest pace since 2002, according to government data. Meanwhile, a stronger dollar against the euro is limiting oil's appeal as a currency hedge, Bloomberg said.
On the NYMEX, crude oil for June delivery was $1.73 lower at $124.23 per barrel.
In a speech on the U.S. economic outlook Monday, Chicago Federal Reserve Bank President Charles Evans said monetary policy was accommodative and supportive of growth, with the inflation-adjusted Fed funds rate "close to zero or slightly negative." He sees growth risks skewed to the downside and inflation risks to the upside.
According to a Wall Street Journal report, Hewlett-Packard was close to a deal to acquire EDS for between $12 billion and $13 billion, citing people familiar with the mater. The terms of the deal were not immediately clear but an announcement was expected as early as Tuesday, the Journal sources said.
Research in Motion (RIMM) was trading higher on news that the company, Thomson Reuters, and the Royal Bank of Canada will launch BlackBerry Partners Fund, a $150 million venture capital fund, to invest in mobile applications, services for the BlackBerry platform, and other mobile platforms. The company also introduced the Blackberry Bold Smartphone and signed a deal with Microsoft (MSFT) that will give BlackBerry Smartphone customers easy mobile access to Windows Live Messenger and an enhanced level of integration between Windows Live Hotmail and the BlackBerry platform.
The new batch of economic data starts Tuesday with a reports on import prices, retail sales and business inventories, all of which will be watched closely for further clues to the state the economy. Inflation-watchers are waiting for Wednesday's consumer price data. Jobless claims numbers are released on Thursday, and Friday brings April housing starts and a first look at the May Reuters/University of Michigan Consumer Sentiment index.
Last week brought news of a narrowing U.S. trade deficit and improvement in one measure of consumer sentiment -- the Royal Bank of Canada's Consumer Attitudes and Spending by Household, or CASH, Index, which bounced nearly 10 points in May and reversed a six-month downtrend. But concerns about recession and the ongoing credit crunch are still weighing on the markets.
Among other stocks in the news Monday, AnnTaylor Stores (ANN) shares rose on a higher earnings forecast of 45 to 47 cents per share in the first quarter, excluding a previously announced restructure charge, vs. previous guidance of 35 to 40 cents per share. The retailer cited stronger results at LOFT, better overall expense, and inventory management. It also said that based on preliminary figures, net sales in the first quarter increased 2%, while comparable sales declined 4.3%.
MBIA Inc. (MBI) shares were up after the monoline insurer posted a $13.03 Q1 loss vs. $1.46 in profits a year ago, on a 43% drop in net premiums written. The company notes $3.6 billion in unrealized losses on insured derivatives, and said it received subpoenas or informal inquiries from variety of regulators on variety of subjects, including disclosures made by the company to underwriters, issuers of certain bonds.
Cumulus Media shares fell Monday after the broadcaster entered into an agreement with an investor group led by the company’s chairman, president and CEO Lew Dickey, and an affiliate of Merrill Lynch Global Private Equity, to terminate a merger agreement entered into between Cumulus and the investor group on July 23, 2007. The members of the investor group informed the company that, after exploring possible alternatives, they were unable to agree on terms on which they could proceed with the deal.
Shares of American International Group (AIG) fell after former AIG CEO Maurice Greenberg reportedly sent a letter to the AIG board outlining the company’s problems, and urging postponement of this week's annual meeting. Newswires reported Greenberg saying AIG in 'crisis' and that he's concerned over the deterioration of a great company.
Major European indexes finished higher Monday, though off the best levels of the session. In London, the FTSE 100 index climbed 0.26% to trade at 6,220.60. In Paris, the CAC 40 index rose 0.32% to 4,976.21, and Germany's DAX index was up 0.47% at 7,035.95.
In Asia, Japan's Nikkei 225 gained 0.64% to end at 13,743.36, while Hong Kong's markets were closed for a holiday.
Long-dated Treasuries traded marginally higher Monday as strength in the stock market offset concerns over credit markets. The 10-year note was up 01/32 at 100-28/32 for a yield of 3.77%. The 30-year bond was up 03/32 at 97-22/32 for a yield of 4.52%.