The market is down 9. The SFE Futures suggested a 16 point rise in the market this morning.

The Dow Jones was up 23.2 – It moved in a narrow 56 point range and closed in record territory, completing its fourth consecutive weekly gain on the back promising earnings reports and a heap of takeover activity. Talk is that Microsoft has renewed talks to acquire or invest in Yahoo Inc (up 9%) and that financial data provider Thomson Corp is likely to bid for Reuters (up 27%). The market was also given a boost after the Labour Department announced the jobless rate increased 4.5% in April, a bit weaker than expected confirming expectation that US rates are not about to rise with an FOMC meeting this week.

We are in a bull market — the Dow Jones has set 19 record closes since the start of the year and 41 since the beginning of October. It was a good week all round for the major indexes, the Dow finished the week 1.10% higher, the S&P 500 up 0.77% and the NASDAQ gained 0.58%. The All Ords was up 2.4% on the week – a compound annualised return of 243% a year (!). Can’t go on like that surely.

Resources doing well today, BHP up 70c to 3130c and RIO up 194c to 8879c. Metals all up on Friday. Copper up 1.7%, Nickel up 3.5% and Zinc 3.4%. Zinifex up 16c to 1777c. Aluminium up 1.5%. Oil price down $1.34 to $61.89 on the back of warmer-than-expected weather in the northeast of the US and some profit taking. Woodside up 31c to 4206c. Gold up $5.30. Newcrest up 11c to 2309c.

You are supposed to Sell in May and Go Away – but nobody did. The All Ords went up 2.53% last week. If the market went up 2.53% compounded every week it would go up 243% in a year. Clearly this is not sustainable but for now the King appears to be pretty fully clothed. It’s the Budget tomorrow – we are bracing ourselves for $15bn of spending and possibly some tax cuts. Usually good for the consumer discretionary stocks, infrastructure and non-residential construction stocks as well as wealth management and stockmarket stocks.

  • Main story today is Qantas (QAN) after the bid failure and how far it might fall. Some of the arbitrageurs will simply have to sell it as part of their mandate. It is no longer a bid situation. The suggestion is that the bid isn’t dead. APA could bid again at the same price or wait four months and come back again. Qantas likely to get sold off this morning but the guess is that it won’t fall far. Some of the other international Airline stocks have returned over 100% in the last year, British Airways over 50%, and that’s without a bid. Qantas is up almost exactly 100% from the bottom last year. It’s nothing extraordinary in this market. QAN last traded at 538c.
  • Alinta (AAN) is in a trading halt this morning after receiving a fresh takeover offer from Macquarie Bank (MBL). They have said the proposal is confidential and that it’s seeking more information from MBL. AAN last traded at 1525c a share.
  • Fairfax (FXJ) down 14c to 513c after News Corp confirmed it had sold 75m shares in the company through Goldman Sachs JB Were. The sell down coincides with last week’s News Corp bid for Dow Jones and many are wondering whether the two are related.
  • Telstra (TLS) unchanged at 486c. There was news in the press this morning that it could be next on the private equity bid list.
  • The AFR has reported that more than 100 pathologists at Symbion (SYB) are considering making an offer for the company’s pathology division with a private equity firm. This follows last weeks $2.78bn bid for the company from Healthscope (HSP) who is joining buyout groups Ironbridge Capital and Archer Capital.
  • Incitec Pivot (IPL) up 245c or 4.64% to 5520c after announcing a $57.2m 1H net profit, up from $10.1m a year ago. They issued a higher than expected 69c dividend, brokers had expected 46-47c.

Warren Buffett’s Berkshire Hathaway had its AGM on the weekend with over 27,000 shareholders in attendance. We have an article in the MARCUS TODAY stock market newsletter highlighting the important issues discussed during question-answer time, including Buffett’s views on private equity.

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