Traders-Blog.com

Stocks closed lower as investors took profit on recent gains, notably in technology shares, offsetting the boost from an upgrade of Citigroup Inc. and more merger news, including two leveraged buyouts. A slide in crude oil prices also weighed on energy shares and capped gains for the broader market.

Today, the Dow closed down 4.25 or 0.03% to 12,441.27, the broader S&P 500 index closed down 4.61 or 0.32% to 1,422.48, the tech-fueled Nasdaq composite closed down 21.63 or 0.88% to 2,435.57.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers by 21 to 11 on volume of 1.5 billion shares. On the Nasdaq, advancers barely edged decliners by 20 to 9 on 1.9 billion shares changed hands.

Profit taking of the market’s strong gains recently and concerns about holiday sales coming in weak contributed to the downside today. The traditional “Santa Claus” rally was missing. However, the market has already been moving higher without much interruption for the past six months, and there is no reason for gains not to continue until the end of the year. While economic data has been showing conflicting signals of both strength and weakness, the fact that we’re holding onto the strong gains means investors are confident. In economic news, the Commerce Department said the U.S. current account deficit widened to $225.6 billion in the third quarter.

Shares of financial services giant Citigroup closed up $1.37 or 2.5% to $55.44, on an upgrade. Merrill Lynch upgraded the stock to a buy from a neutral, with the broker citing the stock’s attractive valuation and saying it has greater confidence the bank will achieve its 2007 earnings target.

Harrah’s Entertainment reportedly is on the verge of being sold to two private-equity firms for at least $90 a share. The stock closed up $2.80 or 3% to $82.30, in what would be one of the largest private deals in history. Apollo Management and Texas Pacific Group are set to win an auction to acquire the gambling giant, beating out an offer from Penn National Gaming Inc. The deal could be valued at more than $16 billion. Penn reportedly offered about $87 a share. Harrah had a revenue of more than $7 billion last year and a current market capitalization of nearly $15 billion. It owns 39 casinos in the U.S., including some gems of the Las Vegas Strip such as Caesars Palace and Paris.

Shares of Realogy closed up $4.91 or 19% to $30.41, after it said that private equity firm Apollo Group would buy it for about $6.65 billion. The firm, whose brands include the Coldwell Banker and Century 21 franchises, will receive $30 per share, or an 18% premium over Friday’s close.

Stock of Biomet Inc. closed down $0.47 or 1% to $41.53, after it said it will be bought by a group of private equity firms for about $10.9 billion. The group that includes Blackstone Group, Goldman Sachs Capital Partners and Kohlberg Kravis Roberts. Additionally, it also said it would be delaying its fiscal second quarter earnings report “due to developments related to the review of historical stock option practices. The bid is 27% over its closing price on April 3, the day before market speculation arose that the company had retained Morgan Stanley to assist it in “exploring strategic alternatives.” However, it is only a couple of dollars above Friday’s close of $42 a share.

U.S. light crude oil for January delivery sank $1.22 to settle at $62.21 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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