Stock Market News for September 29, 2009

U.S. stocks broke a three-day slide and rose more than 1% Monday as a fresh round of strategic corporate deal-making spurred hopes that normalcy is returning to the financial system.  The multi-billion dollar merger announcements signaled a resurrection in merger activity and investors picked up stocks. 

The Dow Jones industrial average jumped 124 points, or 1.3% and the broader S&P 500 index rallied 19 points, or 1.8% and the Nasdaq composite index advanced 40 points, or 1.9%.  The share gains were broad based with 28 of the 30 Dow components advancing.  On the New York Stock Exchange, four stocks rose for each one that declined in price.  Only 978 million shares exchanged hands on the NYSE.  Trading was light due to the Jewish holiday of Yom Kippur.     

In a spate of big corporate merger announcements, Abbott Labs (NYSE:ABT - Analyst Report) said it will pay $6.5 billion for Solvay's pharmaceutical business, and Xerox (NYSE:XRX - Snapshot Report) offered to pay $6.4 billion in cash and stock for Affiliated Computer Services (NYSE:ACS - Analyst Report).  Johnson & Johnson (NYSE:JNJ - Analyst Report) said it will pay $444 million for an 18% stake in Crucell (NASDAQ:CRXL - Snapshot Report).  The announcements signaled corporations’ belief that equity markets still offer values, while economic conditions support a growth environment for purchases made.

The financial, basic materials, and oil & gas sectors were among the leading gainers yesterday.  Even as stock prices rose, Treasuries advanced and the corresponding yields fell, with the yield on the 10-year notes declining to 3.28% from 3.32%.

Yesterday's strength was broad-based with 28 of the DJIA's 30 components moving higher, and all ten S&P 500 industry sectors marking gains.  Financials (+3.4%) were the leading gainers, with American Express (NYSE:AXP - Analyst Report) up 4.1% and Bank of America (NYSE:BAC - Analyst Report) rising 3.7%.  Morgan Stanley (NYSE:MS - Snapshot Report) said it expects banks' credit losses to decline over the next 12-18 months, and noted large-cap banks are "largely done with capital repair."

Analyst upgrades also helped much of the rally yesterday, with Citigroup (NYSE:C - Analyst Report) shares jumping 4.3% on an analyst upgrade. Cisco (NASDAQ:CSCO - Analyst Report) rallied 4.4% after Barclays' (NYSE:BCS - Analyst Report) upgraded the stock to "overweight" from "equal weight," citing prospects in Europe and momentum in the US. Applied Materials (NASDAQ:AMAT - Snapshot Report) jumped 3% on a Citigroup (NYSE:C - Analyst Report) upgrade to "buy" on opportunities in its solar-power operations.  However, MEMC Electronic Materials (NYSE:WFR - Analyst Report) shed 3.1% after Citigroup (NYSE:C - Analyst Report) cut its rating to "hold" from "buy", noting recent poly production problems remain unresolved.