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Stocks ended higher with the Dow Jones Industrial Average posting a triple-digit gain and the Nasdaq Composite up over 2%, after a diplomatic push in the Middle East, a flurry of merger-and- acquisition activity and strong results from Merck and Schering-Plough boosted sentiment. Investors eyed the big deals, upbeat earnings and decided to scoop up recently battered shares.

Today, the Dow industrials average closed up 182.67 or 1.68% to 11,051.05, the broader Standard & Poor’s 500 index closed up 20.62 or 1.66% to 1,260.91, and the Nasdaq composite index closed up 41.45 or 2.05% to 2,061.84.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 5 to 1 on volume of almost 1.29 billion shares. On the Nasdaq, advancers beat decliners nearly 3 to 1 on volume of 1.63 billion shares.

The market sentiment received a boost as U.S. Secretary of State Condoleezza Rice arrived in the Middle East. Her diplomatic offensive raised hopes that a cease-fire between Israel and the Lebanon could be brokered. The brokering for peace, the announcement of mergers and better quarterly results will continue to be the key for the market to recover. Inherently, the market continues to be volatile and shall remain so for some time. Since there is paucity of investor confidence, it doesn’t take much to trigger a big move one way or the other. In addition to good results, there are also technical factors that support gains, and that could help bring in more buyers over the short term.

American Express rose 4 cents to close %50.66 after reporting earnings that declined, but yet, topped expectations. Its second-quarter net income fell 7% from a year earlier, but it expanded its customer base and increased revenue. Income from continuing operations rose 13% to $972 million, and revenue climbed to $6.88 billion against the forecast $6.64 billion.

Shares of hospital operator HCA Inc. closed up $1.61 or 3% to $49.48, after it agreed to a $21 billion leveraged buyout by a private equity group and members of the company’s founding family and current management. The deal is valued at $51 a share, or $33 billion, including the assumption of about $11.7 billion in debt.

Shares in Merck & Co. closed up $1.49 to $38.95, after the company reported higher quarterly earnings that beat estimates and also boosted its outlook for the full year. Fellow drug maker Schering-Plough Corp. also closed up $1.22 or 5.7% to $20.67, after reporting higher quarterly earnings that topped forecasts. The company swung to a second-quarter profit, helped by sales of its rheumatoid drug Remicade and Nasonex.

Advanced Micro Devices Inc. closed down $0.87 to $17.39, after it announced a deal to buy Canada’s ATI Technologies Inc. for $5.4 billion. This move would open a new front in its rivalry with Intel Corp. Shares of ATI shot up $3.02 or 18.8% to $19.67.

On being upgraded, shares of Dell Computers closed up $0.89 or 3% to $20.80. Citigroup upgraded it to “buy” from “hold,” and this follows Dell’s profit warning Friday, with Citigroup saying that any slowdown is already fully reflected in analysts’ earnings estimates on Dell.

U.S. light crude oil for September delivery rose 72 cents to $75.15 a barrel on the New York Mercantile Exchange. Oil prices rose on concerns about a hurricane heading toward the Gulf Coast and comments from U.S. officials casting doubt on the enforceability of any cease-fire in the Middle East.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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