Big Caps Rise; Buffett in Bond, M&A Action
With two days left in the trading year, the long reign of small caps over big caps appears to be over: The Dow Industrials are up 7.2 percent, the S&P 500 is up 4.1 percent, the Nasdaq is up 10.8 percent and the Russell 2000 is down 1.8 percent.
Despite the worries about a slowing economy, cyclicals have outperformed consumer stocks for the year, up 11.9 percent vs. up 6.8 percent, respectively. However, for the quarter cyclicals are down 5.8 percent vs. down 0.6 percent for consumer stocks.
1) A judge in Tennessee has ruled that Finish Line must complete its acquisition of retailer Genesco . The judge ruled that the deal was too solid to be broken by claiming material adverse changes at Genesco. This is a significant ruling, in that it is likely to shake up other companies that are looking for ways to get out of their mergers as well.
However, Swiss bank UBS -- which is funding most of the $1.5 billion deal -- has sued both companies in New York, in an effort to be relieved of its obligation. If the N.Y. court determines that the merged company would be immediately insolvent, the merger could be halted. What a mess. Genesco up 15 percent pre-open.
2) Warren Buffett is set to launch Hathaway Assurance, a bond insurer for local governments. Separately, ING has agreed to sell its Dutch reinsurance unit for $435 million to a subsidiary of Berkshire Hathaway.
3) Sallie Mae up 3 percent pre-open; it has completed the sale of $1 billion of convertible securities and $2 billion of common stock, more than it had expected to raise. The money will be used to pay off bad derivative bets.
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