U.S. Stocks Swing Higher On Mergers, Economic Data
NEW YORK (MarketWatch) -- U.S. stocks staged a vigorous rally Monday, the start of the second half of the year, lifted by data showing unexpected strength in the nation's manufacturing sector and merger news, including a $49 billion takeover of Canadian telecom carrier BCE.
The upbeat news allowed investors to look past higher energy prices and concerns about recent attempted terrorist attacks in the U.K.
The Dow Jones Industrial Average last was up 99 points at 13,508, as blue-chip components Caterpillar Inc. rose 3.2% to $80.82, Honeywell International Inc. gained 1.5% to $57.09, as Intel Corp. gained 2.2% to $24.23.
The S&P 500 was 12.3 points higher at 1,515.6, while the Nasdaq Composite moved up nearly 25 points to 2,627.
Volume was light ahead of the Independence Day holiday. The U.S. stock market will be closed on Wednesday.
There were 925 million shares traded on the New York Stock Exchange, with more than 3 rising shares for every 1 under pressure. There were 1.3 billion shares traded in the Nasdaq market, with 9 stocks posting gains for every 4 declining.
The third quarter kicked off on a positive note, casting out a glum mood that dominated in the second half of June linked to higher bond yields and uncertainty about the extent of subprime impact on the rest of the economy.
"There is a lot of mergers and acquisitions activity in the States and Europe," said Peter Cardillo, chief U.S. economist at Avalon Partners. "Maybe the fear that mergers and acquisitions might be slowing is dissipating."
In addition, the Institute for Supply Management's June manufacturing survey had some good news about the nation's struggling manufacturing sector, long been a drag on economic growth.
The ISM's headline index had a 56.0 reading for last month, which was above 55.0% in May and econmists' forecast for a 55.1% reading.
The reading was the highest since April, 2006 and showed the highest level of production since July 2004.
In addition, the survey's prices paid component pointed to benign inflation.
"The overall feeling in that market is that core inflation is moderating," said Scott Wren, senior equity strategist at A.G. Edwards. "The bond market has rallied lately and there are hopes that yields will go below 5%."
Stocks on the move
A group led by the Ontario Teachers Pension Plan and including two U.S. private-equity houses agreed to buy BCE Inc.
for $48.5 billion, or $40.13 (C$42.75) per share. U.S.-listed shares rose 4.3% to $39.40.
Meanwhile, Carlyle Group has offered between $33 and $35 a share for Virgin Media , the British cable operator listed on the Nasdaq, according to published reports. That would value all of Virgin Media's equity at up to $11.7 billion.
Virgin Media's shares earlier soared as much as 23% as the company confirmed it had gotten the offer. It last was up 18.6% to $28.87.
Nursing home operator Manor Care Inc. agreed to be bought by private-equity firm Carlyle Group for about $6.3 billion. That stock, which ran up dramatically earlier in the year when the company said it would explore options, fell 1.9% to $64.05.
Late Friday, AT&T Corp. agreed to buy Dobson Communications in a deal valuing the rural mobile operator at $2.8 billion, or $13 a share. AT&T also will be in focus on reports of activation problems for the Apple iPhone. The stock last reversed early gains to trade up almost 1% at $41.89.
Bear Stearns tacked on 4.3% to $39.30, recovering from recent blows. The company late Friday sent a letter to investors in two hedge funds that were heavily invested in asset-backed securities in the subprime sector. The investors will have to wait as late as July 16 to find out how much money they have lost, as the firm's having a hard time calculating the losses.
The mortgage-related securities in the fund are thinly traded and the markt for them has been volatile. Worries about the subprime shakeout pressured stocks last week.
Shares of Research In Motion continued to surge Monday. By late afternoon, the stock was up more than 7% at $214.85. The action followed gains of more than 20% on Friday coming after the maker of the BlackBerry wireless devices reported stronger-than-expected results for its first fiscal quarter.
Other markets
Treasurys reacted little to the ISM data as some analysts said bonds appeared to be receiving safe-haven interest in the wake of attempted terrorist attacks in the U.K. and Scotland in recent days. The benchmark 10-year Treasury note last was up 5/32 at 96 3/32 with a yield of 5.006%.
In currencies, the British pound soared to its highest level against the dollar in 26 years, due to widespread expectations that British and other foreign interest rates will move higher, at a time when there also is speculation that the U.S. could put in place a rate cut.
The dollar weakened against the yen amid worries that a rate hike in Japan could come as early as August. Overnight, the Bank of Japan's latest Tankan survey showed unchanged business confidence.
The dollar fell 0.7% to 122.28 yen, as the euro rose 0.6% to $1.3623 and the pound gained 0.4% to $2.0164.
The dollar's weakness, as well as terrorism concerns, bolstered gold, pushing the front-month contract to its best closing level in nearly two weeks, rising $8.30 to $659.20 an ounce.
The August crude-oil future also rallied, rising 41 cents to close at $71.09 a barrel, just off a 10-month high. Crude futures also benefited from safe-haven interest, as well as worries that energy supplies will be dented by the summer driving season.
By Leslie Wines