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U.S. markets gain on hopes for budget deal

Proactive Investors
Monday, 17 December 2012

U.S. stocks tallied gains Monday on optimism that Republicans and Democrats are close to reaching a deal to avert the fiscal cliff that analysts say could push the economy back into recession. 

Over the weekend, House Speaker John Boehner reportedly said he may accept higher taxes on millionaires in exchange for reduced spending on medicare and social security. President Barack Obama and Boehner are meeting in the White House today.

Investors are anxious as there are more than $600 billion in tax hikes and spending cuts set to kick in in January unless Congress can reach a budget agreement. 

Budget talks took a back seat on the weekend to debates on gun control in the wake of a horrific school shooting in Connecticut on Friday that resulted in the killing of 26 people - 20 of which were children. 

Financials led the advancers, as near market close, the Dow was lately up by 86 points, to 13,220, while the Nasdaq gained 31 points to 3,002 and the S&P 500 rallied 13 points to 1,427. 

On the economic front, investors largely ignored economic data in favour of developments on the budget. The  Empire State manufacturing index showed that the manufacturing sector in the area of New York state has been contracting steadily since August. 

The general business conditions index of the Empire State report fell to minus 8.10 for the December reading versus minus 5.22 and minus 6.16 in the prior two months. It has been in negative territory now for the fifth month in a row.

The report for December was filled with negatives that include contraction for new orders, unfilled orders, and employment. 

In corporate news, Apple's (NASDAQ:AAPL) iPhone 5 sales in China have set a new record with the best first weekend sales ever in that country. The technology company sold more than 2 million of its new iPhone 5s during the three days after its launch Friday, marking China's best-selling iPhone rollout ever. 

Shares reversed course to rise by 1% after earlier falling following Pacific Crest and Canaccord Genuity cutting their price targets on the stock, citing concerns about iPhone sales. This followed Citigroup (NYSE:C) lowering its rating on Apple on Sunday. 

Google (NASDAQ:GOOG) shares advanced Monday after a media report said the company is close to the end of a two-year investigation by the Federal Trade Commission into its Internet search business, emerging mostly unaffected. 

Insurer American International Group (NYSE:AIG) could raise as much as $6.5 billion from the sale of its remaining stake in a Hong Kong-based unit, according to reports.

AIG is offering its 13.69 per cent stake in AIA Group, a business the U.S. insurer helped found nearly 100 years ago, in a range of HK$29.65 to HK$30.65 each, media sources said.

Laclede Group (NYSE:LG) Monday said it will buy Missouri Gas Energy and New England Gas Co. from Energy Transfer Equity (NYSE:ETE) and Energy Transfer Partners (NYSE:ETP) in a deal valued at $1.04 billion. 

Sprint Nextel Corp. (NYSE:S) Monday said Clearwire’s (NASDAQ:CLWR) board has agreed to its $2.2 billion bid for the remaining 49 per cent of the company not already owned by Sprint.

The deal, at $2.97 per share for the remainder of Clearwire, values the whole of Clearwire at around $10 billion, including net debt and lease obligations of $5.5 billion. It is also an increase from Sprint’s previous offer of $2.1 billion or $2.90 per share, announced last week.

Shares of Clearwire lately fell over 13 per cent, however, as the new deal is a 12-per-cent discount to Clearwire's Friday closing share price of $3.37.

First Majestic Silver Corp. (TSE:FR)(NYSE:AG) is strengthening its presence in Mexico by acquiring Orko Silver Corp. (CVE:OK) for $387 million.

Sun Life Financial (TSE:SLF) (NYSE:SLF) Monday announced that it has agreed to sell its U.S. annuity business and certain life insurance businesses to Delaware Life Holdings for US$1.35 billion. The company said the deal with Delaware Life, a company owned by shareholders of Guggenheim Partners, is in line with its efforts to reduce its risk profile and focus U.S. insurance operations on its growing employee benefits and voluntary benefits franchises.

Shares in Caribou Coffee Company (NASDAQ:CBOU) soared Monday after it announced it will be taken private by Joh. A. Benckiser (JAB) in a $340 millon deal. 

Activist investment firm Elliott Management Corp Monday made a $2.3 billion offer for business software maker Compuware Corp. (NASDAQ:CPWR). Elliott Management's offer, at $11 per share, is a 15.4 per cent premium to Compuware's Friday close on the NASDAQ. 

Shares in Akamai Technologies (NASDAQ:AKAM) edged up after it named co-founder Tom Leighton as the new chief executive, replacing Paul Sagan, effective January 1. The naming of Leighton, Akamai’s chief scientist, as CEO culminates an executive search begun in April.

After Monday's closing bell, Diamond Foods (NASDAQ:DMND) is expected to post first-quarter earnings of 23 cents per share on revenue of $274.4 million, according to the consensus of analysts surveyed by FactSet.

*Commodities*

Gold for February delivery rose $1.20, or 0.1%, to $1,698.20 an ounce, as manufacturing activity in the New York region remained in negative territory for a fifth month in a row, boosting the metal's safe haven appeal. 

Crude oil, meanwhile, was supported by optimism that Democrats and Republicans would come to a budget agreement to avert the so called fiscal cliff, and on tensions in the Middle East. Crude for January delivery rose 47 cents, or 0.5%, to $87.20 a barrel, trimming gains from earlier in the day.

*Europe*

European markets finished mixed. The DAX gained 0.11%, while the FTSE 100 led the CAC 40 lower. They fell 0.16% and 0.14%, respectively.
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Source: Bloomberg - on December 7, 2012

News video: Hastert, Gephardt See Budget Deal Before Year End

Hastert, Gephardt See Budget Deal Before Year End

Dec. 6 (Bloomberg) -- Former Speaker of the House Dennis Hastert, a Republican, and former House Majority Leader Dick Gephardt, a Democrat, talk about budget negotiations between U.S. lawmakers and the likelihood that they'll avert the so-called year-end fiscal cliff of automatic budget cuts and tax...

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