Weekend Summary

Stocks in the Green on Friday as Santa Boards his Sleigh

Supported by a drop in jobless claims to a pre-Lehman Brothers collapse level and strength in a key metric of business spending in the durable goods orders report, the Dow, S&P 500, and Nasdaq each posted highs for 2009 after finishing in the green for fifth-straight session. Treasuries were lower after losing ground following the manufacturing and jobs data. Equity news was light, with Dow member Pfizer announcing it has received an unfavorable letter from the FDA pertaining to its anxiety treatment, but the healthcare sector received some support after the Senate passed President Obama's healthcare reform bill. Elsewhere in the sector, Arena Pharmaceuticals announced that Dow component Merck & Co. has decided to discontinue the collaborative agreement to develop an atherosclerosis drug. Overseas, Asia moved higher, while Europe finished near the flatline as several major markets were closed.

On Friday the Dow Jones Industrial Average rose 54 points (0.5%) to close at 10,520, the S&P 500 Index added 6 points (0.5%) to 1,126, while the Nasdaq Composite gained 16 points (0.7%) to 2,286. In light volume, 319 million shares were traded on the NYSE and 628 million shares were traded on the Nasdaq. Crude oil was $0.70 higher at $77.37 per barrel, wholesale gasoline was up $0.02 at $2.00 per gallon, and the Bloomberg gold spot price increased $16.85 to $1,104.40 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-was down 0.1% at 77.86. For the week, the DJIA rose 1.9%, the S&P 500 Index gained 2.2%, while the Nasdaq Composite advanced 3.4%.

Dow member Pfizer Inc. (PFE $19) announced that it has received a complete response letter from the Food and Drug Administration (FDA) pertaining to the company's new drug application for its monotherapy treatment, Lyrica, for generalized anxiety disorder. PFE said the FDA determined that the data contained in the application were insufficient to support approval. The company said the application was a resubmission in response to a "not-approvable" letter issued by the FDA in August 2004. PFE said the FDA continues to review a separate application for Lyrica as adjunctive therapy for the treatment of generalized anxiety disorder. Shares were down slightly.

Meanwhile, in related industry news, the US Senate voted to approve President Barack Obama's healthcare reform bill early this morning in a 60-39 vote, as all Democrats and two Independents voted in favor, while all Republicans opposed. Now healthcare reform negotiations will commence next month between the Senate and the House-which approved its own version in early November-and once an agreement is made on a single bill, each section of Congress will vote again before it lands on President Obama's desk to be signed into law.

Staying in the healthcare industry, shares of Arena Pharmaceuticals (ARNA $4) were down solidly after saying that Dow component Merck & Co. (MRK $37) decided to discontinue the collaborative agreement between the two companies to develop an atherosclerosis drug. ARNA said MRK made the decision following the evaluation of the results of a recently completed clinical trial, which did not meet the pre-trial specified primary objective of efficacy. Shares of MRK were also lower.

Durable goods rise, jobless claims fall

All US financial markets were closed on Friday, but traders had some key economic reports to consider during the abbreviated session ahead the Christmas holiday weekend.

Durable goods orders rose by 0.2% in November, versus the 0.5% rise that had been forecast, and October’s 0.6% decrease in orders was left unchanged. Ex-transportation, orders were up 2.0%, compared to the 1.1% growth forecast, and October's figure was favorably revised from a 1.3% decrease to a 0.7% decline. Monthly orders data of goods intended to last at least three years can be very volatile as large orders for items such as airplanes and military equipment have a tendency to distort the data. Nondefense capital goods ex-aircraft, considered a good proxy for business spending, rose 2.9%.

Weekly initial jobless claims fell by 28,000 claims to 452,000-the lowest since September 2008, before the Lehman Brothers collapse-versus last week's figure which was left unrevised at 480,000. The Bloomberg consensus called for claims to decrease to 470,000. The four-week moving average, considered a smoother look at the trend in claims, fell to 465,250 from 468,000, and continuing claims dropped by 127,000 to 5,076,000, compared to the 5,170,000 forecast. Treasuries finished lower after losing ground following the manufacturing and job reports. The yield on the 2-year note rose 4 bps to 0.96%, the yield on the 10-year note advanced by 5 bps to 3.80%, while the yield on the 30-year bond increased 7 bps to 4.68%.

International action muted by holiday

Stocks in Europe finished near the flatline in lighter-than-usual trading ahead the holiday weekend, with most markets across the pond, including Germany, Italy, Spain, Sweden and Switzerland closed. The UK markets were open and the FTSE 100 Index was 0.4% higher, led by oil and gas issues after yesterday's larger-than-expected decline in crude oil inventories, while materials also helped the advance as key metal prices continued to gain ground. Elsewhere France’s CAC-40 Index finished modestly higher.

Elsewhere in international trading, China's Shanghai Composite Index jumped 2.6% following yesterday's forecast by an official at the National Bureau of Statistics that China's economic growth in 4Q will exceed the 8.9% posted in the previous quarter. Meanwhile, Japan's Nikkei 225 Index rose 1.5%, after the Bank of Japan released the minutes from its November policy meeting, showing that "many" members agreed to maintain its stance of responding promptly to changes in the market situation. This meeting preceded the BoJ's emergency meeting on December 1st, in which it deployed a 10 trillion yen ($110 billion) fixed-rate lending facility to combat the steep advance in the Japanese yen, which reached a 14-year high against the dollar in late-November.

M&A and housing data keep bulls out of the fray

Although the lighter-than-usual volume in the holiday-shortened week may have exaggerated the move, stocks posted gains, with the Dow, S&P 500, and Nasdaq all reaching new highs for the year. Optimism about confidence returning to the corporate front to aid in the continuation of the global economic recovery helped this week’s advance, courtesy of some M&A news. Sanofi-Aventis (SNY $40) reported that it has agreed to acquire US healthcare firm Chattem Inc. (CHTT $93) for $1.9 billion. Moreover, Bucyrus International (BUCY $59) was solidly higher, gaining nearly 10%, after the mining equipment firm announced that it has reached a definitive agreement to acquire the mining equipment business of Terex Corp. (TEX $21), for about $1.3 billion.

The housing sector was also a source of the majority of this week's move, as it was a tale of two reports, with existing home sales jumping 7.4% on a rush of first-time buyers seeking to close before the initial expiration of the tax incentive, as first-timers accounted for 50% of sales in November and October. However, due to the differences between when sales are recorded, new home sales unexpectedly fell, reaching the lowest level in seven months as the report lacked the support of the government's tax credit, which was slated to expire in November, but has since been extended into next year.

Stocks managed to finish higher despite the new home sales report-which have only accounted for less than 10% of the total market in 2009-and after some other disappointing data from the economic docket, which included unexpected downward revisions to US 3Q GDP and the University of Michigan’s Consumer Sentiment Index for December.

Another short week and economic docket lie ahead

The year will come to a close with another abbreviated week beginning on Monday, and the there will be a stunted slate of economic reports as traders reflect on 2009 and look ahead to 2010. However, there are some reports on housing and consumer sentiment that are set to be released next week that deserve a mention. The release of the S&P/CaseShiller Home Price Index will kick things off on Tuesday, expected to show a decline of 7.3% year-over-year (y/y) for October, along with the release of the Consumer Confidence Index, forecasted to improve from 49.5 in November to 53.0 in December.

Other releases rounding out the short week include Wednesday’s Chicago PMI and Thursday's report on weekly initial jobless claims.