Traders-Blog.com

Stocks finished the session mixed but posted strong gains for the month of May. The market welcomed Wachovia Corp.’s purchase of brokerage A.G. Edwards for $6.8 billion, which helped investors shrug off news that first-quarter growth was revised to 0.6% from an initial estimate of 1.3%. Tech stocks rose pushing the Nasdaq composite to its highest close in more than six years, and the S&P 500 barely eked out a fresh all-time high in a tough session for the blue chips.

Today, the Dow Jones industrial average closed down 5.44 or 0.04% to 13,627.64, after briefly touching a new intraday record of 13,672.82 in the morning. The broader S&P 500 index closed up 0.39 or 0.03% to 1,530.62, managing to end at a new all-time high. The Nasdaq composite closed up 11.92 or 0.46% to 2,604.51, ending at a 6-year high. For the month, the Dow gained 4.3%, the S&P rose 3.2%, and the Nasdaq climbed 3.1%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers 19 to 13 on volume of 1.8 billion shares. On the Nasdaq, advancers topped decliners by 8 to 7 on volume of 2.4 billion shares.

While investors welcomed the latest deals and a drop in oil prices, the economic news was not encouraging. However, it is expected that gains will continue to be sustained by the tremendous flow of money into the stock market, both from he United States and from investors abroad, through takeovers, mergers and corporate stock buybacks.

In economic news, reports on manufacturing, construction and jobless claims showed improvement. But first-quarter economic growth came in weaker than first thought, at the slowest pace since 2002. The GDP grew at 0.6% in the first quarter, down from its initial read of 1.3%. The Chicago PMI, a measure of manufacturing in the Midwest region, rose to 61.7 in May from 52.9 in April. And the number of Americans filing new claims for unemployment last week fell more than expected.

Stock of Wachovia closed down $0.33 or 1% to $54.22, on news that it is buying A.G. Edwards for $6.8 billion in cash and stock in a move that will create the second-largest U.S. retail brokerage. Shares of A.G. Edwards closed up $11.03 or 13% to $88.18. The combined brokerage would have about 14,784 brokers, and $1.15 trillion of client assets. It expects to command a 14% market share, and employ more than 31,000 people.

Stock of Ceridian closed up $1.09 or 3% to $35.28, after it agreed to be bought out by private equity firm Thomas H. Lee Partners and insurance firm Fidelity National Insurance for $5.3 billion in cash.

Shares of Dendreon closed up $1.84 or 33% to $8.58, on bets that its prostrate cancer treatment Provenge is closer to getting approval. The biotech said that the FDA could grant Provenge approval next year if its current trial shows positive results.

Stock of Brocade Communications Systems closed lower on news that the company will pay $7 million to settle allegations by the SEC that it issued improper stock options grants. The agreement makes Brocade the first company to pay a fine in the backdating scandal.

U.S. light crude oil for July delivery rose 52 cents to $64.01 a barrel on the New York Mercantile Exchange. Prices were volatile following the weekly oil inventories report, which showed a surprise drop in crude oil supplies.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter