Stocks Say 'No Deal' to M&A

"The market has reacted to that news [of M&A activity] over and over," says Bruce Bittles, chief investment strategist at Robert W. Baird & Co.

Save for the latest bid for Equity Office Properties (EOP Quote), no deal worth more than $7 billion, excluding debt, has been announced this year, according to Richard Peterson, senior researcher, capital markets, at Thomson Financial in Boston. "There is no blockbuster, but dealmakers are not on strike."

Indeed, $115 billion in deals have been announced year to date, up 20% from this point last in 2006, according to Peterson. Also, Monday's deals did enliven certain individual names and sectors:

• Laureate Education (LAUR Quote) rose 11.7% on news it is being acquired by an investor group led by its chairman and CEO. Other for-profit education plays, such as Career Education (CECO Quote), rallied in concert.
• Similarly, paper stocks rallied on news of the Abitibi-Consolidated (ABY Quote)- Bowater (BOW Quote) merger agreement. Bowater soared 23.9% on the news while Abitibi jumped 26%; International Paper (IP Quote) rose 0.9%.
• FirstBank (FBP Quote) climbed 9.3% on news of a buyout offer from Bank of Nova Scotia (BNS Quote). Separately, First Republic Bank (FRC Quote) soared 40% on news of a $1.8 billion buyout offer from Merrill Lynch (MER Quote). In response, other Puerto Rican financials such as Popular (BPOP Quote) advanced.

  [In a recent interview on TheStreet.com TV, Ken Fisher of Fisher Investments said Popular is a good takeover candidate in its own right, naming Bank of America (BAC Quote) as a potential bidder. Bank of America, meanwhile, is rumored to be eyeing Countrywide Financial (CFC Quote), which rallied again Monday on said speculation.]

Financials Flummoxed

The broader financial sector failed to capitalize on the deals and rumors, however, which is somewhat surprising giving the deals and buzz in the sector and the aforementioned banking fees.

The Amex Broker/Dealer Index fell 1.2% Monday as Merrill shed 2.3% amid concern it overpaid for First Republic. Meanwhile, the Philadelphia Stock Exchange Bank Index gave back 0.5% as Bank of America lost 1.1%. In addition, Citigroup (C Quote), which agreed to buy U.K.-based online bank Egg Banking for $1.13 billion, fell more than 1% as well.

Ahead of the FOMC's two-day policy meeting Tuesday and Wednesday, and a heavy slate of economic data this week, the financials were held back largely by the same issues weighing on the market last week.