The major stock indexes gained ground in the final hour of trading Monday, closing at or near session highs, as investors weighed merger news and another positive reading on the economy. Treasury yields drifted higher on top of Friday's spike on the robust employment news.
The Dow Jones industrial average added 87.78 points, or 0.84%, to 10,558.37. The broader Standard & Poor's 500-stock index gained 8.73 points, or 0.76%, to 1,145.34. The tech-heavy Nasdaq composite index rose 21.95 points, or 1.07%, to 2,079.12.
After Friday's employment bombshell, another closely-watched economic report released Monday pointed to additional strength. The Institute for Supply Management's reading on the services sector for March came in very strong at 65.8, vs. a median estimate and prior showing of 60.8.
Overall, the report was far better than expected, with orders holding up very well, says economic research group Informa Global Markets. The prices component of the report hints at companies' continued need to contain costs (mostly labor) to offset the squeeze from inputs, notes Informa. The employment gain, though now dated, agrees with the hefty rise in service sector jobs reported for March.
However, attention is shifting from economic optimism following Friday's jobs report to the possibility of an interest rate increase coming sooner than expected, according to Standard & Poor's MarketScope.
The rest of the week is fairly quiet for economic reports, and both the equity and bond markets will be closed Friday in observance of Good Friday.
On the earnings front, Alcoa (AA) will report quarterly results Tuesday, followed by Yahoo (YHOO) on Wednesday. Overall, first-quarter profits for the big cap 500 companies are seen up 17% year-over-year, according to Informa Global Markets. Better pricing power, stronger global demand, and low financing rates are all supporting strong corporate earnings - the latter a key driver for capital expenditures and ultimately jobs, notes Informa.
Among stocks on the move Monday, sectors that are sensitive to interest rates were down, including homebuilders, thrifts and mortgage, banks, and real estate.
In merger news, J.C. Penney (JCP) says it sold its Eckerd drugstores in the Northeast and mid-Atlantic states for $2.375 billion to the Jean Coutu Group. CVS (CVS) will acquire the Eckerd drugstores in the South and Eckerd's pharmacy benefits management and mail order business for $2.15 billion.
WellChoice (WC) is negotiating to buy Oxford Health Plans (OHP) in an all-stock deal, according to the Wall Street Journal.
Cigna (CI) shares shot up after the company raised its earnings outlook. It sees $1.75 to $1.95 first-quarter earnings per share from continuing operations due to stronger than anticipated performance from its health care business.
Siebel Systems (SEBL) expects first-quarter EPS of 5 cents to 6 cents, vs. prior guidance of 4 cents to 5 cents, on total revenue of $329 million, which is near the high-end of its previously announced estimate range of $315 million to $335 million.
Nortel Networks (NT) announced a formal investigation by the Securities and Exchange Commission into the company's previous restatement of its financial results for certain periods, as announced in October, 2003, and its announcements in March, 2004, regarding the likely need to further revise certain previously announced results and restate previously filed financial results for one or more earlier periods.
Treasuries finished lower in price Monday. While flows were not robust, they were slanted to the sellside, so Treasuries took another pounding with mortgage related and technical selling the main impetus, says Informa Global Markets. The strength reported in non-manufacturing ISM, the increase in the employment component in particular, sent Treasuries lower during the morning session. Prices continued to fall during the afternoon, pushing the yield on the 10-year note up to 4.21%.
European stock markets finished higher on Monday. London's Financial Times-Stock Exchange 100 index was up 15.1 points, or 0.34%, to 4,480.7.
Germany's DAX index gained 41 points, or 1.02%, to 4,048.6. In Paris, the CAC 40 index rose 41.29 points, or 1.1%, to 3,781.2.
Asian markets finished higher. In Japan, the Nikkei 225 index jumped 142.37, or 1.2%, to 11,958.32 on the heels of Friday's U.S. employment report. In Hong Kong, the market was closed in honor of the Ching Ming festival.