Mergers, Bailouts Outweigh Job Losses, Google
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Traders had a lot of mixed signals to deal with on Friday, and in the end, they chose to side with the bullish ones.
Stock futures were down overnight after Google missed Wall Street estimates, then up big in the early morning on Microsoft's hostile bid for Yahoo. They took another hit less than an hour later on news that the U.S. economy unexpectedly shed 17,000 jobs last month.
And that was all by 8:30 a.m. Eastern Time, an hour before the stock market opened for trading.
The regular trading session went much the same way, with reports of pending bailouts of bond insurers eventually tipping the scale in favor of the bulls.
The market has had a lot of cross-currents to digest in the last two weeks. On one hand, there has been economic weakness from the credit market fallout, as exemplified Friday by Google's slowing growth and rising joblessness. Yet Microsoft's offer of a 62% premium for Yahoo suggests the stock market may be deeply undervalued, and with the Federal Reserve aggressively slashing interest rates, perhaps better times are not that far off, or at least the worst already priced in. That was the argument that carried the day on Friday.
Yahoo shares soared 48% to $28.38, lower than Microsoft's $31 a share offer, as traders wait to see if a deal can be reached. But with Yahoo shares mired in a downtrend and facing another tough year, the company's board will be hard-pressed to argue that Microsoft's offer isn't in the best interest of shareholders.
Microsoft's offer was well-timed, both because of Yahoo's troubles and because it came on the heels of a disappointing earnings report from Google. Google's shares plunged 8.5%, or $48.40, to $515.90, well below the stock's 52-week high of $747.24 set in November. But for Google, the Microsoft-Yahoo deal is also a sign of just how much trouble the search giant has given its more established rivals.
Microsoft, meanwhile, lost 6.6% on news of its nearly $45 billion bid for Yahoo.
Motorola was another big mover on Friday, gaining 10% after saying it could sell its handset business.
VeriSign and Altera were up after their results beat analysts' forecasts, while Digital River fell on its earnings report.
The Nasdaq climbed 23 to 2413, the S&P gained 16 to 1395, and the Dow rose 92 to 12,743. Volume fell to 4.65 billion shares on the NYSE, but rose to 3.1 billion on the Nasdaq. Advancers led by a 26-6 margin on the NYSE, and 20-9 on the Nasdaq. Upside volume was 84% on the NYSE, and 72% on the Nasdaq. New highs-new lows were 49-57 on the NYSE, and 62-92 on the Nasdaq.