Monday, February 25, 2008

Monday Morning Musings

The market opened on a slightly weak note, but has shaken it off and is rallying as of this post.

Goldman Sachs (GS) reduced estimates on a number of bank and brokers, which weighed on the financial stocks early on. The broker index is still in negative territory.

Biotechs are getting the biggest gain (+2.84%) after Genentech (DNA) got approval for Avastin to treat breast cancer. The stocks spiked +10% on the news, its biggest gain since 2005.

Existing home sales came in a bit above expectations, which is helping to lift the housing index. But meadian home prices fell -4.6% yr/yr, and it seems a bottom in the industry is still not at hand.

There were two M&A announcements this morning, something we haven't seen in a while. Take-Two (TTWO) got a 50% premium buyout offer from Electronic Arts (ERTS) for a deal offered at $2 billion. Getty Images (GYI) also received a $2.4 billion buyout offer from a private equity firm.

Oil is up over $99 again, and this is helping the entire energy complex. Ag stocks and infrastructure are also trading firm today.

Asian markets were mostly higher overnight, save for China which posted another big drop. The Yen is lower today, which may also be helping support this rally in U.S. stocks.

And bond yields are higher with the 10-year yield up 9 basis points to 3.88%. Overall, the market seems to have a bit underneath it as talks swirl that a bailout plan for troubled bond insurer Ambac (ABK) could be announced at any time, and would help it maintain its AAA rating.

long GS


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