By Kate Gibson
Wall Street's six-week run-up resumed on Tuesday as technology
shares displayed further signs of life in a second day of M&A
activity in the sector, with analysts pondering how long banks
would direct the broader market's moves.
"We're not too far away from ramping up and having inventory for
the holiday season. I think iPods, laptops, electronics will be hot
sellers again," said Tim Speiss, head of the wealth-management
division at Eisner LLP, who lists the consumer sector as among the
barometers to watch for signals of a full-fledged economic
turnaround.
"Health care and technology are going to be strong indicators as
well," said Speiss.
On Tuesday, stocks finished solidly higher after wavering
between gains and losses early on. The Dow Jones Industrial Average
(DJI) gained 127.83 points, or 1.6%, to 7,969.56. The S&P 500
(SPX) advanced 17.69 points, or 2.1%, to 850.08, while the
technology-laden Nasdaq Composite (RIXF) climbed 35.64 points, or
2.2%, to stand at 1,643.85.
"U.S. equities turned the corner and rebounded led by the
technology sector following a solid earnings result from Texas
Instruments Inc. (TXI) and this was compounded on the blue chips by
a better than expected profit reading from diversified manufacturer
United Technologies Corp. (UTX). A merger bid in tech also fueled
some investor appetite after Broadcom Corp. (BRCM) made an
unsolicited bid for Emulex Corp. (ELX)," said analysts at Action
Economics. .
Tuesday's M&A activity followed word the prior day that
software goliath Oracle Corp. (ORCL) planned to acquire Sun
Microsystems Inc. (JAVA) for $7.4 billion, and GlaxoSmithKline
plc's announcement (GSK) of a $3.6 billion deal for Steifel
Laboratories.
Monday pattern
Despite finishing higher for the past six weeks straight, the
Dow Jones Industrial Average (DJI) hasn't risen on a Monday since
March 23. That pattern persisted as the current week began, with
the blue-chip index falling nearly 300 points.
"After six straight weeks moving higher, we needed a pause,"
said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Other analysts agreed.
"We view yesterday's action as a normal short-term trading
correction in what is a broader longer-term uptrend which is being
supported by better than expected earnings, and early signs of
economic stabilization," said Robert Pavlik, chief market
strategist, Banyan Partners LLC.
While many are looking to the tech sector to "lead us out of the
current malaise," and the stocks themselves may outperform going
forward, the fact remains that worldwide technology spending is
down," said Dan Greenhaus, equity strategy group, Miller Tabak
& Co.
Bank stocks had led Monday's market declines as a slew of
earnings reports intensified concern that the credit and economic
climate is less rosy than might have been suggested in the sector's
April rally.
"The market is rethinking credit risk and the health of the
financial sector in light of Bank of America Corp.'s (BAC) profit
report, uncertainty over the stress test, and the government policy
toward the banking sector," Nick Kalivas, an equity analyst at MF
Global.
Bank of America's results, reported Monday, illustrated
"everything right and wrong with the financial sector this
quarter," said Pado.
"These are not revenues that will be repeated, a common
complaint about much of the bank earnings this past quarter," Pado
said. .
"Positive bank earnings largely represent a combination of
one-off trading gains and shifts in accounting rules designed to
mask the damage to the financial markets," said TJ Marta, Marta on
the Markets.
"A lot of this might have been smoke as far as first-quarter
earnings go. I don't think we can totally state we're out of the
woods for a couple more quarters," said Speiss.