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Big Merger Deals Fuel Today's Wall Street Rally

UPDATED at 4:30 p.m.:

A wave of pre-market merger-and-acquisition (M&A) deals pushed Wall Street to its best day in recent weeks, as all three major indexes surged.

The Dow closed up 124.17, or 1.3 percent, at 9,789.36 after being up as much as 1.6 percent during the day.

The broader S&P 500 closed up 1.8 percent at 1,062.98 after being up nearly 2 percent earlier today.

The tech-heavy Nasdaq closed up 1.9 percent at 2,130.74 after being up as much as 2.3 percent in intraday trading.

It was the Dow's biggest point and percentage gain since Aug. 21. Of the Dow's 30 blue-chip stocks, 28 rose and two fell.

What's caused the surge, especially on a day of lighter volume, thanks to the Jewish holiday?

First, the markets were influenced by the rash of pre-market "merger Monday" deals out this morning, including Xerox's $6.4 billion purchase of Affiliated Computer Services and Abbot Labs saying it would buy a Belgian pharma business for $6.6 billion.

Traders like mergers because they generally are a sign of a healthier market. The M&A market has been largely moribund over the past year, with the occasional strategci exception, such as Disney's purchase of Marvel.

For example: Total M&A activity in the U.S. was $990 billion in 2005, a figure that peaked at $1.32 trillion the following year. Last year, that number had dropped to $910 billion. So far this year, $426 billion worth of M&A deals have been announced.

The huge drop off during that time came in leveraged buyout deals. In 2005, there were $118 billion worth of LBO deals. That peaked at $376 billion in 2007 before absolutely falling off the table last year, dropping to $29 billion, because no one could raise any capital. So far this year, the pace is even slower: $12 billion in LBO deals, according to Capital IQ.

Also, we're coming up on the end of the third quarter of the year, and sometimes mutual fund managers indulge in "window dressing," which means to dump poor-performing stocks and buy strong-performing ones just before the end of the quarter, so their quarterly report to clients will look better.

Also, the markets' "animal spirits" seemed to want to reverse the three-day losing street that concluded on Friday. I know that's a frustrating thing to hear, because it doesn't give you anything to hang your hat on, but it's as true a reason as anything else.

In a research note this morning, Mizuho Securities warns: "Domestic financial markets continue to firm as the recovery and asset reflation trades work in tandem to push up valuations and yet the rally appears to be getting long in the tooth." (Emphasis mine.)

One of the reasons for the market rally is savings: people are spending less and putting more away, Mizhuo writes: "...excess liquidity is being channeled into the financial markets instead of the goods market as households scramble to rebuild savings balances."

Over the past six months, the Dow is up just a little less than 25 percent. The S&P 500 is up about 28 percent over the same period and the Nasdaq is up about 35 percent, as tech stocks have been leading this rally.

-- Frank Ahrens
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By Frank Ahrens  |  September 28, 2009; 4:30 PM ET
Categories:  The Ticker  | Tags: Dow Jones, nasdaq, s&p 500  
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Next: Home Prices Still Declining, But Tick Up In July

Comments

More mergers. Get your kicks on 66.

Posted by: Dermitt | September 28, 2009 11:47 AM | Report abuse

Suckers...

Posted by: jerkhoff | September 28, 2009 12:45 PM | Report abuse

There are few, if any, fundamentals in the American economy that justify the market at these levels. Incomes are dropping, record foreclosures, bankruptcies soaring, and the economy is still peeling away jobs.

And mergers mean yet more layoffs. This is the banksters, using every and any excuse they can to pump their Feb-printed-gifts into the market to gin up a rally. In doing so, they persuade every ma and pa sucker they can to jump back in. Then when it crashes, the banksters, already flush with trillions that the American people are on the hook for, will peel off more trillions in profits, as ma and pa lose what's left of the 401k.

Yes, it's a sucker's rally. The banksters are manipulating, and the American sucker is getting taken yet again. It's Modern Serfdom in action, all part of the biggest reverse bank robbery in world history, and all part of what will someday have people in the streets, tearing these criminal institutions down.

Posted by: gatias | September 28, 2009 1:27 PM | Report abuse

"Dealmaking Boosts Wall Street"

....... Well its certainly not do to the attacks and assaults that they have been taking from the left-ists in our government.

Business is the "engine of our economy" and where ALL wealth comes from.

Yet the flaming liberals love to trash "business". Bad move........

Posted by: allenridge | September 28, 2009 1:29 PM | Report abuse

M&A buzz interesting. Newspapers are going to need merged soon or later, if there is a later. This could get more interesting.

Posted by: Dermitt | September 28, 2009 1:29 PM | Report abuse

"Kraft CEO Irene Rosenfield said Cadbury CEO Todd Stitzer had failed to "do the math quite accurately""

Like writing, these activities denote a high degree of civilization. If the numbers suck, the solution or salvation is in the writing. Computers don't seem to be helping much. You still need to think it over and that takes time. back to other action. Have a good business day, you might not get another.

Posted by: Dermitt | September 28, 2009 1:42 PM | Report abuse

I posted this to an article yesterday but moments after the post the article vanished.

It still seems pertinent.

A repost.
I Originally posted this in 2007, it seems apropos.

It always amazed and baffled me that one of the greatest of Scientists, Richard P. Feynman, could explain the most complicated topic known to man. That being Particle Physics, specifically Quantum Electro Dynamics. He could explain the subject in such a way that most human beings could have at least a fundamental grasp of the ideas presented. He was articulate and definitely inspirational. Contrast Feynmans brilliant way of explaining the astounding complexity of Particle Physics with Greenspans way of addressing the much less complicated and increasingly nebulas topic of economics, and it seemed like that later was more adapt at gibberish, as in unnecessarily pretentious and vague language. A psychotic language of the elite. Greenspan did this, time and time again at congressional hearing, while everyone looked on, hanging on to every nonsensical statement. Politicians who are in trusted to look out for the American people just sat by. They either new the gig or they were to stupid to catch on to the big scam. That makes them complicit or incompetent. Either way it's more than tragic, it's criminal. I remember viewing one congressional meeting recently. it concerned the real estate market. My Engineering colleagues and I were for years absolutely astounded by what we knew would be an inevitable collapse, the irrational greed could not be sustained. When Greenspan was asked about what he thought with respect to the real estate market, his response was he detected a bit of frothing. A bit of FROTHING! It seemed to us like a gross understatement, it was a gross understatement. And not just in the real estate arena, capitalism itself has become just one big pyramid scheme. Competition has become an oxymoron.

An update:
We kept hearing that it was all an unanticipated surprise. No one saw it coming. Not true! To a man, everyone of my colleagues and I saw it coming. In fact many people saw it coming. The news media certainly did not!. We had and still do have running jokes about the ineptitude of the Wall Street analyst. Nothing much has really changed, we're poised to see a repeat.

Posted by: morphylius | September 28, 2009 2:19 PM | Report abuse

Arrest these wall street criminals, confiscate their ill gotten gains and put them in jai.

Posted by: kevin1231 | September 28, 2009 3:29 PM | Report abuse

Adverse Business
"Knotty problems were discussed on their merits, as if confidences could never be betrayed, and in the process both of them learned respect for other's experience and powers of decision." Apples and Ashes Capitalism still has lots of knotty problems. It's getting to be apple cider time again, followed by firewood season. Lots of trees will be burned and that requires capital. Such simple difficulties.

Posted by: Dermitt | September 28, 2009 4:40 PM | Report abuse

Oops, each other's. There perfect now.

Posted by: Dermitt | September 28, 2009 4:48 PM | Report abuse

This is a market rally for carnival marks, rubes, and complete idiots. They are attempting to steal what little capital is left in the accounts of the American people before the roof caves in on the American economy. Now they are bundling life insurance policies in new derivative trading because they know the Golden Calf is dying and they will never in their lifetimes make that kind of money again. Unfortunately they are abetted by the US government and both parties that have done absolutely nothing to regulate these criminals in spite of the last year of crisis.

Posted by: garrafa10 | September 28, 2009 4:56 PM | Report abuse

If traders like it, beware. Isn't this the same snake oil that got us in this mess? Wall Street exists and moves in a parallel universe, apart from us.

Posted by: Diogenes | September 28, 2009 5:00 PM | Report abuse

"Posted by: gatias...Yes, it's a sucker's rally. The banksters are manipulating, and the American sucker is getting taken yet again. It's Modern Serfdom in action, all part of the biggest reverse bank robbery in world history, and all part of what will someday have people in the streets, tearing these criminal institutions down."

You are absolutely correct. When the American people are left penniless they will awaken to the fact they willingly and stupidly participated in their own ruin. For a few shiny beads, cheap liquor, and mirrors they believed the lies they were "wealthy". The plutocrats never thought this through because they only think of short-term profits: were exactly are Americans to find employment when we have no manufacturing sector and make nothing? It will be too late when they decide to convene the Estates-General. After hyper-inflation and double-digit unemployment leave them in misery for years then this country will face and have a social revolution.

Posted by: garrafa10 | September 28, 2009 5:03 PM | Report abuse

It looks like our economy just hasn't crashed hard enough... yet. I keep wondering when all these Wall Street reptiles will be gone, but every time I look up, there they are, glutting on the pathetic remains of our economy. Does anyone see any new businesses being created,let alone jobs? We're all supposed to believe that Wall Street has learned its lesson, but gambling addicts don't learn anything because they are purely motivated by uncontrollable impulse. These guys won't stop until everything is gone.

Posted by: crystalseashore | September 28, 2009 7:31 PM | Report abuse

The communications Post needs to expand. I'm thinking a big consolidation is needed. The newspapers in NYC are wreckable, which could be a great opportunity. This could develop into an extended rally. There is much to be gained and the losses keep multiplying. The Post can bail NYC out and make a nice profit doing so. I'm getting tired and a little dizzy. Looks like more wreckage ahead, so don't get too far ahead of yourselves. Don't fall behind either.

Posted by: Dermitt | September 28, 2009 8:15 PM | Report abuse

Unfortunately the comment "Traders like mergers because they generally are a sign of a healthier market." is completely wrong.

When any industry collapses it does not do so in a uniform manner, some businesses have to sell out to retain some value while those that are still viable buy up those businesses in distress, which is a canibalistic reaction - it is also how monopolies are created. M&A's are not necessarily a good sign for consumers who lose choice with less competition, it has always been this way. And, for it to happen during a market crisis suggests a bad outcome for everyone, including those merging and acquiring.

Posted by: icurhuman2 | September 28, 2009 9:05 PM | Report abuse

The comments to this entry are closed.

 
 
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