Street Draws Strength From AT&T Confidence ?

MAKE MONEY BLOG$/AT&T and JPMorgan Chasegave the stock market a shot of confidence Monday – the former is shelling out $39 billion to buy T-Mobile and the latter is providing $20 billion in financing for the deal – and sparked a big rally to start the week.

The gains come in the midst of a rocky stretch as traders grapple with uncertainty over the state of Japan’s nuclear power facilities in the wake of the March 11 earthquake and mull launch of air strikes in Libya by Western forces. Those concerns were put aside for the most part Monday though, and the major indexes rallied 1.5% or better.

By day’s end the Dow Jones industrial average was 178 points higher at 12,037, the S&P 500 was up 19 points to 1,298 and the Nasdaq added 48 points to 2,692.

Telecommunications stocks got a shot in the arm from the massive deal between AT&T and Deutsche Telekom for T-Mobile, which combines two of the four biggest players in the U.S. wireless market. Shares of AT&T added 1.2% and rival Verizon managed a 1.7% rally, while Sprint Nextelwas left out in the cold with a 13.6% slide. Sprint was rumored to be considering a combination with T-Mobile before the weekend deal was announced.

Don’t overlook JPMorgan’s role in the T-Mobile deal either. In addition to advising AT&T, the bank made an 18-month commitment for a one-year unsecured bridge term facility for $20 billion, a clear sign that at least one of the full-service financial supermarkets is ready to participate in big-game hunting by corporate America. (See “JPMorgan Provides Ammo For AT&T’s T-Mobile Buy.”)

Another major bank made headlines Monday as well, with Citigroupannouncing a 1-for-10 reverse stock split and plans to reinstate a one-cent dividend in the second quarter. Shares lost 1.5%. The announcement from Citi comes after the Federal Reserve completed its second round of bank stress tests and cleared a number of firms to begin returning capital to shareholders.

Goldman Sachs immediately expressed its intent to repurchase preferred shares owned by billionaire Warren Buffett’s Berkshire Hathaway (he acquired them in a $5 billion deal in September 2008 that was allegedly leaked to hedge fund manager Raj Rajaratnam by a former Goldman board member).

Shares of Goldman were 0.2% higher Monday. Wells Fargo and JPMorgan, which each announced dividend increases Friday, gained 0.2% and lost 0.2%, respectively.

source: http://blogs.forbes.com

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