U.S. MARKET AVERAGES

The three major averages have been trading in a narrow range, staying close to their lows of the day. Eight of the ten economic sectors post losses. Volume has been light as many traders took the Columbus Day holiday off. Stock markets opened mostly higher as investors welcomed news of a $7.5 billion acquisition in the insurance sector and an investment rating upgrade at International Business Machines Corp., but later the averages lost their early gains and since then have been trading below the flat line. The weakness came after auto-parts supplier Delphi Corp. filed for bankruptcy over the weekend.

Investors lack trading activity as they eagerly await the start of third-quarter earnings reports and end-of-the-year profit outlooks.Dow component Alcoa, the world’s largest aluminum producer, will kick off the reporting season when it announces quarterly results after the closing bell.

The gold sector is one of the notable gainers, reaching an 18-year high of nearly $480 per ounce. HMO stocks are higher as well. The disk drive, Internet and software spaces post modest gains.

Energy sector is a notable decliner, down by 2.1% on extended profit-taking last week.

The semiconductor sector is among the morning's worst performers, down by 2.1%, dragged largely by Xilinx (XLNX: chart). The stock’s drop is more than 13% on lowered quarterly sales guidance released before the opening bell.

GM (GM: chart) is the worst performing Dow component, dropping by 4.6% on Delphi's (DPH: chart) bankruptcy, reaching its lowest level since May. Exxon Mobil (XOM: chart) is down by 1.8% after last-week’s gains on profi-taking.

Merck (MRK: chart) is the best performer among the Dow components after a sharp drop on Friday on concerns about the company's VIOXX trial in New Jersey. The stock is up 2.3%. Wal-Mart and IBM are notable gainers on positive comments from analysts. Wal-Mart (WMT: chart) is up 1.7% on an encouraging report from Barron's, while IBM (IBM: chart) is higher by 1.6% on an upgrade from Citigroup.

In late morning, the Dow Jones industrial average declined 3.36, or 0.03%, the Standard & Poor's 500 index dropped 3.87, or 0.32%, while the Nasdaq composite index sank 4.96, or 0.24%.
The U.S. government bond market was closed Monday.

MOVERS AND SHAKERS

Auto parts maker Delphi (DPH: chart) dropped 57% after the company was pressed to file under Chapter 11 of federal bankruptcy on Saturday after failing to negotiate a restructuring with previous parent company General Motors (GM: chart) and the United Auto Workers union. The filing was the largest in the US auto industry and was linked to high wage and benefit expenses. General Motors fell 4.6%..

Auto system company Dana Corp. (DCN: chart) lost 29.9% after it said yesterday it will have to review earnings for 2004 and part of 2005 and postpone its third-quarter report, because of accounting controls issues. Dana has not set a new date for its third-quarter earnings release, which had been slated for October 19. The company has also withdrawn earnings forecasts for the fiscal year 2005.

Dow component International Business Machines Corp. (IBM: chart) added 1.7% after the company was upgraded at Citigroup to “buy” from “hold”. The broker cited as a reason the company’s strenght in computerr services, and gains in market share for mid-range and high-end servers market.

Another Dow component, Intel Corp. (INTC: chart), was up 1.7%, after a report in Wall Street Journal announcing that the company will introduce a series of dual-core server chips, as a part of its competition with rival Advanced Micro Devices (AMD: chart). The new chips promise up to a 50% improvement over systems with two single-core processors. Advanced Micro also rose 0.4%.

Jefferson-Pilot Corp. (JP: chart) is up 6.7% after the news that t will be bought by insurance provider Lincoln National Corp. (LNC: chart) for about $7.5 billion in cash and stock. This would be one of the biggest acquisitions in the financial sector recently. Lincoln National was up 1.5%.

ECONOMIC NEWS

No major economic news release is due out on Monday.

INTERNATIONAL MARKET NEWS

Asian-Pacific benchmarks finished mixed with the Japanese Nikkei closed for a national holiday. Across the region Hong Kong’s Hang Seng added 0.3% with China Resources Enterprise and oil company CNOOC among the biggest gainers. South Korea’s Kospi rebounded from last week’s decline of 3% to climb 2% on third-quarter earnings forecasts and positive consumer sentiment index data. The Tokyo foreign exchange market was closed Monday.

European markets closed in the positive, boosted by telecom equipment stocks on news that Ericsson is near a deal with its smaller rival Marconi, resource shares and political news from Germany, saying that Angela Merkel will take over as the new government’s chancellor. Narrow trading range on Wall Street capped European gains. The German DAX 30 added 0.3%, the French CAC 40 rose 0.2%, and London’s FTSE 100 increased 0.2%.