The major indices traded in positive territory throughout the day in response to news that General Motors (GM 37.64, +3.22) and the United Auto Workers union (UAW) reached a tentative labor agreement. While buying efforts tapered off in the early afternoon, the indices saw a late day push when The New York Times reported that Bear Stearns (BSC 123.00, +8.76) is in serious discussions with outside investors to sell up to a 20% stake in the firm.
The GM and UAW agreement includes the creation of VEBA, an independent trust that will take over $50 billion in retiree health insurance obligations. The deal reportedly also includes an important provision on second tier wages for some incoming employees.
GM stated that the deal "paves the way for GM to significantly improve its manufacturing competitiveness." The agreement must still be ratified by UAW members, but the two-day nationwide strike at GM plants has ended.
With respect to the Bear Stearns speculation, The New York Times named Warren Buffett, Bank of America (BAC 50.41, +0.19), Wachovia (WB 50.64, +0.20), Chinese Construction Bank and Citic Group as parties potentially interested in acquiring the minority stake.
The news caused Bear Stearns shares, and the financial sector to jump noticeably, and carried the the Dow and S&P to their best levels of the day with a half hour to go in the session.
A separate report soon thereafter that SLM Corp. (SLM 45.01, -1.24) has been notified by its suitors that they don't expect to consummate their acquisition took a little wind out of the late-day rally. Still, the indices finished comfortably above the unchanged mark.
Earlier in the session the stock market was unfazed by the report that durable goods new orders dropped 4.9% in August versus the consensus estimate for a drop of 3.5%. July posted a strong 6.1% gain, so an offset was expected.
Meanwhile, the Dept. of Energy reported that crude inventories rose 1.84 million barrels in the latest week. The consensus estimate, according to a Bloomberg survey, predicted a draw of 2.15 million barrels.
Following the bearish announcement, oil prices surrendered a 1.4% gain and traded as low as $78.44. They soon rebounded, though, to end the day up 1.2% at $80.49. The turnaround was attributed to concern that inventory levels are still below year-ago levels despite the latest weekly reading.
All 10 economic sectors ended the day in positive territory, with consumer discretionary (+1.0%), consumer staples (+0.9%) and materials (+0.9%) scoring the largest gains. Energy (+0.2%), which was down for a good part of the day, posted a modest gain but trailed the broader market.
Several economic reports will be released Thursday morning, including the final Q2 GDP report, initial jobless claims, the help-wanted index and new home sales.
Trade system guidelines
(edited):
Only available to Newsletter Subscribers.
1.
PX - Praxair Inc
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-27-07 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 83.26
|
2.
CSCO - Cisco Systems Inc
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-27-07 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 33.00
|
3.
NVDA - NVIDIA Corp
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-27-07 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 36.75
|
4.
MSCC - Microsemi Corp
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-27-07 |
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* Please Note: If the stock gaps down at the open do not enter the trade unless it trades above 27.88
|
STX - Seagate Technology
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
|
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* did not setup
|
ADI - Analog Devices Inc
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
|
|
Long |
Above 15 high |
Sell 1/2 once risk covered |
Below LOD at time of setup |
|
|
* did not setup
|
CEN - Ceridian Corp
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-26-07 |
|
Long |
34.23 |
34.35 |
Below 33.97 |
up to + 10 cents per share (34.33) |
|
|
RIO - Companhia Vale do Rio Doce
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-25-07 |
|
Long |
31.89 |
Reached (32.82) |
Below 32.15 |
up to + $ 1.19 per share (33.08) |
|
* 09-25-07 - stock gapped down
|
GRMN - Garmin Ltd
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-25-07 |
|
Long |
115.24 |
Reached (116.06) |
Below 115.25 |
up to + $5.29 per share (120.53) |
|
* 09-25-07 - stock gapped down
|
EXM - Excel Maritime Carriers Ltd
| Entry Date |
Exit Date |
Position |
Entry Price |
Target Price |
Stop Price |
Max P/L |
| 09-24-07 |
09-26-07 |
Long |
53.67 |
Reached (55.41) |
Closed Below 53.60 |
up to + $6.23 per share (59.90) |
|
09-24-07 - our stop of 53.60 (7 cents below 53.67 our entrance price) kept us in the trade and into profits of up to + $5.43 per share despite the fact that the stock traded 1 cent above our stop during the first 15 minutes of trading!
|
FRO - Frontline Ltd
