The broad indices all ended higher, as investors looked ahead to earnings reports, following last week's disappointing employment growth numbers.
General Electric (GE) early on Monday announced an agreement to pay $3.3 billion in cash to acquire Lufkin Industries (LUFK). Lufkin is a manufacture of artificial lift equipment used for oil drilling, as well as other equipment used for oil and gas drilling.
The GE deal predictably sent Lufkin's shares up nearly 38% to close at $87.96, slightly below the takeout price of $88.50 a share. GE's shares rose 1% to close at $23.12, after Jim Cramer said investors should buy the company's stock "right here," and that GE could become "the premier energy service company, after Schlumberger (SLB), in the world, after a few more acquisitions.""The wave of merger & acquisition activity is gathering strength," according to St. John's University professor Anthony Michael Sabino, who said in an email that GE's acquisition of Lufkin "demonstrates that GE, which was battered in its financial services operations from the Great Recession, is back in the game." Sabino added the continuing M&A wave "displays confidence, and that translates into growth and what we need most -- jobs." The KBW Bank Index (I:BKX) rose over 1% to close at 55.74, with all 24 index components showing gains for the session, except for M&T Bank (MTB) of Buffalo, N.Y., which was down slightly to close at $101.09, and Wells Fargo (WFC), which was down slightly to close at $37.02. Wells Fargo and JPMorgan Chase (JPM) will lead off earnings season for the nation's largest lenders on Friday, before the market opens. Analysts polled by Thomson Reuters estimate Wells Fargo will report first-quarter earnings of 88 cents a share, declining from 92 cents in the fourth quarter, but increasing from 75 cents in the first quarter of 2012. Most analysts expect Wells Fargo's mortgage loan origination and sale revenue to suffer a major decline this year, although the decline may be largely offset by increases in loan servicing revenue and accounting adjustments. The consensus among analysts is for JPMorgan Chase to report first-quarter EPS of $1.40 a share, increasing from $1.39 in the fourth quarter and 1.19 in the first quarter of 2012.
A "Catalyst" for First Niagara
First Niagara's shares have returned 13% this year, following declines of 5% during 2012 and 35% during 2012. The shares trade for 1.6 times their reported Dec. 31 tangible book value of $5.65, and for 11.1 times the consensus 2014 earnings estimate of 80 cents a share. The consensus 2013 EPS estimate is 75 cents.
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