Stocks Up on Income; UAL, Continental Merger

Arthi Gupta, Mayank Mehta and Sanjay Barot
03 May, 2010
New York City

U.S. stocks are trading higher on Greece bailout package and merger of two airlines but the euro fell. U.S. personal income for March rises at the fastest pace in six months. UAL agrees to acquire Continental Airlines for $3.2 billion. Loews quarterly revenue rises 23%.

[R]10:20 AM New York – U.S. stocks are trading higher on Greece bailout package and merger of two airlines but the euro fell. U.S. personal income for March rises at the fastest pace in six months. UAL agrees to acquire Continental Airlines for $3.2 billion. Loews quarterly revenue rises 23%.[/R]

U.S. stocks gain in early New York trading after UAL and Continental announce a merger and personal income for March rose at the fastest pace in six months.

The U.S. dollar traded higher against the euro, the pound and the yen. But the euro fell and European stocks declined as investors worry if Greece can sustain the austerity measures.

Prime Minister George Papandreou said on Sunday that Greece has agreed with the EU and IMF for €110 billion emergency loans for a period of three years.

The deal aims to help the country avoid debt default and prevent economic contagion from spreading throughout the region. However, it must first be approved by some parliaments in the 15 other euro-zone countries. The IMF is expected to approve its portion of the loan this week, IMF managing director Dominique Strauss-Kahn said.

Finance Minister George Papaconstantinou aid that Greece would make budget cuts of €30 billion, or $40 billion, to reduce the budget deficit to less than 3% by 2014 from the current deficit of 13.6%.

Papaconstantinou said Greece had agreed to raise its value-added tax to 23% from 21%, cut civil servants’ wages and to eliminate public-sector annual bonuses amounting to two months’ pay.

He said special rules allowing for early retirement of civil servants would be tightened and the government also intended to increase taxes on fuel, tobacco and alcohol by about 10%. Papaconstantinou forecast a deeper than expected recession of 4% for 2010 and 2.6% in 2011 before a return to growth of 1.1% in 2012.

March personal income rises 0.3% and disposable personal income increased 0.3%. Personal consumption expenditure increased 0.6% in the month. In February personal income increased 0.1%, DPI less than 0.1% and PCE increased 0.5% on revised estimate.

United Airlines and Continental Airlines on Monday announced a $3.2 billion merger that would create the world’s biggest airline by passenger traffic. United is buying Continental, and the combined company will keep the United name and be based in Chicago. Jeffery A. Smisek, Continental’s chief executive, will run the combined airline with over $29 billion in annual revenue and UAL CEO Glenn Tilton will be non-executive chairman for the next two years.

The name of the holding company would be United Continental Holdings Inc, and the name of the airline will be United Airlines and the company will retail Continental logo.

The UAL Corporation, United’s parent company, will issue 1.05 shares for each Continental share, valuing the acquisition at $3.17 billion, based on Friday’s closing price.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.3242 and increased against the Japanese yen to 94.27.

Crude oil increased $0.39 to $86.54 a barrel for a front month contract, natural gas edged higher $0.04 cent to $3.96 per mBtu and gasoline increased 1.160 cents to 241.10 cents.

Gold increased $2.40 in New York trading to close at $1,183.10 per ounce, silver closed higher $0.096 to $18.73 per ounce and copper for the front month delivery decreased 2.200 cents to $3.15 per pound.

Yields on 10-year U.S. bonds increased to 3.69% and on 30-year U.S. bonds traded at 4.54%.

Stock Movers

Companhia de Saneamento Basico do Estado de Sao Paulo rose 2.9% after the Brazil’s water utility has launched a 27.6 million real or $15.8 million tender to improve water services in western São Paulo city.

Integral Systems, Inc. dropped 6.9% after the maker of Epoch Client satellite systems and software said that Bill Bambarger has announced his intention to resign as Chief Financial Officer citing personal and health reasons.

Nomura Holdings, Inc., Japan’s financial services company fell 1.8%.

Popular, Inc., a diversified, publicly owned bank holding company gained 8.6%.

Pozen Inc. surged 21.2% after the drugmaker and AstraZeneca said the U.S. regulatory agency has approved VIMOVO™ for arthritis patients.

Earnings Review


Genworth Financial, Inc. ((GNW)), the insurer said first quarter revenues rose 40% to $2.42 billion from $1.73 billion a year ago. Net income in the quarter was $178 million or 36 cents per diluted share compared to net loss of $469 million or $1.08 per share a year ago.

Loews Corporation ((L)), the holding company reported first quarter revenues rose 23% to $3.71 billion from $3.02 billion a year ago. Net income in the quarter was $420 million or 99 cents per diluted share compared to net loss of $647 million or $1.49 per share a year ago.

McAfee, Inc. ((MFE)), the computer-security software maker said first quarter sales rose 12% to $502.7 million from $447.7 million a year ago. Net income in the quarter fell 30% to $37.6 million or 23 cents per diluted share compared to net income of $53.5 million or 34 cents per share a year ago.

Asian Markets Review

Hang Seng index in Hong Kong decreased 297.23 or 1.41% to 20,811.36 and ASX 200 index in Australia decreased 21.90 or 0.46% to 4,785.50. The FTSE Bursa KL Composite index in Malaysia closed higher 0.51 or 0.04% to 1,346.89 and The Markets of Japan and China were closed today.

The Kospi Index in South Korea decreased 20.35 or 1.17% to close at 1,721.21 and JSE Index in Indonesia decreased 10.36 or 0.35% to 2,960.90. The Sensex index in India decreased 172.63 or 0.98% to 17,386.08 and The Markets of Thailand were closed today.

Europe Markets Review

The London markets were closed today, in Paris CAC 40 Index decreased 25.15 or 0.66% to 3,791.84 and in Frankfurt DAX index traded lower 12.23 or 0.20% to 6,123.47. In Zurich trading SMI decreased 37.76 or 0.57% to 6,579.06.