Countrywide up despite stock fall; E*Trade rises; AMR, Continental rise as airlines soar; Ceradyne up on contract

By Evan Weinberger

New York, Nov. 28 - Countrywide Financial Corp. and E*Trade Financial Corp. convertibles rallied as financial stocks led a big day on Wall Street. Several other downtrodden financials - including BankUnited Financial Corp. - were also up on the day.

But the bigger gains were seen in airlines as AMR Corp. and Continental Airlines Inc. all moved higher.

Ceradyne Inc. and EMC Corp. also had strong days.

The big news was in equities, however.

It's amazing what a total of $13.5 billion raised by two major financial institutions and a few well-received words from a high-ranking Federal Reserve official can do for a troubled market. On Monday night, the market discovered that Citigroup had raised $7.5 billion. On Tuesday night, Freddie Mac announced that it would raise $6 billion in a preferred stock offering - a portion of which will be convertible. On Wednesday, Fed vice chairman Donald Kohn told the Council on Foreign Relations that the central bank may consider "offsetting" policies to balance out troubled financial markets.

Falling oil and other commodity prices helped drown out more bad news on the housing and durable goods front Wednesday.

The opening bell was more like the start of a race Wednesday, and the three major indices sprinted to the finish throughout the day.

The Dow Jones Industrial Average leaped 331.01 points, or 2.55%, to close at 13,289.45.

The Standard & Poor's 500 stretched 40.79, or 2.86%, for a 1,469.02.

The big winner on the day was the Nasdaq, which picked up 82.11 points, or 3.18%, for a 2,662.91 close.

"I think there's been so much selling pressure that people were looking for any excuse to buy anything," an analyst said. He added that it was too soon to tell whether the rally would sustain itself and that the next two or three days would be "very interesting."

One other story that helped was rumors of further mergers in the financial sector. On the convertibles front, one trader said he saw upped bids on what he called "dicier" financials throughout the day. "Some are folks covering shorts, some new investors getting confidence that [the] world will continue to have banking in the U.S.A. The thing that really did it was the Bank of America/Citi merger chatter," he said in an e-mail. "There are so many [rumors] going on at moment -some will occur."

No new issues priced Wednesday.

Countrywide, E*Trade rally

With big movements in the financial sector, Calabasas, Calif.-based mortgage lender Countrywide saw both of its convertibles post decent gains Wednesday.

Countrywide's Libor minus 350 basis point series A convertible senior debentures due April 15, 2037 closed Wednesday at 78.7391 versus a closing stock price of $8.72. They closed Tuesday at 77.4782 versus a stock price of $8.97.

Countrywide's Libor minus 225 bps series B convertible senior debentures due May 15, 2037 closed Wednesday at 74.1608 versus a stock price of $8.72 after closing Tuesday at 72.6217 versus a stock price of $8.97.

Countrywide stock (NYSE: CFC) didn't participate in the big market rally and closed down 25 cents, or 2.79%.

New York-based online financial institution E*Trade was up in both its stock and convertibles Wednesday. E*Trade's 6.125% common equity units due Nov. 18, 2008 (Nasdaq: ETFCP) gained 55 cents, or 7.05%, to close at $8.35 Wednesday.

E*Trade common stock (Nasdaq: ETFC) gained 37 cents, or 7.54%, to close at $5.28 on the day.

BankUnited also up

Coral Gables, Fla.-based commercial bank BankUnited saw its 3.125% convertible senior notes due March 1, 2034 close Wednesday at 68.3354 versus a closing stock price of $7.18. They closed Tuesday at 67.55 versus a stock price of $6.50.

BankUnited stock (Nasdaq: BKUNA) soared 68 cents, or 10.46%, on the day.

Airlines take flight

Falling oil prices and the announcement that AMR would spin off or sell its regional airline American Eagle sent airline convertibles higher Wednesday.

Fort Worth, Texas-based AMR, the parent company of American Airlines, saw its 4.5% convertible senior notes due Feb. 15, 2024 close Wednesday at 119.976 versus a closing stock price of $21.98. They closed Tuesday at 116.125 versus a stock price of $20.56.

AMR's 4.25% convertible senior notes due Sept. 23, 2023 closed Wednesday at 137.081 versus a stock price of $21.98 after closing Tuesday at 131.702 versus a stock price of $20.56.

AMR stock (NYSE: AMR) was up $1.42, or 6.91%, on the day.

Houston-based Continental watched its 5% convertible senior notes due June 15, 2023 close at 156.227 versus a closing stock price of $27.98. They closed Tuesday at 150.812 versus a stock price of $26.74.

Continental stock (NYSE: CAL) added $1.24, or 4.64%, in trading Wednesday.

Ceradyne surges on Army contract

Costa Mesa, Calif.-based industrial ceramics producer Ceradyne surged Wednesday on the announcement that it had won a major Army contract to produce bullet-proof vests.

Ceradyne's 2.875% senior subordinated convertible notes due Dec. 15, 2035 closed Wednesday at 112.064 versus a closing stock price of $50.28. They closed Tuesday at 105.514 versus a stock price of $45.57.

Ceradyne stock (Nasdaq: CRDN) jumped $4.71, or 10.34%, on Wednesday.

EMC rise continues

Hopkinton, Mass.-based data storage producer EMC continued its rebound Wednesday.

EMC's 1.75% convertible senior notes due Dec. 1, 2011 closed Wednesday at 139.416 versus a closing stock price of $19.11. They closed Tuesday at 133.266 versus a stock price of $18.19.

EMC's 1.75% convertible senior notes due Dec. 1, 2013 closed Wednesday at 140.727 versus a stock price of $19.11 after closing Tuesday at 134.659 versus a stock price of $18.19.

EMC stock (NYSE: EMC) added 92 cents, or 5.06%, on Wednesday.

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