Wall Street hits milestone
Wall Street reached another milestone during a muted session today, when the Standard & Poor's 500 index briefly passed its record close of 1,527.46 for the first time in more than seven years.
The S&P 500, considered by market professionals the best indicator of stock performance, surpassed the mark shortly after noon following a fresh spate of takeover deals. The broad market index has lagged the Dow Jones industrial average in recovering from the prolonged stock slump earlier this decade.
The S&P 500 rose as high as 1,529.87, then edged back to 1,525.10, up 2.35, or 0.15%, as cautious investors locked in some profits from weeks of gains. The index's advance was driven by buying in non-technology sectors such as energy, materials, industrials and financials, S&P data showed.
It is still well below its all-time trading high of 1,552.87 set on March 24 2000, the day the index reached its record close.
Reassuring Wall Street on Monday that acquisition activity will keep up its record pace this year, General Electric said it is selling its plastics division to Saudi Arabia's largest industrial company, Saudi Basic Industries for 11.6bn (€8.61bn).
The announcement followed news yesterday that telecommunications company Alltel agreed to be bought for 24.8 billion dollars, and that China's new state investment company was investing $3bn (€2.22bn) in Blackstone Group LP.
Blackstone, the second-largest US private equity firm, is planning an initial public offering for later this year, and has been on a buying tear; just last week, it snapped up credit card services provider Alliance Data Systems for $6.43bn (€4.77bn).
The Dow retreated modestly after venturing further into record territory earlier in the day. The blue-chip index fell 13.65, or 0.10%, to 13,542.88 after hitting an intraday high of 13,586.03.
The Nasdaq composite index rose 20.34, or 0.80%, to 2,578.79, after reaching a six-year high of 2,587.87.
In early 2000, all the major stock market indicators reached record highs, only to be dragged down by the end of the dot-com boom, recession, the 2001 terror attacks and a series of corporate scandals including the collapse of Enron.
The S&P 500 fell to a low of 776.76 in October 2002 at the depths of a three-year bear market on Wall Street.
The market recovered slowly, but it wasn't until last October that the more widely recognised Dow Jones industrial average surpassed its own previous closing high of 11,722.98.
The Dow has gone on to barrel past 13,000 as Wall Street rallies on a mixture of corporate takeover news, respectable earnings and hopes for an interest rate cut.
After 24 record closes for the Dow this year, the S&P has finally caught up.
"This is new territory, but more importantly it serves as a reminder that the three broad indices are doing well. That should be the focus," said Arthur Hogan, chief market analyst at Jefferies & Co.
The Nasdaq, however, is unlikely to reclaim its record close of 5,048.62 anytime soon. The technology-dominated index was overinflated by investors eager to grab any high-tech stock.
The market is being driven in part by acquisitions, which have convinced investors there is an abundance of cash in the marketplace.
The run-up in takeovers has been shepherded by a push from private equity firms; buyout shops have racked up more than $370bn (€274.8bn) in global buyouts this year, and are on pace to beat last year's record of $730bn (€542.1bn), according to financial data provider Dealogic.
Although there has been strength in takeover activity, as well as signs of economic recovery in recent snapshots of US manufacturing, many market watchers are nervous that the market has been driven by momentum trading rather than individuals putting money in stock-based mutual funds.
"People are buying the market because it's going up," said Brian Gendreau, investment strategist for ING Investment Management. "We'd like to see a stronger foundation for this market."
Bonds edged higher today, with the yield on the benchmark 10-year Treasury note slipping to 4.79%, down from 4.81% late on Friday. The dollar gained against other major currencies, and gold prices also rose.
After two private equity firms said they were buying Alltel, the wireless company rose 4.39, or 6.7%, to 69.60.
General Electric rose 14 cents to 37.10 after agreeing to sell its plastics business.
In other corporate news, drug developers Wyeth and Elan said they are planning late-stage studies for their Alzheimer's drug candidate bapineuzumab. Wyeth rose 2.03, or 3.6%, to 58.41, and Elan's US shares rose 2.09 dollars, or 12.6%, to 18.69.
Meanwhile, home improvement goods retailer Lowe's reported a 12.1% drop in first-quarter profit and lowered its annual earnings forecast. Lowe's fell 1.03, or 3.2%, to 31.63.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange. Volume came to 1.51 billion shares, down from 1.65 billion on Friday.
The Russell 2000 index of smaller companies rose 9.99, or 1.21%, to 833.65.
The S&P's milestone comes during a light week for economic data. The few notable reports are Thursday's durable goods and new homes sales reports from the Commerce Department, and Friday's existing home sales data from the National Association of Realtors.
