Revived M&A and leadership from tech behind September rise By Kate Gibson, MarketWatch NEW YORK (MarketWatch) -- The U.S. stock market will be on the prowl in the days ahead for an impetus to propel it through its recent trading range if Wall Street is to manage a fourth consecutive week of gains. “We need a catalyst to get over levels that we haven’t seen since early April. The M&A front will be very relevant, and could be a negative if that momentum doesn’t continue,” said Alan Lancz, director of research at LanczGlobal.com. The recent burst of deal making had health-care products giant Johnson & Johnson (JNJ 61.57, +0.28, +0.46%) on Friday announcing it was in late-stage talks to purchase Dutch biotech company Crucell NV (CRXL 32.02, +11.48, +55.89%) for $2.29 billion. “The corporate cash coffers have been building incredibly as many of these companies are running leaner and meaner. And, with the cash they have earning little to no interest, they are better off buying a company as a strategic acquisition,” said Lancz. “We see it as a positive sign,” he added. On Friday, the major indexes notched a third week of gains, with the technology sector leading the rise after two of technology’s bigger names, Oracle Corp. (ORCL 27.48, +2.12, +8.36%) and Research In Motion Ltd. (RIMM 46.72, +0.23, +0.49%) late Thursday reported robust results. “Technology was a key this week, and next week we’ll hear from Adobe (Systems Inc.) (ADBE 32.78, -0.07, -0.21%) and some of the retail bellwethers,” said Lancz. On Friday, the Dow Jones Industrial Average (DJIA 10,608, +13.02, +0.12%) rose 13.02 points, or 0.1%, to end at 10,607.85, leaving the blue-chip index with a weekly gain of 1.4%. Up 1.4% from the week-ago close, the S&P 500 Index (SPX 1,126, +0.93, +0.08%) added nearly 1 point, or less than 0.1%, to end at 1,125.59. During Friday session, the index rose as high as 1,131.47, but did not manage to clear the technical hurdle in a meaningful way. “The 1,132-level is significant, we’ve been kind of touching on that today, but you have to have a significant sustainable advance through that to bring on a new round of buyers,” said Lancz. Up for an eighth consecutive session, the Nasdaq Composite Index (COMP 2,316, +12.36, +0.54%) climbed 12.36 points, or 0.5%, to 2,315.61, marking its longest winning-streak so far this year by surpassing a seven-day climb that ended June 18. It ended with a weekly rise of 3.3%. The Nasdaq tracks all securities traded on the Nasdaq Stock Market, but is mostly used to track technology stocks, given the many computer, biotechnology and telecommunications companies listed on it. And technology, the largest industry group among the S&P 500’s 10 major sectors with an 18% weighting, has risen the most in recent weeks, and is up 9.6% month-to-date. But the sector remains among the laggards for 2010 so far, the third-worst performing sector after energy and health care. And, the top four holders of cash among the 500 companies on the S&P are technology companies, and three do not pay a dividend, according to Howard Silverblatt, senior index analyst at S&P Indices. “IT pays the least as a sector, with only 41% of the issues paying versus 79% for the rest of the index. That said, they are under increasing pressure to use their cash for M&A and buybacks, with dividends now on the list,” said Silverblatt. The three non-dividend payers include Cisco Systems Inc. (CSCO 21.86, -0.07, -0.31%) , which at the end of the second quarter, held the largest horde of cash and equivalents, with $39.9 billion, which represents 33.8% of its market value, Silverblatt said. The next three weeks bring the first few companies reporting third-quarter earnings for 2010, with 13 S&P 500 companies on tap in the week ahead. “Corporate guidance is expected to pick up, an event that could spark sharp price movement in stock groups,” offered S&P’s Silverblatt. Discover Financial Services (DFS 15.57, -0.22, -1.39%) , which is taking over the ongoing business of Student Loan Corp. (SLM 11.72, +0.50, +4.46%) from Citigroup, is among the companies scheduled to report results on Monday, along with home builder Lennar Corp. (LEN 13.99, -0.10, -0.71%) Retailers including Bed Bath & Beyond Inc. (BBBY 41.10, -0.69, -1.65%) and Nike Inc. (NKE 77.26, +0.62, +0.81%) report later in the week, the former coming on Wednesday and the latter the following day. On Friday, estimated share-weighted earnings for the S&P 500 for the third quarter of 2010 stood at $193 billion, slightly below last week’s $193.1 billion, according to John Butters Thomson Reuters. Economic data next week brings reports on housing , along with weekly jobless claims reported on Thursday. The count of those applying for jobless benefits have taken on added significance with the count of unemployed Americans still “stubbornly high,” said Lancz.

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