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Wall St.'s merger Monday
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December 17, 2001: 5:20 p.m. ET
Multi-billion-dollar merger momentum fuels U.S. tech stocks, big-cap names.
By Staff Writer Alexandra Twin
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NEW YORK (CNN/Money) - Wall St. rallied Monday, as U.S. stock investors bounced off the sidelines and into tech and blue-chip names on hopes that the day's two multi-billion-dollar merger deals will prove to be representative of better times to come in the corporate world.
Investors approached the last full week of trading before the close of the year with surprising gusto, despite light volume, as news of the largest merger in biotech history boosted the Nasdaq composite index, while big-cap names lifted the Dow Jones industrial average.
"We had a good day with surprising strength, but I need to see a follow-through tomorrow to believe it will stick," Larry Wachtel, market analyst, Prudential Financial, told CNNfn's Street Sweep.
The Nasdaq composite index rose 34.28 to 1,987.45. The Dow Jones industrial average added 80.82 to 9,891.97, while the Standard & Poor's 500 gained 11.29 to 1,134.36.
Treasury prices fell, with the 10-year note yield up to 5.31 percent from 5.16 percent late Friday.
Causing a stir were two early morning deals.
Amgen (AMGN: up $3.46 to $59.49, Research, Estimates) said it will buy biotech sector mate Immunex (IMNX: up $3.44 to $29.06, Research, Estimates) for $16 billion in stock and cash. Widely reported since the end of last week, the deal gives Amgen the rheumatoid arthritis drug Enbrel.
Vivendi Universal (V: up $3.15 to $52.10, Research, Estimates) will buy the shares of cable channel operator and film distributor USA Networks (USAI: up $1.20 to $25.02, Research, Estimates) that it doesn't already own. The French-American media conglomerate will spend $10.3 billion in cash and stock.
"The mergers helped, but you also had some asset reallocation, with people taking money out of Treasurys and putting it into equities," Wachtel said.
The Amgen news in particular helped kick start the tech sector and in turn, the Nasdaq, but gains in blue-chip names, symbolized by the Dow, joined the rally with just as much verve.
"The news created volume on positive speculation about other potential corporate mergers. However, last week was a down week, so we have a little bit of a bounce-back rally Monday," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
Looking ahead, traders said that market action would probably be extremely choppy for the remainder of the week.
Asian stocks closed lower Monday, while European bourses closed higher. The dollar gained against the yen but eased lower versus the euro.
Light crude oil futures fell 1 cent to $19.52 a barrel in New York.
Market breadth was positive. On the New York Stock Exchange, nearly nine stocks rose for every seven that fell as almost 1.23 billion shares changed hands. On the Nasdaq, gainers beat losers by about 4-to-3 as nearly 1.80 billion shares traded.
Biotech boom
Biotechs, chipmakers and networking issues gave the Nasdaq strength, while oil, energy and retail names were among the big losers.
In addition to the Amgen news, biotech as a sector benefited from the rotation of 13 companies within the Nasdaq 100, announced Monday and taking effect Dec. 24. The American Stock Exchange Biotechnology index added 3.5 percent.
"We're going to see communication stocks and dot.com stocks and things that you probably didn't like in the market over the past year coming out of the Nasdaq, and a lot of biotechs going in," Michael Farr, president of Farr, Miller & Washington, told CNNfn's Market Call.
Pharmaceutical company Pfizer (PFE: up $0.89 to $40.33, Research, Estimates) rose on news that the company's single-dose children's ear infection remedy got a regulatory OK. The company also updated guidance for 2001 earnings per share, saying it is comfortable with earnings of at least $1.30 per share, a penny short of estimates.
Automaker Ford Motor (F: down $1.10 to $15.00, Research, Estimates) is looking to raise $10 billion through a shelf registration statement filed with regulators. The company may also cut production and lay off staff, according to a published report.
But tech stocks ruled the day.
Conexant Systems (CNXT: up $0.71 to $16.57, Research, Estimates) guided higher for its fiscal first quarter due to stronger-than-expected performance of its wireless and broadband access units. The communications chipmaker also agreed to merge its wireless business with Alpha Industries (AHAA: up $5.15 to $26.35, Research, Estimates) to create a combined company worth about $3 billion.
Morgan Stanley raised its guidance on Internet security software maker Network Associates (NETA: up $1.76 to $26.06, Research, Estimates) to "outperform volatile" from "neutral volatile," and also raised its 2002 and 2003 earnings outlook for the company.
Communications service provider Comverse Technology (CMVT: up $1.29 to $20.43, Research, Estimates) will provide voicemail services for Verizon Wireless (VZ: up $1.16 to $48.36, Research, Estimates) in several U.S. markets.
Some smaller names made big waves, as well.
XM Satellite Radio (XMSR: up $0.48 to $16.72, Research, Estimates) and Sirius Satellite (SIRI: up $1.66 to $8.41, Research, Estimates) were unusually active, building on Friday's gains after SG Cowen started coverage of XM with a "strong buy" rating and noted the potential of satellite radio.
Security Capital Group (SCZ: up $4.59 to $25.29, Research, Estimates) rose substantially on news of a buyout from GE Capital, a unit of General Electric (GE: up $0.65 to $38.30, Research, Estimates).
The Dow industrials were largely positive, with United Technologies (UTX: up $1.39 to $62.85, Research, Estimates), Microsoft (MSFT: up $1.54 to $68.98, Research, Estimates) and 3M (MMM: up $1.50 to $117.30, Research, Estimates) among the day's biggest gainers.
Leading the list of losers were stocks in the energy sector.
Moody's Investors Service cut power producer Calpine's (CPN: down $0.30 to $12.90, Research, Estimates) credit rating to junk status and said it may cut it again should the company fail to find additional financing.
Energy marketer Mirant (MIR: down $2.35 to $13.35, Research, Estimates) suffered a pair of brokerage downgrades on concerns about its credit rating.
Dynegy (DYN: down $3.24 to $21.70, Research, Estimates) fell after lowering its earnings guidance for 2002. The former merger partner of Enron (ENE: down $0.06 to $0.57, Research, Estimates) also said it will issue additional stock to raise money. 
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