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Market Update 070319
http://biz.yahoo.com/mu/update.html

4:20 pm : Stocks recouped nearly all of last week's losses Monday as investors embraced a round of encouraging M&A news that added to the belief that stocks are oversold on a short-term basis and may have found a bottom. The Dow, S&P 500 and Nasdaq closed up 1.0%, 1.1% and 0.9%, respectively.

The biggest news item making waves was confirmation that Barclays PLC (BCS 53.43 -0.07) is in "exclusive preliminary discussions" with ABN Amro (ABN 41.36 +5.12) over a potential blockbuster merger. Such a combination would create a banking powerhouse with a market capitalization of roughly $156 bln.

Also helping participants look past recent subprime concerns was a deal involving ServiceMaster's (SVM 15.14 +1.67) decision to go private for $4.7 bln. The 16% premium to Friday's closing stock price renewed enthusiasm for an investment banking group that has been at the heart of our Overweight rating on the Financials sector since September. Morgan Stanley (MS 75.02 +0.61) and Goldman Sachs (GS 202.44 +3.44) acted as financial advisers.

Aside from the all-important Financials sector playing an influential role, M&A news also gave the Health Care sector a boost. Community Health Systems (CYH 34.78 -2.02) confirming it will pay $5.1 bln in cash for Triad Hospitals (TRI 51.95 +2.59) - canceling a $4.5 bln private equity bid - kept other hospital names in play as possible takeover targets.

The Utilities sector was another bright spot for investors following reports that a Blackstone-led group is looking to trump a record-breaking $32 bln bid for TXU Corp. (TXU 64.28 +1.53).

The day's best performing sector today was Energy. Not even a nearly 1% decline in oil prices was enough to attract sellers as bargain hunters, embracing a 2.7% surge in gasoline futures instead, scooped up beaten-down drillers and refiners.

A rally in overseas markets, as a falling yen eased liquidity concerns tied to a potential unwinding of the carry trade, also helped restore optimism among investors also weighing the possibility of policy makers softening their language in this week's Fed policy directive. A more balanced approach to monetary policy Wednesday afternoon and improvement in the interest rate outlook would be welcome news, especially since lowered earnings expectations of late restrict the upside potential for equities.

Volume on the NYSE just barely exceeding its slowest day of the year, and the lack of participation from transports, a leading economic indicator, diminished some of the excitement, however, behind the day's broad-based bounce. BTK 1.3% DJ30 +115.76 DJTA +0.3% DJUA +1.2% NASDAQ +21.75 SOX -0.6% SP500 +15.11 XOI +1.7% NASDAQ Dec/Adv/Vol 1024/2036/1.69 bln NYSE Dec/Adv/Vol 816/2458/1.37 bln

3:30 pm : The indices are slipping from their afternoon highs but not nearly enough to make a significant change in the standings. As can be expected heading into a two-day FOMC meeting, some investors have felt compelled to lock in a portion of today's surprise gains.

However, just as below average volume has lent less credibility behind today's broad-based bounce, with the NYSE not surpassing 1.0 bln shares until around 3:00 ET, so too has the recent attempt to consolidate gains been met with little conviction, leaving room for buyers to get in the last word and close the indices sharply higher on the day.DJ30 +99.34 NASDAQ +15.33 SP500 +12.58 NASDAQ Dec/Adv/Vol 1098/1918/1.38 bln NYSE Dec/Adv/Vol 819/2422/1.07 bln

3:00 pm : Stocks are holding on to most of their intraday gains as buying remains widespread across most areas. Bonds, however, recently closed lower as their safe-haven status became less appealing compared to the renewed interest in beaten-down equities.

It is worth noting, though, that selling pressure was modest, barely lifting yields across the curve, and that weakness in Treasuries was also attributed to the Fed possibly softening its bias against inflation, which is bullish for stocks. DJ30 +112.21 NASDAQ +21.45 SP500 +14.90 NASDAQ Dec/Adv/Vol 1013/2012/1.26 bln NYSE Dec/Adv/Vol 776/2451/988 mln

2:30 pm : More of the same for stocks as bargain hunters continue to sideline much of the negative sentiment that has weighed on stocks of late. As reflected in the A/D line, advancers outpace decliners on the NYSE by a more than 3-to-1 margin while those on the Nasdaq hold a 2-to-1 edge. The ratio of up to down volumes paints even more of a bullish picture at the Big Board and the Composite.

A 12% decline on the VIX (CBOE Volatility Index) further underscores the renewed optimism to own equities on the heels of last week's pullback. The index spiking lower suggests investors are actively buying call options in anticipation that a short-term bottom has been put in place. DJ30 +104.62 NASDAQ +21.87 SP500 +14.07 NASDAQ Dec/Adv/Vol 926/2090/1.13 bln NYSE Dec/Adv/Vol 711/2502/890 mln

2:00 pm : Even though stocks have been held in a relatively narrow trading range over the last two hours, onward and upward remains the days' driving mantra. Virtually every industry group continues to attract buyers, with particular interest being paid to those areas hit the hardest this year.

Financials sector components like Thrifts & Mortgages and Consumer Finance, two of the worst performers in 2007, are among today's winners. Tires & Rubber, though, is extending its reach as the year's best performer (+42.5%). It ranks as today's best performing S&P industry group (+5.9%) as well after Goodyear Tire & Rubber (GT 29.93 +1.67) was upgraded. DJ30 +115.04 NASDAQ +22.55 SP500 +14.84 NASDAQ Dec/Adv/Vol 937/2047/1.08 bln NYSE Dec/Adv/Vol 729/2443/834 mln

1:30 pm : Stocks continue to post sizable gains even after investors recently discovered that home builders were less optimistic about the housing market earlier this month. At the top of the hour, the National Association of Home Builders/Wells Fargo index of sentiment fell to 36 this month from February's revised reading of 39, a seven-month high.

The NAHB said some builders see the effects of the subprime shakeout on current home sales and are uncertain about the impact tighter mortgage lending standards are having on sales from. Nonetheless, both equity and bond traders are evidently waiting for more quantitative data from the likes of tomorrow's more influential Housing Starts and Building Permits reports, and perhaps new wording in Wednesday's FOMC policy statement, to provide a clearer picture about the state of housing. DJ30 +110.32 NASDAQ +20.55 SP500 +13.92 NASDAQ Dec/Adv/Vol 936/2039/984 mln NYSE Dec/Adv/Vol 708/2459/760 mln

1:00 pm : Today's session on Wall Street is one residents of Pamplona, Spain, could appreciate as traders have been running with the bulls since the start of trading.

The indices are off their best levels of the session, but continue to sport good-sized gains that are being underpinned by broad-based leadership. All ten economic sectors are on positive ground with the all-important financial sector (+1.00%) playing an influential role.

Consistent with a market that has a feel-good vibe to it, small-cap issues are outperforming their larger counterparts.DJ30 +106.39 NASDAQ +20.24 R2K +1.10% SP500 +13.61 NASDAQ Dec/Adv/Vol 890/2064/880 mln NYSE Dec/Adv/Vol 646/2493/677 mln

12:30 pm : Not much has changed as traders make their way through the New York lunch hour. From a sector standpoint, Energy (+1.8%) still leads the charge, but a 1.2% advance in the beat-down Financials sector is providing the foundation for today's rebound.

After tumbling 3.1% last week on the AMEX Securities Broker/Dealer Index, today's round of merger news has renewed enthusiasm for an investment banking group that has been at the heart of our Overweight rating on the Financials sector since September. DJ30 +118.65 NASDAQ +23.29 SP500 +14.79 NASDAQ Dec/Adv/Vol 824/2119/796 mln NYSE Dec/Adv/Vol 592/2541/602 mln

12:00 pm : Stocks are trading at session highs midday as a wave of encouraging M&A news provides some validation that stocks may have found a short-term bottom, prompting a broad-based rally. The Dow, S&P 500 and Nasdaq are up 1.1% on average; all 10 sectors are noticeably higher.

Topping the headlines has been speculation over a potential blockbuster merger between Barclays PLC (BCS 53.10 -0.40) and ABN Amro (ABN 39.76 +3.52). Such a move would create a banking giant with a market cap of more than $150 bln. Community Health Systems (CYH 34.32 -2.48) has confirmed it will pay $54/share in cash for Triad Hospitals (TRI 51.86 +2.50). The 9.4% premium to Triad's closing price on Friday totaling $5.1 bln cancels a $4.5 bln private equity bid.

Proposed private-equity buyouts are also contributing to today's bullish disposition. A Blackstone-led group is reportedly looking to trump a record-breaking $32 bln bid for TXU Corp. (TXU 63.73 +0.98). ServiceMaster (SVM 15.14 +1.67) is soaring 12% to five-year highs after saying it will go private for $4.7 bln, a 16% premium to Friday's closing stock price.

Investors also appear to be pricing in the possibility that this week's Fed policy directive will provide a more balanced approach to monetary policy. Any softening of the statement's wording Wednesday afternoon and improvement in the interest rate outlook will be welcome news, especially since lowered earnings expectations of late restrict the upside potential for equities and will continue to underpin a cautious tone until the market receives more convincing evidence of a possible rate cut.

A rally in overseas markets, as a falling yen eases liquidity concerns tied to a potential unwinding in the carry trade, is again being cited as a reason for underpinning an improved sentiment in the wake of the global sell-off that transpired three weeks ago. BTK +1.6% DJ30 +121.45 DJTA +0.5% DJUA +1.1% DOT +1.2% NASDAQ +27.14 NQ100 +1.2% R2K +1.3% SOX +0.3% SP400 +1.2% SP500 +16.13 XOI +1.3% NASDAQ Dec/Adv/Vol 796/2109/708 mln NYSE Dec/Adv/Vol 596/2510/524 mln

11:30 am : Buyers remain in complete control as the indices hold onto gains across the board. The S&P 500, fueled by solid gains in all 10 economic sectors, and the Nasdaq, are now up at least 1.0%. The latter index is getting a big lift from strong gains in tech belwethers like MSFT (+1.2%), CSCO (+1.0%), AAPL (+1.7%), and ORCL (+1.3%).

On the Dow, 28 0f its 30 components are trading higher, paced by a 2.0% surge in Caterpillar (CAT 64.40 +1.24) and getting an added lift from Exxon Mobil (XOM 70.83 +0.97) as oil prices continue to climb. DJ30 +103.06 NASDAQ +23.04 SP500 +13.36 NASDAQ Dec/Adv/Vol 817/2046/604 mln NYSE Dec/Adv/Vol 601/2481/436 mln

11:00 am : Stocks finally get a bump to the upside as the indices are now trading at session highs. Community Health Systems (CYH) recently confirming it will acquire Triad Hospitals (TRI) for $54/share in cash, or roughly $6.8 bln including debt. That leaves Health Care Facilities (+1.8%), now one of today's top ten performers, under the microscope for more possible takeovers in the space.

With the market more sensitive to signs of economic weakness than inflation, oil's recent turnaround has actually had a positive impact on the broader market with regard to further upside leadership from Energy. The sector is now up 1.4% as 31 of its 33 components are posting gains.

DJ30 +98.22 NASDAQ +23.37 SP500 +13.03 XOI +0.9% NASDAQ Dec/Adv/Vol 847/1899/448 mln NYSE Dec/Adv/Vol 636/2351/316 mln

10:30 am : Investors continue to embrace a fresh round of M&A activity as well as hope for some bullish leanings from Wednesday's Fed policy statement; but the absence of a new catalyst since the market opened leaves stocks vulnerable to some intraday consolidation.

While recent evidence of a slowing economy leaves some participants expecting the Fed to offer a more balanced approach to monetary policy this week, there's still a risk policy makers will err on the side of caution and reiterate their tightening bias. After all, if everyone was fully anticipating more convincing evidence of a possible rate cut sometime soon, the bond market would be shrugging off the resurgence in equities and also be catching a bid. The 10-year note is down 7 ticks to yield 4.57%.DJ30 +68.74 NASDAQ +12.82 SP500 +8.60 NASDAQ Dec/Adv/Vol 888/1806/334 mln NYSE Dec/Adv/Vol 644/2257/228 mln

10:00 am : The indices are off their opening highs but are still holding on to the bulk of early gains. All 10 sectors are in positive territory, led by a 1.0% advance in Energy along with notable gains of at least 0.6% for even more influential areas like Financials, Technology and Industrials.

Of the 147 S&P industry groups, 142 are trading higher, further underscoring the broad-based nature of this morning's renewed enthusiasm for equities and a sense that last week's pullback may signal a short-term bottom. DJ30 +73.38 NASDAQ +14.60 SP500 +9.14 NASDAQ Dec/Adv/Vol 606/1942/172 mln NYSE Dec/Adv/Vol 401/2270/80 mln

09:40 am : As expected, stocks open sharply higher as rally around the fact that low interest rates and ample liquidity continue to feed the M&A pipeline. Reports that Barclays PLC (BCS 53.72 +0.22) is making a blockbuster bid for ABN Amro (ABN 39.47 +3.23) top today's headlines, since such a move would create a banking giant with a market cap of more than $150 bln. Community Health Systems (CYH 36.80 unch) is reportedly ready to top a $4.5 bln private equity bid for Triad Hospitals (TRI 49.36 unch). Shares of both stocks have been halted.

Proposed private-equity buyouts are also contributing to this morning's bullish disposition. A Blackstone-led group is reportedly looking to trump a record-breaking $32 bln bid for TXU Corp. (TXU 64.01 +1.26) while ServiceMaster (SVM 15.12 +1.65), the only confirmed deal of note, has said it will go private at a 16% premium to Friday's closing stock price. DJ30 +86.15 NASDAQ +16.10 SP500 +10.01 NASDAQ Vol 88 mln NYSE Vol 52 mln

09:15 am : S&P futures vs fair value: +7.3. Nasdaq futures vs fair value: +8.3.

09:00 am : S&P futures vs fair value: +7.2. Nasdaq futures vs fair value: +9.2. Futures trade is holding steady above fair value, setting the stage for stocks to stage a respectable rebound. Aside from M&A activity and a rally in overseas markets contributing to the positive disposition, the market also appears to be pricing in the possibility that this week's Fed policy directive will provide a more balanced approach to monetary policy. Any softening of the statement's wording on Wednesday and improvement in the interest rate outlook will be welcome news, especially since lowered earnings expectations of late restrict the upside potential for equities and will continue to underpin a cautious tone until the market receives more convincing evidence of a possible rate cut.

08:30 am : S&P futures vs fair value: +7.3. Nasdaq futures vs fair value: +9.2. Still shaping up to be a strong open for stocks as the futures market continues to trade above fair value. With the mix of data last week doing little to alter economic perceptions, the absence of potentially troubling reports this morning is also helping to pave the way for investors to get back on the buying track following a down week.