One Week Before Q3'09 Ends - Market Makes a U-turn...

NEW YORK (CNNMoney.com) -- Stocks fell for the third straight session on Friday, ending lower for the week, after weaker-than-expected reports on durable goods orders and new home sales sparked concerns about the strength of any recovery.

The Dow Jones industrial average (INDU) lost 42 points, or 0.4%. The S&P 500 (SPX) index lost 6 points, or 0.6%. The Nasdaq composite (COMP) fell 17 points, or 0.8%. Stocks slid in the previous two sessions after having ended Tuesday at one-year highs. Investors reacted negatively to Wednesday's Federal Reserve meeting and Thursday's weaker existing home sales report and oil slump.

The mix of economic news Friday gave investors another reason to retreat after the recent advance. An attempt at stabilizing in the last hour of trading gave out near the close. "Today is the third day that we are seeing selling on higher volume," said Curtis Lyman, managing director at HighTower Advisors. "It's indicative that the market is consolidating after the very nice recovery we've seen."

Stocks have seen a huge spike over the last 6-1/2 months. Since bottoming at a 12-year low March 9, the S&P 500 has gained 54.4% and the Dow has gained 47.6%, as of Friday's close. After hitting a six-year low, the Nasdaq has gained 64.8%.

This week's retreat has left Wall Street at what could be a key inflection point, said Brian Peardon, wealth advisor at Harrison Financial Group. "We could see a new push higher or a much more substantial selloff," Peardon said. "It's just a matter of all the cash on the sidelines and whether the (buy on the) dip buyers decide to come in."

He said that a continued move higher is more likely than a big selloff at this point, but that the upcoming quarterly earnings reporting period will be critical in terms of whether the rally gets another leg up.

Disney Bought Over Marvel... and now Kraft, Nestle, & Hershey is Aiming for Cadbury??

Sept. 8 (Bloomberg) -- Companies worldwide have led $36 billion of takeovers in the past 10 days, according to Bloomberg data. Walt Disney Co. agreed on Aug. 31 to buy comic-book creator Marvel Entertainment Inc. for about $4 billion. The same day, Baker Hughes Inc. agreed to buy BJ Services Co. for $5.5 billion in the largest oilfield-services company takeover since 1998. EBay Inc. agreed a day later to sell 65 percent of its Skype Internet-calling unit to a group led by firm Silver Lake for about $2 billion.

The flurry of takeovers shows that “confidence in the corporate sector has risen off the floor, where it was a year ago,” Lucy MacDonald, who manages $6.8 billion as chief investment officer at RCM UK Ltd., said in a Bloomberg television interview. “Secondly, corporate balance sheets have recovered quite significantly in the last year. We’d expect to see M&A picking up from relatively low levels.”

Kraft Foods Inc.’s 10.2 billion- pound ($16.7 billion) bid for Cadbury Plc may be a sign that Europe’s frozen takeover market is beginning to thaw after the slowest August in five years.

Kraft, the maker of Oreo cookies, said yesterday it would pursue the acquisition after the British maker of Dairy Milk chocolate rejected the offer. The 745 pence-a-share proposal may trigger a competing offer from Nestle SA and Hershey Co., forcing Kraft to increase its bid, according to Warren Ackerman, an analyst at Evolution Securities in London.

The acquisition would be the biggest cross-border deal this year and follows the $21 billion of European takeovers announced in August, according to data compiled by Bloomberg. Companies are revisiting plans for mergers that had been shelved during the credit crisis amid signs the recession may be easing. The MSCI World Index has gained 58 percent since hitting a 14-year-low in March, making it easier for firms to fund takeovers with stock.

Mixed Signals

The nation's unemployment rate climbed last month to 9.7 percent — the highest in nearly a generation — but the number of job losses was less than expected and the smallest monthly total in a year.

"It's good to see the rate of job losses slow down," said Nigel Gault, chief U.S. economist at IHS Global Insight. But with unemployment rising, "there isn't the underlying fuel there for strong consumer spending growth," which is vital for a strong recovery.

"The bulls let out a collective sigh of relief today, after the government's highly anticipated payrolls report wasn't as sour as expected," said Andrea Kramer at Schaeffer's Investment Research. "Against this backdrop, the bulls won the battle for the session, but the bears won the war for the first week in three."

"While the labor market is still showing significant job losses, the August employment report showed a continued slowing in their pace, and we expect job growth to turn positive by year-end as the recovery becomes entrenched and businesses feel more comfortable hiring," said Barclays economist Dean Maki.