Wall St advances to new highs
Wall St advances to new highs
By Alex Barker
Copyright The Financial Times Limited 2007
Published: April 20 2007 14:02 | Last updated: April 20 2007 14:02
Solid earnings and speculation about buy-outs of financial groups pushed US stocks into record territory this week as the leading indices recouped all the losses from the slump that began in late February.
Boosted by bullish earnings updates from Caterpillar and Honeywell on Friday, the Dow Jones Industrial Average closed at a record level for a third successive day, climbing 1.2 per cent to 12,961.98.
The S&P 500 index broke through its high for the year reached before the plunge in equities two months ago, rising 0.9 per cent to 1,484.35 on Friday to stand 2.2 per cent up this week.
The technology-led Nasdaq Composite rose 1.3 per cent this week to 2,526.39.
While the advance gathered pace on Friday, the rally earlier in the week was driven by a relatively narrow base of stocks. Blue chips had the best of the gains: the Dow Jones advanced 2.8 per cent this week while the Russell 2000 index of small companies rose just 1.2 per cent.
“It is a ‘Chicken Little’ recovery – the market rises yet never seems able to generate confidence.”
Google led the way up after beating analysts’ expectations with a sharp rise in profits on the back of strong search engine revenues. Its shares rose 2.3 per cent to $482.48.
This rise was in stark contrast to Yahoo, which slid 12.6 per cent to $27.46 this week after the introduction of Panama, its new online advertising system, failed to stem the deterioration in profits and sales. Caterpillar, a Dow component, surged 4.7 per cent to $71.82 on Friday after the heavy machinery maker reported profits in excess of analysts’ estimates and raised its earnings forecasts.
Shares in Honeywell International rose 4.8 per cent to $51.40 on Friday after the industrial conglomerate raised its earnings forecasts for the year and beat Wall Street profit estimates.
The financial sector came in from the cold this week, with the S&P Financial index up 3.9 per cent to break past its 50-day moving average and stand in positive territory for the year.
The rise came amid a burst of takeover speculation after a $25bn agreed buy-out of Sallie Mae, the student loan group, by a JC Flowers-led consortium that sent shares in Sallie Mae up 15.5 per cent to $54 this week.
The groundbreaking deal, which is structured to make it unnecessary for Sallie Mae to hold its own capital, turned attention to financial groups that were previously considered improbable buy-out targets. Foremost among those was Countrywide Financial, the biggest home lender, which jumped 11.1 per cent to $37.36.
Speculation about the identity of a potential buyer has centred on Merrill Lynch, which has made bullish comments about the subprime mortgage market.
Merrill rose 6.7 per cent to $92.02 this week after reporting a four-fold rise in profits.
In the latest example of the growing appetite for financial deals, H&R Block agreed to sell Option One Mortgage, its subprime mortgage unit, to a company affiliated with Cerberus Capital Management, the private equity group. Shares in H&R Block rose 3.3 per cent to $22.56 on Friday.
Intel made big gains this week, rising 8.3 per cent to $21.16, as the chipmaker raised its revenue forecasts after a successful overhaul of its product line.
Rival AMD fared less well, easing 0.8 per cent to $14.16 on Friday after what Robert Rivet, chief executive, described as a “disappointing and unacceptable” first quarter, with lower sales and deteriorating margins.
The rally in railway stocks gathered steam as TCI, the activist hedge fund, built a stake in CSX, highlighting the potential for takeovers and asset sales in this cash-generative sector.
Shares in CSX jumped 6.1 per cent to $4504.
Atticus, a hedge fund that has worked with TCI in the past, already holds big stakes in railway groups, including Union Pacific, which rose 6.8 per cent this week to $117.21.
Homebuilders bounced off their lows for the year as fears eased about the severity of the housing market downturn. The S&P Homebuilders index jumped 8.6 per cent while DR Horton rose 8.9 per cent to $23.39.
By Alex Barker
Copyright The Financial Times Limited 2007
Published: April 20 2007 14:02 | Last updated: April 20 2007 14:02
Solid earnings and speculation about buy-outs of financial groups pushed US stocks into record territory this week as the leading indices recouped all the losses from the slump that began in late February.
Boosted by bullish earnings updates from Caterpillar and Honeywell on Friday, the Dow Jones Industrial Average closed at a record level for a third successive day, climbing 1.2 per cent to 12,961.98.
The S&P 500 index broke through its high for the year reached before the plunge in equities two months ago, rising 0.9 per cent to 1,484.35 on Friday to stand 2.2 per cent up this week.
The technology-led Nasdaq Composite rose 1.3 per cent this week to 2,526.39.
While the advance gathered pace on Friday, the rally earlier in the week was driven by a relatively narrow base of stocks. Blue chips had the best of the gains: the Dow Jones advanced 2.8 per cent this week while the Russell 2000 index of small companies rose just 1.2 per cent.
“It is a ‘Chicken Little’ recovery – the market rises yet never seems able to generate confidence.”
Google led the way up after beating analysts’ expectations with a sharp rise in profits on the back of strong search engine revenues. Its shares rose 2.3 per cent to $482.48.
This rise was in stark contrast to Yahoo, which slid 12.6 per cent to $27.46 this week after the introduction of Panama, its new online advertising system, failed to stem the deterioration in profits and sales. Caterpillar, a Dow component, surged 4.7 per cent to $71.82 on Friday after the heavy machinery maker reported profits in excess of analysts’ estimates and raised its earnings forecasts.
Shares in Honeywell International rose 4.8 per cent to $51.40 on Friday after the industrial conglomerate raised its earnings forecasts for the year and beat Wall Street profit estimates.
The financial sector came in from the cold this week, with the S&P Financial index up 3.9 per cent to break past its 50-day moving average and stand in positive territory for the year.
The rise came amid a burst of takeover speculation after a $25bn agreed buy-out of Sallie Mae, the student loan group, by a JC Flowers-led consortium that sent shares in Sallie Mae up 15.5 per cent to $54 this week.
The groundbreaking deal, which is structured to make it unnecessary for Sallie Mae to hold its own capital, turned attention to financial groups that were previously considered improbable buy-out targets. Foremost among those was Countrywide Financial, the biggest home lender, which jumped 11.1 per cent to $37.36.
Speculation about the identity of a potential buyer has centred on Merrill Lynch, which has made bullish comments about the subprime mortgage market.
Merrill rose 6.7 per cent to $92.02 this week after reporting a four-fold rise in profits.
In the latest example of the growing appetite for financial deals, H&R Block agreed to sell Option One Mortgage, its subprime mortgage unit, to a company affiliated with Cerberus Capital Management, the private equity group. Shares in H&R Block rose 3.3 per cent to $22.56 on Friday.
Intel made big gains this week, rising 8.3 per cent to $21.16, as the chipmaker raised its revenue forecasts after a successful overhaul of its product line.
Rival AMD fared less well, easing 0.8 per cent to $14.16 on Friday after what Robert Rivet, chief executive, described as a “disappointing and unacceptable” first quarter, with lower sales and deteriorating margins.
The rally in railway stocks gathered steam as TCI, the activist hedge fund, built a stake in CSX, highlighting the potential for takeovers and asset sales in this cash-generative sector.
Shares in CSX jumped 6.1 per cent to $4504.
Atticus, a hedge fund that has worked with TCI in the past, already holds big stakes in railway groups, including Union Pacific, which rose 6.8 per cent this week to $117.21.
Homebuilders bounced off their lows for the year as fears eased about the severity of the housing market downturn. The S&P Homebuilders index jumped 8.6 per cent while DR Horton rose 8.9 per cent to $23.39.
posted by Carlos T Mock at 8:14 AM
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