Stocks Close with Modest Gains
Equity indexes closed higher Monday as investors bought with the belief that last week's sell-off was overdone. Brokerage upgrades in the tech sector and merger activity also helped boost the market.
However, an annoucement by Corning (GLW ) after the closing bell could signal a weak open for Tuesday's session. The fiber-optic giant said it will take a charge of $5.1 billion in the second quarter for goodwill and inventory write-offs, and that it will close three plants and idle about 1,000 employees. The company called the abruptness of the industry downturn "unprecedented."
Tech stocks received an initial boost Monday as Bear Stearns upgraded its ratings on Sun Microsystems (SUNW ) and EMC Corp. (EMC ), citing signs of a bottoming or upturn in the U.S. economy. Juniper Networks (JNPR ) and QUALCOMM (QCOM ) were among the other tech companies that received brokerage upgrades.
The big corporate news story of the day was the hostile bid by Comcast Corp. (CMCSK ) for the broadband business of AT&T Corp. (T ). The cable giant is offering $44.5 billion in Comcast stock and $13.5 billion in debt assumption. For its part, AT&T said it has no current plans to sell the business, but it will evaluate Comcast's proposal.
Bill Meehan, chief market analyst at Cantor Fitzgerald, says the session's early gains were a result of not only the upgrades within the tech sector, but in a bounce back from last week's oversold conditions as vacationing money managers return to the field.
"We had a lot of big players away at the beach or playing golf, so you don't tend to get a lot of big buying," he points out. "The troops remaining at the desk reacted to downgrades or negative news by blowing stuff out, but it takes the [portfolio managers] and investment committees at larger places when you want to put some money to work."
The strategist believes the broader market is "fairly valued to slightly overvalued" and thinks that most of the large cap stocks are still richly valued, particularly in the technology sector.
Among Monday's other stocks in the news, Anchor Gaming (SLOT ) agreed to be acquired by International Game Technology (IGT ) in a $1.365 billion deal. In the deal each SLOT share would be exchanged for one IGT share.
The Dow Jones Industrial Average ended higher by 46.72 points, or 0.46%, at 10,299.40. The Nasdaq Composite gained 22.55 points, or 1.13%, to close at 2,026.71. Meanwhile, the broader S&P 500 index finished higher by 8.19 points, or 0.69%, to 1,198.78.
Treasuries ended the day slightly higher in the wake of another Fed coupon pass. Traders will have no major economic news until Friday's Retail Sales, PPI and Michigan Sentiment index data.
European equity markets reversed earlier weakness and now trade mixed. In London, the Financial Times 100 Index ended off 10.30 points, or 0.19% to 5468.90. In France, the CAC 40 closed up 28.01 points, or 0.56%, to 5027.37. Germany's DAX Index closed higher by 1.56 points, or 0.03%, to 5863.66.
Asian markets ended lower. In Japan, the Nikkei Index lost 66.40, or 0.54%, to close at 12239.68. Hong Kong's Hang Seng Index shed 308.80, or 2.38% to finish at 12690.68.
With the House preparing to debate campaign finance legislation this week, the bill's critics are offering an alternative that would continue to allow unions, corporations and individuals to donate to political parties: wires.
Japanese machinery orders -- a key gauge of capital spending -- fell in May but were better than economists expected, offering a ray of hope for the economy after a barrage of gloomy data: Reuters.
U.S. purchases of machine tools in May rose 14.7% from the previous month but was down 15% from the year-ago May, two industry groups reported: wires.
By Alan Hughes in New York