U.S. Stocks Gain on Obama Agreement; Treasury Sells Citi Stake

Arthi Gupta
07 Dec, 2010
New York City

U.S. stocks gained after President Obama announced extension of tax cuts and Treasury sold its remaining stake in Citigroup. GE formed a venture with China-based railroad company CSR Corp. Aetna agreed to buy Medicity for $500 million. AGL acquired Nicor in $2.4 billion cash and stock.

[R]9:35 AM New York – U.S. stocks gained after President Obama announced extension of tax cuts and Treasury sold its remaining stake in Citigroup. GE formed a venture with China-based railroad company CSR Corp. Aetna agreed to buy Medicity for $500 million. AGL acquired Nicor in $2.4 billion cash and stock.[/R]

U.S. stocks traded higher after President Barack Obama extended tax cuts for two years and unemployment for long term jobless for thirteen months.

Asian stocks traded sideways on concerns that China may increase interest rates and European markets advanced.

Euro-zone finance ministers decided not to increase the size of the current €750 billion rescue fund on Monday. They also ruled out immediate measures to assist Portugal and Spain noting that the existing facilities are sufficient in an emergency.

The Reserve Bank of Australia decided to maintain its key lending rate unchanged at 4.75%. RBA Governor Glenn Stevens highlighted in an accompanying statement that after the increase of cash rate last month and the subsequent increase in mortgage rates by financial institutions, lending conditions in the economy are “little above the average” and views this setting of monetary policy as “appropriate” for the economic outlook.

Obama Extends Tax Cuts

President Obama announced a """"""""framework"""""""" for extension of tax cut and said the tentative bi-partisan agreement will extend all of the tax cuts for two years. The agreement would also extend unemployment benefits for the long-term jobless for 13 months, and reduce payroll taxes for all workers for a full year.

The White House said the package will cost about $900 billion over the next two years.

U.S. Treasury Sells Remaining Stake in Citigroup

The U.S. Department of the Treasury plans to sell the remaining 2.4 billion shares or 7% stake it holds in Citigroup, Inc. as it continues to dispose its stake in the bank. The Treasury entered into a fifth pre-arranged trading plan with Morgan Stanley, as Treasury''s sales agent, to sell the company''s common stock.

The Treasury said it already completed the sale of about 5.3 billion shares of the 7.7 billion shares of Citigroup common stock across four pre-arranged trading plans to date in at-the-market sales.

Global Hiring Plans Set to Improve

Hiring intentions among U.S. employers remain modest but with the most optimistic first quarter outlook in three years, according to the latest quarterly Employment Outlook Survey published by the employment services provider Manpower.

Data published reported improved hiring expectations from 12 months ago in 28 of 39 countries and territories. The survey found that job prospects continue to be strong across the Asia Pacific region with Chinese and Indian employers reporting the most optimistic hiring intentions globally.

However, hiring plans continue to be mixed across the 21 nations surveyed in the Europe, Middle East and Africa region, with positive activity expected in 14 countries. German employers are reporting their strongest hiring plans since early 2008.

Hedge Fund Supports Borders Group’s Bid

William Ackman''s hedge-fund Pershing Square Capital Management LP offered to support bookstore chain Borders Group’s $16 per share offer for the rival Barnes & Noble Inc. The offer values the company at over $900 million.

GE Forms JV with CSR Corporation

General Electric Company, the diversified conglomerate announced a cooperative framework agreement with CSR Corporation Limited, China''s largest maker of rail vehicles to establish a U.S.-based joint venture to advance high-speed and other rail technology in the U.S.

The partnership represents an investment of approximately $50 million in the joint venture with the potential to sustain or create 250 U.S. jobs by 2012 for the first phase of the agreement.

Toronto-Dominion in Talks to Buy Chrysler Financial

Toronto-Dominion Bank is in talks to buy Chrysler Financial Corp, the auto lender owned by Cerberus Capital Management LP, according to media reports, citing people close to the matter. The deal could be reached in the next few weeks, reports stated.

Aetna Buys Medicity

Aetna said it agreed to acquire Medicity, a health information exchange technology company. The purchase price is approximately $500 million.

AGL Resources Acquires Nicor

AGL Resources Inc., the energy services holding company agreed to acquire natural gas distributor Nicor, Inc. in a $2.4 billion cash and stock deal that will create a leading U.S. natural gas distribution company having an enterprise value of $8.6 billion.

Earnings Review

AutoZone, Inc. ((AZO)), the retailer and a distributor of automotive replacement parts and accessories reported first quarter net sales grew 13% to $1.79 billion from $1.59 billion in the prior-year quarter. Domestic same store sales increased 9.5% for the quarter. Net income in the quarter increased 20% to $172.08 million or $3.77 per share, compared to net income of $143.3 million or $2.82 per share last year.

BMO Financial Group ((BMO)), the major international bank reported fourth quarter revenue improved 8% to C$3.23 billion from C$2.99 billion in the comparable period. Net income in the quarter climbed 14.2% to C$739 million or C$1.24 per share from C$647 million or C$1.11 per share last year.

eGames, Inc. ((EGAM)), the software games maker reported first quarter net revenues increased 23.4% to $859,000, compared to $696,000 for the similar fiscal quarter a year ago. Net loss for the quarter widened 116% to $350,000or 3 cents per diluted share, compared to a net loss of $162,000 or 1 cent per share in the previous year''s first quarter.

Layne Christensen Company ((LAYN)), the provider of drilling and construction services reported third quarter revenues grew 23.9% to $269.8 million from $217.8 million generated in last year. Net income in the quarter increased 23.8% to $8.20 million or 42 cents per diluted share, compared to net income of $6.62 million or 34 cents per share in the prior-year period.

Photronics, Inc. ((PLAB)), the photomasks manufacturer reported fourth quarter sales increased 16% to $110 million from $94.7 million in the year-ago period. Net income in the quarter surged 575% to $8.1 million from $1.2 million in the year-ago period. On a per-share basis, quarterly earnings were 14 cents per share compared with a loss of 11 cents per share a year ago.

Rambus Inc. ((RMBS)), the chip interface technology developer estimates fourth quarter revenues to be between $85 million and $93 million, up from the earlier forecast of $40 million to $50 million.

The Pep Boys - Manny, Moe & Jack ((PBY)), the automotive repair and maintenance services provider reported third quarter total revenues increased 5.0% to $496.36 million from $472.64 million last year on comparable store sales rise of 3.5%. Net earnings in the quarter soared 170% to $5.72 million or 11 cents per diluted share, compared to net earnings of $2.12 million or 4 cents per share in the previous year.

The Talbots, Inc. ((TLB)), the specialty retailer stated third quarter net sales slipped 3.2% to $299.1 million from $308.9 million in the comparable period a year ago. Net income in the quarter rose 9.8% to $17.0 million or 24 cents per diluted share, compared to last year’s income of $15.5 million, or 28 cents per share.