US Equity and Commodities Markets Update

Posted on | June 29, 2009 |

US equity markets opened the week in positive territory today as broker upgrades and merger-and-acquisition activity fuelled risk appetite.

JC Penney, the third-largest US department-store chain, was 1.8% higher at $28.89 a share this afternoon after Morgan Stanley upped its recommendation from ‘equal weight’ to ‘overweight’. The bank highlighted the fact that the retailer trades at a 24% discount to its peer group, and stated that it is the ‘most likely candidate in the department store group to outperform current consensus gross margin expectations in the second-half of 2009 and beyond.’ [1]

Software giant Microsoft Corp also benefitted from a broker upgrade today. The company rose 2% to $23.82 after Deutsche Bank upped its price target from $22 to $30 a share, saying that the release of Windows 7 would help the company’s share price. In the meantime, Collins Stewart raised its price target on Microsoft to $30 a share, saying that there are ‘incremental opportunities’ from Windows 7. [2]

The Financial Times, meanwhile, reported that Microsoft has appointed Morgan Stanley to find it a buyer for Razorfish, a digital agency that could be valued up to $700 million.

Elsewhere, TEPPCO Partners, a publicly traded energy logistics partnership, surged 4.4% to $29.95 after Enterprise Products Partners LP agreed to acquire the company for around $3.3 billion. The CEO of Enterprise Products believes the deal will start increasing his company’s earnings in 2010 and will result in cost savings of circa $20 million.

Consulting firms Towers Perrin Forster & Crosby and Watson Wyatt Worldwide yesterday agreed to merge via an all-stock deal valued at approximately $3.5 billion. The merger is meant to help the companies cut costs and exploit synergies. Shares in Watson Wyatt fell almost 8% to $37.9 a share, nevertheless.

Biotechnology company Biogen Idec was also in the spotlight today, after another patient using its multiple sclerosis drug developed a deadly brain disease. In addition, Deutsche Bank downgraded the biotechnology company’s shares from ‘buy’ to ‘hold’, saying its share price was now ‘fairly valued’. Not surprisingly, shares in Biogen Idec slid 6.9% to $46.61 this afternoon.

In the meantime, the International Energy Agency (IEA) today cut its five-year forecasts for global crude oil demand, saying the ‘deep economic recession that has spread worldwide in the past year has taken a severe toll on oil demand.’ [3]

The agency said that demand may grow 0.6% per annum until 2014 but could drop by 0.2% a year if global GDP turns out to be below the International Monetary Fund’s forecasts. The price of August crude continued to rise, however, up 2.9% to $71.18 a barrel, following militant attacks on Nigerian oil pipelines.

By 3.30pm (London time) the S&P 500 was trading 3.3 points higher (+0.36%) at 922.2, while the Dow Jones Industrial Average had gained 42.77 points (+0.51%) to 8481.16.

It is worth noting that the main focus this week will be the June labour market report, which is scheduled for release on Thursday, instead of Friday, when US markets will be shut for the Independence Day holiday.

[1] Source: Bloomberg News (29 June 2009)
[2] Source: Bloomberg News (29 June 2009)
[3] Source: Bloomberg News (29 June 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Comments