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Marsh McLennan avoids potential "death penalty"

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Insurers were broadly higher in Monday's session, where in after- hours trade, Marsh McLennan (NYSE:MMC) $26.42 -1.38% jumped to $28.94 after New York Attorney General Eliot Spitzer said his office would not charge the company with criminal charges after its Board of Directors announced the resignation of it embattled CEO Jeffrey Greenberg earlier in the day.

The news created a short-term sigh of relief as some industry watchers speculated that criminal charges against the insurance giant might eventually end the company's 130-year history.

Late Monday, Marsh McLennan named Michael Cherkasky as the company's CEO, where Mr. Cherkasky helped reform the Los Angeles Police Department and the Teamsters union during his time as an executive of corporate investigations firm Kroll, Inc, whom Marsh McLennan recently acquired.

Mr. Cherkasky was Eliot Spitzer's boss when they both worked for the Manhattan District Attorney's office.

While analysts tend to agree that margins will likely be squeezed as the industry reforms how it deals with commissions and the bidding process for business among the major insurers, Spitzer's response to Marsh's management change at the top gave hint that the New York Attorney's office is looking for reform, and not looking to put major insurers out of business.

At the time of this writing, Spitzer's office did not rule out the likelihood of civil penalties.

In related insurance industry news, Chubb (NYSE:CB) $65.36 -0.15% slid to $65.01 in Monday's extended session after the insurer of businesses and wealthy individuals said it received a subpoena from Connecticut's Attorney General about possible antitrust violations.

The New Jersey firm said in a filing with the Securities and Exchange Commission (SEC) that it received "interrogations and a subpoena" from the state's Attorney General's office on Friday.

The company did not provide any further details of the inquiry.

U.S. Market Watch - 10/25/04 Close

The major indices finished Monday's session relatively unchanged.

Today's lone economic report was a big one for the homebuilders as the Dow Jones Home Construction Index (DJUSHB) 619.87 +4.26% surged back above its 200-day SMA (601) after September existing home sales rose to a seasonally adjusted annual rate of 6.75 million, which was ahead of the 6.54 million projected by economists.

Pulte Home (NYSE:PHM) $51.50 +9.4% lead the list of homebuilder gains, where it was Pulte that triggered the sector's declines in September after warning that it has raised new home prices too aggressively in some of its Las Vegas, Nevada markets, which in turn had sector bulls fearing a price bubble for the broader housing market was about to burst.

While cautious, Smith Barney, which has been one of the more bearish Wall Street firms on the semiconductors, upgraded several names in the sector saying many chipmakers have been quicker to react to building inventories than has historically been found and that recent CapEx spending has been reduced to trough levels.

The AMEX Gold Bugs Index ($HUI.X) 239.55 +3.9% jumped back to test 240 resistance and 2004 highs, as Goldman Sachs raised their gold price targets (see 09:00 AM Update) on thoughts of a weaker dollar. Goldman Sachs said sector bellwether Newmont Mining (NYSE:NEM) $47.66 +3.33% remained their favorite in the group.

A quick check of the $HUI.X's point and figure chart has it remaining bullish, with a vertical count to 266.00. First sign of weakness would be a double bottom sell signal at 216. While "overbought" at 72.02%, the sector bullish % (BPPREC) from Dorsey/Wright and Associates is still "bull confirmed" and would take a reversal lower reading of 66% to turn "bear alert."

Market Snapshot / Internals - 10/25/04 Close

Today's trade at $428 for December Gold futures (gc04z) $430.20 +0.06%, where Spot Gold lags just a smidge, builds a newly construction bullish vertical count to $474.00. February '05 Gold futures (gc05g) $431.60, which gave a double-top buy signal last week at $428 currently has a bullish vertical count being constructed to $476.

Pivot Matrix -

The Dow Industrials (INDU) 9,750 -0.08% made a valiant effort to reclaim its MONTHLY S2 by the close on negative breadth of 19 to 11. Insurer American International Group (NYSE:AIG) $56.10 +2.55% was the top percentage gainer and rose to $58.40 in tonight's extended session. The Dow Diamonds (AMEX:DIA) $97.68 -0.08% last ticked by at $97.80, where correlative, yet tentative support at DAILY Pivot and MONTHLY S2 could have some bears looking to lock in gains as long as that level holds support the remainder of the week.

Semiconductor Index (SOX.X) - Daily Intervals

While not a component of the Semiconductor Index (SOX.X), electronics manufacturing service provider to original equipment manufacturers (OEMs) Flextronics Intl. (NASDAQ:FLEX) $12.54 -0.31% dropped to $11.60 in this evening's after-hours session.

While the company narrowly missed Wall Street's sales expectations and issued tepid guidance for the next two quarters, the company characterized the current market environment as being not that "big of a deal." Company execs cited modestly improving gross margins with inventory turns at 11-times with its leverage ratio down from last quarter, as reasons for fundamental analysts to focus on 20-30% growth in the next two quarters.

Friday's sector bullish % (BPSEMI) readings from Dorsey/Wright and Associates still find the semiconductors in "bull alert" status at 28.9% after a recent low reading of just 6%. Bullish divergence continues to present itself from July readings of 26%, where a break much above WEEKLY R1 and 413 could pave way to WEEKLY R2 and MONTHLY R2.

On Wednesday, Micron Technology (NYSE:MU) $11.71 +1.56% is holding an analyst meeting in London, England.

Jeff Bailey

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