Market Plays Follow the Leader
Bob Pisani is out this week - this post was written by CNBC producer Robert Hum
It’s back to school for the kids, and it’s back to work for the traders.
Stocks are set to rise to kick off the holiday-shortened work week following a solid two-day rally overseas in Asia and Europe. While U.S. markets were closed for the Labor Day holiday yesterday, Hong Kong’s Hang Seng index ended its session today at a new 52-week high, while Australia’s All Ordinaries and the U.K.’s FTSE 100 are at their highest levels since October.
Fueling the rally pre-open this morning: a modest rise in commodity stocks, which are all up 3 percent to 6 percent in early trading. This comes as the U.S. Dollar Index falls to its lowest levels since the end of last September, sending hard commodities up 2 percent to 6 percent this morning. Highlighting the commodity move this morning is gold, which is trading above $1,000 an ounce for the first time since February. If the bullion’s current levels hold by the end of its session today, it will be set to close at a new all-time high.
Not sweet enough! That’s what Cadbury’s board of directors is telling Kraft Foods about its surprise bid for the U.K. chocolate maker. Over the long weekend, Kraft made a $16.7 billion offer for Cadbury in a cash and stock deal that represents a 31 percent premium for Cadbury shares. However, Cadbury’s board rejects the offer, telling Kraft that the current offer “fundamentally undervalues” the company.
While shares of Kraft are down 6 percent in pre-market trading, Cadbury shares are trading up 42 percent pre-open, reflecting strong expectations that Kraft’s offer will eventually be revised upward or that a potential bidding war may ensue as rivals Hershey and Nestle each evaluate a possible bid for the British chocolatier.
Smithfield reports a bigger-than-expected Q1 loss on falling gross margins, continued weakness in its pork business, and poor volumes in its packaged meat operations. The deteriorating performance in its hog production unit was highlighted a triple whammy of depressed hog prices, weak volumes, and dismal plunge in pork exports (down 34 percent!).
Looking ahead, Smithfield warns “The hog production industry will very likely continue to incur losses until an industry-wide liquidation occurs.”
AIG down 5 percent pre-open after Credit Suisse downgraded the financial firm to “underperform” and halved the price target from $30 to $15, warning that “near term monetization of value of business suggests little to no value” for shareholders. This comes following a 20 percent decline in AIG stock last week. Still, the company is up nearly 200 percent from $13 levels one month ago.
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