A couple of hours ago, it was hard to imagine that anything would be able to knock
confirmation that they are discussing "wide-ranging" cooperation out of the top slot of corporate headlines.
If the two combined, they would have assets of about $1.25 trillion. That's a pretty big bank -- the world's largest, in fact. But this is America, and the tech-obsessed U.S. stock market has just received its latest indication that, in the short term at least, hypervaluation doesn't necessarily mean overvaluation.
Web security consulting firm
buying Internet domain-name registrar
in a stock deal valued at $21 billion. VeriSign will issue 2.15 shares of its stock for each share of Network Solutions. Based on yesterday's closing price, that would come out to a staggering $532 a share. Network Solutions closed yesterday at 360 5/8.
trading has since moderated the payoff for Network Solutions shareholders, though. VeriSign had lately traded at 216 1/2, which cuts the deal down to about $465 a share.
Skeptics will stress that no cash is involved in the deal. But in the minds of technology bulls, the massive premium that VeriSign is willing to pay for Network Solutions can only justify the lofty levels at which many tech stocks are trading. Technology stocks deserve such valuations, the thinking goes, not merely because they give them the currency to expand and dominate their markets, but also because other corporations are willing to pay those premiums.
"It's getting people heartened," said Mike Clark, managing director of equity trading at
Credit Suisse First Boston
. "But the Comp still has to prove it can have a down day in a difficult tape. To be down 9 points yesterday when you're up 20% on the year isn't saying much. The market's going to keep testing the Comp until it rolls over in the short term."
Not this morning. The VeriSign deal has lit up the futures market. The
futures were up 67.45 to 4564.95, well off their early lows and indicating a big upside open for large-cap technology stocks.
It looks like the broader market will be participating, too -- at least in the early going. At 9:05 a.m. EST, the
futures were up 8.3, more than 10 points above fair value and setting a positive tone for the open. But
Proctor & Gamble's
earnings-warning preannouncement could stall any early rally the
Dow Jones Industrial Average
Proctor had last traded at 75 on Instinet, down from yesterday's 87 7/16. "I can't imagine that's a good thing," said Clark.
The bond market was edging lower, with the 10-year note down 9/32 to 100 11/32 and yielding 6.452%. The 30-year bond, meanwhile, was off 9/32 to 101 5/32, putting its yield at 6.164%. No first-tier data are scheduled for release, though the
has revised fourth-quarter productivity growth up to 6.4% from the preliminary 5.0%. That's extremely impressive productivity growth, though its ability to control wage pressures is severely compromised by a 6.9% fourth-quarter jump in
gross domestic product
Labor also said that unit labor costs fell 2.4% in the fourth-quarter, a bigger decline than the initial 1.0% fall. EUROPE
The large European indices were mixed in early afternoon trade. The Deutsche Bank/Dresdner Bank news had Frankfurt's
flying up 144.38, or 1.8%, to 8120.16. Dresdner Bank was surging more than 20%, while Deutsche Bank and insurer
, a major shareholder of both banks, were also sharply higher.
was up 37.86 to 6583.84, while London's
was down 3.3 to 6564.5.
The euro was trading at $0.9574.
Asian markets went their separate ways overnight.
Tokyo stocks edged higher in volatile trading, especially in
, which jumped late in the day to erase its 15% loss from Monday. But other large tech plays were weaker, as investors unwound cross-shareholdings before the March 31 fiscal year-end. The
rose 147.89 to 19,944.24.
The dollar inched slightly higher to 107.73 yen in a sluggish session. It was lately trading at 107.35 yen.
rose 106.60 to 17,865.36. Traders are waiting on the release of the fiscal budget Wednesday, and some said there could be damaging news for property, financial and retail shares if Hong Kong introduces a retail sales tax or increases the corporate tax rate.
index gained 12.16 to 9380.07, and South Korea's
lost 1.99 to 907.34
For a look at stocks in the preopen news, see Stocks to Watch, published separately.