Takeovers and consumer confidence boost Wall St
Stocks surged higher today as another round of corporate takeovers prodded investors to continue a largely uninterrupted months-long buying streak.
The Dow Jones industrial average registered its 24th record close this year and the Standard & Poor’s 500 index came within striking distance of its record high.
Beyond the buyout news, which has lent buoyancy to the markets for months, a stronger-than-expected reading on consumer sentiment helped investors set aside some concern that consumers unnerved by higher gas prices would pare back spending and up-end the economy’s smooth slowdown.
The latest takeover news, including deals involving marquee names like General Electric Co and Microsoft Corp, signalled that the enormous amount of liquidity that has lubricated global stock markets in recent months does not appear on the verge of evaporating.
“The M&A activity and earnings seem to be holding up better than expected. I think you’re going to see more of this,” said Bill Dwyer, chief investment officer at MTB Investment Advisors, referring to merger and acquisition deals as well as surprisingly strong profits.
The Dow rose 79.81, or 0.59%, to 13,556.53. The blue chips set a new trading high of 13,558.48, having crossed 13,500 for the first time on Thursday. The Dow has been on a strong run since early April.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 10.00, or 0.66%, to 1,522.75, its highest level in more than six years. The index came within fewer than 5 points of its record close of 1,527.46, set in March 2000.
The Nasdaq composite index rose 19.07, or 0.75%, to 2,558.45.
Bonds fell as the market appeared to look past China’s announcement of an interest rate increase and a widening of the range at which the yuan can trade. A rising Chinese currency would make Chinese imports less competitive in the US. The yield on the benchmark 10-year Treasury note rose to 4.81% from 4.76% late on Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 8 cents to 64.94 dollars per barrel on the New York Mercantile Exchange.
Investors appeared unfazed by rising oil prices, instead focusing on corporations’ continued appetite for merger deals. The Wall Street Journal reported GE is near a deal to sell its plastics division to a Saudi Arabian industrial giant for 11 billion dollars. GE rose 43 cents to 36.96 dollars.
Microsoft struck an agreement to acquire online advertising company aQuantive Inc for about 6 billion dollars in cash, paying a premium following a rush of major online ad deals by its competitors in the past six weeks. AQuantive soared 27.92 dollars, or 77.8%, to 63.79 dollars, while Microsoft slipped 15 cents to 30.83 dollars.
The buyout news came alongside favourable economic findings. The preliminary Reuters/University of Michigan index of consumer sentiment for May came in at 88.7. Wall Street had expected the reading would be unchanged from April at 87.1.
The mood of consumers remains important to the economy as consumer spending makes up two-thirds of US economic activity. Perhaps giving investors further room for confidence, retailers JC Penney Co, Kohl’s Corp and Nordstrom Inc yesterday each posted earnings that topped Wall Street’s expectations.
The reports came amid record gasoline prices – which are averaging more than 3 dollars per gallon (80 cents a litre) nationwide. Higher gas prices could dent consumer spending, however, particularly at retailers such as Wal-Mart Stores Inc, whose primary customers are often sensitive to increases at the pump.
The recent rise in oil prices sent helped send shares of energy companies higher. ConocoPhillips rose 1.60 dollars, or 2.2%, to 74.85 dollars, while Exxon Mobil Corp. advanced 1.46 dollars to 83.26 dollars.
In other corporate news Friday, Trump Entertainment Resorts Inc rose 2.73 dollars, or 21%, to 15.80 dollars after the casino and hotel operator said would-be suitors have shown interest in buying the company. Trump, which last year hired Merrill Lynch to explore the company’s options, did not disclose the interested buyers.
Intuit Inc jumped 3.84 dollars, or 13.9%, to 31.56 dollars after the software maker said its third-quarter profit rose 23%. The company’s fiscal 2007 profit forecast outstripped Wall Street’s expectations.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where volume came to 1.65 billion shares.
The Russell 2000 index of smaller companies rose 8.02, or 0.98%, to 823.66.
