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Stock Swapping Tuesday

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The computer industry got a little more interesting after Hewlett-Packard (HWP) agreed to acquire Compaq Computer (CPQ) in a stock swap valued at $25 billion. The move would combine the world's number two and number three computer maker, and set the stage for a computer price war with industry leader Dell (DELL).

In a smaller deal, Santa Fe International (SDC) has agreed to acquire Global Marine in a $3 billion stock swap. The merger of equals creates the world's second largest oil and natural gas driller.

Not to be outdone, Devon Energy (DVN) bought Canadian natural gas company Anderson Exploration for $4.6 billion in cash. Devon will acquire 532 million barrels of proven oil reserves.

October crude oil futures are down 10 cents as Labor Day marked the end of the summer driving season, but Natural gas futures are down 4.24%.

Index futures are mixed, with Dow and S&P 500 futures in the red, and Nasdaq futures up 0.50 points.

According to HL Camp & Company, fair value for the S&P 500 is $1.52. Buy programs are set at $2.72 and sell programs are ready to go a ($0.02).

Bond yields are higher across the board, but not enough to signal a possible rally in stocks. Bonds should see some action after NAPM manufacturing data and constructing spending is released at 8:00 a.m. EDT.

The HP-Compaq merger boosted stocks in Tokyo, and the Nikkei was able to stop its five-day skid. Today's 3.5% gain almost recoups half of last week's losses.

Telecommunication stocks are attracting some selling in Europe after Marconi issued a profit warning and announced a dramatic restructuring. The telecom equipment maker is dumping their CEO, trimming 25% of its workforce, suspending its dividend, and selling non-core assets.

Dutch phone company KPN is also coming under fire after the company warned that it won't raise as much cash as it had expected from asset sales.

Jeff Canavan
Assistant Analyst

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