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Market Recap: WaMu Surges But Stocks End Flat


WaMu gets $5 billion and surges 30% on the day.

Stocks, boosted by news of more capital injections in the financial sector, had a strong opening but the equity markets peaked by midday to end the session virtually flat. The Dow Industrials added +3 points, or +0.02% to 12612, the S&P 500 closed +2 points, or +0.16% to 1372, and the Nasdaq Composite fell -6 points, or -0.26% to 2364.

According to Bloomberg, Washington Mutual (WM) surged the most in nearly 25 years after the company said it was expecting $5 billion from private equity firm TPG. This comes after WaMu, the largest savings and loan in the U.S., lost 74% of its market value in the last 12 months. The company was late to the game in the subprime market and posted more than $3 billion in writedowns and loan losses. Further, Standard & Poor's cut the company's credit rating last month to BBB from BBB+, two levels above junk status, and added that further reductions were possible. Nonetheless investors were pleased with the company's move as credit default swaps declined and the stock jumped +29% to $13.15.

Other stocks in the sector got a lift as a result of the news. Notable gainers include UBS (UBS) +3.6% to $34.88. Merrill Lynch (MER) added +2.8% to $47.55. Lehman Brothers (LEH) finished +1.25% to $44.60, and Goldman Sachs (GS) closed +1.9% to $178.73. For more on WaMu, read Minyanville Editor Andrew Jeffery's column, WaMu Shores Up Balance Sheet.

M&A news helped prop up the markets this morning as well. Novartis (NVS), Switzerland's second-largest drugs company, said it agreed to buy Nestlé's 77% stake in U.S. company Alcon (ACL). The deal, which could be worth up to $39 billion, would make Novartis the world's biggest maker of eye-care products. Novartis will first acquire a 25% stake for $11 billion at a 4% discount to ACL's Friday closing price, but the company will retain the option to acquire the remaining 52% for a fixed price of $28 billion between January 2010 and July 2011, marking a 22% premium. Among the reasons for the acquisition, Novartis CEO Daniel Vasella said "the margins are higher than our pharma business and are obviously very attractive. NVS declined -4% to $50.00, and ACL finished +1.5% to $150.63. Read Toddo's Monday Morning Point Guard: Bulls Run and Gun.

In tech, Yahoo (YHOO) insisted that Microsoft (MSFT) raise its $31 per share offer, saying the bid undervalued the company. Professor Sean Udall offered his thoughts on the Buzz:

"YHOO's playing a dangerous game. It seems that many pundits don't think MSFT could lower their bid in a hostile situation.

"Why not? MSFT could lower the bid to, say, $28 or so and ask for a vote. Most shareholders know where the stock would go if the merger vote didn't pass. As I said before, the MSFT offer of $31 is solid and frankly came at a time when YHOO really needed a lift.

"After all, where would YHOO have traded (with no bid), before Bear Stearns' (BSC) week after its last quarter and tech analysts downgrading stocks everyday?"

MSFT shares fell -0.17% to $29.16. YHOO lost -2.22% to $27.74. Other notables in the sector include Garmin (GRMN) closing -2.6% to $52.51, Apple (AAPL) added +2.6% to $155.75, and Baidu (BIDU) finished at the $300 mark for a +2.2% gain. Read Toddo's Random Thoughts.

In commodities, crude oil gained +2.51% to 108.89. Gold gained +14.10 to 923.10. Silver closed +0.3000 to 18.055, and copper rose +0.15 to 398.00.

Check out Professor Ryan Krueger's Longer-Term Bet on Lower-Cost Oil.

The dollar index gained +024$ to 72.194.

For more Buzz insight, check out Minyanville's Buzz Bits.

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: MA, SPX, XBD, BKX, AAPL, ASIA, CNTF, DOX, RVBD, NM, MON, SYT, EMC, WBD, DVN, DO, CPKI, KEG, FLS, ISRG, AIG, MER, tran, steel

Some bearish trade or investment ideas: BIDU, JPM, FNM, FRE, FSLR, AEM, VMW, SKX, SCSC, FII, MGM, VMI

The Mondays... the worst is over. Hope you have a great night!
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