M&A activity helps stocks rise as bulls try to end a three session losing streak. Last week saw the major market indices fall with the bears taking control following the FOMC meeting on Wednesday. After large gains from the March lows, traders decided to take some profits, but the question is whether this profit taking will lead to something more severe. Economic news is light Monday, but the economy is the focus this week with the employment report due out Friday.

Merger news tends to be a positive for the stock market and this has been the case in early trading Monday. The big story has been Xerox's (XRX) announcement that they would buy Affiliated Computer Services (ACS) in a deal valued at $6.4 billion. XRX will pay 4.935 shares and $18.60 in cash for each ACS share, which values ACS at $63.11 based on Friday's close. However, XRX shares are down nearly 15 percent in early trading Monday with ACS shares up more than 15 percent at a price near $54.50.

In other news, Belgian firm Solvay announced it would sell its drugs unit to Abbott Labs (ABT) for $6.6 billion in cash. This news has pushed ABT shares higher by nearly 5 percent with the stock trading just under $50. Reports have also surfaced that Kraft (KFT) may launch a hostile bid for Cadbury in a deal valued at about $17.6 billion. Merger activity shows faith in the corporate America and this tends to lead to gains for the stock market.

Overseas markets are seeing mixed results with indices in Asia all falling to start the week, but markets in Europe are mostly higher. One story to keep an eye on is Iran's nuclear program. Tensions rose last week when Iran disclosed that it was building its second uranium enrichment plant. President Obama warned Iran about not following the U.N., but Iran has shown no fear of the U.S. or the U.N. The main concern is that Iran has been testing missiles that have the ability to reach Israel and U.S. bases in the Gulf. Oil prices have not risen like one would expect on this news with the commodity losing 8.4 percent last week. In early trading Monday, crude is flat at a price near $66 a barrel.

The third quarter will come to an end Wednesday with the major market indices up sharply. Not including Monday's movement, the major market indices are all seeing gains greater than 13 percent for the quarter. Economic data will impact trading this week with the ISM Mfg. Survey, GDP, and Personal Income and Outlays report on tap. However, the focus is firmly on the employment data due out Friday. Economists are looking for nonfarm payrolls to fall by 170,000 in September after a decline of 216,000 in August.

Jody Osborne
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site