Wall Street Surges 2%: AT&T Drops $39 Billion T-Mobile Bid

Nichole Harper
20 Dec, 2011
New York City

Stocks in New York surged and popular indexes advanced more than 2% after housing starts soared in November. AT&T said it will pay $4 billion in breakup fee after it dropped its merger plan with T-Mobile USA. Red Hat quarterly revenues increased 23%.

[R]10:40 AM New York – Stocks in New York surged and popular indexes advanced more than 2% after housing starts soared in November. AT&T said it will pay $4 billion in breakup fee after it dropped its merger plan with T-Mobile USA. Red Hat revenues increased 23% and CVS Caremark lifted its annual view.[/R]

Stocks in early trading in New York soared after new home permits surged in November. Market confidence was also bolstered after the euro zone finance ministers agreed to provide additional capital to the IMF and also latest business climate survey in Germany showed an improvement.

The Commerce Department said new home permits in November increased 5.7% and as more apartment construction began. The new construction permits soared 11% on a 30% surge in apartment permits.

From a year ago to November, apartment permits soared 63% and single family permits increased 6.6%.

Seasonally adjusted new home construction jumped 9.3% from October to 685,000 homes and in October builders started construction on new homes at a rate of 628,000.

However, housing market is still struggling near the bottom it reached in 2009 when only 554,000 homes were built, the lowest in fifty years. Home construction increased to 587,000 in last year.

European Markets Rebound

Stocks in European markets traded higher after investors focused on the latest confidence survey that showed a slight increase in Germany and three other institution offered weak outlook for German economic growth.

The business climate index tracked by Germany based Ifo Institute increased to 107.2 in December from 106.6 in November. The survey of 7,000 German businesses indicated that the monthly gain was the largest since February on the stable domestic demand.

However, IMK, another research group lowered its estimate of German economic to shrink 0.1% from the earlier estimate of 0.7% increase in October.

Think tank RWI lowered its growth estimate to 0.6% from 1% and IfW reduced its growth view to 0.5% from the previous estimate of 0.8%.

The economic growth outlook across the region is dim and economists are lowering their estimates as exports slowdown and manufacturing in Germany and Italy struggles

In Frankfurt trading, DAX 30 index increased 53.40 or 0.9% to 5,724.11 and CAC 40 index added 25.76 to 2,999.96. Across the region, the benchmark index in Spain increased 0.7%, in Italy gained 0.9%, in Switzerland fell 0.4% and in Sweden added 0.6%.

The euro edged higher to trade near $1.31 in Frankfurt and in New York.

Stock Movers

AT&T ((T)) increased 17 cents to $28.91 after the mobile telecom giant said it will end its merger talks with T-Mobile USA after Justice Department rejected its proposal.

AT&T will pay in breakup fee $4 billion or after-tax $1.2 billion, to T-Mobile. AT&T will share its bandwidth and spectrum for roaming services with T-Mobile.

Red Hat, Inc ((RHT)) dropped 7.4% to $42.58 after the company sales were lower than estimated in the quarter to November. Revenues in the third quarter increased 23% to $290 million and earnings increased to $38.2 million from $26 million a year ago quarter.

Earnings per share increased to 20 cents from 14 cents a year ago quarter.

General Mills Inc ((GIS)) dropped 2% to $38.88 after food products maker reported second quarter adjusted earnings of 76 cents a share. General Mills quarterly earnings declined to $444.8 million from $613.9 million and earnings per share fell to 67 cents from 92 cents.

Revenues in the quarter increased 14% to $4.62 billion and U.S. sales increased 3% on price increase and higher snack sales. For the year the company estimated earnings per share between $2.59 and $2.61.

CVS Caremark Corp increased 4% to $38.15 after the drug retailer lifted its quarterly earnings to 16.25 cents from 12.5 cents a share. The retailer also guided adjusted earnings per share in the year between $3.15 and $3.25 and free cash flow between $4.3 billion and $4.6 billion.

Banks rebounded after trading near multi-year in yesterday’s trading.

Morgan Stanley ((MS)) increased 39 cents to $14.55, Bank of America added 13 cents to $5.12 and Citigroup gained 93 cents to $25.75.