Merger News Lifts Stocks

A fresh spate of deals, plus strength in Asia and Europe, sparked buying Monday

Stocks finished broadly higher Monday amid merger news and following strength in Asian and European equities markets, along with a weaker yen.

On Monday, the Dow Jones industrial average rose 115.76 points, or 0.96%, to 12,226.17, paced by strength in Caterpillar (CAT) and Exxon Mobil (XOM). The broader Standard & Poor's 500 index was up 15.11 points, or 1.09%, to 1,402.06. The tech-heavy Nasdaq composite gained 21.75 points, or 0.92%, to 2,394.41.

Among the numerous merger headlines Monday, Barclays (BCS) has made a tentative takeover approach to ABN Amro Holding (ABN) as the embattled Dutch bank attempts to fight off campaign by activist investors, according to the Financial Times.

Private equity firm Clayton, Dubilier & Rice agreed to acquire ServiceMaster (SVM), which makes Terminix pest removal and TruGreen home lawn care, for $4.8 billion, or $15.63 a share.

Community Health Systems (CYH) will purchase Triad Hospitals (TRI) for $54 per share in cash, or $6.8 billion, including $1.7 billion of existing indebtedness.

InfraSource Services (IFS) agreed to be acquired by Quanta Services (PWR) in a $1.26 billion deal.

Logistics company EGL (EAGL) agreed to be bought by James R. Crane, the company's largest shareholder, an investment group affiliated with Centerbridge partners, and Woodbridge Co. for $38 a share, in a deal valued at about $1.7 billion.

Todco (THE) will be acquired by Hercules Offshore in stock and cash deal valued at about $2.3 billion. Terms: THE holders will get an average total consideration equal to 0.979 HERO shares, $16 cash for each share held.

Foot Locker (FL) is prepared to go hostile to take over Genesco (GCO), reports Women's Wear Daily. Foot Locker is said to be preparing a tender offer for shares of Nashville-based Genesco in the $44-$46 per-share range, the paper reported.

One stock was getting dumped Monday was Atherogenics (AGIX). The company says a Phase III clinical study of lead drug candidate AGI-1067 did not show difference from placebo in a composite primary endpoint. Atherogenics and AstraZeneca (AZN) are in collaboration covering the development of AGI-1067.

In the subprime mortgage area, Accedited Home Lenders (LEND) skidded after it received notice from NASDAQ that its stock is subject to delisting from NASDAQ in connection with the company's failure to file its 2006 annual report (10-K) by Mar. 15.

Novastar Financial (NFI) announced it will reduce its workforce by about 350 people, or about 17%, to align organization with changing conditions in the mortgage market. It says the cost of terminations will range between $2.7-$3.1 million, expected to be incurred in the first quarter.

Monday's economic calendar featured a report on sentiment among U.S. homebuilders. The U.S. NAHB index fell to 36 in March, from a revised 39 in February. The decline is "not that surprising given the debacle in subprimes," notes Action Economics.

This week's key event is the Federal Reserve's policy meeting Tuesday and Wednesday. The Fed is unlikely to change rates, but focus will be on what language it uses for hints toward future policy, says S&P. There will also be updates on housing starts and home sales this week. On the earnings calendar, Oracle (ORCL) reports results on Tuesday and FedEx (FDX) will be on Wednesday.

In the energy markets, April West Texas Intermediate crude oil futures fell 52 cents to $56.59 per barrel, succumbing to downward pressure on the eve of the April contract's expiration Tuesday.

European markets ended higher Monday, fueled by takeover news, with gains accelerating late in the session. In London, the FTSE-100 index rose 58.8 points, or 0.96%, to 6,189.4. Germany's DAX index gained 91.54 points, or 1.39%, to 6,671.41. In Paris, the CAC 40 index was up 76.79 points, or 1.43%, to 5,458.95.

Asian markets finished with strong gains Monday. In Japan, the Nikkei 225 index jumped 265.4 points, or 1.59%, to 17,009.55. In Hong Kong, the Hang Seng index climbed 313.24 points, or 1.65%, to 19,266.74.

Treasury Market

Treasuries fell modestly Monday amid a shift in investor capital into equities, which were boosted by merger and acquisition news and yen weakness that alleviated concerns of carry trades being unwound. Trading was fairly quiet, with the bond market's attention heavily focused on the FOMC policy statement Wednesday. The 10-year note eased 05/32 in price to 100-15/32 for a yield of 4.56%. The 30-year bond tumbled 11/32 in price to 100-17/32 for a yield of 4.72%.