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Dow Crosses 9,900 Amid Earnings Optimism

CNBC.com
Monday, 12 Oct 2009 | 12:19 PM ET

Stocks opened higher Monday as better-than-expected third-quarter results began trickling in, boosting investors' optimism about the overall earnings season.

The Dow Jones Industrial Average rose more than 40 points, crossing over the key 9,900 mark in the first few minutes of trading — and remaining there into the afternoon session. The S&P 500 rose 0.6 percent and the Nasdaq advanced 0.4 percent.

Market activity will be lighter than normal. The Columbus Day holiday closes the U.S. bond market, banks, government offices and many businesses, though the stock market will be open for a normal day of trading.

This comes after the Dow logged its highest close in over a yearon Friday, which, coincidentally, was also the two-year anniversaryof its record close above 14,000.

Another M&A deal was announced today: Onyx Pharmaceuticals has agreed to buy Proteolix, a private biotech firm that's developing cancer drugs, for an upfront cash payment of $276 million. Onyx could pay an additional $535 million, depending on whether the new company reaches various development and regulatory approval milestones.

Earnings season kicks into high gear this week and the word of the week is: Banks. We'll get reports from JPMorgan on Wednesday, Citigroup and Goldman Sachs on Thursday and Bank of America on Friday.

Big banks should do wellin the coming quarters, helped by strong trading activity, banking analyst Dick Bove said on CNBC this morning. But, he cautioned that regional banks will take a hit from commercial real estate.

Traders are going to be paying particularly close attention to Goldman Sachs's earnings to see how the firm deals with up to $20 billion in bonuses just one year after it accepted federal bailout money.

We'll also get reports this week from a couple of the Dow's tech components — Intel and IBM .

Black & Decker shares jumped after the power-tool maker raised its third-quarter profit target, citing better-than-expected sales, operating margin and tax rate.

In analyst action today:

UBS raised its rating on chip maker AMD to "buy" from "neutral," and slashed its rating on SanDisk to "sell" from "neutral."

UBS raised its price targets on Hewlett-Packard and IBM .

Google got a double bonus: Goldman raised its price target on the stock, while JPMorgan raised its earnings projection.

And Credit Suisse raised its rating on credit-card providers MasterCard and Visa to "outperform" from "neutral," and raised its price targets on the stocks to $255 and $84, respectively.

No major economic numbers on tap today but later this week we'll get some key readings, including the consumer price index, initial jobless claims, and consumer confidence.

Among news items of interest, St. Louis Federal Reserve President James Bullard says medium term inflation risks could be higher than many think. He spoke at an economic conference in St. Louis over the weekend.

Various published reports indicate that private equity firm Blackstone Group is planning to list up to eight companies in its portfolio and selling five others. This is being seen as another sign of a healthier market for IPOs and M&A activity.

Shares of investment bank Lazard are under pressure overseas, following news that chairman/CEO Bruce Wasserstein has been hospitalized with an irregular heartbeat, though he is said to be stable and recovering.

KB Home shares may bear watching, as the SEC announces an investigation of possible accounting and disclosure issues.

This Week:

MONDAY: NABE annual meeting; Columbus Day holiday in US—stock market open but bond market closed
TUESDAY: NABE annual meeting; Bear Stearns execs on trial; Enron's Skilling resentenced; Fed's Kohn and Dudley speak; Treasury budget; Earnings from Johnson & Johnson, Intel
WEDNESDAY: Allen Stanford court appearance; Weekly mortgage applications; government's report on retail sales; import/export prices; business inventories; Fed minutes; Earnings from Abbott Labs and JPMorgan
THURSDAY: IRS amnesty for offshore accounts ends; CPI; Empire State manufacturing; weekly jobless claims; Philly Fed; weekly crude inventories; Earnings from Citigroup, Goldman Sachs, Nokia, IBM and AMD
FRIDAY: Industrial production; consumer sentiment; Fed's Fisher speaks; Earnings from Bank of America, GE, Halliburton and Mattel

Send comments to cindy.perman@nbcuni.com.

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