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BusinessWeek.com
October 9, 2006
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Dow Hits New High Despite North Korea Tests

Pyongyang conducted a nuclear test, flouting international warnings. Deal news was also in focus

Stocks finished modestly higher Monday as the Dow Jones industrial average touched a new intraday record, recovering from early worries sparked by North Korea's underground nuclear test as the energy and materials sectors helped support the broader market. The economic calendar was empty for the Columbus Day holiday.

The Dow Jones inched higher 7.6 points, or 0.06%, to 11,857.81, paced by Caterpillar (CAT), after briefly surpassing Thursday's record 11,866.69 close and setting a new all-time intraday peak of 11,857.81. The broader Standard & Poor's 500 index rose 1.08 points, or 0.08%, to 1,350.66. The tech-heavy Nasdaq composite advanced 11.78 points, or 0.51%, to 2,311.77, helped by Google (GOOG ) on reports of a possible YouTube acquisition.

NYSE breadth was positive, with 20 issues advancing for every 13 declining. Nasdaq breadth was 18-12 positive.

Investors were eyeing the North Korea tests Monday. In the energy markets, November West Texas Intermediate crude oil futures rose 20 cents to $59.96 a barrel amid the North Korea news and reports of imminent OPEC production cuts.

Deal activity was also in focus. Cablevision (CVC) was sharply higher as its controlling Dolan family offered to take the cable TV operator private in a deal valued at $7.9 billion.

Regional banker Mercantile Bankshares (MRBK ) was sharply higher on an agreement to be acquired by PNC Financial Services (PNC ), the holding company for Pennsylvania's largest bank.

In earnings news, Powerwave Technologies (PWAV ) was sharply lower after the wireless gear maker cut its revenue guidance for the third quarter.

Shares of Johnson Controls (JCI ) was higher as the auto parts supplier projected 14% fiscal 2007 growth despite a slow start in the first quarter.

On the analyst front, Advanced Micro Devices (AMD ) was lower despite UBS upgrading the chipmaker's stock from reduce to neutral.

Meanwhile, Citigroup raised its rating on AT&T (T ) from hold to buy while lowering fellow telecom Verizon (VZ ) from hold to sell, citing greater earnings power for AT&T in the next three years.

Elsewhere, Target (TGT) was modestly lower after the discount retailer reportedly sent a letter to major movie studios warning them that movie downloads could hurt Target's DVD sales.

Looking ahead, Alcoa (AA ) kicks off third-quarter earnings season Tuesday, followed by earnings reports from Costco (COST ) and PepsiCo (PEP ) on Thursday.

The week's economic calendar includes a report Friday on retail sales. The docket also holds the Federal Reserve's Beige Book report and the minutes from the Fed's Sept. 20 monetary policy meeting, along with data on September import prices and August international trade.

European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index rose 29.7 points, or 0.49%, to 6,030.9. Germany's DAX index edged down 1.42 points, or 0.02%, to 6,084.4. In Paris, the CAC 40 index crept higher 2.68 points, or 0.05%, to 5,284.74.

Asian markets ended sharply lower on the North Korea news. Japan's Nikkei 225 index was closed for a holiday after it on Friday declined 13.27 points, or 0.08%, to 16,436.06. In Hong Kong, the Hang Seng index slid 228.15 points, or 1.27%, to 17,675.24. Korea's Kospi index tumbled 32.6 points, or 2.41%, to 1,319.4.

Treasury Market

The Treasury market was closed for the Columbus Day holiday. On Friday, the 10-year note ended at a yield of 4.7%.