Futures indicated an upward start to today’s action, causing major averages to open modestly higher on Thursday. Following a modestly higher open however, the indices started to sell-off and hover in red territory to only resume climbing again, as Fed Chairman Bernanke and Treasury Secretary Paulson began their semi-annual testimony before the House Financial Services Committee.
Market sentiment continued to improve as the session progressed. Merger news and positive economic data prompted investors to overcome credit concerns and insolvency issues facing Fannie Mae (FNM) and Freddie Mac (FRE).
Chemical stocks remained in the spotlight after Dow Chemical Co. (DOW) announced it will acquire Rohm & Haas Co. (ROH) for $15.3 billion, a 74% premium on the company’s closing price of $44.83 a share on Wednesday. This is the biggest deal in Dow’s 101-year history.
The deal is being financed with equity investments of $3 billion by Warren Buffett’s Berkshire Hathaway, and $1 billion from the Kuwait Investment Authority.
On the economic front – the Labor Department said initial jobless claims for the week ending July 5 totaled 346,000. Economists had forecast claims would fall to 395,000. Weekly claims decreased 58,000 from the prior week. The figure may have been misrepresented by annual July shutdowns at auto plants. (during the month of July automakers reduce staff to upgrade factories in preparation for new car models) However, despite this fact – the average of the last two weeks is 375,000, indicating a fair level of stability in relation to claims.
All major averages were higher at midsession, as gains remain broad-based with advancers mostly in control of the market breadth. But as crude prices spiked, almost $4 going into the close of pit trading, following a report that Iran test-fired more missiles today in the Persian Gulf, market gained volatility. However, at closing the market advanced successfully across positive territory with the Dow Jones Industrial Average adding more than 80 points to-tape.
In other news
– Back in focus was the fourth-largest U.S investment bank, Lehman Brothers (LEH) which saw its shares decline on rumors that investment management firms, including Pimco, the world’s biggest bond fund, may be reducing their relationship with the company. Lehman’s shares fell as low as $16.20, their lowest level in eight years.
– Retailers posted their strongest monthly gain in more than a year in June as rebate checks fueled spending at wholesale clubs and other stores. Wal-Mart (WMT) and Costco (COST) led U.S retailers by reporting higher sale. Wal-Mart, by itself accounted for more than half of the industrywide sales gain.
– Earnings season is already under way. Texas Industries (TXI) announced earnings of $0.92 per share or $0.49 ex-items, versus the consensus of $0.75. Revenues came in at $266.4 million, versus the consensus of $269.7 million.
– Bank Of England left its main interest rate target unchanged Thursday at 5.0 percent.