Tuesday, February 20, 2007

Dow Hits New High amid Profits, M&A

News Article
February 20, 2007

BusinessWeek Logo

Dow Hits New High amid Profits, M&A

Wal-Mart's earnings topped expectations, while Home Depot disappointed. Also in focus: merger news, including a Sirius-XM deal

Stocks finished modestly higher Tuesday, recovering from initial lows, as investors digested mixed earnings news from Wal-Mart (WMT) and Home Depot (HD), along with some takeover deals. The Dow Jones industrial average hit a new all-time closing high.

On Tuesday, the Dow rose 19.47 points, or 0.15%, to a record 12,787.04, after touching a new all-time intraday high of 12,795.85. The broader Standard & Poor's 500 index added 4.15 points, or 0.29%, to 1,459.69. The tech-heavy Nasdaq composite was up 16.73 points, or 0.67%, to 2,513.04.

Last week's record highs put the market on strong technical footing, some analysts say. "These moves are not a sign of a nearing bear market, but a sign we believe, that the equity market is possibly entering a 'new' leg of a bull market," says Mary Ann Bartels, chief U.S. market analyst at Merrill Lynch, in a note to clients.

Other market watchers see less reason for excitement. "Buying has dried up after the market registered its best week since November and a light economic calendar won't be inspirational," says Action Economics.

In earnings news, Wal-Mart beat analysts' expectations with net income rising to $3.9 billion.
However, Home Depot disappointed as weakness in the housing market netted profits of only $925 million in the fourth quarter, a record 28% year-over-year decline for the home-improvement giant.

On the M&A front, Sirius Satellite Radio (SIRI) agreed to merge with XM Satellite Radio (XMSR) in a stock swap deal, including debt, worth about $1.6 billion. Both both stocks rallied on the news.
Florida Rock (FRK) shot higher on news it will be acquired by Vulcan Materials (VMC) in a cash and stock deal valued at approximately $4.6 billion.

Lesco (LSCO) agreed to be acquired by Deere & Co. (DE) for $14.50 per share in cash.

Meanwhile, New River Pharmaceuticals (NRPH) agreed to be acquired by Shire PLC in a $2.6 billion deal, or $64 cash per New River share.

In other news, General Electric (GE) was modestly higher despite news the company will record a $115 million expense (about 1 cent per share) after losing an appeal over asbestos-related payments.
Altria (MO) was slightly lower, showing little reaction to news the U.S. Supreme Court set aside a $79.5 million punitive damages award won against the cigarette maker.

Shares of JetBlue (JBLU) extended their skid after the airline had to cancel over 1,000 flights since last week's ice storm.

SanDisk (SNDK) was higher on news it will cut about 250 jobs to reduce costs.

There were no major economic reports today. Wednesday's CPI report highlights the week's docket, and it is not expected to show much inflation. Tomorrow's calendar also holds a report on U.S. leading indicators and the release of the minutes for the Federal Reserve's Jan. 30-31 policy meeting.

In a speech, Fed Governor Susan Bies voiced concerns about the subprime mortgage market, but said housing demand may be nearing a bottom.

Oil prices skidded, weighing on corresponding shares. In the energy markets, March West Texas Intermediate crude oil futures fell $1.32 to $58.07 a barrel amid warmer weather in the eastern U.S.
European markets finished modestly lower. The FTSE-100 index in London fell 32.1 points, or 0.5%, to 6,412.3. Germany's DAX index edged down 4.17 points, or 0.06%, to 6,982.91. In Paris, the CAC 40 index was down 26.45 points, or 0.46%, to 5,713.45.

Asian markets ended narrowly mixed. In Japan, the Nikkei 225 index edged down 0.97 points, or 0.01%, to 17,939.12. Korea's Kospi index advanced 4.15 points, or 0.29%, to 1,452.96. In Hong Kong, markets were closed after the Hang Seng index on Friday gained 29.49 points, or 0.14%, to 20,567.91.
Treasury Market
Treasury prices drifted higher amid a quiet session for economic data, ahead of Wednesday's CPI data. The 10-year note edged up in price to 99-18/32 for a yield of 4.68%. The 30-year bond rose modestly to 99-16/32 for a yield of 4.78%.

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