Short and sweet on Wall Street
Major indexes rise in a half-day session as investors send financial stocks higher after Merrill Lynch announces a big capital boost.
NEW YORK (CNNMoney.com) -- Stocks closed higher Monday afternoon at the end of a half-day of trading on the eve of a Christmas pause, as investors flocked to financial services firms after yet another Wall Street firm announced a big foreign cash investment.
Treasury prices fell. The dollar dropped versus the euro and gained against the yen. Oil and gold prices rose.
Monday's session opened higher, extending gains from Friday's rally. Trading volume remained light throughout the day, and markets will remain closed Tuesday for the Christmas holiday.
Thursday is slated to bring a key report on U.S. consumer confidence. And on Friday, the government will release data on new home sales for November.
Merrill Lynch (MER, Fortune 500), which has been battered by the credit crisis, announced early Monday that it will sell a $4.4 billion stake to Temasek Holdings, Singapore's state-owned investment company, and $1.2 billion to a U.S. advisory firm.
In recent weeks, a number of big financial services companies - including Morgan Stanley (MS, Fortune 500), Citigroup Inc. (C, Fortune 500) and UBS AG (UBS) - have received capital infusions from foreign government investment entities to help offset subprime related losses.
"The big news of the day are these investments in investment banks by sovereign wealth funds," said Brian Gendreau, investment strategist at ING Investment Management.
Merrill Lynch also announced Monday that it will sell its commercial finance unit, Merrill Lynch Capital, to the finance branch of General Electric. Terms of that deal were not disclosed. Shares of General Electric Co (GE, Fortune 500). rose 2 percent on the news.
The market appears to be responding favorably to the recent efforts by Wall Street firms to bolster their capital.
"The financials are leading the way, suggesting that the market is seeing some buying opportunities there," notes Gendreau.
Shares of Merrill Lynch, which were up nearly 4 percent in early trading, ended Monday a little more than 3 percent lower.
In a reminder of the depths of the problems facing Merrill, a Wachovia (WB, Fortune 500) analyst lowered his earnings forecast for the company on Monday. He warned that Merrill may takemore writedowns when it reports fourth-quarter earnings even after reporting close to $8 billion in writedowns last quarter due to souring mortgage-backed securities.
While Merrill was the main attraction Monday, other Wall Street firms saw their stocks increase. Citigroup ticked up 2.5 percent percent and Lehman Brothers (LEH, Fortune 500) and J.P. Morgan Chase (JPM, Fortune 500) each went up about 1.6 percent.
One of the big economic stories was holiday shopping, and the outlook was uncertain because all the data has not come in yet. But some retailers are jittery on fears that a pre-holiday shopping frenzy may have fizzled out.
In corporate news, consumer electronics retailer Circuit City (CC, Fortune 500), which reported a larger-than-expected quarterly loss last week, rose 4 percent despite an analyst report saying the company will be challenged for years to come.
Market breadth was positive. On the Dow, winners beat losers by roughly three to one on a volume of 536 million shares. On the Nasdaq, advancers beat decliners roughly eight to five on a volume of 781 million shares.
Treasury prices fell, raising the yield on the 10-year note to 4.21 percent from 4.16 percent late Friday. Treasury prices and yields move in opposite directions.
U.S. light crude oil for January delivery rose 84 cents to $94.15 on the New York Mercantile Exchange.
In currency trading, the dollar fell versus the euro and gained against the yen.
COMEX gold for February delivery rose $1.10 to $816.50 an ounce.