TODAY'S MARKETSDECEMBER 21, 2010, 1:51 P.M. ET
Financials Lead on Deal Hopes
By KRISTINA PETERSON
Major banks led the Dow Jones Industrial Average higher as deal activity boosted financials and a Chinese official's comments helped sentiment around the fragile euro zone.
The blue-chip measure rose 50 points, or 0.4%, to 11529. Financials were the Dow's top three components in recent trading, with J.P. Morgan Chase up 3%, American Express up 2% and Bank of America up 1.7%.
The euro has been pushed and pulled all day, first lifted by supportive news from China, then hurt by a Moody's warning on Portugal, and finally hit by the ambiguous announcement that the Federal Reserve is extending its currency swap line agreement with the European Central Bank. Donna Kardos Yesalavich, John Shipman and Michael Casey report.
The Nasdaq Composite gained 0.6% to 2666. The Standard & Poor's 500-stock index rose 0.5% to 1254, led by its financials sector.
Investors said financials appeared to be getting a boost from expectations that deal-making in the sector will continue next year after Canadian bank Toronto-Dominion Bank agreed to acquire Chrysler Financial, the auto lender owned by Cerberus Capital Management, for $6.3 billion. Shares of Toronto-Dominion rose 2.7%.
Global stocks rose broadly after China Vice Premier Wang Qishan said that China supports efforts by European officials to stabilize the global markets hit by the euro zone's debt crisis.
Later in the session, Fitch Ratings became the third major credit rating agency this month to put Greece's ratings on review for a possible downgrade into junk territory. The market had little reaction to the news, as investors have braced themselves for a long recovery in Europe.
"Europe is a lingering condition," said Stephen Wood, chief market strategist at Russell Investments. "It's not that dissimilar from housing or employment—you can say it's stabilized, but it won't get better anytime soon."
Investors predicted trading would slow through the end of the year, though stock moves may be amplified by thin trading volumes.
Four hours into the session, just over two billion shares had traded hands in New York Stock Exchange Composite volume, on pace to fall below the month's average of 4.8 billion shares per day.
"The remainder of the year will likely be quiet, but steadily strong," said Wasif Latif, vice president of equity investments at USAA Investment Management Co. "The underlying theme is that we could be on our way to a sustainable yet gradual recovery," he said.
Investors in European markets largely shrugged off a warning by Moody's Investor Service that it may lower Portugal's A1 rating by one or two notches, citing uncertainties over the longer-term health of Portugal's economy, which could suffer from the government's fiscal austerity plans.
However, the euro unwound gains after the warning, trading recently at $1.3079, down from $1.3126 late Monday in New York. The dollar strengthened against the yen.
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Among stocks in focus, Martek Biosciences soared 35% after the company agreed to a $31.50 a share bid, or $1.09 billion, from Dutch-based life sciences and materials-science group Royal DSM.
Adobe Systems jumped 4.8% after the software maker swung to a fourth-quarter profit as revenue climbed by a third and the company provisioned much less for taxes than it did a year ago. Adobe's chief executive said he expects 2011 revenue to increase 10% over 2010 revenue.
Shares of Hewlett-Packard edged up 0.4%, despite reports that the Securities and Exchange Commission is investigating former Chief Executive Mark Hurd's departure from the company in a broad inquiry that includes a claim that Mr. Hurd shared inside information, people familiar with the matter told The Wall Street Journal.
Darden Restaurants, the owner of the Olive Garden, Red Lobster and other restaurant chains, slid 6.7% after its fiscal second-quarter earnings rose 24% on new-restaurant growth and moderate gains at existing locations for its casual-dining chains. But its lead over competitors seemed to narrow and peers are gaining ground.
Carnival gained 3.4% after its fiscal fourth-quarter earnings rose 29% as the cruise-ship company continued to benefit from this year's rebound in demand. Results topped expectations, pushing the stock up even as the company projected a first-quarter profit below Street expectations.
Demand for Treasurys declined, pushing yield on the 10-year note up to 3.36%.
Crude-oil prices advanced above $89 a barrel, while gold futures also rose.
Write to Kristina Peterson at
kristina.peterson@dowjones.com