4:20 pm : Stocks snapped a three-day losing streak Tuesday as a rumored takeover of a Dow component and upbeat analyst commentary gave investors some confidence to get back into the market.
The day's biggest headline included Alcoa (AA 34.96 +2.06), which surged 6.3% amid reports that mining giants BHP Billiton (BHP 45.05 +1.04) and Rio Tinto (RTP 217.04 +6.61) are mulling separate impending buyout bids as high as $40 bln for the Dow component. The stock, which was up as much as 10% and accounted for a 25-point move on the Dow earlier, pared some of the gains intraday after Lehman dismissed the likelihood of a takeover.
Nonetheless, the Alcoa news left many on Wall Street pricing in the likelihood of more blockbuster M&A deals, which gave a lift to brokerage stocks and played into our Overweight rating on Financials. Also providing a floor of support for the S&P 500's most influential sector were Banks. Dow components like Citigroup (C 53.68 +0.25) and JP Morgan Chase (JPM 50.96 +0.52) advanced after Merrill Lynch said concerns over sub-prime mortgage exposure are "overblown."
Providing further evidence that valuations are reasonable at current levels and temporarily silencing talk of a possible market correction was 3M Co. (MMM 76.33 +1.74). The stock turned in the day's second best performance (+2.3%) on the Dow after announcing plans to repurchase $7 bln in company stock over the next two years.
Staying in the Industrials sector, the ability of transportation stocks to look past a 2.0% surge in oil prices was also noteworthy. Railroads was one of today's best performing S&P industry groups after Bear Stearns cited greater operating efficiencies and a more diversified freight mix as reasons to keep riding the rails.
With regard to oil, crude for March delivery closed at $58.97/bbl after the I.E.A. raised its 2007 forecast for global oil consumption. While higher energy prices are bearish for the economy, and may garner added attention in Fed Chairman Bernanke's semi-annual meeting over the next two days, prices merely rebounding from Monday's 4.0% sell-off provided enough subsequent leadership in the beaten-down Energy sector to act as an offset. As a reminder, policy makers removed the "impetus from energy prices" as an inflation risk from their most recent FOMC statement (Jan. 31).
Another sector providing notable leadership was Consumer Discretionary. Comcast (CMCSA 41.00 +1.02) was the biggest source of sector support, as news that its closest rival, Time Warner Cable, going public lent some validation to the health of the growing cable business. General Motors (GM 36.64 +0.93) surging 2.6% to a new 52-week high after being upgraded to Buy from Sell at Merrill Lynch was another sector bright spot and contributed to the Dow's first 100-point advance this month. BTK -0.1% DJ30 +102.30 DJTA +1.5% DJUA +0.4% DOT +0.5% NASDAQ +9.50 NQ100 +0.3% R2K +0.7% SOX +0.5% SP400 +0.9% SP500 +10.89 XOI +1.5% NASDAQ Dec/Adv/Vol 1191/1818/1.86 bln NYSE Dec/Adv/Vol 954/2338/1.34 bln
10:00 am : The indices are extending their reach to the upside as all 10 sectors are in positive territory. Not surprising, speculation that one of its most heavily weighted components (Alcoa) is a takeover target, Materials is pacing the way higher (+1.7%). Oil prices rebounding from yesterday's 4.0% sell-off rank Energy (+0.6%) second among today's leaders. Technology (+0.5%), due in large part to a 1.0% advance from its most influential component -- Microsoft (MSFT 29.12 +0.28), is also providing some notable leadership. The Dow component has been down for eight straight days.DJ30 +73.77 NASDAQ +13.25 SP500 +6.74 NASDAQ Dec/Adv/Vol 819/1647/168 mln NYSE Dec/Adv/Vol 698/1859/74 mln
09:40 am : As expected, stocks open on an upbeat note as today's encouraging M&A news helps investors look past the collapse of two deals yesterday. After taking a breather over the last three sessions, the Dow is pacing the way out of the gate following reports that Alcoa (AA 35.09 +2.19) is the target of two separate impending takeover bids. The blue-chip index is getting an added boost from 3M Co. (MMM 76.29 +1.70), whose board approved a $7 bln share buyback, General Motors (GM 36.98 +1.27), which was upgraded to Buy from Sell at Merrill Lynch.DJ30 +59.28 NASDAQ +8.53 SP500 +4.81 NASDAQ Vol 88 mln NYSE Vol 54 mln
09:15 am : S&P futures vs fair value: +3.1. Nasdaq futures vs fair value: +3.0.
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