Last updated: April 6, 2010 9:56 pm

US stocks rise on bank takeover speculation

Shares in Massey Energy, the largest coal producer in the central Appalachian region of the US, dived more than 11 per cent yesterday following an explosion at a coal mine in West Virginia that killed at least 25 people.

The disaster was the worst of its kind for fatalities in the US since 1984.

Federal inspectors have already fined the company more than $382,000 for repeated serious violations involving its ventilation plan and equipment at the mine, the Associated Press reported yesterday.

Massey’s shares sank 11.4 per cent to $48.45.

Elsewhere, US stock prices fluctuated around the flat level yesterday for much of the session but swung modestly higher after the release of the latest Federal Open Market Committee minutes.

Continuing Greek sovereign debt problems weighed on investor sentiment. However, takeover speculation among regional banks gave some support.

“The market is on guard for a discount rate hike,” said Nick Kalivas, vice-president of financial research at MF Global.

Looking forward to next week’s start of the earnings season, Mr Kalivas said: “The market is pricing strong results, and the reaction to friendly news next week will provide insight into the market’s ability to move higher into May and June.”

After the closing bell, the S&P 500 was up 0.2 per cent at 1,189.44, the Dow Jones Industrial Average was flat to 10,969.99 and the Nasdaq Composite was 0.3 per cent higher at 2,436.81.

The Vix index, closely-watched as a guide to risk aversion, fell 3.8 per cent to 16.4.

Regional banks were some of the highest rising stocks in the S&P 500 index, helped by speculation that some may be takeover targets for overseas financial groups.

Regions Financial led the group, rising 4.4 per cent to $8.55. Zions Bancorp rallied 4.6 per cent to $24.27, Keycorp was up 3.8 per cent to $8.47 and SunTrust Banks added 3.5 per cent to $28.71.

CA, a leading maker of software for mainframe computers, fell 1.9 per cent to $23.40 as the company said it expected its profit in 2010 to be at the lower end of its forecast range.

It also said it would cut about 1,000 jobs as part of a restructuring programme – 8 per cent of its workforce.

The homebuilding sector was lower across the board as Daniel Oppenheim, an analyst at Credit Suisse, warned that the sector could underperform the wider market over the coming months as demand for houses falls after the US homebuyer tax credit expires at the end of the month.

KB Home, a homebuilder that caters to first-time buyers, lost 2.8 per cent to $16.51 as the stock was downgraded to “neutral” from “outperform” by Credit Suisse.

In a client note, Mr Oppenheim wrote that companies catering to the lower end of the housing market would be the most affected by the end of the tax credit.

Rival NVR lost 1.4 per cent to $727.44 as the stock was also downgraded to “neutral” from “outperform” at Credit Suisse with a target price of $750 per share. Pulte Group lost 2.5 per cent to $11.16, and DR Horton fell 0.6 per cent to $12.52.

Shares in Teekay Tankers , an oil tanker owner and operator, were down 6.8 per cent at $12.15 after the company said it would offer 7m shares of common stock as part of its plan to finance a $169m acquisition of three tankers from its affiliate.

El Paso Corp, which owns the longest US natural gas pipeline network, rallied
1.6 per cent to $11.66 on news that Global Infrastructure Partners, an infrastructure fund backed by Credit Suisse and General Electric, had agreed to invest up to $700m in the Ruby Pipeline project in the Rocky Mountain region of the US and take a 50 per cent stake in the project.

China Information Security Technology was one of the top risers in the Russell 2000 index, a small-cap index, gaining 31.6 per cent to $7 on news that the software company had been chosen as one of two suppliers to State Grid Corporation of China to help build a nationwide electricity grid.

Microsoft gained 0.2 per cent to $29.32. Reports suggested that it was set to launch its long-awaited “Project Pink” phones next week as part of its drive to gain share of the growing smartphone market.

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