Two Mega Deals

123jump.com Staff
05 Dec, 2005
New York City

News of two large deals supported early rise in the averages, which faded quickly. The rise of oil and natural gas drove yields on ten-year bonds to 4.57% and averages lower at clsoe. Tech stocks and financials were weak during the session. Stocks in energy, brokerage, and housing sector were in favor during the session. Oil reached $60 for the first time in the month, and Dow has rebounded 7% from the lows of the year.Gold shines in the session.

U.S. MARKET AVERAGES

Market declined in late afternoon.

News of two large deals drove early momentum in the market, which quickly faded as oil and natural gas rose. With the absence of economic data for the day, market took its cue from the trading in the bond and oil markets. Oil rose in the face of inclement weather in the Northern United States. Rise in oil was followed by the rise in natural gas prices. However the price of natural gas declined at close.

Yield on ten year bonds rose from 4.53% to 4.57%. Report on service sector indicated that the sector of the economy is still growing but at a slower pace.

Verizon is reported to plan a spin-off or sell Verizon Information Services at a price as high as $17 billion. The company plans to sell phone and Internet directory business and focus on broadband and wireless operations.

Boston Scientific has initiated a competing offer for Guidant, stent maker, at $25 billion, $3.5 billion higher than offered by Johnson & Johnson. If the deal is completed that will make Boston Scientific the largest stent maker in the world.

MOVERS AND SHAKERS

Noven Pharmaceuticals ((NOVN)) advanced after an FDA panel supported the approval of an ADHD skin patch. The stock rose 32%.

Boston Scientific ((BSX)) bid $25 billion in cash and stock for Guidant ((GDT)). Under the deal, Boston Scientific would buy each Guidant share for $36 in cash and $36 in stock, which is 14% over Johnson & Johnson’s offer of $22 billion. Boston Scientific’s shares fell 5.7%, while Guidant’s rose 10%.

RSA Security ((RSAS)) agreed to acquire privately-held online security firm Cyota Inc. for about $145 million. RSA Security announced a restructuring of its engineering resources into 4 core locations around the world. The company also said it started a search for a new CFO after its CFO Jeff Glidden resigned. The stock slid 12%.

Copart ((CPRT)), vehicle auctioneer, posted Q1 earnings of $22.8 million, or 25 cents a share, compared with $22.7 million, or 24 cents a share last year, missing analyst estimates of 27 cents per share. Company’s quarterly revenue was $119 million, matching estimates. The stock dropped 11%.

ECONOMIC NEWS

Monday morning, the Institute for Supply Management released its report on business activity in the service sector in the month of November, showing that the pace of growth in the sector slowed from the previous month.

The report showed that the ISM''s business activity index for the non-manufacturing sector fell to 58.5 in November from 60.0 in October. Economists had been expecting the index to fall to 59.0. A reading above 50 still indicates growth in the sector.

The slowdown in the pace of growth in the sector came in spite of some improvement in new orders growth, with the new orders index rising to 59.5 in November from 58.2 in October.

The report also showed an increase in the pace of expansion of employment in the service sector, as the employment index rose to 57.0 in November from 52.9 in October.

Additionally, the ISM said prices continued to increase, although at a slightly slower pace, with the prices index slipping to 74.2 in November from 78.0 in October.


INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed with the Nikkei ending up 0.8% at 15,551,31, boosted by strong domestic capital-spending data which raised hopes for higher GDP and robust corporate results. Across the region, Taipei’s Weighted Index surged 1.9%, while Hong Kong’s Hang Seng fell 0.3%. The yen dropped 0.6% against the dollar.

European markets finished in the red, dragged by mining and telecom shares with BHP Billiton and. Virgin Mobile being the leading decliners. The German DAX 30 dropped 0.8%, the French CAC 40 ended down 0.3%, and London’s FTSE 100 also fell 0.3%.

OIL, METALS, CURRENCIES

Crude oil prices jumped back to $60 a barrel on U.S. winter storm forecast. Light sweet crude for January delivery jumped to as high as dollar but settled at rise of 59 cents to $59.91 a barrel on the Nymex. Heating oil gained 1.7 cents to $1.7896 a gallon, followed by gasoline declined 2.1 cents to $1.5898. Natural gas climbed 45 but at close declined 27 cents to $13.66 per 1,000 cubic feet. London Brent jumped $1 to $58.05.

European gold advanced, hovering near a 23-year high on inflation worries and strong interest in commodity investment. In London the precious metal closed at $505.05 per troy ounce, up from $503.50. In Zurich gold traded at $505.45, up from $502.05. In Hong Kong gold fell 30 cents to close at $506.25. Silver traded at $8.55, up from $8.53. In New York gold jumped $5.60 per ounce to $512.60 a record 23-year high and silver rose 8.8 cents to $8.733 per ounce and copper rose 2.3 cents to $2.089.

The U.S. dollar lost ground against most major counterparts. The euro was quoted at $1.1763, up from $1.1714. The dollar bought 120.77 yen, up from 120.42. The British pound traded at $1.7392, up from $1.7340.

CORPORATE NEWS

Boston Scientific ((BSX)) bid $25 billion in cash and stock for Guidant ((GDT)). Under the deal, Boston Scientific would buy each Guidant share for $36 in cash and $36 in stock, which is 14% over Johnson & Johnson’s offer of $22 billion. Boston Scientific’s shares fell 5.7%, while Guidant’s rose 10%.

Liberty Media ((L)) agreed to acquire Provide Commerce ((PRVD)) for $477 million in cash. Under the deal, each Provide Commerce share will be exchanged for $33.75 in cash. The transaction is likely to close in the second quarter of 2006.

Sears Holdings ((SHLD)) offered to acquire the public minority stage in Sears Canada ((SCC.TO)) for C$16.86 per share, an 8.7% premium over Friday''s closing price. The company already owns 53.8% and the total purchase price for the rest of the stake, which is 46.2%, would be about C$835.4 million.