Kraft, IBM, Costco, AIG in focus TUESDAY MORNING'S TOP STORIES

U.S. stock futures made a strong advance on Tuesday, with Kraft Foods' unsolicited $16.7 billion bid for Cadbury and a Group of 20 pledge to continue stimulus spending providing a boost after the Labor Day break. See Indications.
Global markets

European shares rose for a fourth straight session, with miners getting a lift from stronger gold prices. Australian shares were among the winners in Asia, buoyed by a jump in business confidence to its highest level since October 2003.

Morgan Stanley changed its tech-sector view, upgrading systems and PC hardware to attractive from in-line, while downgrading software to in-line from attractive. Among several rating changes, the broker cut Dell (DELL 15.72, +0.03, +0.19%) , IBM(IBM 118.17, +0.71, +0.60%) and Texas Instruments(TXN 24.86, 0.00, 0.00%) to equal-weight from overweight.

Credit Suisse downgraded American International Group (AIG 38.36, -1.69, -4.22%) to underperform from neutral and slashed its price target to $15 from $30, saying there could be little value left for common equity holders after AIG has sold off its core businesses.

Costco Wholesale Corp. (COST 56.95, +1.48, +2.67%) was upgraded to overweight from equal weight by Morgan Stanley, which said food deflation and other headwinds that had been pressuring the company are dissipating.

Kraft Foods Inc.(KFT 26.41, -1.69, -6.01%) said on Monday that it's pursuing a takeover of Cadbury (CBY 52.59, +15.13, +40.39%) after the U.K. chocolate maker rejected a $16.7 billion bid. Kraft said a combination of the two companies would create a "global powerhouse" in snacks and confectionery with annual sales of more than $50 billion. Analysts, however, said the U.S. giant may need to significantly raise its offer. A counter-bid from Nestle and Hershey (HSY 39.45, +0.82, +2.12%) is also considered a possibility.


Gold futures surged above $1,000 an ounce on Tuesday, propelled by weakness in the U.S. dollar. The December contract hit an intraday high of $1,009.40. Analysts said it's unclear how sustainable the rise above $1,000 will be, as the last two times it occurred it was followed by a sharp correction back below $900.


Chartered Semiconductor Manufacturing (CHRT 17.25, -1.53, -8.15%) said over the weekend that it has struck a deal to sell itself to Abu Dhabi's Advanced Technology Investment Co. for approximately $1.8 billion in cash.


Atheros Communications Inc. (ATHR 28.82, +0.84, +3.00%) said it will acquire Intellon Corp. (ITLN 7.15, +2.15, +43.00%) in a stock-and-cash deal valued at about $244 million, or $181 million net of Intellon's cash and short-term investments.

Disclosure I am long KFT shares.