INO.com News - Stocks Moving Off Highs But Holding Onto Notable Gains

Stocks Moving Off Highs But Holding Onto Notable Gains - U.S. Commentary

(RTTNews) - Stocks are attempting to hold onto strong gains in early afternoon trading on Monday, although they have moved well off their best levels of the day. The major averages are all in positive territory by substantial margins, looking to kick off the holiday-shortened week on a strong note.

Early gains by stocks came amid weakness in the U.S. dollar, which also boosted commodity prices. Additional buying interest came shortly after the opening bell, with the National Association of Realtors reporting that existing home sales rose by more than anticipated in the month of October.

The strong existing home sales growth was partly due to the first-time homebuyer tax credit, helping to drive the annual rate to its highest level since February of 2007.

On the corporate front, the rivalry to acquire U.K.-based confectionery maker Cadbury (CBY) is escalating, with Kraft Foods (KFT) reportedly considering an increase in its bid to $16.3 billion. U.S. chocolate maker Hershey (HSY) and Swiss chocolate giant Nestle have also shown interest in Cadbury.

In other news, Chicago Federal Reserve President Charles Evans said that U.S. unemployment would likely peak around 10.5 percent in spring 2010 and probably won't begin to decline until the summer. Evans also said in an interview with the Financial Times that the Fed would probably keep interest rates near zero until late next year, at the earliest.

The major averages have seen some downside in recent trading, moving further off their highs for the session. Nonetheless, the Dow remains up 120.77 at 10,438.93, the Nasdaq is up 26.91 at 2,172.95 and the S&P 500 is up 14.18 at 1,105.56.

Sector News

Health insurance stocks are turning in some of the day's best performances, with the Morgan Stanley Healthcare Provider Index up by 3.5 percent. At its high for the session, the index was at its best intraday level in roughly fourteen months.

WellPoint (WLP) and Cigna (CI) are two of the strongest gainers in the sector, advancing by 4.4 percent and 7.3 percent, respectively, reaching their best intraday prices in two months. The gains come after JP Morgan Chase upgraded both stocks to Overweight from Neutral.

Gold and oil service stocks are also posting notable gains, with the NYSE Arca Gold Bugs Index up by 2.5 percent and the Philadelphia Oil Service Sector up by 2.4 percent. The gold index has reached a twenty-month intraday high, while the oil service index remains in a range.

The gains by gold and oil service stocks have come amid a rally in their related commodity prices on the NYMEX. Gold for December delivery is currently up by $21.40 at $1,168.20 an ounce, while oil for January deliver is currently up by $1.51 at $78.98 a barrel.

Banking, airline, electronic storage and commercial real estate stocks are also on the rise, among others, reflecting the day's broad based strength.

Stocks In The News

LDK Solar (LDK) is seeing strength in early afternoon trading after it reported third-quarter net income of $0.27 per ADS, beating the expected $0.10 per ADS for the quarter. Sales also beat Wall Street forecasts. The stock has shot up by 8.3 percent, setting a two-month intraday high.

Diedrich Coffee (DDRX) is also on the rise following news that Peet's Coffee & Tea (PEET) increased its previously announced offer to acquire Diedrich to $32 per share. Shares are up by 26.9 percent, reaching their best intraday price in over a decade.

On the other hand, Ciena (CIEN) is moving lower after the firm was selected as the successful bidder in the auction of the global optical networking and carrier ethernet businesses of bankrupt Canadian networking firm Nortel (NT). The stock has slipped by 9.7 percent, backing further off of last week's monthly high.

In Focus: Existing Home Sales

As mentioned above, the National Association of Realtors reported that existing home sales jumped 10.1 percent to an annual rate of 6.10 million units in October from a downwardly revised 5.54 million in September. Economists had expected sales to rise to 5.70 million from the 5.57 million originally reported for the previous month.

Lawrence Yun, NAR chief economist, said, "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November."

"With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer," Yun added.

While the first-time homebuyer tax credit had been due to expire at the end of November, President Barack Obama signed a bill earlier this month that extended and expanded the tax credit.

The bill extends the $8,000 first-time homebuyer tax credit through April 30, 2010 and expands it to include a $6,500 credit for people who have lived in their current homes for at least five years.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mostly higher on Monday, although the Japanese market was closed on the day. Hong Kong's Hang Seng Index rose by 1.4 percent, while China's Shanghai Composite Index closed up 0.9 percent.

The major European markets also saw notable gains, with the U.K.'s FTSE 100 Index rising by 1.7 percent, while the French CAC 40 Index and the German DAX Index closed up by 2.3 percent and 2.4 percent, respectively.

In the bond markets, treasuries continue to see weakness ahead of the release of the results of today's two-year note auction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 3.390 percent, posting gain of 3.0 basis points.

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