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From Briefing.com: 6:03PM Swing Trader: OIH, JBLU, SRNA : -- Technical -- A relatively choppy trading session throughout the morning session which turned into a strong uptrend for the afternoon. Market Breadth was mixed on the day. The SPY action still remains under its 20-day ema (118.52) and downtrend off the March 8 high, but majority of sectors and individual stocks continue to look short-term oversold at current levels. It's likely we will continue to chop sideways this week, favoring the trader who "buys near support" and "sells near resistance."...continued

Close Dow +16.84 at 10421.14, S&P +3.20 at 1176.12, Nasdaq +6.26 at 1991.07: Late-day profit taking in oil prices, coupled with some upbeat corporate news, was enough to reverse early nervousness and close the indices to the upside... Crude oil futures ($57.01/bbl -$0.26) had touched an all-time high above $58/bbl amid concerns that a 500K barrel-per-day increase in OPEC output still would not be enough to offset inadequate refining capacity and the growing demand for gasoline heading into the summer driving season...
But consolidation of gains in oil heading into the close of commodities trading - in the absence of earnings and economic data to offer additional influence on market activity - provided just enough of a spark to improve sentiment and help seven of the ten economic sectors close into positive territory... Telecom Services (+1.3%) paced the way following reports that Verizon Communications (VZ 35.60 +0.41) may pull out of its lower $7.6 bln offer for MCI Inc. (MCIP 25.08 -0.21), if MCI's board considers Qwest's (Q 3.79 +0.15) sweetened $9.0 bln deal to be "superior."... Financial (+0.8%), which accounts for about 21% of the S&P, had an even larger impact on overall sentiment...

Reports that mortgage giant Fannie Mae (FNM 51.51 -1.73) may have failed to properly account for the trusts it sets up to issue mortgage-backed securities initially weighed on the sector and countered news that HSBC Holdings (HBC 78.60 -0.02) may be considering a $75 bln bid for Morgan Stanley (MWD 58.31 +1.44)...

But when Morgan Stanley's Board approved the sale of its Discover credit card business - a move that could generate as much as $8-9 bln in proceeds - followed by NY Attorney General Eliot Spitzer saying a "civil resolution" with American International Group (AIG 53.13 +2.18) will "ultimately be achievable," buyers stepped back into the market... Two analyst upgrades on AIG also helped the large insurer erase much of last Friday's 8.0% drubbing, prompted by an expanded probe into AIG's improper accounting practices... Health Care (+0.6%) was also an influential leader to the upside, benefiting from strength in drug Distributors (+2.7%) ahead of Pfizer's (PFE 25.93 -0.22) analyst meeting tomorrow (9:00 ET).. Technology (+0.3%) closed modestly higher, as gains in Hardware and Internet were just enough to offset weakness in every other sub-sector while Consumer Staples, Consumer Discretionary and Utility also closed higher...

Energy (-0.6%), however, closed lower, despite confirmation that ChevronTexaco (CVX 56.90 -2.41) will buy Unocal (UCL 59.61 -4.74) for roughly $18 bln... The deal, widely anticipated by market participants, was priced below last Friday's closing price ($63) on UCL shares, did little to generate much excitement among investors... The Materials (-0.6%) sector was also weak as the dollar strengthened against major currencies...

The greenback extended its gains, hitting a 7-week high against the euro (1.2852) amid inflationary Fed speak and a reduction in the European Commission's 2005 growth outlook (to 1.6% from 2%) that further reiterated that central banks in Europe will likely not raise rates anytime soon... Meanwhile, there was no notable economic reports to sway the Treasury market in either direction, as technical trade and light volume kept bonds mired in relatively tight trading ranges... The benchmark 10-year note was off 2 ticks to yield 4.45%...DJTA +0.6, DJUA +0.2, DOT +0.7, Nasdaq 100 +0.5, Russell 2000 +0.3, SOX -0.4, S&P Midcap 400 +0.1, XOI -1.0, NYSE Adv/Dec 1699/1569, Nasdaq Adv/Dec 1422/1651

10:10AM Altair Nanotechnologies signs agreement with Advanced Battery Technologies (ALTI) 3.95 +0.39: Altair Nanotechnologies and Advanced Battery Technologies (ABAT.OB), a U.S. and Chinese-owned co with factories in Harbin, People's Republic of China, announced today that they have signed a mutually exclusive development agreement for lithium polymer batteries in China. This agreement covers the incorporation of Altair's battery electrode nano-materials into ABAT's existing polymer battery product lines. Terms of the agreement were not disclosed.

9:02AM Gapping Down : UCL -5.6% (to be bought by CVX; premium not as much as investors had thought), RIMM -2.7% (CRN reports that Microsoft's forthcoming Windows Mobile upgrade is designed to be a BlackBerry killer), NTIQ -10% (guides lower), ATPL -8.5%.... Under $3: AAII -13% (says it is likely to file for bankruptcy), IMNR -9% (auditors express a going-concern qualification).

8:55AM Gapping Up : KKD +9.6% (announces $225 mln financing), MWD +3% (speculation that HSBC Holdings is considering a bid for co), AIG +3% (Morgan Stanley upgrade), ENER +4.3% (extends recent momentum), CRIS +14% (announces second major collaboration with Genentech), SIMC +8% (extension of 66% move last week).... Small cap energy stocks are on the move on higher crude prices and the Unocal/CVX merger : BDCO +14%, GEOI +10%, MSSN +9.4%, FUEL +12%, IVAN +3.5%, USEG +3.8%... Under $3: SRXA +38% (announces new order for TRAC), NTOP +9% (co and Motorola expand joint relationship), PPHM +8% (positive clinical data on Tarvacin).

12:31PM Siebel Systems (SEBL) $9.31 -0.15 (-1.6%) Siebel Systems has been up sharply recently, having closed at $8.59 last Monday (March 28). Volume has been up sharply as well, with Thursday's 21.8 million and Friday's 28.0 million shares much higher than the usual 11 million daily volume. At noon, volume is almost 6 million, so higher than usual volume today is also likely. (This is unusual because SEBL has a history of showing much lower volume on Mondays.) Also unusual is much, much higher volume in SEBL options recently. A Reuters article on Thursday evening pointed out the very high daily volume in SEBL May $10 calls and attributed the volume to speculation that Siebel will be acquired soon.

The truly interesting datapoint about SEBL call options, however, is not the daily volume, but the open interest on the May $10 calls. The number now stands at 52,695 May $10 call options outstanding. This number dwarfs the open interest contracts for every other call and put options on SEBL. For example, the April $10 call option has only 9,237 open contracts and the May $7.50 put has 13,500 open interest contracts. The next largest May call options ($7.50 and $12.50) have open interests of just over 3,000 each. Someone is buying May $10 options in big numbers.

The conclusion that Siebel Systems is a possible acquisition candidate is a solid one, whether based upon options activity or an analysis of the maturation of the industry. (We prefer the latter approach.) We have written about why Siebel Systems has value as an acquisition several times in the past six months on the Ahead of the Curve pages.

There are some problems with SEBL as an investment opportunity, using an acquisition premise. The first is the eroding revenue trend and increasing loss of clients (see the Ahead of the Curve column of 26-Oct-04 "Siebel Systems Earnings Review" for more details on the client loss issue).

Somewhat problematic is the slightly high valuation of the stock. Trading at $9.31 with a 2005 consensus estimate of $0.29 EPS puts SEBL at a forward PE of 32, considerably higher than the average forward PE in the industry of around 22-24. The higher valuation is somewhat offset by the fact that Siebel has $2.2 billion in cash, with virtually no debt. With a market cap of $4.8 billion, this means the actual acquisition cost for Siebel's customer base is only $2.6 billion, since the acquirer can view the balance sheet almost like a "rebate" on the purchase price. Cash per share on December 31 was $4.36, or about 47% of the current $9.30 price.

We do think Siebel Systems is a prime acquisition candidate. The issue is "at what price." It would certainly be at a premium to today's levels, but we prefer the candidates with better acquisition premium opportunities (see the seven-part series of Ahead of the Curve columns entitled "Ent. App. SW Acq Candidates, which ran from January 10 through February 8 for those picks and the logic behind their selection.) Also of issue is "when?" Buying May $10 options on SEBL on an acquisition premise and having their acquisition announced on June 1 would be a tough way to be wrong. Nevertheless, whenever option activity picks up to high levels like this on a stock that is a prime acquisition candidate for other reasons, it is usually worthwhile to start watching the stock very closely. - Robert V. Green
12:17PM ChevronTexaco Corp (CVX) 57.52 -1.79: Big deal in the big oils on a day when the price of crude reaches new highs. ChevronTexaco announced it would acquire Unocal Corp (00C) for $18 bln in stock, cash, and debt assumption. The deal values Unocal at $62/share with its shareholders receiving either 1.03 shares of CVX, or $65 in cash for each share held. This deal has been rumored for some time accelerating shares in both companies. However, both stocks are down in the pre-market on a buy the rumor, sell the news trading mentality.

ChevronTexaco is offering 75% stock and 25% cash and will assume $1.6 bln in UCL's debt. CVX expects the deal to be broadly neutral to earnings per share and will only add to earnings on a cash flow basis. The rational behind the deal centers on boosting reserves. It has become increasing difficult, not to mention costly, to increase reserves for these companies. Finding and developing fields in more remote locations across the globe has led E&Ps to consider consolidation as a means to generate oil and gas reserve growth. The deal could boost CVX's reserves by 50%, according to industry analysts. Considering the high price of oil and the coffers of cash oil companies have on their books, more deals are likely to come. The companies most sought after would be the ones with the best production profiles.

Chevron's oil and gas reserves last year fell 6% to 11.252 bln barrels of oil due to asset sales and reservoirs tests in Africa and Asia. Reserves are a means of measuring an oil company's future earnings potential. Chevron, the second largest oil company behind Exxon Mobil (XOM) may feel some downside pressure in its shares, as the deal also highlights the fact that it's having difficulty developing its own assets. CVX's capex budget is forecasted to increase 20% from last year to $10 bln. Unocal's attractiveness resides in its Asian assets, which is the fastest growing energy market in the world. It owns the rights to pump oil and gas in Indonesia through 2028 where it started the first deepwater oil production in the West Seno field off of Borneo. CVX is already that country's largest producer. As the eight largest oil and gas company, UCL has 1.754 bln in reserves 50% of which are in Asia.

The deal is a discount to Unocal's closing price on Friday of $64.35, which brings up the question, why would UCL accept a discounted price? The company has been in play for some time, which has driven its shares up 54% since the rumors started back in Jan. There is some speculation that by accepting a lower price this puts the company in play, which in turn may prompt other potential bidders to step in. China's largest oil company, CNOOC (CEO) China National Offshore Oil Corp, has been rumored to be a potential buyer as it tries to increase production in order to meet soaring demand. The Financial Times suggested a price tag of more than $13 bln, with others speculating CEO may just make a bid for UCL's Asian assets.

This is the biggest oil deal in three years. Speculation over other potential deals in the energy patch is sure to continue, as consolidation is viewed as an alternative to exploration and production. This deal makes sense as there is a lot of geographic overlap between the two companies, in addition to cost benefits. Chevron is mostly an oil producer with over 72% of production, compared to Unocal which is mostly natural gas at 62% of total. Chevron expects to fully integrate the company within six months. This deal is expected to meet little resistance by regulators, and if completed, will be the largest oil merger since Phillips Petroleum bought Conoco (COP) back in 2002. ----Kimberly DuBord, Briefing.com

9:00AM Page One - Blah, Blah : This market has the blahs.

There was absolutely no followthrough to the early rally Friday. That is understandable, as the employment data that morning was not at all bullish. On Friday we wrote that the seemingly positive reaction initially was surprising. That the stock market ended the day and week lower was not.

This week brings little that is likely to change the tone. There are practically no earnings reports. Alcoa on Wednesday is the only one of note. The economic calendar is even more bare, with only the weekly new claims numbers on Thursday and the typically ignored wholesale inventories and consumer credit data that day as well.

That leaves a pre-occupation with oil as a likely market driver. That isn't good this morning, as oil prices are up yet again. Oil prices could decline, and provide a boost to stocks, but that is a risky bet to say the least.

So, the stock market blahs will likely continue this week. Earnings reports during the later weeks of April may provide a boost to the stock market. For now though, the action is likely to remain listless.

The news this morning includes a couple of "Merger Monday" items. HSBC Holdings (Hong Kong Shanghai Banking Corp. was the founding member) is reportedly looking to make an offer for Morgan Stanley. ChevronTexaco has agreed to acquire Unocal for about $18 billion. Once again, however, the extremely hot merger action has failed to light a fire under the broader market. Dick Green, Briefing.com