US SMALL/MIDCAPS-Tech M&A, bank rules lead shares sharply higher

NEW YORK, Sept 13 Mon Sep 13, 2010 1:12pm EDT

NEW YORK, Sept 13 (Reuters) - Mid- and small-cap stocks rallied on Monday as more merger news in the technology space, along with new global banking rules, helped lift positive sentiment.

ArcSight Inc ARST.O soared 25 percent to $43.85 after Hewlett-Packard Co (HPQ.N) agreed to buy the company for $1.5 billion, or $43.50 per share.

Separately, GTSI Corp GTSI.O gained 34 percent to $6.96 after Eyak Technology LLC launched a hostile bid for the company worth $67 million.

For details, see [ID:nSGE68C0H6] and [ID:nSGE68C0I5]

The deals are the latest in a line of notable acquisitions in the tech space. Earlier this month, HP won a bidding war to purchase 3PAR Inc (PAR.N).

"It's encouraging to see that companies are willing to pay such large premiums and still think the deals will be accretive to earnings," said Terry Morris, senior equity manager at National Penn Investors Trust Company in Reading, Pennsylvania.

"The premiums are a sign of how cheap tech stocks are right now, and that's why you're seeing so many deals in the space."

New bank capital rules agreed by global regulators brought relief to the world's banks. The requirements, known as Basel III, will demand banks hold top-quality capital totaling 7 percent of their risk-bearing assets, but a long lead-in time eased fears that lenders will have to rush to raise capital. [ID:nLDE68C0D3]

Financials also got a boost from Bernstein, which upgraded four regional banks to "outperform" on improving credit trends and stronger balance sheets. [ID:nSGE68C0IU]

Regions Financial Corp (RF.N) climbed 4.2 percent to $7.18 while Huntington Bankshares (HBAN.O) advanced 3.4 percent to $6.05, Zions Bancorp (ZION.O) surged 5 percent to $20.85 and Marshall & Ilsley Corp MI.N gained 3.9 percent to $7.23.

On the downside, Duoyan Printing Inc DYP.N plummeted 44 percent to $3.66 after it named replacements for its chief executive and chief financial officer, both of whom recently resigned. [ID:nWNAB5317]

In the pharmaceutical space, Cyclacel Pharmaceuticals Inc (CYCC.O) added 13 percent to $1.78 after it reached an agreement with the U.S. health regulator on the design of a late-stage trial of its experimental leukemia drug. [ID:nSGE68C0GO]

The S&P MidCap 400 index .MID added 1.5 percent while the S&P SmallCap 600 index .SML was up 1.8 percent. By comparison, the benchmark S&P 500 .SPX gained 0.6 percent.

(Editing by Chizu Nomiyama)

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