Tag - Fnfg

After trading down for most of today's session stocks edged up toward the close to finish up.

The Dow finished at 9,108.51, up 15.27 points; the Nasdaq was up 1.93 point to close the day at 1,967.89; and the S&P 500 was up 2.92 points to end at 982.18.

The Russell 2000 was up 2.42 points to finish strong at 550.88.

Leading small-cap price gainers was Select Comfort Corp. (Nasdaq:SCSS) up 46% on news that while sales for the second quarter of 2009 were down compared to the same quarter in 2008, operation income was positive net losses were substantially less. The company reported that Q2 operating income was $1 million.

Other leading small-cap gainers include Cerus Corp. (Nasdaq:CERS) up 45%; Jazz Pharmaceuticals (Nasdaq:JAZZ) up 44%; Ariad Pharmaceuticals (Nasdaq:ARIA) up 42%; and Harleysville National Corp. (Nasdaq:HNBC) up 38% on news that it would be acquired by First Niagara (Nasdaq:FNFG) for $237 in an all stock deal. The deal values HNBC at roughly $5.50 per share, representing a 37.5% premium over Friday's closing price for HNBC.

*****Earnings season has been overwhelmingly positive so far. Only 16% of the S&P 500 companies that have reported so far has missed expectations. 75% have beaten expectations. That's what happens when earnings estimates are so low that they are virtually impossible not to beat. 

But what's happening now is very interesting…

Analysts are raising their earnings estimates considerably. Bloomberg reports that forward revisions to estimates now put the forward P/E of the S&P 500 at 13.13. That's 26% below the 50-year average 16.54.

So are we due for a 26% rally as stocks return to their historical norms?

*****If earnings season finishes with 75% of the S&P 500 exceeding expectations, that would be a record. Since 1933, no more than 72% of the S&P 500 has beaten earnings expectations.

But Bloomberg also reports that just half of the S&P 500 companies that have reported have beaten revenue expectations. That means much of the earnings surprises we've seen are a product of cost-cutting and not rising revenues.

To the bears, this suggests there is still risk for stock prices.

*****To the bulls, it's now clear that pessimism went way too far. Stocks were priced way too low for a disaster that never materialized. More and more strategist-types are coming out and saying things like the economy is stronger than the numbers show and that a V-shaped recovery is underway.

Some economists are even raising their 3rd quarter GDP estimates.

Federal Reserve Chief Ben Bernanke states that the economy will be in stronger footing. And this is an interesting point. Overinvestment in real estate is being written off and prices are falling to levels that make sense for the family budget and the business bottom line. Increased regulation will keep investors' money safer (we hope). Increased savings will put consumers on stronger footing.

In essence, the U.S. economy will, at some point, start growing from a much lower baseline. And while the stock market may only recover the gains it lost over the last two years, that recovery process would lead to some phenomenal gains from current levels.

*****The question for me is: when? I can't help but think that analysts may be overshooting on the upside, just as they overshot on the downside. And I'm pretty sure I'm not the only one who feels this way. Consider that existing home sales jumped 11% in June, and yet stocks are in the red so far today.

There can be no doubt that such a jump in home sales is unexpected good news. But stocks are ignoring it. I say that's because there's a lot of good news priced in already. 

*****So I may be cautious, but I'm going to do what I have been: buy quality stocks, watch them closely and take profits. That approach has been working great so far this year… 

*****TradeMaster Daily Stock Alerts readers just took another 19% gain on MYR Group (Nasdaq:MYRG). Nice work, Jason. If you missed Jason's video chart analysis from Friday, you can check it out HERE. 

*****Now let's have a look at the economic data for the week.

Tomorrow, Tuesday, June 28, we get the Case-Shiller Home Price Index and Consumer Confidence numbers. Wednesday, it's Durable Goods and Oil Inventories. Jobless Claims are out on Thursday.

Friday is the big one, with the release of Second Quarter GDP. This should be a major market mover.

Best Regards,

Ian Wyatt
Editor
SCI Daily

First Niagara Financial Group Inc. (Nasdaq: FNFG), the holding company of First Niagara Bank, announced before the opening bell it is acquiring Great Lakes Bancorp Inc. (NYSE: GLK) for about $153 million in cash. Great Lakes Bancorp operates 16 banks in the Buffalo, New York, area.

"This transaction with First Niagara stays true to our vision of being a community bank based in Western New York while also providing our consumer and business customers with a broader array of products and services to best serve their financial needs,” Great Lakes Bancorp CEO Andrew Dorn said in a press release.

Under the terms, Great Lakes stockholders may receive $14 in cash per share, or 0.993 shares, of First Niagra.

The merger will significantly boost Lockport, N.Y.-based First Niagara's market share in the Buffalo region, First Niagara CEO John Koelmel said.

In afternoon trading, shares of the small cap are up $1.05, or 8.75%, at $13.05. Over the last 52 weeks, shares have ranged from $11.35 to $16.80.