Warren Buffet Buys 10.9% Stake in Burlington

Elena
09 Apr, 2007
New York City

U.S. stock markets failed to sustain the initial strength and turned to lackluster trading. Despite the pullback by the major averages, the transportation sector moved notably higher, led by Burlington Northern. The railroad company jumped 7.1% on the heels of news that Warren Buffett''s Berkshire Hathaway became the biggest shareholder, as he bought a 10.9% stake in the railroad company.

[R]11:00AM U.S. markets lost direction. Transportation stocks rose.[/R]
U.S. stock markets failed to sustain the initial strength and turned to lackluster trading. Despite the pullback by the major averages, the transportation sector moved notably higher, led by Burlington Northern ((BNI)). The railroad company jumped 7.1% on the heels of news that Warren Buffett''s Berkshire Hathaway became the biggest shareholder, as he bought a 10.9% stake in the railroad company. Berkshire ((BRK-A)) had accumulated 39 million shares of the second- largest U.S. railroad, paying between $81.18 and $81.80 for the final 1.6 million. Some chemical stocks also showed strength, with shares of Dow Chemical ((DOW)) up 5%. At the same time, airline stocks came under pressure although the price of oil continued to fall after showing a notable decline last week. Some weakness was also visible in the semiconductor sector. Maxim Integrated Products ((MXIM)) and Micron Technology ((MU)) turned in two of the sector's worst performances, falling 1.1% and 2.1% respectively. On the side of the gainers, Advance Micro Devices ((AMD)) rose 4.7% even though the chip maker warned of weaker-than-expected Q1 revenues.


[R]9:45AM U.S. stocks opened higher, boosted by deal talk and jobs data.[/R]
U.S. stock markets saw a positive start of Monday trading session, lifted by news that Dow Chemical is the target of $50 billion leveraged buyout, as well as easing economic growth concerns on the back of robust jobs report. The advance added to last week''s gains, which helped the major indexes return to positive territory for the year. In corporate news, Dow Chemical ((DOW)) was sent 6.6% higher by a report, saying that the break-up bid for Dow Chemical would be between $52 and $58 a share, valuing the company at a minimum of $50 billion. In other deal news, Dow component Citigroup ((C)) lost 0.1% after it agreed to buy Taiwan''s Bank of Overseas Chinese for about $426 million in cash.

Among companies in focus, American Home Mortgage ((AHM)) tumbled 16% after the company cut its earnings outlook by more than 25% and slashed its quarterly dividend by about 38%. As a result, the company''s stock was downgraded both at Citigroup and Lehman Bros. Shares of Ariad Pharmaceuticals ((ARIA)) slipped 12% after the company said that it may delay patient enrollment for its Phase III trial for cancer drug AP23573 to Q3 from Q2. Sanmina-SCI shares ((SANM)) dropped 4.2% after the electronics contract manufacturer warned the Q2 revenue would miss its previous estimate. In the first hour of trading, the Dow Jones industrial average rose 13.89, or 0.11%, to 12,574.09. The Standard & Poor''s 500 index was up 1.71, or 0.12%, at 1,445.47, and the Nasdaq composite index added 3.02, or 0.12%, to 2,474.36. Bonds regained some traction after falling in a shortened session Friday on the employment report. The yield on the benchmark 10-year Treasury note fell Monday to 4.73% from 4.75%.


[R]9:00AM U.S. stock futures pointed to a higher opening, helped by jobs data.[/R]
Wall Street looked poised for higher reopening after the three-day Easter holiday. U.S. stock futures rallied, boosted by stronger-than-expected jobs data in March and a report that Dow Chemical Co. is the target of a $50 billion buyout offer. On Monday, investors had their first chance to react to a Labor Department report which said Friday that nonfarm payrolls expanded by 180,000 in March, while the unemployment rate slipped to 4.4% from 4.5% in February. Economists had been expecting jobs growth of 168,000 and a jobless rate of 4.5%, on average. The jobs data raised some hope that growth was stronger-than-expected during the quarter, soothing concerns of economic slowdown before the Q1 earnings season. On the other hand, the robust jobs data significantly reduced the odds of an interest rate cut in the near future.

Dow Chemical ((DOW)) was in focus on speculations that a consortium of Middle Eastern investors and American buyout firms will launch a $50 billion bid to acquire the company. Kohlberg Kravis Roberts & Co., one of the biggest U.S. private equity firms is said to be one of the bidders. The stock rose 8.4% in the pre-open trading. In corporate news, Citigroup ((C)) said it agreed to buy Taiwan''s Bank of Overseas Chinese for $426 million. The deal is expected to complete in the second half of 2007. Company''s stock gained nearly 1% in the-open.

Among companies driven by analyst comments, American Home Mortgage ((AHM)) tumbled 19.3% after the company cut its earnings outlook by more than 25% and slashed its quarterly dividend by about 38%. Consequently, Lehman Bros. downgraded the stock to equal weight from overweight, and cut its price target to $20 from $45. Citigroup cut its rating to sell from hold and its price target to $19 from $26. Lehman Bros. downgraded Murphy Oil ((MUR)) to equal weight from overweight, citing valuation. Sanmina-SCI shares ((SANM)) dropped nearly 3% in pre-market trading after the electronics contract manufacturer warned the Q2 revenue would miss its previous estimate due to weak demand in the communications market. S&P 500 futures climbed 5.10 points to 1,457.80 and Nasdaq 100 futures hiked up 7.75 points to 1,836.00. Dow industrials futures ran up 40 points to 12,662.


[R]8:15AM Dow Chemical soars on bid speculations of $50 B.[/R]
Dow Chemical ((DOW)) jumped 10% in pre-market trading, driven by news that it could be target of the biggest leveraged buyout of all time. A consortium of Middle Eastern investors and American buyout companies is reportedly preparing a bid offer valued at $50 billion. Half of the capital is being provided by investors from Saudi Arabia, Kuwait, Bahrain, Qatar, UAE and Oman. A number of U.S. buyout firms including Kohlberg Kravis Roberts are responsible for contributing the rest of the financial resources. According to reports, a financing package has been put in place for a break-up bid of between $52 to $58 a share and an approach valuing the company at least $50 billion could come by the end of this week.


[R]8:00AM NY-7:PM Mumbai Sensex zooms more than 300 points on a broad rally.[/R]
The Sensex on BSE finished 321.66 points, or 2.50%, higher at 13,177.74. The market-breadth was very strong as there were more than three gainers for each decliner. For 1,915 stocks that advanced, 613 stocks declined, and only 71 stocks which remained unchanged. Of the 30 stocks in the Sensex, only one stock declined. The turnover on BSE was Rs 3,075 crore, slightly lower than Rs 3,182.14 crore on Thursday. On NSE, the turnover was Rs 6,286.86 crore, lower than Rs 6946.16 crore on Thursday.

Economic news

Prime Minister Manmohan Singh stated on Monday that Assam remains top priority for the UPA government and projects such as the gas cracker will bring development opportunities for the state. Mr. Singh demanded that project be put on fast track.

Trading highlights

Tata Steel was the most-active stock with a turnover of Rs 133.50 crore followed by MindTree and Indiabulls Real Estate.

Advancers

Steel stocks rose on reports that cold rolled steel makers are set to raise prices between Rs 4,200 and Rs 6,500 a ton, next week, a steep rise from the current price between Rs 32,000 and Rs 33,000 a ton. Tata Steel led the advancers, soaring 6% to Rs 493. ITC surged 5% to Rs 155. Hindustan Lever gained 2% to Rs 204.

Banking shares edged higher under the belief that an increase in lending rates will protect their profit margins. State Bank of India added 4.3% to Rs 988.7, on lifting the benchmark prime lending rate by 50 basis points to 12.75% per annum with effect from Monday (9 April).

Maruti and Reliance Communications rallied around 4.5% each to Rs 790 and Rs 416, respectively. Last week, Maruti reported record March month sales. Reliance Communications advanced after adding 1.2 million new wireless subscribers in March 2007. Reliance Communications said its average revenue per user was expected to rise by 12%, as a result of the re-verification exercise, making it one of the top-three players in India in terms of average revenue per user.

Cement stocks advanced for the second day in a row today, as cement makers refused to reduce cement prices despite the government last week banning import duties on the product. Grasim gained 3.88% to Rs 2,195, ACC rose 2.4% to Rs 739.90 and Gujarat Ambuja Cements added 2.4% to Rs 108.50.

Hindalco, BHEL, ONGC gained nearly 3% each at Rs 136, Rs 2,425, respectively. Other included Reliance Industries, Bharti Airtel, TCS and Wipro surging 2% each to Rs 1,384, Rs 761, Rs 1,217 and Rs 562, respectively. Infosys rallied 2.5% to Rs 2,044.

Decliners

Bajaj Auto was the sole decliner among the index stocks today, off 0.5% at Rs 2,297.


[R]7:00AM Asian markets finished higher on Monday with Japan upbeat on exporters.[/R]
Asian markets finished higher on Monday. Japan''s benchmark Nikkei 225 index rose 258.98 points, or 1.48%, to finish at 17,743.76. Upbeat figures showing U.S. non-farm payroll on Friday cheered optimism about the U.S. economy, the biggest export market for Japan. The weakness of the yen also buoyed sentiment. Advancers included Advantest, climbing 4.17% and Toyota Motor rising 1.89%. Machinery stocks also advanced with Komatsu rising 4.26%.

The Korea Composite Stock Price Index in South Korea gained 16.91 points, or 1.1%, to 1,501.06, in the third record close in four sessions. Hyundai Engineering & Construction gained 3%, Doosan Heavy Industries & Construction rose 3.8% on rising order news and Doosan Infracore rallied 8.4% on increasing demand for excavators in China.

In China, banks bounced back, after declining Friday on the latest reserve requirement ratio increase, supporting the country key stock indexes to a record finish for the sixth straight session. The benchmark Shanghai Composite Index gained 2.3% to 3,398.95 and the Shenzhen Composite Index added 2.1% to 907.82.