MARKET BEAT: August 27, 2007

EARLY TRADE

Call it a case of the Monday Morning Blues as the bulls schnitzel some profits on motivations mostly removed from the headlines. As of 10:45 ET the Naz’100 () and S&P500 “SPYder” () are down .41% to .68% on swimming conditions still suited for hedge hogs.

Investors awoke to some good ol’ fashioned Merger Monday headlines. Unfortunately, potential relief has been pasted and cut into reasons for concern or what others might just call well-deserved and mostly lethargic profit-taking. Headlining today’s soulful search by Wall Street, is news of Home Depot () confirming its building supply unit sale for an 18% reduction, following Friday’s well-received anticipatory buzz. Traders continue to bid shares of HD, currently up .65 cents at 35.33.

Unfortunately for investors elsewhere, the continued upside reaction in shares of Home Depot appears to be more a case of real relief, rather than a buoyant broad-based cheer. The report has actually set a bit of a negative tone for Wall as investors fear the reduced terms necessary to close the deal doesn’t bode well for other negotiated M&A announcements still in need of financing. And for a market which owed much of its march to all-time and multi-year highs based on those same wheelings and dealings; well Monday’s story isn’t nearly as appealing.

In other credit-related news, despite worries over deals still in need of financing, a couple of fresh forays are being dangled to investors. A report by the Financial Times suggests Wal-Mart (), the world’s largest retailer, is shopping around for potential acquisitions for the first time in twenty-five years. Shares of WMT are flat on the day at 43.73. Shares of Altria () are up 1.37 at 70.56 on a report that it will spin off its overseas cigarette unit, while US Steel () is down .10 cents at 93.29 after announcing a minor $1.04B acquisition of Canada’s Stelco.

In closing out Monday’s wheelings and dealings, one-time computer heavyweight Gateway () received a lift from Taiwanese rival Acer. The two look to merge for $710M and a 57% premium to Friday’s closing price. Further, the combined entity looks to expand its European presence with a “first attempt” bid for Paris-based Packard Bell much to the chagrin of the world’s third largest PC maker, China’s Lenova. Shares of GTW are up .59 cents at 1.80, ten-cents below the negotiated price and world’s removed from other mad money efforts of recent months.  

On the officially sanctioned side of what’s “moooving” the bulls into profit-taking, an in-line 5.75M reading of existing home sales isn’t helping matters. Not that the number is bad, as economists were on the mark for once and the data does match June’s result. Unfortunately, so they say, following Friday’s surprisingly strong new homes data, the headline disappointment for a market in no need of excuses, does have the upper hand in some investors thoughts and actions in Monday’s first-half.

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

Select reports scheduled after the market close:

IBD 100 stock China Medical () is receiving an anticipatory bid in front of its report this evening. Some of the bullish posturing might be related to today’s well-received and better-than-expected results from countryman and fellow IBD’er Shanda Interactive (). Additionally, the fact the Chinese-based PowerShares Golden Dragon ETF () sports similar pattern strength to both component companies, which certainly doesn’t hurt Monday’s wishful actions. Intraday, CMED is up 1.88 at 34.94 and working its way higher within the right side of an observed seven-week cup base sans the handle. 

REPORT CALENDAR

Economic releases on tap:

INDICES & MARKET MOOD

The dog days of summer have arrived just in the nick of time, well for many owning vacation time shares and the like. Exiting the lunchtime hour, the market has taken mostly inconsequential news and shaped it into profit-taking. With factoids such as gains of nearly 8% in seven sessions for the S&P500 and an equally scary 45% thumping of the CBOE Volatility Index () into an anticipated technical floor, that’s thought to be the better story to appreciate.

Chris Tyler
Staff Writer & Options Strategist
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