Monday, February 14, 2005

Wall Street Lovin': VZ marries MCI

Cupid certainly made his presence known on Wall St. Monday. Telco giant Verizon outbid Quest and acquired MCI, a stock rumored to have been bought out for a long time now. MCI, or the artist formerly known as Worldcom, had long been slashing debt and looking for buyers of its distressed assets. As we mentioned last week, when everyone including your 79 year old grandmother is privy to buyout gossip--sell!!! All the hoopla has already been factored into the price of the stock. More likely than not, investors will be disappointed by a piece of news released on buyout day. MCI fell after the dust cleared on yet another merger Monday. Monday's action, folks:
[BRIEFING.COM] Market showed little enthusiasm as split industry leadership, mixed breadth figures, very light trading volumes and a lack of market moving news left the indices relatively unchanged all day and closed the major averages in split fashion... Even confirmation that Verizon Communications will acquire MCI for $6.75 bln in cash and stock - a formal bid that brought the total M&A activity in 2005 to nearly $160.0 bln and would on most days provide stronger support to the overall stock market - did little to spur broad-based buying interest... Invest ors were also left with little in the way of notable earnings reports and economic data to provide enough conviction to extend Friday's solid gains, as lower volume consolidation implied only minimal selling pressure.
ValueLine analyst John Koller is right when he calls Wednesday this week's humpday:
Wednesday is the big day this week, when Federal Reserve Chairman Alan Greenspan goes before the senate to discuss his views on the economy etc. Typically, members of congress treat Mr. Greenspan with generous helpings of respect and awe. This isn’t likely to change, but what may change is the outlook for interest rate hikes. There is a bubbling of opinion that the Federal Reserve may indeed drop the “measured pace” phrase from its written statement. However, that could entail a slowdown in the rate of interest rate hikes, rather than an increase. If Alan Greenspan makes dovish statements the markets are likely to move higher and bonds could well enjoy a rally.

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