U.S. MARKET AVERAGES

U.S. stock markets opened in the positive and after some mixed performance advanced upward. The Nasdaq is the best performer among averages, rising 0.5%, followed by Dow and S&P 500 each slightly above 0.3%. Monday trading session lacks significant earnings news. The traditional market-driver, oil, is not a leading performer, although it has started gaining speed upward on winter expectations. The market sentiment is influenced by a few merger-and-acquisition deals and economic data.
In the focus of Monday's session there are two pieces of economic data- the report of ISM and August auto sales report.

Investors eagerly awaited the manufacturing index data for August, as concern about how the consumer will react to high oil prices after Katrina’s and Rita’s impact was of primary importance to them. They had expected the index to fall to 52.0 but were surprised to see that the purchasing managers index had risen to 59.4 in September from 53.6 in August, reflecting the 28th consecutive month of growth in sector.

The semiconductor sector stands out among the best performers in early trading, currently up 1.3%. Energy stocks are also strong, with the natural gas sector climbing 1.2%.

Gold stocks are modestly lower, with some losses also coming from the insurance sector.

On the corporate news front a number of merger and acquisition deals deserve attention.

Standard & Poor's revealed that homebuilder Lennar (LEN: chart) will be added to the S&P 500 index in the place of Gillette (G: chart), which was acquired by Procter & Gamble (PG: chart). Beazer Homes US (BZH: chart) has been selected to replace Lennar (LEN: chart) in the S&P MidCap 400, S&P said.

NTL (NTLI: chart) announced that it has agreed to acquire Telewest Global (TLWT: chart) for $6 billion, or $23.93 per share. The transaction will likely close in the first quarter of 2006.

MOVERS AND SHAKERS

NRG Energy (NRG: chart) added 0.8% on Friday. The company said that it would acquire privately held company Texas Genco for $5.8 billion. The company will pay $4 billion in cash and $1.8 billion in stock, and assume $2.5 billion in debt. The company expects the transaction to close in the beginning of 2006. The deal comes four months after Duke Energy Corp. agreed to acquire its rival Cinergy Corp. for nearly $9 billion in stock.

R.H. Donnelley Corp. (RHD: chart) will pay about $4.2 billion in cash and stock for Dex Media Inc. (DEX: chart), according to the yellow pages publishers. Donnelley will also assume about $5.3 billion in debt. Donnelley gained 0.4% while Dex added 0.5% on Friday. The combined company will be the third-largest print and Internet directory publisher in the U.S.
Dex shareholders will own about 53% of the combined company.

Reliant Energy (RRI: chart) announced its plans to sell its three power plants in New York City for $975 million to an investor group led by Madison Dearborn Partners and US Power Generating Co. The plants have a combined summer capacity rating of about 2,100 megawatts and Reliant acquired the units as part of its purchase of Orion Power Holdings in February 2002.

Altria Group Inc. (MO: chart) upped 0.2% after Goldman Sachs raised its fair valuation to by $5-$90. The broker said the move echoes a raised calculation for its Philip Morris-USA tobacco business and a higher cash balance for 2006. Altria is currently thinking about the separation of its businessess in a bid to boost shareholder value.

The Semiconductor Industry Association reported a 3.2% increase in global semiconductor sales for August and that is likely to bring attention to the chip sector. Nevertheless, Vitesse Semiconductor (VTSS: chart) lost 7.4% after the company narrowed its fiscal fourth-quarter revenue forecast to $48 million from its prior expectation of $52-$53 million.

ECONOMIC NEWS

Monday morning, the Commerce Dept. released its report on construction spending in the month of August, showing an increase in spending that came in slightly below economists' expectations.

The report showed that construction spending rose 0.4 percent in August following a 0.3 percent increase in July. Economists had been expecting an increase of about 0.5 percent.

The Commerce Dept. said that the increase in construction spending reflected increases in spending on both private and public construction.

The report showed that private construction spending rose by 0.4 percent in August while public construction spending rose by 0.5 percent.

The manufacturing sector saw continued growth in the month of September, according to a report from the Institute for Supply Management, with the pace of growth accelerating unexpectedly. The faster growth came in spite of the impact of Hurricane Katrina.