Selling continues Monday on rising oil prices and despite more merger news. Traders continued to be concerned about the sub-prime mortgage market and Iran is a wild card that could escalate into further problems. Traders did get news of the largest leveraged buyout in history, which has pushed TXU (TXU) shares sharply higher. 

Energy company TXU is seeing its shares rise more than 13 percent Monday. The company agreed to be purchased by a group of private equity firms for about $32 billion, or $69.25 a share. With debt included, the deal is worth a total of $45 billion. The largest buyout before this deal was in 1988 when KKR bought RJR Nabisco for $25 billion. 

Interestingly, there are reports today that Dow Chemical (DOW) is also close to being taken over in a private equity deal worth approximately $54 billion. DOW shares are up five percent on these reports. In other merger news, Station Casinos (STN) agreed to be purchased by Company Management and Colony Capital for about $8.8 billion. STN shares are up four percent on the news to about $87.

Oil prices have moved high Monday, nearing the $62 a barrel mark. Reports that Iran has test fired its first rocket into space has traders nervous. An article in the New Yorker even states that the Pentagon has devised plans to bomb Iran if they do not comply soon. Of course, continued unrest in Iraq and cold weather has also put bullish pressure on oil.

Several Dow ($INDU) components are benefiting from analyst upgrades today. Merck (MRK) shares are up more than four percent after the stock was upgraded at Citigroup to a "Buy." Citi believes that Merck will benefit from strong sales of its type II diabetes drug Januvia. Coca-Cola (KO) shares are also higher today, rising by one percent on an upgrade to "Buy" from "Hold" at Deutsche Bank.

One positive sign is that as the major market indices experience profit taking, it is raising the fear indices. The CBOE Market Volatility Index ($VIX) is up nearly six percent today, moving above the 11 level. Each time the VIX has hit 10 in the recent past, it has resulted in at least some consolidation. However, dips in stocks have also resulted in a rather quick recovery as traders buy the dips. 

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