We Could Be in Store for a Santa Claus Rally (UNH, KMP, KMI, T, MCP, MRGE, HZNP)
Stocks climbed on the day, buoyed by strong Black Friday weekend sales data and news out of Europe on plans to help stabilize the weaker member of the EU. The solid sales data shows a U.S. consumer that continues to remain resilient and wants to shop as the economy slowly improves. That is why despite Europe remaining a big question mark, we are still cautiously optimistic for December, as we think we could be in store for a Santa Claus rally.
The Radiology Stocks Index was the top performing tickerspy Index on the day, led by Merge Healthcare (MRGE) with a 17% gain. The Pain Management Stocks Index was the day’s worst performing tickerspy Index, with Horizon Pharma (HZNP) down -10%.
Stocks soared on the day, led higher by an 86-point, or 3.5%, surge in the Nasdaq to 2,527. The Dow jumped 291 points to 11,523, while the S&P climbed 34 points to 1,193. Gold rose $25.10 to $1,710.80 an ounce, while oil advanced $1.44 to $98.21 a barrel.
In economic news, the Commerce Department said new home sales rose 1.3% in October to a seasonally adjusted annual rate of 307,000, but the September reading was revised down and the October number is still well below the 700,000 units economists view as necessary for a healthy housing market.
In earnings news, shares of health insurance provider UnitedHealth (UNH) rose 3.1% after the company said it expects its 2012 earnings to grow 5% and analysts called that outlook conservative. The company forecast a 2012 profit of $4.55 -$4.75 a share on revenue of $107-$108 billion. Analysts were expecting a profit of $4.75 on revenue of $108.1 billion. The Minnesota-based company also reaffirmed 2011 guidance for EPS of $4.52-$4.57. Analysts were expecting the company to earn a profit of $4.55 a share.
Pipeline MLP Kinder Morgan Energy Partners (KMP) is projecting 2012 segment earnings of $4.4 billion and expects to declare cash distributions of $4.98 per unit for 2012, an 8.3% increase over its 2011 budget target of $4.60 per unit, the company said in a statement. Kinder Morgan Inc. (KMI), meanwhile, expects to declare a 2012 dividend of $1.35 per unit, a 16.4% increase from the 2011 payout of $1.16. KMP units rose 1.9, while KMI shares fell -0.7%.
Shares of Dow component AT&T (T) rose 2.0% after the telecom giant said it is considering a massive asset sale plan to salvage its $39 billion takeover of T-Mobile. Though the exact size of the disposals hasn’t been determined, they could be as much as 40% of T-Mobile USA’s assets, Bloomberg reported, citing a person close to the matter. For now, the companies have withdrawn their merger bid with the FCC to work on the anti-trust suit, and AT&T will write down $4 billion in Q4 to reflect the breakup fee if the merger does not gain anti-trust approval. Nearly 400 pros held AT&T in their portfolios at the end of Q3 and more than 3,300 tickerspy members own the stock in their portfolios.
Shares of Molycorp (MCP), the largest U.S.-based rare earths miner, surged 13.6% after the company inked a deal with Japan’s Daido Steel Co and Mitsubishi to produce and sell high-powered rare earth magnets. Colorado-based Molycorp will have a 30% stake in the venture. The magnets will be produced in Japan. Four pros counted Molycorp among their top holdings at the end of Q3 and nearly 730 tickerspy members own the stock in their portfolios.
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Kinder Morgan Energy Partners (NYSE: KMP) Buys Out El Paso Corp. (NYSE: EP) (Money Morning, 10/18/11)
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