Wall Street Rallies 3%; Complete Production in $2.6 Billion Deal

Nichole Harper
10 Oct, 2011
New York City

Stocks in early trading in New York surged more than 3% after France and Germany reiterated their support to recapitalize banks. Banks, materials and transportations stocks led the rally. Complete Production Services soared 34% after it agreed to a $2.6 billion bid.

[R]11:00 AM New York – Stocks in early trading in New York surged more than 3% after France and Germany reiterated their support to recapitalize banks. Banks, materials and transportations stocks led the rally. Complete Production Services soared 34% after it agreed to $2.6 billion bid.[/R]

New York markets opened sharply higher following the rally in the European markets.

The Franco-German pledge to support bank recapitalization in the euro zone at least for now lifted market sentiment. However, investors may be sorely disappointed if proclamations are not followed with concrete steps.

In commodities markets oil gained 2%, gold added 0.5% and silver and copper jumped more than 1%. European market indexes added more than 1% in Germany and France and jumped more than 2% in Italy.

European markets edged higher after leaders of Germany and France pledged to work together to expedite the bank recapitalization plan and accelerate fiscal integration of Europe by the next meeting of G 20 nations in Cannes on November 3-4.

Stress in the banking sector was evident on the first day of trading this week. Erste Bank tumbled more than 10% and Dexia SA investors were wiped out after the bank was forced to accept nationalization and loan guarantees.

Markets indexes edged higher in the early trading but gains were trimmed after Austria based East European lender Erste Group Bank estimated huge losses linked to Eastern European loans and Greek sovereign bonds.

Belgium, France and Luxembourg agreed to work together that will see the failed bank Dexia SA nationalized. Dexia has a total of €700 billion loan portfolio and has suffered heavy losses linked to Greek and other peripheral euro zone nations’ debt.

Dexia agreed to a €90 billion state guarantee and sell its Belgium division to the government as a part of the rescue deal.

The euro rebounded 1.6% against the dollar and traded up to $1.359 from the low of $1.3145. The euro also gained against the Swiss franc and traded at a 4-month high of 1.23.

Stock Movers

Complete Production Services, Inc ((CPX)) soared 34% to $27.40 after it agreed to be acquired by Superior Energy Services ((SPN)) for $2.6 billion. The acquisition is expected to increase company’s market share in providing hydraulic services for shale gas exploration.

Superior Energy dropped 17% or $4.81 to $22.60.

Under the terms of the deal, Complete Production shareholders will receive 0.945 common share of Superior and $7 cash for every share held in the company.

The deal offers 29% premium for the average price of Complete in the last two months. After the merger Superior shareholders will own 52% of the combined company and Complete shareholder will control 48%.

Netflix, Inc ((NFLX)) soared 7.3% or $8.54 to $125.76 after it decided to reverse its earlier decision to split its mail order DVD rental business from the online streaming services.

AT&T Inc ((T)) gained 1.6% to $28.88 after the mobile telecom carrier said it received pre-orders of 200,000 for iPhone 4S in the first 12 hours.

Sprint Nextel Corp ((S)) declined 15 cents to $2.26 after the struggling third largest telecom carrier is preparing raise capital and last week it assured the market that it has enough capital to last at least two years.

Yahoo! Inc ((YHOO)) rose 38cents to $15.84 after the company’s co-founder and former chief executive Jerry Yang was rumoured to prepare for a leverage buyout of the Internet portal.

The Scotts Miracle-Gro Company ((SMG)) dropped 4.6% to $44.79 after the lawn and garden products maker lowered its annual earnings outlook for the third time in four months and blamed weak demand of Hurricane Irene and harsh weather.